Cooperative Regions of Organic Producer Pools v. Noble Dairy et al
Filing
50
Order GRANTING, Ex Parte Motion for Temporary Restraining Order and Order to Show Cause re Preliminary Injunction 6 . The injunction previously ordered by this Court (#12) on February 5, 2015, is continued on the same terms through August 4, 2015. The Noble Dairy Defendants are hereby enjoined from selling organic milk to any third parties, including Defendant OrganicWest Milk, Inc. The Noble Dairy Defendants are hereby required to deliver all the organic milk they produce to Plaintiff, pursuant to the terms of the August 14, 2014, Marketing Agreement between the parties. Plaintiff shall pay the Noble Dairy Defendants for the organic milk as provided by the Marketing Agreement. As security, Plaintiff shall maintain the bond previously entered in this case. (See attached PDF for complete details). Signed on 2/23/2015 by Judge Owen M. Panner. (jkm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MEDFORD DIVISION
COOPERATIVE REGIONS OF
ORGANIC PRODUCER POOLS, a
Wisconsin Cooperative,
1:15-cv-00187-PA
Plaintiff,
v.
ORDER
NOBLE DAIRY, an Oregon
business entity of unknown
form; JERRY NOBLE,
individually, as trustee for
the Jerry Noble Trust, and
doing business as Noble
Dairy; SANDRA NOBLE,
individually, as trustee for
the Jerry Noble Trust, and
doing business as Noble
Dairy; ORGANIC WEST MILK, INC.,
a California Corporation;
GAGE STUEVE; LEONARD C.
VANDENBURG; DOES 1-50, inclusive,
Defendants.
1 - -ORDER
FANNER, District Judge:
This matter comes before the Court on Plaintiff Cooperative
Regions of Organic Producer Pools' Motion for a Preliminary
Injunction (#6).
Plaintiff seeks to continue the temporary
injunction already in place requiring Defendants Jerry Noble,
Sandra Noble, and N6ble Dairy (collectively "the Noble Dairy
Defendints") to deliver all of their organic milk products to
Plaintiff and forbidding them from selling organic milk produGtS
to any other parties.
Plaintiff's motion is GRANTED.
Background
Plaintiff in this action is a large agricultural cooperative
based in Wisconsin.
As a cooperative, Plaintiff assembles, packs,
processes, and sells the produce of its member farms.
A large
part of Plaintiff's operations involve the marketing and
distribution of organic milk from its member farms.
The demand for organic milk has increased substantially in
recent years, but the process of turning an existing dairy farm
ihto an organic dairy farm-is both expensive and time-consuming.
As a consequence, the supply of organic milk is limited relative
to the, growing demand.
The Noble Dairy Defendants own and operate a large organic
dairy farm in Josephine County, Oregon.
On July 22, 2014, the
Noble Dairy Defendants signed a Letter of Intent indicating their
interest in becoming one of Plaintiff's
14, 2014, the Noble Dairy Defendants
m~mber
~igned
On August
a Dairy Member
Agreement ("Member Agreement") with -Plaintiff.
2 - ORDER
farms,
Under the terms of the Member Agreement, th'e Noble Dairy
Defendants "agree[d] to be bourid by both the
and this'agreement."
~ooperative
bylaws
The Noble Dairy Defendants "pledge[d] all
organic dairy production" to Plaintiff and appointed Plaintiff "as
its exclusive agent in the marketing of organic milk/dairy
products."
In return,
Plaintiff pledged to pay the Noble Dairy
Defendants "for their ·certified orgapic milk according to the
rates and programs established· by the Dairy Executive Committee
and the Board of Directors for the Member's region."
The Member Agreement was to be "in effect continuously from
date hereof," subject to termination by either party at any time
by giving 180 days .notice in writing.
The Noble Dairy Defendarits
were to begin providing organic milk to Plaintiff on February 1,
2015.
In early January 2015, the Noble Dairy Defendants began to
negotiate with Defendant Organic West Milk,
Inc.
("Organic West"),
a California corporation that competes directly with Plaintiff in
. the organic milk market.
