Fisher v. Flue-Cured Tobacco Cooperative Stabilization Corporation, No. 374A14

Docket NºNo. 374A14
Citation794 S.E.2d 699, 369 N.C. 202
Case DateDecember 21, 2016
CourtUnited States State Supreme Court of North Carolina

369 N.C. 202
794 S.E.2d 699

Kaye W. FISHER, Dan Lewis And Daniel H. Lewis Farms, Inc., George Abbot, Robert C. Boyette and Boyette Farms, Inc., Kyle A. Cox, C. Monroe Enzor, Jr., Executor of the Estate of Crawford Monroe Enzor, Sr., Archie Hill, Kendall Hill, Whitney E. King, Cray Milligan, Richard Renegar, Linwood Scott, Jr. and Scott Farms, Inc., Orville Wiggins, Alford James Worley, Executor of the Estate of Dennis Anderson, Chandler Worley, Harold Wright, and Others Similarly Situated
v.
FLUE-CURED TOBACCO COOPERATIVE STABILIZATION CORPORATION

No. 374A14

Supreme Court of North Carolina.

Filed December 21, 2016


Blanchard, Miller, Lewis & Isley, P.A., Raleigh, by Philip R. Isley ; Speights & Runyan, by C. Alan Runyan, pro hac vice; and Richardson, Patrick, Westbrook & Brickman, LLC, by James L. Ward, Jr., for plaintiff-appellees.

794 S.E.2d 703

Quinn Emanuel Urquhart & Sullivan, LLP, by John B. Quinn, pro hac vice, and Derek L. Shaffer, pro hac vice; and Wyrick Robbins Yates & Ponton LLP, Raleigh, by K. Edward Greene and Tobias S. Hampson, for defendant-appellant n/k/a U.S. Tobacco Cooperative, Inc.

Robinson, Bradshaw & Hinson, P.A., Charlotte, by John R. Wester, for NC Chamber, amicus curiae.

JACKSON, Justice.

369 N.C. 204

In this case we consider whether the trial court erred by allowing plaintiffs’ motion to certify a class of current and former flue-cured tobacco producers who were members of defendant Flue-Cured Tobacco Cooperative Stabilization Corporation between 1946 and 2004. Because we cannot conclude that the trial court abused its discretion, we affirm and remand.

This appeal arises from two cases that were consolidated for pretrial purposes. These two cases began with the filing of complaints on 6 January 2005 and 11 February 2005. Plaintiffs are current and former tobacco producers and members of defendant, a nonprofit cooperative that administered the federal tobacco price support program (the Price Support Program) for flue-cured tobacco from 1946 through 2004.

According to the allegations in plaintiffs’ third amended and consolidated complaint, flue-cured tobacco producers participating in the Price Support Program were required to be members of defendant. To become a member, a producer paid five dollars to defendant in exchange for one share of defendant's stock. The complaint asserted that each member entered into a contract with defendant that stated:

The undersigned grower of flue-cured tobacco (hereinafter "grower") applies for membership in the Flue-Cured Tobacco Co-operative Stabilization Corporation, a nonprofit co-operative ... and herewith makes payment of
369 N.C. 205
$5.00 to the undersigned agent for one (1) share of common stock.

The grower hereby appoints the Association as his agent to receive, handle and market all or such portion of the flue-cured tobacco ... as the grower may elect or choose to deliver to the Association for disposition in accordance with the terms of this contract and the Association accepts such appointment....

The Stabilization Corporation agrees (1) to receive, handle and sell ... such tobacco as the grower may elect to deliver to the Stabilization Corporation, and (2) that in addition to the amount of [sic] paid to the grower upon delivery of tobacco, it will distribute to him his pro rata share of any net gains remaining after payment of operating and maintenance costs and expenses and a reasonable deduction for reserves as determined by the Board of Directors.

The complaint asserts that each member "was guaranteed a lifetime membership in [defendant] that could not be cancelled without a hearing."

