please the court and with your permission i will assume you already understand the nature of the crosby's betrayal of their association while he sat on the board of directors of the target quality and also spare you a link the dissertation on the long and rich history of the cooperative marketing association which establishes that they are favored in beneficial energies with a strong public policy need for enforceable liquidated damages provision i would like to skip to the crux of the situation and that is whether or not the liquidated damages provision in our contract with our members as part of our association was reasonable while we believe the liquidated damages provision should be viewed under a liberal view or as only unenforceable if they're determined to be grossly excessive we believe this liquidated damages provision meets the reasonable test that's normally reasonable in this test normally applied to business contracts so are you going to proceed principally under the the camelot the three factor came a lot test instead of the liberal enforcement of the statute or you can argue the statute to us as well i don't intend to not today i just i think if if the reasonable test is met all these other questions are irrelevant and not if it's if it's reasonable under the standard test then it  price that is so sation it's just seems to me to have no relationship to what your actual estimate of well you're right judge the under the traditional rules it does seem to be the eye of the beholder you know freedom of contract goes out the window and then you know you cordy's agreeing on a liquidated damages provision in the courts as i just doesn't seem fair it seem fair if they had to just pay the average price well i mean in your paraphrase of the provision you repeatedly insert the word average which does not exist and you know what i mean but i guess that  provision right says the price of such cotton in the new york futures market during the period beginning with the data breach and ending with the fact that final delivery and you keep saying the average price of such cotton and i think you have to do that because as you know the price of cotton will fluctuate over time but average might make some sense but lois could make sense highest could make some sense median might make some sense why average just as an example we know what the average price of cotton was well skilled my fan or a pen but i thought maybe i have the i thought your formula measured it from the highest price you got even though it was a small but i am that you sold at that less the average price damages would be twice what we are claiming in this case and the only way that works is if you take the highest price we were able to get after the breach and you subtract the average which leaves a the average was in the range of a dollar fifty six a payout when you do the calculation in our liquidated damages provision it's seventy three cents a pound and the judge anderson and i are asking about two potential problems with your argument one his question is why highest i mean is that is that a reflection of reality that you actually would have gotten the highest price for cotton post breach that's that's i think so generous and question where is that come from and is that does that have any relationship to the real world or is it simply a penalty provision well up to this point time the highest cotton market since the civil war the difference between the highest in the average might have been ten sits at max most years i mean when this was written we didn't know that prices were going to go to two dollars and thirty cents a print it never happened before but i guess which way does that cut right because we're asking in part what was the intention of the drafters wasn't an intention to approximate damages or was it an intention to penalize and if you didn't know at the time you drafted it and you chose the term highest sounds to me like it might have been an intention to penalize well it was an intention to let the market decide what the penalty or liquidated damages provision is going to turn out to be whichever way you look at it it's using the market to determine what you pay if you don't deliver your cotton because we don't have the ability to know what that is going to be we don't have the cotton to sell we don't know we can't we can't fix compensatory damages we need liquidated damages provision to protect the existence of these associations if all of them if what you say and you need a penalty in order to protect the existence of the association only in the sense that willesden and contracts that liquidated damages provisions have that element of  the element of trying to ensure performance they all do it's but in the in this situation they are the authors of the contract and we don't know how long it was used several years i thought alabama low i the way i would i think you're correct i would for is it that there are two basic things you have to show one you have to show that it's very difficult if not impossible to figure out what the true damages would be and i think everybody here basically that's water under the bridge the other pieces and then that the any and in light of the fact it's hard to do the damages you do a reasonable attempt to approximate what these unspecified uncatchable damages would be and if you do both of those things that should be enforceable under any test and i guess that's i guess that's what we're getting at is he's you're saying it is reasonable and we're kind of pushing back and asking you some questions about that is it fair for us to then look at what the if you actually apply this at least what the other side will say is that you would be entitled to much more than their actual profit was