Rigby v. Flue-Cured Tobacco Coop. Stabilization Corp.

• Decision Date: 20 October 2014
• Docket Number: No. A13A1659.,A13A1659.
• Citation: 755 S.E.2d 915,327 Ga.App. 29
• Court: Georgia Court of Appeals
• Parties: RIGBY et al. v. FLUE–CURED TOBACCO COOPERATIVE Stabilization Corporation.

327 Ga.App. 29

755 S.E.2d 915

RIGBY et al.

v.FLUE–CURED TOBACCO COOPERATIVE Stabilization Corporation.

No. A13A1659.

Court of Appeals of Georgia.

March 28, 2014.

Reconsideration Denied April 10, 2014.

Certiorari Denied Oct. 20, 2014.

Savage & Turner, Brent J. Savage, Kathryn Hughes Pinckney, Savannah, for Appellants.

Edenfield, Cox, Bruce & Classens, Gerald M. Edenfield, Vera Sharon Edenfield, Statesboro, L. Morgan Martin, for Appellee.

MILLER, Judge.

Julian A. Rigby, Terry Altman, Elton Carter, Byron Carter, David H. Lee, and Bryan Aldridge (collectively, “the Plaintiffs”) are tobacco farmers who were members of and sold their tobacco to Flue–Cured Tobacco Cooperative Stabilization Corporation, now known as the United States Tobacco Cooperative, Inc. (the “Tobacco Cooperative”).¹ The Plaintiffs sued the Tobacco Cooperative for breach of contract, an accounting, and other claims relating to allegations that they were wrongfully stripped of their membership in the cooperative, were entitled to an accounting of the Tobacco Cooperative's capital reserve, stock certificates, and dividends, and were denied the opportunity to sell their tobacco to marketing centers. The Plaintiffs appeal from the trial court's rulings dismissing some of their claims and granting summary judgment on their remaining claims. The Plaintiffs contend that the trial court erred in granting summary judgment to the Tobacco Cooperative on: their claim to be reinstated as members of the Tobacco Cooperative; their demand to be issued shares of the Tobacco Cooperative common stock; their claim for an accounting of the Tobacco Cooperative's capital account; their breach of contract claim concerning the Tobacco Cooperative's failure to provide them an opportunity to sell tobacco through its marketing facilities; and their claims relating to the Tobacco Cooperative's failure to pay them a pro-rata share of profits earned between the years 1967 and 1973. The Plaintiffs also contend that the trial court erred in dismissing their claim for breach of fiduciary duty and in granting summary judgment to the Tobacco Cooperative on their claim for attorney fees. For the reasons that follow, we affirm in part and reverse in part.

Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. A de novo standard of review applies to an appeal from a [grant or] denial of summary judgment, and we view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant.

(Citations and footnote omitted.) GEICO Gen. Ins. Co. v. Wright, 299 Ga.App. 280, 281, 682 S.E.2d 369 (2009).

So viewed, the evidence shows that the Tobacco Cooperative, a non-profit agricultural cooperative association, was organized in 1946 under North Carolina law for the purpose of engaging in business activities related to the marketing, selling, and distribution of flue-cured tobacco. Article VI of the Tobacco Cooperative's Articles of Incorporation (“Article VI”) provides that common stock in the Tobacco Cooperative “may be purchased, owned or held by producers who shall patronize the corporation in accordance with uniform terms and conditions prescribed thereby and only such persons shall be regarded as eligible members of the corporation.” Article VI also provides that no dividends shall be paid upon the common stock.

Among the Tobacco Cooperative's activities, it administered the federal minimum price support program offered to flue-cured tobacco farmers within portions of the Southeastern United States, including Georgia. The Tobacco Cooperative worked through the Commodity Credit Corporation (“CCC”) and the United States Department of Agriculture(“USDA”) to administer the federal tobacco price support program within the framework first created by the Agricultural Adjustment Act of 1938, which established a program of federal tobacco quotas and price supports aimed at stabilizing and increasing the prices paid to America's tobacco growers. 7 USC §§ 1281 et seq.