On January 12, 2015, the Noble Dairy
Defendants entered into a contract with Organic West promising to
provide all of Noble Dairy Defendants' organic milk t6 Organic
West.
Under the terms of the January 12 contract, the Noble Dairy
Defendants were to begin supplying organic milk to Organic West on
February 1, 2015.
On January 22, 2015, the Noble Dairy Defendants notified
Plaintiff by letter that they were terminating the Member
Agreement effective immediately.
The letter indicated that the
Noble Dairy Defendants were unaware that the Member Agreement was
3 - ORDER
not a letter of intent.
On January 30, 2~15,
Plaintiff sent a cease-and-desist letter
to Organic West, informing it of Plaintiff's Member Agreement with
the Noble Dairy Defendants and demanding that Organic West refrain
from purchasing organic milk from the Nobl~ Dairy Defendants.
Plaintiff also sent the Noble Dairy Defendants a formal letter on
January 30, 2015, stating its position that the August 14 Member
Agreement was binding and that the Noble Dairy Defendants could
not'withdraw from the cooperative without 180 days notice,
Plaintiff indicated that it intended to send a truck to pick up
the first shipment of organic milk from Noble Dairy on February 1,
2015.
On February 1,
Dairy Defendants.
~015,
Plaintiff's milk truck was turned away and the
Noble Dairy Defendants
West.
Plaintiff sent a milk truck to the Noble
~elivered
their organic milk to Organic
On February 2, 2015, Plaintiff filed this action (#1).
On
February 4, 2015, Plaintiff filed an Ex Parte Motion for Temporary
Restraining Order and Order to Show Cause re Preliminary
Injunction (#6).
On February 5, 2015, I granted a Temporary
Restraining Order requiring the Noble Dairy Defendants to deliver
their entire organic milk production to Plaintiff pursuant to the
Member Agreement.
Legal Standard
The Ninth Circuit.has laid out the factors used to determine
whether a preliminary injunction should be granted:
The factors we traditionally consider in determining
whether to grant a preliminary injunction in this,
circuit are (1) the likelihood of plaintiff's suctess on
4 - ORDER
the merits; (2) the possibility of plaintiff's suffering
irreparable injury if relief is not granted; ( 3) the
extent to which the balance of hardships favors the ·
respective parties; and (4) in certain cases whether the
p~blic iriterest will be advanced by the -provision of
preliminary relief.
Dollar Rent A Car of Wash., Inc. v.
Travelers Indemnity Co., 774 F.2d _1371, 1374 (9th Cir ..
1985).
To obtain a preliminary injunction, the moving
party must show either (1) a combination of probable
success on the merits and the possibility of irreparable
injury or (2) that serious questions are raised and the
balance of hardships tips in its favor.
Benda v. Grand
Lodge of Int'l Ass'n of Machinists & Aerospace Workers,
584 F.2d 308, 314-315 (9th Cir. 1978) ,'cert dismissed,
441 U.S. 937, 99 S. Ct. 2065, 20 L. Ed. 2d 667 (1979).
These two formulations represent two points on a sliding
scale in which the required degree of irreparable harm
increases as the probability of success decreases.
Oakland Tribune, Inc. v. Chronicle Publishing Co., 762
F.2d 1374, 1376 (9th Cir: 1985).
United States v. Odessa Union Warehouse,
833 F.2d 172, 174
(9th
Cir. 1987).
~
Thus,
"the elements of the preliminary injunction test are
balanced, so that a stronger showing of one element may offset a
weaker showing of another.
For example, a stronger showing of
irreparable harm to plaintiff might offset a lesser showing of
likelihood of success on the merits."
Rockies v. Cottrell,
Alliance for the Wild
632 F.3d 1127, 1131 (9th Cir. 2011) (citing -
Winter v.· Natural Res. Def. Council,
Inc., 555 U.S. 7 (2008)).
The moving party must show, at an irreducible minimum, that
they have a fair chance of success on the merits.
Univ. of S. Cal., 13 F.3d-1313,
1319 (9th Cir. 1994) (quoting
Martin v. Int'l Olympic Comm., 740 F.2d 670,
1994)); Comm. Of Cent. Am. Refugees v.
