Title: Goshen County Co-op. Beet Ass'n v. Pearson

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Goshen County Co-op. Beet Ass'n v. Pearson1985 WY 157706 P.2d 1121Case Number: 84-175Decided: 10/09/1985GOSHEN COUNTY COOPERATIVE BEET ASSOCIATION, APPELLANT (PLAINTIFF), 

v. 

RICHARD PEARSON; ROBERT RING; TOM F. ABE; DOUGLAS ABE; GEORGE FUJINAMI; ROBERT A. COOK; KELLY SCHMER; TERRY MARGHEIM; CARL EISENBARTH, JR.; NEIL E. BURKHART; ROBERT STRECKER; KEITH STRECKER; HOWARD EDWARDS; MIKE EDWARDS; VERNON BRIGGS; THOMAS E. BRIGGS; HERMAN RING; ED H. WEGLIN; ED H. WEGLIN, JR.; RUBEN SCHREINER; ALEX SCHREINER; TRIPLE H. FARMS; BERNARD G. HAAS; LEONARD SCHICK; CARL F. RUPP; LIPPINCOTT FARMS; LEROY E. MEININGER; LUIZ RUIZ, JR.; GABRIEL RUIZ; ALVIN RUIZ; JOHN L. BATH; BILL VANDIVORT; HORT FARMS, INC.; AND PHILLIP HORT, APPELLEES (DEFENDANTS), 

BUZZARD FARMING, INC.; AND HAROLD E. MEHLING, (DEFENDANTS).

Supreme Court of Wyoming

GOSHEN COUNTY COOPERATIVE BEET 
ASSOCIATION, APPELLANT (PLAINTIFF), 

v. 

RICHARD PEARSON; ROBERT 
RING; TOM F. ABE; DOUGLAS ABE; GEORGE FUJINAMI; ROBERT A. COOK; KELLY SCHMER; 
TERRY MARGHEIM; CARL EISENBARTH, JR.; NEIL E. BURKHART; ROBERT STRECKER; KEITH 
STRECKER; HOWARD EDWARDS; MIKE EDWARDS; VERNON BRIGGS; THOMAS E. BRIGGS; HERMAN 
RING; ED H. WEGLIN; ED H. WEGLIN, JR.; RUBEN SCHREINER; ALEX SCHREINER; TRIPLE 
H. FARMS; BERNARD G. HAAS; LEONARD SCHICK; CARL F. RUPP; LIPPINCOTT FARMS; LEROY 
E. MEININGER; LUIZ RUIZ, JR.; GABRIEL RUIZ; ALVIN RUIZ; JOHN L. BATH; BILL 
VANDIVORT; HORT FARMS, INC.; AND PHILLIP HORT, APPELLEES (DEFENDANTS), 

BUZZARD FARMING, INC.; 
AND HAROLD E. MEHLING, (DEFENDANTS).

Rehearing Denied October 
29, 1985.

 
 
Appeal from the District 
Court, GoshenCounty, William A. Taylor, 
J.

 
 
Frank J. Jones 
of Jones & Weaver, P.C., Wheatland, for appellant.

Keith G. Kautz 
of Sawyer, Warren & Kautz, Torrington, for appellees.

Before THOMAS, C.J., and 
ROSE, ROONEY, BROWN and CARDINE, JJ.

ROSE, 
Justice.

[¶1.]     The issue raised in 
this appeal is whether the federal injunction entered May 20, 1983, shields the 
appellees, 34 beet growers in and around Goshen County, Wyoming, against suit for breach of contract 
for conduct occurring while the injunction remained in effect. The injunction 
restrained appellant Goshen County Cooperative Beet Growers Association 
(Association) from interfering in any manner with any beet grower who negotiated 
an independent contract for the sale of his sugar beet crop during the 1983 
growing season. The district court determined that the injunction protected 
those who acted in reliance on it, notwithstanding the subsequent reversal of 
the injunction by the court of appeals. Accordingly, the district court entered 
summary judgment against the Association in its action to recover damages from 
named growers who allegedly entered into separate marketing contracts in 
violation of their cooperative agreements with the Association during the 
effective period of the injunction. We will reverse.

FACTS

[¶2.]     Appellant is a 
cooperative marketing association formed and operating under the Cooperative 
Marketing Act, § 17-10-101 et seq., W.S. 1977. Appellees are beet growers and 
members of the appellant Association. The articles of incorporation of the 
Association set out the organization's purposes:

"That the purpose of this 
corporation is to organize a cooperative marketing association to assist and 
encourage the business of producing sugar beets in a profitable manner to a 
grower of the same * * *.