According to the complaint, the process of participating in the Price Support Program involved tobacco producers delivering their product to a warehouse, where defendant then graded the tobacco and attempted to sell it at auction. The auction was subject to a minimum price established annually by the United States Department of Agriculture, and the tobacco would not be sold for less than that price. If the tobacco could not be sold, then defendant would process and store it, while advancing the minimum price less an administrative fee to the tobacco producer. Defendant paid the tobacco producers using loans from the Commodity Credit Corporation (CCC), a corporation owned and operated by the federal government that helped administer the Price Support Program. The unsold tobacco served as collateral for the loans issued by the CCC.

Plaintiffs’ complaint alleged that until 1982, these loans "were completely non-recourse, meaning that all losses or defaults incurred under the program were borne by the CCC and the taxpayers of the United States." At the same time, if tobacco from a given crop year eventually was sold at a price higher than necessary to pay that year's loans, then "these gains were to be allocated pro-rata among [ ] the [tobacco producers] who participated in the program that year." This system of allocating losses and gains remained in effect until 1982, when Congress enacted the No Net Cost Tobacco Program Act (the NNC Act). Pursuant

369 N.C. 206

to the NNC Act, defendant

794 S.E.2d 704

began collecting an additional payment (the NNC Assessment) from tobacco producers when they delivered their tobacco to defendant. These funds served as additional collateral for the loans issued to defendant by the CCC, limiting losses borne by the federal government. If any funds remained after the loans were repaid, the surplus funds belonged to the tobacco producers who had participated in the Price Support Program. Ultimately, the Price Support Program came to an end in 2004.

Plaintiffs asserted claims related to funds accumulated by defendant throughout the lifetime of the Price Support Program and held by defendant as reserve funds. According to the allegations in the complaint, the money in defendant's reserve funds came primarily from a few specific sources. First, defendant received and stored tobacco from 1967 to 1973 and eventually sold the tobacco at a price higher than necessary to repay the loans from the CCC for those crop years. Some of this surplus money was distributed to the tobacco producers, and some was retained by defendant as reserve funds. Defendant issued certificates of interest to the tobacco producers whose tobacco had created the surplus during this time period. The certificates of interest showing that the tobacco producers had an interest in the reserve funds were issued on a pro rata basis. Second, after 1982 defendant used surplus funds collected from NNC Assessments to redeem unsold tobacco that had been held as collateral for loans from the CCC. Defendant sold that tobacco for a substantial amount and retained the money as reserve funds. Third, when the Price Support Program came to an end in 2004, defendant satisfied its remaining loans, and the CCC returned to defendant approximately eighty-three million pounds of processed tobacco that had been held as collateral. Defendant sold this tobacco and again retained the revenue.

Plaintiffs’ complaint alleged that in 2004, defendant notified all its members that unless they entered into new contracts to sell tobacco exclusively to defendant in 2005, they would lose their memberships—thus "forc[ing] Plaintiffs to either enter into that contract, at reduced prices and quantities, or lose their substantial investment in [defendant], including their share of the reserves, retained earnings, and margins." Plaintiffs contended that defendant "expelled hundreds of thousands" of members and took control of the reserve funds in an "attempt[ ] to create a ‘last man standing’ scenario in which a few hundred remaining member[s] potentially have the benefit of hundreds of millions of dollars in assets which have been created through the efforts of all member[s], including Plaintiffs." Plaintiffs sought, inter alia , money damages, partial distribution of defendant's assets, and a declaratory judgment that

369 N.C. 207

plaintiffs are members of defendant and are "entitled to all rights, privileges, and benefits resulting" from their membership.

Plaintiffs also filed a motion for class certification. The trial court allowed the motion, stating that the certified class shall include:

All individuals, proprietorships, partnerships, corporations, or their heirs, representatives, executors or assigns, and other proper entities that have been members/shareholders of the Flue-Cured Tobacco Cooperative Stabilization Corporation ... at any time from its inception through the end of crop year 2004, and any heirs, representatives, executors, successors or assigns, and;

(a) had not requested cancellation of their membership and whose membership was cancelled by Stabilization without a hearing, and/or

(b) were issued a certificate of interest in capital reserve by Stabilization for any of the tobacco crop years between and including 1967-1973, and/or

(c) delivered, consigned for sale, or sold flue-cured tobacco and paid an assessment for deposit into the No Net Cost Tobacco Fund or No Net Cost Tobacco Account during any tobacco crop years between
...