In brief, the USDA annually set the minimum price for flue-cured tobacco, and the payment for tobacco was funded through loans that the Tobacco Cooperative received from the CCC. The Tobacco Cooperative used the loans to purchase eligible tobacco that served as collateral for the CCC loans. The Tobacco Cooperative then processed and stored the tobacco, and later attempted to resell it at a price sufficient to repay or reduce the CCC loans. When the Tobacco Cooperative realized more from the sale of a particular tobacco crop than necessary to repay the CCC loans and recover its costs, the tobacco growers who produced that particular crop received a portion of the surplus, or net gain. When the proceeds from the sale of a particular crop were insufficient to repay the CCC loans, however, the losses were absorbed by the federal government.²

The Plaintiffs, all flue-cured tobacco farmers, applied for and received the Tobacco Cooperative stock in exchange for a $5 capital contribution. In particular, the Tobacco Cooperative records show that Rigby applied for and received a share of common stock in 1982; Altman in 1979; Elton Carter in 1955; Byron Carter in 1993; Lee in 1970; and Aldridge in 1993. Rigby and Byron Carter testified, however, that they did not actually receive their certificates reflecting the purchase of common stock.

The Plaintiffs sold tobacco to the Tobacco Cooperative from time to time as part of the minimum federal price support program. Specifically, between 1967 and 1973, Rigby, Lee, and Elton Carter sold tobacco to the Tobacco Cooperative as a part of the federal minimum price support program. During these years, and for only these years, the Tobacco Cooperative realized a net gain from the tobacco it sold. The Tobacco Cooperative distributed a portion of the net gain to farmers, including $291.15 to Elton Carter and $6.40 to Lee, and issued certificates of interest to the farmers for the undistributed portion of the net gain, which was valued at approximately $26.8 million. In 1975, the Tobacco Cooperative's board of directors set aside the undistributed net gain into its capital reserve, and it notified members of the decision through a newsletter. As provided by Article XI of the Tobacco Cooperative's Articles of Incorporation, as amended, (“Article XI”) the certificates of interest “carry no rights of dividend, interest or other income or appreciation,” and the certificates are redeemable “only upon such terms and at such times as may be determined from time to time by the Board of Directors.” Furthermore, Article XI further provided that the “death, withdrawal or expulsion of a member shall not give rise to any right to receive any payment from the capital reserve[.]”

The evidence shows that most of the Plaintiffs stopped patronizing the cooperative by 2001. Altman deposed that he stopped selling tobacco to the Tobacco Cooperative sometime in 2003 or 2004.

In 2004, the federal government ended the minimum price support program with passage of the Fair and Equitable Tobacco Reform Act of 2004 (“FETRA”). Around the same time, the Tobacco Cooperative bought a processing and manufacturing facility and entered into an agreement to supply a third-party who would distribute cigarettes under a brand to be developed by the Tobacco Cooperative. In December 2004, the Tobacco Cooperative sent a letter to flue-cured tobacco farmers informing them that it would be manufacturing cigarettes and offering farmers the opportunity to enter into an exclusive marketing agreement with the Tobacco Cooperative. The letter instructed farmers that only persons or entities that signed the exclusive marketing agreement would be able to retain membership in the Tobacco Cooperative for 2005. The letter also instructed that any farmer who does not sign the agreement may elect to have his common stock redeemed at par value, or $5.00. Additionally, citing to its Article XI, the Tobacco Cooperative informed farmers that, if they chose to withdraw their membership by not signing the agreement, they were not entitled to a share of capital reserves by virtue of such withdrawal. The Tobacco Cooperative also informed farmers, however, that if they decided not to enter into an exclusive agreement for 2005, they would not be precluded from entering into future marketing agreements, provided the Tobacco Cooperative offered such agreements. Specifically, the Tobacco Cooperative told farmers that

if you elect not to retain your membership for 2005, you would not be precluded from becoming a member in a subsequent year. As long as this proposed program continues, [the Tobacco Cooperative] membership will be open to all former tobacco farmers who are willing to sign an exclusive agreement with [the Tobacco Cooperative] and abide by the uniform terms and conditions set forth in the marketing agreement.

In 2007, the Plaintiffs filed their initial complaint against the Tobacco Cooperative, alleging that they were entitled to: an accounting of the Tobacco Cooperative's capital account and contributions made by the Plaintiffs (Count 1); a distribution of reserved capital (Count 2); and specific performance to reinstate them as members of the cooperative by issuing their respective stock certificates (Count 3). The Plaintiffs also raised claims of breach of contract for denying the Plaintiffs the opportunity to enter into exclusive marketing agreements with the Tobacco Cooperative (Count 4); breach of fiduciary duty against the Tobacco Cooperative's director (Count 5); and for attorney fees (Count 6).

Count 5 was subsequently dismissed pursuant to the parties' joint stipulation. Thereafter, in an order dated June 15, 2012, the trial court granted summary judgment to the Tobacco Cooperative on Counts 2, 4, 5, and 6.³ The Plaintiffs then amended their complaint, as revised, to add three additional counts: Count 7 for...