"To become an agency for 
the marketing of beets grown by its members and to that end to enter into 
contracts with its members, and for the exclusive and irrevocable right to 
market their sugar beets and other products * * *." Article 
II.

The bylaws 
establish the procedures for managing the affairs of the Association and 
provide:

"The Association, acting 
by and through its Board of Directors, is designated the sole agent to negotiate 
and finalize each and every contract and amendments thereto for the sale of all 
sugar beets grown by members of this Association." Article VIII, Section 
1.

[¶3.]     The marketing contracts 
between the members and the Association implement the purposes of the 
organization:

"1. The Member hereby 
appoints the Association as his sole and exclusive agent for the purpose of 
negotiating a marketing contract or contracts for the sale of all sugar beets to 
be processed for sugar which are grown and harvested by him, or acquired by him 
during the term of this contract. The Member agrees to market all such sugar 
beets exclusively through the Association.

"2. The Member agrees not 
to market nor to enter into a contract to market any crop of sugar beets to be 
harvested in a crop year for which no agreement for the sale of such crop of 
sugar beets has been negotiated by the Association."1

In the event a 
member markets sugar beets in violation of these provisions, the contracts 
specify the sum of two dollars per ton of beets wrongfully sold as the 
liquidated damages sustained by the Association.

[¶4.]     In November of 1982, 
representatives of the Association and the Holly Sugar Corporation began 
negotiating a contract for marketing the sugar beets to be grown by members 
during 1983. Between November, 1982 and May, 1983, Holly Sugar presented several 
contract offers, each of which was rejected by a substantial majority of the 
membership.

[¶5.]     On May 11, 1983, Holly 
Sugar and two of the appellees filed an action in the United States District 
Court for the District of Wyoming to enjoin the Association from interfering in 
any manner with beet growers who pursued contract negotiations with Holly Sugar 
for the purchase and sale of the 1983 beet crop. The farmers and Holly Sugar 
based their claims for relief on the Association's alleged violations of federal 
antitrust laws and intentional interference with their prospective business 
advantages. Following a hearing, the federal court, on May 20, 1983, issued a 
permanent injunction which provided in part:

"NOW, THEREFORE, IT 
IS

"ORDERED that the 
defendant in this action, the Goshen County Cooperative Beet Growers 
Association, together with its directors, officers, agents, employees and those 
acting in concert therewith be, and the same are, hereby enjoined from 
interfering, intimidating, threatening or harassing in any manner any beet 
grower in Goshen County who negotiates or contracts with Holly Sugar for the 
sale of their sugar beet crop in the 1983 growing season; it 
is

"FURTHER ORDERED that 
each individual beet grower in GoshenCounty is free to enter into a separate 
and independent agreement with Holly Sugar for the growing and sale of sugar 
beets * * *."

[¶6.]     The Association 
appealed this order, and on June 10, 1983, the Tenth Circuit Court of Appeals 
stayed the effect of the injunction pending resolution of the appeal. Between 
May 20, 1983, when the injunction issued, and June 10, 1983, when it was stayed, 
the appellees entered into contracts with Holly Sugar and planted their beet 
crops. The court of appeals reversed the federal district court's injunction on 
January 16, 1984. Holly Sugar Corporation 
v. GoshenCounty Cooperative Beet 
Growers Association, 725 F.2d 564 (10th Cir. 1984).

[¶7.]     The Association 
subsequently brought the present breach-of-contract action to recover damages 
for the growing and marketing of sugar beets by appellees outside the marketing 
association. The trial court entered summary judgment against the Association on 
the ground that the federal court's injunction immunized the growers against 
suits on their cooperative marketing contracts.

ISSUE

[¶8.]     The Association words 
the issue for review:

"DID THE ORDER OF THE 
UNITED STATES DISTRICT COURT PROTECT DEFENDANTS FROM AN ACTION FOR BREACH OF 
CONTRACT WHEN THE ORDER WAS ULTIMATELY REVERSED ON 
APPEAL?"

DECISION

Scope of the 
Injunction

[¶9.]     Preliminarily, we 
question the rights of 32 of the appellees in this case to rely on the 
protection of an injunction to which they were never a party. These appellees 
concede that they did not seek injunctive relief against the Association, either 
individually or as members of a class. Nevertheless, they urge that their 
conduct was protected by the broad language of the federal court's order which 
purports to authorize "each individual beet grower in GoshenCounty" to enter into an independent 
contract with Holly Sugar.