are should we be looking at that to see that this was in fact not a reasonable estimate i don't understand why you would look at their profit the if you assume that we could get two dollars and thirty cents a pound in the market why would we assume they could get to thirty dollars and thirty cents a pound in the market with this two million pounds of c thousand bales that were not delivered seems to me to be most unrealistic my point is they could have gotten the same price if they had gotten the same price with their cotton they would have made over five million dollars they could have paid our liquidated damages and walked home with three point five million dollars it's all about what the price of cotton does during the period of time after the breach in before the market mean the crop year is over why would why would it not be fair to say to somebody if you're going to not deliver your cotton that you will assume that we could have sold your cotton at the higher price less the average price less the average price and can you help me again just to circle back because i think i might have stepped on judge anderson's question earlier about highest but can you help me to understand where it is that the the other factor that the average where is it average shows up in the formula or does the words were average show up in the formula it doesn't it's like you said it's the price on the new york market from the time of breach to the last delivery time so that that's a period of time the price changes every day it changes during the day and so and the i mean we're targeted to me and the other side though says that's actually a bug in the formula is that it's sort of fatally ambiguous ambiguous for a number of reasons not the least of which is that it doesn't even specify sort of which price we're supposed to be looking at why not median why not lowest you just were picking average to make the formula work so that you have a mathematical equation that you can work but in fact the formula doesn't reduce to a mathematical equation and isn't that a problem if you take it average it does something we calculate out to four decimal points in accuracy but i'm just saying that you are required to sort of a fudge factor to make the formula work well there are arguments to be made about how to tweak the formula that they have made that would change it a little bit either way but that does not mean it's void as against public policy which is what the district court said this is void against public policy and we know we've had years of history with these things where they used ten cents a pound think that be double what  our damages would be in this case brought to present value adjusted for inflation you know reserve the remainder of your time  morning to please the court i'll meet my colleague on the ground that he's laid out which is the reasonable ness of this provision under alabama common law even if you assume utterly unrealistically that the association would have gotten the highest price they got for even the smallest quantity of cotton for the crosby share the crosby's would have gotten the lion share of that the association share of that unrealistically high price even if they had gotten that for the crosspiece cotton wouldn't somehow be the delta between that high price and some average new york if you want to insert the word average some average new york futures price this clause doesn't come close to meeting alabama law and it strikes me what a pivot this is the argument that they lead with and that dominates the reply brief is one that comprise fewer than two pages before the district court and the only evidence of reason most they offer is the deposition of their expert john there that's their expert on how to apply this formula and he repeatedly testified that this formula does not approximate the associations out of pocket loss or its lost profits or any other kind of actual damages that he could think of he said it's not trying to calculate anything resembling actual damages or any calculation of what a tall guy had to pay out of pocket instead he five times explains this provision as a disincentive to breach and i'm not claiming he's got special knowledge of the of the people who actually wrote this and signed it but he is an ex for chording to them on how this provision operates and he's an expert on cotton marketing and the justification he can think of this provision walks them squarely into alabama penalties law now in fairness i guess doesn't he maybe it's cleanup but doesn't he sort of go back they've got some testimony that they cited page seven of the gray brief that says you know he did say it's supposed to approximate some loss to a toggle some attempt toward making the toggle whole but we really can't just know the right number sounds so i think that's their best quote it's page three ninety seven of the deposition and it says it's some calculation of the grievance grevious damage done to a ta da or the pool it's not a specific calculation it's not a make a a hole it is an incentive that is in the direction of damage that is a disincentive for a farmer not to perform that's their best quote and that doesn't get them there what they would need is evidence that they are likely lost in the event of a breach would somehow be captured by this formula and if this formula ever captured their likely loss in the event of non delivery it would just be an accident it first of all glaringly it doesn't account for the fact that the farmer gets the gross share  lion's share of the sales price that's why you market to an association yes they take a cut off to cover administrative and marketing expenses but this formula doesn't measure that last contribution to overhead it doesn't measure anything