LEGAL PHASES OF COOPERATIVE ASSOCIATIONS. 27 
an injunction to prevent a member from disposing of produce out- 
side of the association, is to be regarded as a decision indicating 
that a liquidated damage clause provision is valid. 
In the Xew York and Alabama cases referred to it was claimed 
that the provisions relative to liquidated damages were invalid on 
the ground that they restrained trade. It was also claimed in the 
AVashington case just discussed that the contract involved was in 
restraint of trade. But the court in each instance overruled this 
contention. However, in two Iowa cases by-laws providing for the 
payment of a stipulated amount in case a member disposed of his 
produce or live stock to a competitor in a particular market were 
held invalid on the ground that they restrained trade or competition. 
The by-laws involved in the first 9i of the two Iowa cases to be de- 
cided provided that any member of the association should forfeit 5 
cents for every hundredweight of produce or live stock sold to any 
competitor of the association. The association bought and sold the 
produce and live stock of nonmembers as well as that of members. 
The by-law in question did not provide that the sum to be paid by 
members in case they sold to competitors was to be regarded as 
liquidated damages, but it is doubtful if any weight is to be attached 
to this fact. The court emphasized the fact that the association was 
something more than a mere selling agency, as it dealt with mem- 
bers and nonmembers. Some weight was apparently attached to the 
fact that the association often paid nonmembers more for their hogs 
than it paid members. 
In a later case 95 the Supreme Court of Iowa held a by-law of a 
cooperative association invalid as in restraint of competition which, 
among other things, provided that any member should pay 1 cent 
per bushel as liquidated damages for all grain which he might sell 
to competitors of the association who might offer more for grain 
than the association and 5 cents per 100 pounds for all hogs and 
cattle so sold. It appeared that a member sold 13,000 pounds of 
pork and 4,000 bushels of oats to competitors of the association in 
a particular market, and the association attempted to deduct $10.50 
on this account, in accordance with the by-law, from dividends 
amounting to $4-5.25 which were due him. The member then brought 
suit against the association to recover the entire amount, $45.25, and 
won. In holding the by-law invalid in this case, the court did so on 
the authority of the earlier case which has been discussed. 
In a Colorado case 96 a by-law provided that stockholders might 
sell grain to competitors of the association in a particular town, by 
94 Reeves v. Decorah Farmers' Cooperative Society, 1G0 Iowa 194, 140 N. W. 844, 44 
L. R. A. (X. S.) 1104). 
95 Ludewese c. Farmers' M. C. Co.. 164 Iowa 197, 145 N. W. 475. 
96 Burns v. Wray Farmers" Grain Co., G5 Colo. 425, 176 Pac. 487. 