(9th Cir. 1986).
5 - ORDER
Stanley v.
674-75
(9th Cir.
INS, 795 F.2d 1434, 1437
Discussion
Plaintiff seeks an injunction requiring the Noble Dairy
Defendants to comply with the terms of the Member Agreement by
delivering their entire organic milk production to Plaintifr ~nd
refraining from selling their organic milk to any other party,
including Organic West.
Such an injunction would last until
August 4, 2015. 1
I. Likelihood of Success on the Merits
The Ninth Circuit has adopted an analytical approach to the
"likelihood of success" factor which considered whether "serious
questions going to the merits [are] raised and the balance of
hardships tips sharply in plaintiff's favor."
at 1131.
test.
Id.
Cottrell, 632 F.3d
This test is also referred to as the "serious questions"
"In other words,
'serious questions going to the
merits' and a hardship balance that tips sharply toward the
plaintiff can support the issuance of an injunctio~, assuming the
other two elements of the Winter test are met."
Id. at 1132.
Under Oregon law, a claim for breach of contract
requi~es
that the plaintiff plead and prove the existence of a contract,
its relevant terms, the plaintiff's full performance and lack of
breach, and the defendant's breach resulting in damage 'to
plaintiff.
Slover v. Or. State Bd. Of Clinical Soc. Workers, 144
Or. App. 565; 570 (1996).
1
Aug~~t 4, 2015, is 180 days after the date of the Temporary
Restraining Order issued in this case (#12).
I accept
Plaintiff's argument that th.e 180 notice period should not begin
to run until the date ·Of the Noble Dairy Defendant's actual
compliance with the Member Agreement, as opposed to the date of
their notice of termination, January 22, 2015.
6 - ORDER
Plaintiff contends that it has shown a likelihood of success
on the merits based on the terms of the August 14 Member Agreement
signed by the Noble_ Dairy_Defendants and the undisputed fact that
the Noble Dairy Defendants refused to deliver organic_milk to
-Plaintiff until ordered to do so by this Court.
Defendants do not dispute that the Noble Dairy Defenaants
signed the Member Agreement.
Larry Hansen,
Rather,
Defendants contend that
Plaintiff's sales representative, told the Noble
Dairy Defendants that the Member Agreement was not binding until
the Noble Dairy Defendants made their first delivery of milk to
Plaintiff.
Defendants characterize the Member Agreement as a
letter of intent, rather than a binding contract.
I do not find Defendants' arguments persuasive.
First, I
note that the Noble Dairy Defendants signed a Letter of Intent
with Plaintiff in July 2014.
That document was clearly labeled as
a letter of intent and contained language limiting its binding
power.
The subsequent Member Agreement, by-contrast, states that
the signatory agrees to be bound by Plaintiff's bylaws and- the
agreement itself.
parties.
It lists the right§ and obligations of both
The plain language of the Member Agreement indicates
that it -constituted a binding contract.
this stage to determine what,
It is not necessary at
if any, representations were made by
Larry Hansen to the Noble Dairy Defendants or what significance
those representations might have for the ultimate
enforceabil~~y
of the Member Agreement.
The Noble Dairy Defendants separately argue that the Member
Agree~ent
7 - ORDER
did not
co~tain
pricing information for' the organic milk
and that, as such, _the Member Agreement lacked an essential term.
I note, however, that the Member Agreement does contain a term
concerning the price to be paid for the organic milk', which
explains how the price will be set.
Based on the record,
I conclude that Plaintiff has
demonstrated a sufficient likelihood of success on the merits to
justify the issuance of a preliminary injunction.
II. Irreparable Harm
A plaintiff seeking a preliminary injunction must show a
likelihood that the party will suffer irreparable harm in the
absence of preliminary relief.
Winter, 555 U.S. at 20. Typically,
monetary harm does not constitute irreparable harm. Los Angeles
Mem'l Coliseum Comm'n v. Nat'l Football League,
1202 (9t1_;l Cir. 1980).