[¶10.]  We are mindful that a class action is the 
usual means by which a large group of potential litigants, similarly situated, 
obtains injunctive relief for violations of the antitrust laws. Chmieleski v. City Products Corporation, 
71 F.R.D. 118 (W.D.Mo. 1976); Rule 23, Federal Rules of Civil Procedure. In the 
case at bar, only two of the growers, in addition to Holly Sugar, sought relief 
and were parties to the federal injunction. We need not explore, however, the 
nonparties' rights under the federal order, because we will hold that the 
injunction did not and could not permanently immunize any of the growers against 
enforcement of the valid contracts which they had made.

Protection Afforded by an 
Injunction Following Reversal

[¶11.]  In considering the ramifications of a 
reversed injunction, courts in other jurisdictions have applied the rules 
applicable to reversals of judgments in general. Welsh v. Sells, 244 Ind. 423, 192 N.E.2d 753 (1963); Willett Company v. 
Carpentier, 4 Ill. 2d 407, 123 N.E.2d 308 (1954); see also Harvey Aluminum v. School District No. 
9, 248 Or. 167, 433 P.2d 247 (1967) (absent unique circumstances, actions 
taken in reliance on a declaratory judgment are at the risk that it will be 
reversed on appeal). In Willett Company 
v. Carpentier, the trial court, in a previous taxpayers' class action, had 
held unconstitutional a particular amendment to the motor vehicle laws and had 
enjoined the secretary of state from collecting taxes or fees under the 
amendment. The Illinois Supreme Court subsequently reversed that decree. While 
the injunction was in effect, however, Willett Company paid the taxes imposed by 
the law prior to amendment, and the secretary accepted such payment and issued 
license plates under the compulsion of the injunction. Following the Supreme 
Court's decision reversing the injunction, the secretary brought an action 
against Willett Company to recover the difference between the taxes actually 
paid and the amount due under the amended act. The Illinois Supreme Court 
rejected Willett Company's argument that the injunction protected its conduct 
and that the secretary could not collect increased taxes 
retroactively:

"However, the rights of 
parties to an action, pending an appeal, are well settled. In First National Bank v. Road District No. 
8, 389 Ill. 156, we said, page 161, 58 N.E.2d 884, at 
:

"`A party to a suit is 
presumed to know of all the errors in the record, and such party cannot acquire 
any rights or interests based on such erroneous decree that will not be 
abrogated by a subsequent reversal thereof. If such party has received benefits 
from the erroneous decree or judgment, he must, after reversal, make 
restitution, and, if he has sold property erroneously adjudged to belong to him, 
he must account to the true owner for the value. Titles acquired by parties to 
the record under an erroneous decree or judgment will be divested by the 
subsequent reversal of such decree or judgment. [Citations.] A party to a decree 
cannot acquire any rights thereunder while the same is subject to review which 
he can assert after the decree is reversed, since the effect of the reversal is 
to abrogate the decree and leave thet [sic] cause as it stood prior to the entry 
of the decree. * *'

"We believe that the law 
set forth in that case is sound and is squarely applicable to the present case. 
* * * Any advantages which it [Willett Company] obtained by virtue of said 
erroneous decree cannot be retained by appellee, for the reversal leaves the 
case as though no such decree had ever been entered." 123 N.E.2d  at 
311.

[¶12.]  In Welsh v. Sells, supra, the Indiana 
Supreme Court found it necessary to expressly mandate a prospective effect of 
its decision dissolving an injunction and reversing a trial court's judgment 
that a sales and use tax was unconstitutional. Without such prospective 
enforcement of the tax law, those who acted in reliance on the trial court's 
judgment and injunction would be subject to fines and 
penalties:

"In reaching a decision 
that the Act in question is constitutional (with the exceptions designated), 
this court is confronted with the fact that the purchasing public and retail 
merchants should be protected against liability, both criminal and civil, by 
reason of their failure to pay and collect taxes on transactions occurring 
during the period of the trial court's injunction. Undue hardships and 
injustices, without question, would occur were we to follow the principle of law 
that the reversal or overruling of an adjudication of unconstitutionality 
validates the statute from the date of its enactment. 16 C.J.S. Constitutional 
Law § 101, p. 469.

