Cooperative associations are a group of retailers who join together to purchase merchandise. They combine under a common name for a common purpose. The purpose of a cooperative association is to procure the highest possible price for the products of its members.
Powers, duties, and liabilities of cooperative associations are defined in governing statutes[i]. In certain matters, the powers and duties are defined in the articles of incorporation of the association or in association bylaws. However, if there is no provision regarding powers and duties of an association, the association can make legitimate rules. The marketing contracts between members and associations form a guide to the provisions[ii].
A cooperative association cannot commit a tort even if it is for attainment of its common legitimate purpose. An association also cannot interfere with a private business that comes in its way of accomplishment of its purpose.
Cooperative associations have the power to spend reasonable amounts of money to present the merits of a claim for increase of tariff rates before Congress in matters of marketing. However, the association can spend money only through fair and open means[iii].
An unincorporated association will have power to make employment contracts that consist of restrictive rules regarding the future business activities of an employee. However, the association should create the contract in a reasonable manner. It can only create contracts that are limited to the time and territory applicable. The powers that a corporation can exercise should not be exercised against the U.S. constitution[iv].
A cooperative marketing association can also submit arbitration claims against its branch associations. The Cooperative Association Statute permits associations to engage in any activity that is related to the marketing of any agricultural products. However, these provisions do not permit such associations to operate in public markets.
Cooperative associations can deal with their members in a reasonable manner when there are no provisions provided for the exercise of duties of an association. Cooperative associations are not required to treat every member equally if such a treatment would pose a detriment to the association. On the other hand, a cooperative association cannot discriminate between members in an unfair manner. There should be reasonable grounds for discriminating between members and the price structure classification should also be set in a fair manner for the members[v].
The members of an association should be dealt as a group. The association can ask an individual to surrender some rights in a group’s interest. Less fortunate individual members can gain advantage by such measures taken by the cooperative associations.
When a statute provides power to a cooperative marketing association, it can levy an assessment upon the members to provide working capital and to meet existing indebtedness[vi]. This can be limited to a nominal amount by the bylaws of the association. A cooperative association can also assess from its stockholders a sum sufficient to liquidate the indebtedness of the association that is insolvent[vii]. However, a cooperative marketing association that has no capital stock is not entitled to levy an assessment upon its members. If there is no way to equalize the assessment among members, the provisions in the articles of association cannot be implemented. This is possible only when there is no statute that authorizes levy of assessment on members.
When an agricultural cooperative association imposes an assessment on members for promotion and advertisement, it can be considered as void if it is against the bylaws of the association. It will be void if the assessment is non uniform and if it imposes an assessment that is not in the form of a scale-off.
An incorporated cooperative association can make an annual proportionate assessment against every member. When a member withdraws from the membership voluntarily, the member will be liable for the year’s assessment in which the member withdraws. However, the withdrawing member can credit against the assessments for the amount of the anticipated future operating costs that can be paid after the effective date of the termination of the membership.
[i] In re Missco Homestead Asso., 86 F. Supp. 511 (D. Ark. 1949).
[ii] Dark Tobacco Growers’ Co-op. Ass’n v. Robertson, 84 Ind. App. 51 (Ind. Ct. App. 1926).
[iii] Fites v. Marsh, 171 Cal. 487 (Cal. 1915).
[iv] Long v. Atlanta & W. P. R. Co., 253 Ga. 257 (Ga. 1984).
[v] Barendse v. Knappa Water Asso., 260 Ore. 356 (Or. 1971).
[vi] In re Monroe Chapter, O. E. S., 132 Misc. 109 (N.Y. Sup. Ct. 1928).
[vii] Merchants’ & Mfrs’ State Bank v. Dyste, 171 Minn. 133 (Minn. 1927).