that would have happened had the farmer delivered and the association sold it is as i think the panel has rightly observed or at least implied with questions completely arbitrary the top driver of the formula is the highest price the association received for any quantity of cotton no matter how small at any point in the growing year their expert john mitchell conceded as he had to that that price is not representative even of the trades that same day let alone the trades over the whole growing season i mean can you imagine the association coming into court and trying to prove its damages if it had to prove damages by using a price that it achieved one time on less than one tenth of one percent of all the cotton they sold that is what the supreme court referred to unanimously and it's miller the alabama supreme court referred to unanimously in its miller decision as an arbitrary calculation with no correlation to actual loss now as it turns liquidated damages eight eighty percent of the gross sales price of the cotton leaving my clients with twenty percent but depending on the price at which the farmer sells the highest price the association can get for any tiny quantity of cotton and what's happening with the new york futures market there is no reason why this formula couldn't produce a number much larger than the gross sales price of the cotton no reason whatsoever why this formula if my brother and sister will this would take the position that because of the peculiar situation of association it would not apply the traditional route with the sign straight scrutiny that alabama coats  but because it is absolutely necessary for the distance of the association in any association of this guy and that there deliver is of cotton actually be delivered because obviously the association is going to be engaged in in futures contracts and and it needs to have the commitments that it is expecting therefore i think what the bama supreme court would do is  moderate that somewhat to indicate that although some disincentive is appropriate because of the necessity it cannot be won that is and trouble is the line drawn to too harsh the two things about that want the first point is they don't need leeway they don't need  ooseness they need a decision that would allow them to enforce a provision that has no relationship whatsoever to actual damages so i think one they would need a complete sea change thing to it when i read the alabama case law i come away absolutely convinced that the alabama supreme court would never do what you say unless the legislature had acted and if you look at a case we cite in our may second notice of stuff in the authority we're responding to the tourette's case that they cite and we cite a case called  twenty thirteen alabama supreme court decision and the parties they are made public policy arguments about how the alabama supreme court should decide that issue of statutory interpretation and the alabama supreme court said we don't do that we don't make policy we look at legislative text the text of the statute the alabama supreme court is not going to decide that it is such an expert in agricultural policy that at that cooperative marketing associations have to be allowed to enforce provisions that are enforceable in any other contract in alabama can question about just the articles three and four the separateness of articles three and four could and i'll ask your adversary as well but could a toggle have incorporated under article three if it had wanted i believe so they would have had to make whatever organizational adjustments are required by th article but they could have chosen the article three path that they did not and what the only thing the legislature has said the only hope that the alabama supreme court could rely on to make that public policy ruling the judge anderson is the use of the word liquidated damages in one thousand nine hundred twenty one statute saying you can include liquidated damages in your marketing agreements well under alabama best two days ten days sixty five it isn't honor and under alabama law two things were perfectly clear at that time first that liquidated damages tell you well settled common law meaning that means the camelot standards that's not a new law that goes back to the eighteen hundreds the other thing that was perfectly clear to the legislature is that the alabama courts then and now read common law terms of art in statutes to have their common law meaning so if the legislature which is the sole policy maker in alabama meant to exempt agricultural marking associations from the rule against penalties there's no way it would have simply said you can include liquidated damages they would have known what that meant and they would have known the courts would have interpreted it that way so the odd thing to me about that argument is than the then what is the legislative purpose for including it in three but not for i mean surely it must give some kind of bump right legislature to clarify for example that they could obtain specific performance because the statute says that you and i might think of that as default law right you can always get specific performance of a contract if you meet the at woodville standards but they specified that they specified that you could have liquidated damages provisions because otherwise those might have been as they were attacked as contracts and restraint of trade now look at what they did when they were concerned that the alabama courts would apply common law restraints in ways the legislature didn't want to look at to seventy one to ten seventy one says these these associations are not subject to the alabama laws against restraints on trade if they had wanted to send the signal to the courts by the way we