* * * * * 
*

"No court is so absolute 
that it can, by simply so decreeing, erase the past effects of and compliance 
with the trial court's injunction preventing the operation of the act in 
question during the period of this litigation. In justice to all parties 
involved, our decision must have only a prospective effect from the date of its 
certification. Both purchaser and retailers would otherwise be subject to fines 
and penalties, including imprisonment, by reason of failure to comply with the 
act." 192 N.E.2d  at 765.

[¶13.]  In Edgar v. MITE Corporation, 457 U.S. 624, 
102 S. Ct. 2629, 73 L. Ed. 2d 269 (1982), United States Supreme Court Justice 
Stevens, concurring in part and concurring in the judgment, reasoned that an 
injunction reversed on appeal affords no protection from statutory penalties 
imposed as a result of actions taken in reliance on the injunction. Although a 
majority of the Court declined to consider the issue, that said by Justice 
Stevens is persuasive and helpful to our resolution of this 
appeal:

"Since a final judgment 
declaring a state statute unconstitutional would not grant immunity for actions 
taken in reliance on the court's decision, certainly a preliminary injunction - 
which on its face does nothing more than temporarily restrain conduct - should 
not accomplish that result. Neither the preliminary injunction nor the 
subsequent judgment declaring the statute unconstitutional can fairly be 
construed as a grant of absolute immunity from enforcement of the Illinois 
statute.

* * * * * 
*

"My conclusions 
concerning the proper nature of injunctive and declaratory relief are not based 
upon arcane interpretations of common law. Federal courts are courts of limited 
jurisdiction. Before a federal court exercises any governmental power, it has a 
duty to determine its own jurisdiction to act. There simply is no constitutional 
or statutory authority that permits a federal judge to grant dispensation from a 
valid state law.

"* * * The District Court 
in this case entered both an injunction restraining certain conduct by the 
Illinois Secretary of State and a judgment declaring a state statute 
unconstitutional. It did not - because it could not - grant immunity from the 
requirements of a valid state law." 457 U.S.  at 651-654, 102 S. Ct.  at 
2645-46.

[¶14.]  The foregoing cases concern the right of 
the state to enforce a valid state law, while the instant case concerns the 
right of a private entity to enforce a valid contract.2 This distinction is not material, 
however, to our determination of whether the injunction affords appellees a 
complete defense to the Association's action for breach of contract. The 
reversal of the district court's injunction by the court of appeals abrogated 
the decree as though it had never been entered. While the injunction was in 
effect, however, the beet growers obtained certain advantages by negotiating 
independently with Holly Sugar. The cooperative marketing contracts prohibit 
such conduct and provide for liquidated damages in relation to the tonnage of 
beets wrongfully sold. While the district court had authority to temporarily 
prohibit the Association from enforcing the marketing agreements, it had no 
authority to permanently immunize the growers against suits for actions taken in 
violation of valid contracts.

[¶15.]  Appellees contend that in the event the 
Association is entitled to recover in this case, its damages are limited to the 
amount of the injunction bond. The posting of an indemnity bond protects the 
enjoined entity if the injunction was "`wrongfully' sued out," Liner v. Jafco, Inc., 375 U.S. 301, 305-306, 84 S. Ct. 391, 11 L. Ed. 2d 347 (1964). The face of the bond limits the amount recoverable by way of 
damages. Weber v. Johnston Fuel Liners, 
Inc., Wyo., 540 P.2d 535 (1975). The majority of the 
appellees in the instant case, however, did not join the complaint for an 
injunction and did not post a bond to protect the Association from harm 
resulting from the issuance of an erroneous decree. These appellees are not 
entitled to rely on the injunction bond to compensate the Association for 
damages arising from their breaches of the marketing 
agreements.

[¶16.]  Since the federal injunction did not, as 
a matter of law, immunize appellees from suit for contract violations during the 
effective period of the injunction, summary judgment was improper. We reverse 
the judgment and remand the case for further proceedings consistent with this 
opinion.

1 Section 17-10-121(a), 
W.S. 1977, authorizes agreements which designate a cooperative marketing 
association as the exclusive agent for the sale of all or part of its members' 
agricultural products:

"The association and its 
members may make and execute marketing contracts, requiring the members to sell, 
for a period of time, not over ten (10) years, all or any specified part of 
their agricultural products or specified commodities exclusively to or through 
the association or any facilities to be created by the 
association."

2 Nothing in the record 
suggests that the marketing contracts are not legally valid, and we assume their 
validity for purposes of reviewing the summary judgment entered in this 
case.