Cone Mills Corporation v. Hurdle
| Decision Date | 10 January 1974 |
| Docket Number | No. WC 73-91-S,EC 73-89-S.,WC 73-91-S |
| Citation | 369 F. Supp. 426 |
| Parties | CONE MILLS CORPORATION, Plaintiff, v. Wayne HURDLE et al., Defendants. ALLENBERG COTTON CO., INC., Plaintiff, v. R. W. COLEMAN et al., Defendants. |
| Court | U.S. District Court — Northern District of Mississippi |
COPYRIGHT MATERIAL OMITTED
L. Glen Fant, Jr., Fant, Crutcher, Moore & Spencer, Holly Springs, Miss., Calvin L. Wells and Jack W. Brand, Wells, Gerald, Brand, Watters & Cox, Jackson, Miss., Dudley B. Bridgforth, Walker, Franks, Rone & Bridgforth, Hernando, Miss., for Cone Mills Corp.
John B. Farese, Peggy A. Jones, Farese, Farese, Jones & Farese, Ashland, Miss., Fred B. Smith, Robert W. Elliot, Ripley, Miss., for Wayne Hurdle.
Pat D. Holcomb, Grady F. Tollison, Holcomb, Dunbar, Connell, Merkel & Tollison, Clarksdale, Miss., James F. Blumstein, Nashville, Tenn., for the
American Cotton Shippers Assn., amicus curiae.
Bennett L. Kight, Michael H. Pope, Sutherland, Asbill & Brennan, Atlanta, Ga., for the American Textile Manufacturers Institute, Inc., amicus curiae.
F. M. Bush, Jr., F. M. Bush, III, Mitchell, McNutt & Bush, Tupelo, Miss., for Allenberg Cotton Co.
William W. Goodman, John McQuiston, Goodman, Glazer, Strauch & Schneider, Memphis, Tenn., for Allenberg Cotton Co. and Cone Mills Corp.
Walter M. O'Barr, Kenneth Coleman, O'Barr, Coleman & Burns, Okolona, Miss., John D. Sibley, Okolona, Miss., C. Michael Malski, Fagan, Amory, Miss., for R. W. Coleman and others.
Each of the above actions is before the court upon a motion to dismiss. Relevant facts have been presented by way of affidavits and admissions. The motions have been briefed and argued extensively. The court has also received amicus curiae briefs from two trade associations with a meaningful interest in the resolution of the primary issue before the court.1 The trade associations furnishing briefs are The American Textile Manufacturers Institute, a trade association for the cotton, man-made fibers, silk, and wool segments of the United States textile industry, and The American Cotton Shippers Association, a trade association of cotton merchants, shippers, and exporters.
The court's jurisdiction is invoked under 28 U.S.C.A. § 1332. Violations of the Commodity Exchange Act2 and the Sherman Anti-trust Act3 have also been alleged. At this stage, however, the fundamental question in each action involves the enforceability vel non of contracts for the advance or forward sale of cotton fiber grown for the 1973 crop year. Although these actions do not arise in identical factual settings, they share remarkable similarities and involve the same primary issue of law. The court, therefore, has decided to consider and discuss both in a single opinion.
During 1973 the price of raw cotton fiber on world markets rose in a sudden and spectacular fashion. Weather conditions, unprecedented foreign and domestic demand, dollar devaluation, and related factors combined to cause the market price to more than double within a six month period. When money speaks enticingly, listeners often become litigants.
The court will take judicial notice of its own docket and observe that literally scores of suits have been filed to either enforce or rescind advance or forward contracts for the sale and delivery of cotton fiber. In the present actions, buyer-plaintiffs are seeking to enforce cotton contracts on the terms and conditions allegedly agreed upon. The seller-defendants have moved to dismiss on several grounds. As noted, their primary contention is that a foreign corporation doing business in Mississippi without having qualified to do so prior to execution of the contracts is barred by Mississippi law from access to any court in Mississippi, state or federal, to enforce the contracts.