don't want you to enforce the traditional limitations on penalties they would have done something like that remember in alabama that the common law was codified alabama code one dash three dash one they have adopted the common law except in so far as the legislature has specifically and acted statutes and derogation or  law does it matter to your argument in two ten sixty five that the statute says at the end and any such provision shall be valid and enforceable i mean any is a broad word right that the terms that i would focus you want are such provisions because such provisions refers back to the phrase may fix as liquidated damages specified psalms and before i stray from specified soms that's important if the association is right that this statute is in derogation or modification of a common law you have to strictly construe it according to its terms specified sums matters you can't read that as mere surplus it is rational for the legislature to say ok but the farmer has to know there's a specified some before breach this formula is far from a specified sum as you can get it's a multi variable formula but the real kicker is it is unknowable until the growing season in terms because the market values that populate it even if you ignore all the missing specifications and you shouldn't those those values are unknowable the time of breach so even if you thought the statute was in derogation of common law and even if you thought an article for association could invoke it you'd have to find this you still couldn't say this provision is it's not a specified som what are the remedies there that are available to the association your clients deposition of their expert who didn't do any actual damages calculations no proof of actual damages whatsoever and that i know you don't want to hear about the common law maybe but that kills them under camelot because a third prong of camelot is applied after the fact according to the miller case and if you can't prove any damages you can't possibly prove the some us to made it was reasonable under alabama law is that is that the timeline of when three and four were enacted that you think explains you were talking about sort of the context of twenty one of nine hundred twenty one is that the time line that explains why yes an enforcement provision and three no enforcement provision in force so yes i think so and the other bit of objective evidence i would offer you not just the lapse of time but also the article four doesn't have that expense expressed preemption of kaamelott restraint on trade law and all of that is just an indication these associations were coming into more acceptance by that point and the legislature didn't feel the need to specify that they could do they that any corporation could do that could be present in any contract should we be certifying any questions to the alabama supreme court we certainly have heard judge anderson saying there is what i think the alabama supreme court would do and you say i disagree absolutely you shouldn't because you have to quote this court sufficient sources of law to allow a principled conclusion i'm citing hammond versus department of corrections a twenty two f third twelve zero one but you said it a number of times you know alabama treats liquidated damages provisions you know how alabama interpret statutes you know from that nkrumah case that referred back to that alabama courts don't create policy they look to the legislature and they look to text now their bare hope that the alabama supreme court might throw everything in reverse and enact a sea change in alabama law doesn't justify adding another twelve to eighteen months to this proceeding and a new court you see you as you say in the hammonds case and many others you use much judgment restraint and discretion and certifying and think about the things that would have to happen so they can't possibly win under the common law court would have to decide that in article four association can invoke an article three provision contrary to how the courts interpreted those articles they would have to decide that liquidated damages as used in that statute doesn't mean the common law but need something much economy or something it was actually antithetical to the notion of liquidated damages of the common law contrary to all alabama rules construction they would have to decide that this multivariate formula that is unknowable until the growing season ends unknowable the time of breach qualifies as a specified  and finally they would have to decide the extreme version of this argument not just that they're going to be more liberal we're going to be more loose that we're going to allow them to enforce a provision there's no relationship whatsoever to actual laws that could in any given year double triple toward the entire amount the farmer got for his cotton and i guess on that point i should add they make the argument that if we had just waited longer in the market and sold for more we wouldn't have as much to complain about you know look that's another way of saying this provision has no relationship whatsoever to the price at which a farmer sells us c you know if we'd sold earlier we would have lost even more that doesn't make the provision enforceable i think we're coming up on tongue in cheek time and red light time of the any more questions before i sit down thank you very much thank  you five minutes yes could we have chosen the article three path yes it was there at the time the article for path has tax  benefits and i'll point out that when an article three associations sought those tax benefits that weren't in article three albums alabama courts said they could do that article in another context but essentially you concede right no explanation and that