LEGAL PHASES OF COOPERATIVE ASSOCIATIONS 75 
members of the association to break their contracts, the supreme 
court of that State said : " We consider the law settled that one who 
maliciously induces another to break a contract with a third person 
is liable to such third person for the damages resulting from such 
breach." 
In a Texas case 22 and in a North Carolina case 28 suits were brought 
by the associations involved against members and dealers who were 
handling or offering to handle their products with knowledge of the 
fact that the products were covered by contracts with the association, 
and in each of these cases the members were enjoined from disposing 
of their products outside the association and the dealers were en- 
joined from interfering with the performance of the contracts. The 
cooperative cases cited above were all decided under the general prin- 
ciples of equity and independent of statutory provisions. 
In addition to the right which an association has in an appropriate 
case to enjoin interference with its contracts, or to recover damages 
from persons doing so, in pursuance of equity or common-law prin- 
ciples, provisions have been included in many of the statutes provid- 
ing for the formation of cooperative associations which make it a 
misdemeanor knowingly to induce the breach of a marketing con- 
tract and which authorize associations to recover a penalty of $500 
for each such offense. 24 Sections 26 and 27 of the Bingham Coopera- 
tive Marketing Act of Kentucky were upheld by the Supreme Court 
of the United States 25 in a case arising in Kentucky, 26 in which the 
Burley Tobacco Growers' Cooperative Association recovered a penalty 
of $500 from a warehouse company that sold tobacco that was cov- 
ered by a marketing contract of the association. "Before the sale 
the association notified the warehouse company of Kielman's mem- 
bership and of his marketing contract, requested it not to sell his 
tobacco, and called attention to the prescribed penalties." Similar 
provisions in the cooperative act of Colorado were upheld by the 
supreme court of that State. 27 
The Supreme Court of Minnesota held that a similar penalty sec- 
tion in one of the cooperative statutes of that State was unconsti- 
tutional as violating the freedom of contract provisions in the State 
and Federal Constitutions. 28 In reaching this conclusion, the court 
said : 
Of course, it is well settled that a malicious interference by one not a party 
to a contract to induce its breach is a tort for which redress may be had. 
* * * But section 27 does not stop with those who maliciously interfere 
with existing contracts between third parties. * * * In other words, the 
section attempts to prevent all dealings between members of a cooperative 
marketing association and outsiders in respect to products contracted for by 
the association, no matter how free from legal malice or devoid of induce- 
ments the conduct of the outsiders may have been, provided they knew that the 
product was under contract. 
22 Hollingsworth v. Texas Hay Ass'n (Tex. Civ. App.), 246 S. W. 1068. 
23 Tobacco Growers' Co-op. Ass'n v. Pollock, 187 N. C. 409, 121 S. E. 763. 
24 See sees. 26 and 27 of the Bingham Cooperative Marketing Act of Kentucky on pp. 
124 and 125 in appendix. 
28 Liberty Warehouse Co. v. Burley Tobacco Growers' Co-op. Marketing Ass'n, 276 U. S. 
71, 48 S. Ct. 291. 
* e Liberty Warehouse Co. v. Burley Tobacco Growers' Co-op. Marketing Ass'n, 208 Ky. 
643, 271 S. W. 695. 
27 Fort v. People ex rel. Co-op. Farmers' Exchange, 81 Colo. 420, 256 P. 319. 
28 Minnesota Wheat Growers' Co-op. Marketing Ass'n v. Radke, 163 Minn. 403, 204 
N. W. 314. 