Cotton growers have traditionally sold their annual harvest on the open market some time after planting. Government price supports have, in some measure, enabled growers to reduce the risk of a buyer's market during seasons of abundant harvest or lagging demand.4 The government's purpose has been to encourage continued, steady production by insuring an adequate profit for the grower. Since an artificial market tends to promote surplus production, the government may also pay to insure that crops are planted only on a limited number of acres.
Increasing sophistication in growing, milling, and marketing techniques has fostered the utilization of the "forward" contract; a relatively new feature which is now gaining acceptance throughout the cotton industry. By forward contracting, a grower agrees to sell his future crop before it is planted or soon thereafter. A capable farmer can virtually assure himself a profit even before planting. If he is unable to negotiate a price which he anticipates will be profitable, he may plant other crops which are in demand or simply allow his land to lie fallow. Thus, in theory at least, forward contracting will help restore traditional principles of supply and demand to the cotton market with the added feature that the element of risk is reduced.
The grower, moreover, can borrow on forward contracts and textile mills can price their finished product long before manufacture. Forward contracting also enables the retail merchant to determine the price of an article manufactured from cotton months in advance. However, these qualities are discussed merely to provide background. It is not necessary to consider the social aspects of forward contracting in order to reach a decision.
(1) Cone Mills Corporation (Cone), the plaintiff in WC 73-91-S, is a corporate citizen of North Carolina with its principal place of business in that state. Cone manufactures textiles and operates mills in several states for that purpose. None, however, are or were during the pertinent period situated in Mississippi. The defendants, both individuals and partnerships, are citizens of Benton or Marshall Counties, Mississippi. They are cotton growers or producers.
Cone utilizes or blends various grades and varieties of cotton to manufacture textiles, and apparently buys cotton direct from many areas. The cotton grown in Benton and Marshall Counties is strict low middling or better 1 1/16 inch staple; a variety primarily used by Cone to manufacture corduroy fabric.
Through a local agent, Cone executed the subject contracts in Mississippi at a time when it had not qualified to do business in Mississippi. Qualification was subsequently perfected on September 27, 1973, seventeen days after Cone received notification from the defendants, all of whom acted upon the advice of the same attorney, that they would not honor the contracts nor deliver the cotton.
Each contract provided that the cotton was to be delivered to the buyer at a Mississippi gin or compress. On each of the contracts Cone's place of business was penciled in as "Slayden, Mississippi". Slayden, however, was the residence of Cone's agent. Although several of the defendants had sold their 1972 crop to Cone's agent, each denied having knowledge that Cone was the actual purchaser. Apart from the contracts, evidence adduced on behalf of the plaintiff demonstrates that Cone at all times contemplated loading the cotton on board trucks after ginning for shipment to its mills outside Mississippi.
(2) Allenberg Cotton Co., Inc. (Allenberg), the plaintiff in EC 73-89-S, is a corporate citizen of Tennessee with its principal place of business in that state. Allenberg is primarily a merchant or "middle-man" company engaged in the business of buying and selling cotton in numerous states, including Mississippi. Allenberg also merchandises cotton in foreign countries. The defendants are citizens of and cotton growers in Chickasaw and Lee Counties, Mississippi.
The subject contracts were initially executed in Mississippi by the defendants and Allenberg's agent, also a corporate citizen of Tennessee. Subsequently, they were transmitted to Memphis and signed by an officer of Allenberg. The defendants were aware they were selling their crop to Allenberg. The contracts called for the cotton to be ginned and baled locally and delivered on board Allenberg's trucks at the gin.
At the time of execution, Allenberg had not qualified to do business in Mississippi. On May 29, 1973, Allenberg qualified. About September 25, Allenberg was notified that defendants would not honor the contracts nor deliver the cotton.
Miss.Code Ann. § 79-3-211 (1972) provides in pertinent part:
Miss.Code Ann. § 79-3-247 (1972) provides in pertinent part:
Miss.Code Ann. § 79-3-289 (1972) provides in pertinent part:
The provisions of this chapter shall apply to commerce with foreign nations and among the several states only in so far as the same may be permitted under the provisions of the Constitution...
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