decision it it feels a little dish to me i would concede that the history of how all that there were three main alabama had to cope cooperative marketing act before anybody else and then the cooperative marketing at came in a twenty one and they changed that and then the in thirty four i mean we had of agriculture agricultural marketing act and it is i can't tell you what they meant or why they left out the restraint of trade in article four i mean i think it's just as reasonable to think they thought it was already in article three they didn't need to say it again just seems to me that if you've got a choice you've got three you're looking at three and four four you say has tax benefits some burdens perhaps three has the liquidated damages benefit perhaps not the tax benefits and you make a choice sort of opt in do you want tax benefits or you want liquidated damages and having made the choice for tax benefits you can't simply just sort of cross over to article three to get the benefit as well of a provision that applies only to article three associations that you know article two that applies to everything we say such associations are declared to be impressed with a public service and every such association shall be subject to the supervision inspection investigation of the commissioner so article two says all of these associations have a public service so why would why would the statement that a liquidated damages provision in article three shall be enforced respect to associations incorporated under that article right right shall be enforced and assume that they shall not be enforced in article four associations so what about sort of the ordinary canon of construction that says that where the legislature has included language in one section of a statute but not in another law section of the statute that that is presumed to have been an intentional choice and i'm not just making that up i mean u s supreme court said it a thousand times well we urge you and here there's no conflict it's just that article three includes the provision that you want to take advantage of but you happen to be an article or right that's true but this is in chapter ten of the code cooperatives in associations all of these are in that group and they're all in press with public policy benefits that foot indicate that you would not that you would give their liquidated damages provisions more scrutiny and less scrutiny than in a business context  the statement that there's no relationship to actual damages the problem is you don't know what the actual damages are in these situations because the person hasn't delivered the cotton what what mr mitchell sa in there's no dispute there were two million two hundred forty five thousand pounds of cotton that were not delivered in december january march february two thousand and ten eleven that had incredible value and the argument is you have no damage at all you have no damage at all when you've got you missing two and a half to two point two million pounds of very valuable cotton in an up market and a liquidated damages provision does is side we got actually two dollars and thirty cents a pound in a shipment of much more than eighteen hundred bales of cotton it was a very large purchase at two dollars and thirty cents we were able to get that in march if they had delivered their cotton to us it would have been sold during the period of time from november third through march so our liquidated damages provision you don't know that they are cut and was delivered in march we know they're caught it was delivered before the end of december their call their cotton was sold to cargill by december third so you can you assume that you would have gotten it in march well we don't know when we would have gotten it we would have had it should have been in a warehouse subject to us selling it before december third we should have been able to have it then we found out we didn't have it that's when the time period runs on this liquidated damages provision it's not the average price of the whole year it's it's not the price of the whole year it's the price from the data breach to the last date if any cotton being delivered to us and the highest price that we were able to obtain on a significant amount of cotton which we had during that period of time and what i don't understand is if we had just applied if caught if we just said the lowest price for caught during that period was seventy cents a pound which would be incredible because it was not the lowest price and that's all you get that's that's what our liquidated damages provision generated at seventy three cents a pound that's what our provision is because it uses the it to subtracts the average price from the highest price if it didn't if it was only the highest price i would understand that does sound pretty harsh but it's the highest price less the average price and it comes down into a range which is lower than the average price of cotton by half during the period of time we could have covered licious a we hadn't had any futures markets and we just car contract we had to cover what would we have had to pay to replace the two point two million dollars worth of cotton and it would have been judge in the ninety's to a dollar to a dollar and a half is what we would have had to cover so to say there are no damages here which is the net effect of this opinion we we have strong evidence of a member of the board of directors knows what art hedging strategy is knows that we've locked in our prices at seventy one cents which is what our members got that year for every pound of cotton that they produced and gave us they netted seventy one cents he knew this prices start going up and he starts leaving got it thank you so much i think we've got