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10 practice notes
  • Speaks v. U.S. Tobacco Coop., Inc., No. 5:12-CV-729-D
    • United States
    • United States District Courts. 4th Circuit. Eastern District of North Carolina
    • February 20, 2018
    ...Court of North Carolina affirmed the order granting class certification. See Fisher v. Flue-Cured Tobacco Coop. Stabilization Corp., 369 N.C. 202, 794 S.E.2d 699 (2016). In early 2017, the parties in this federal case began discussing how to proceed with this case. On May 11 and 12, 2017, p......
  • State v. Moir, No. 49PA14
    • United States
    • North Carolina United States State Supreme Court of North Carolina
    • December 21, 2016
    ...should be considered in its true legal light," Helms v. Rea , 282 N.C. 610, 620, 194 S.E.2d 1, 8 (1973) (brackets in original) (quoting 794 S.E.2d 699 McGill v. Town of Lumberton , 215 N.C. 752, 754, 3 S.E.2d 324, 326 (1939), and citing Davis v. Davis , 269 N.C. 120, 127, 152 S.E.2d 306, 31......
  • Chambers v. Moses H. Cone Mem'l Hosp., No. 147PA18
    • United States
    • North Carolina United States State Supreme Court of North Carolina
    • June 5, 2020
    ...including "preventing a multiplicity of suits or inconsistent results"); Fisher v. Flue-Cured Tobacco Coop. Stabilization Corp. , 369 N.C. 202, 216, 794 S.E.2d 699, 710 (2016) (same). By consolidating numerous individual claims with common factual and legal issues into a single proceeding, ......
  • Sharp Farms v. Speaks, No. 18-1316
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • February 28, 2019
    ...five dollars ... in exchange for one share of [the Cooperative’s common] stock." Fisher v. Flue-Cured Tobacco Coop. Stabilization Corp. , 369 N.C. 202, 794 S.E.2d 699, 703 (2016) (" Fisher-Lewis "). According to the Cooperative’s governing documents, this common stock could be "purchased, o......
  • Request a trial to view additional results
9 cases
  • Speaks v. U.S. Tobacco Coop., Inc., No. 5:12-CV-729-D
    • United States
    • United States District Courts. 4th Circuit. Eastern District of North Carolina
    • February 20, 2018
    ...Court of North Carolina affirmed the order granting class certification. See Fisher v. Flue-Cured Tobacco Coop. Stabilization Corp., 369 N.C. 202, 794 S.E.2d 699 (2016). In early 2017, the parties in this federal case began discussing how to proceed with this case. On May 11 and 12, 2017, p......
  • State v. Moir, No. 49PA14
    • United States
    • North Carolina United States State Supreme Court of North Carolina
    • December 21, 2016
    ...should be considered in its true legal light," Helms v. Rea , 282 N.C. 610, 620, 194 S.E.2d 1, 8 (1973) (brackets in original) (quoting 794 S.E.2d 699 McGill v. Town of Lumberton , 215 N.C. 752, 754, 3 S.E.2d 324, 326 (1939), and citing Davis v. Davis , 269 N.C. 120, 127, 152 S.E.2d 306, 31......
  • Chambers v. Moses H. Cone Mem'l Hosp., No. 147PA18
    • United States
    • North Carolina United States State Supreme Court of North Carolina
    • June 5, 2020
    ...including "preventing a multiplicity of suits or inconsistent results"); Fisher v. Flue-Cured Tobacco Coop. Stabilization Corp. , 369 N.C. 202, 216, 794 S.E.2d 699, 710 (2016) (same). By consolidating numerous individual claims with common factual and legal issues into a single proceeding, ......
  • Sharp Farms v. Speaks, No. 18-1316
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • February 28, 2019
    ...five dollars ... in exchange for one share of [the Cooperative’s common] stock." Fisher v. Flue-Cured Tobacco Coop. Stabilization Corp. , 369 N.C. 202, 794 S.E.2d 699, 703 (2016) (" Fisher-Lewis "). According to the Cooperative’s governing documents, this common stock could be "purchased, o......
  • Request a trial to view additional results

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