634 -F.2d 1197,
The Ninth Circuit has recognized,_ however,
that "intangible injuries, such as damage to ongoing recruitment
efforts and goodwill, qualify as irreparable harm."
Rent-A-
Center, Inc. v. Canyon Television and Appliance Rental, Inc., 944
F.2d 597,
603 (9th Cir. 1991); see also Stuhlbarg Int'l Sales Co.,
Inc. v. John D. Brush and Co., Inc., 240 F.3d 832, 841 (9th Cir.
2 001) (holding that, in the context of trademark' cases, " [ e] vidence
of threatened loss of prospective customers or goodwill certainly
supports a finding of the possibility of irreparable harm.").
In this case, Plaintiff has provided_a declaration of Louise
Hemstead,
Plaintiff's Chief Operating Officer.
Hemstead's
responsibilities include direction and oversight of Plaintiff's
supply chain.
Hemstead~s
Declaration explains that Plaintiff used
Noble dairy's production figures in calcu~ating its available
8 - ORDER
supply of organic m{lk for the coming months.
Plaintiff's
forecasted supply is, in turn, used to make commitments to third
party customers.
Plaintiff argues that if the Noble Dairy
Defendants are allowed to iefuse to delivery organic milk as
required by the Member Agreement,
its "downstream" commitments.
Plaintiff will be unable to meet
Failure to meet i-ts commitments
would result. in the loss of customer goodwill and future business
opportunities as customers look elsewhere for more reliable
sources of organic milk.
Plaintiff also asserts that, due to the limited supply of
organic milk relative to demand and the constraints of its status
as a cooperative, it is unable to procure replacement product to
cover the loss of the Noble Dairy milk.
Defendants contend that the milk Plaintiff has received from
Noble Dairy since the February 5 TRO has been sent by Plaintiff to
be processed into powdered milk and cheese.
Plaintiff's use of the Noble
Dai~y
milk for
Defendants ·contend
~heese
artd powdered
miJk indicates that the milk is "excess" product and that, as the
product is excess, Plaintiff will not be irreparably harmed by its
loss.
The Hemstead .Declaration provides a plausible explanation for
Plaintiff's decision to use Noble Dairy's milk for cheese and
powdered milk, however.
According to the Hemstead Declaration,
Plaintiff's 2015 milk plan called for a large portion of Northwest
milk to be made into less perishable products like ch-eese, butter,
and powdered milk.
9 - ORDER
Those less-perishable products can then be
shipped to other regions of the country, freeing Plaintiff to use
the milk produced by member farms in those regions for bottling.
In light of the Hemstead Declaration, I conclude that Plaintiff's
decision to allocate the Noble Dairy milk to cheese and powdered
milk production does not undermine Plaintiff's showing of
irreparable harm.
I conclude that Plaintiff has made a sufficient showing of
irreparable harm to justify the issuance of a preliminary
injunction.
III. Balance of Equities
In considering a motion.£or a preliminary injunction, "a
court must balance the competing claims of injury and must
consider the effect on each party of the granting or withholding
of the requested relief."
AK, 480 U.S. 531, 542
Amoco Prod. Co. v. Vill. of Gambell,
(1987); see also Univ. of Hawai'i Prof'l
..
Assembly v. Cayetano, 183 F.3d 1096, 1108
(9th Cir. 1999) ("To
determine which way the balance of the hardships tips, a court
must identify the possible' harm caused by the preliminary
injunction against the possibility of harm caused by not issuing
it. If) •
Althou~h
I recognize that under the terms of the injunction,
Defendants will be
de~rived
of the benefit of their January 12
contract, that deprivation will only endure for the limited period
of this injunction.
The harm to the Noble Dairy Defendants is
also limited by the fact that Plaintiff will _continue to pay the
Noble Dairy Defendants £or the organic milk a the rate provided
10- ORDER
for by the Member Agreement. 2
I conclude that the balance of equities tips in favor of an
injunction.
IV. Public Interest
Generally speaking, the public has an interest in enforcement
of valid contracts to which the parties have voluntarily agreed.
Giftanqo, LLC v. Rosenberg,
2013) .
925 F. Supp. 2d 1128, 1141 (D. Or.
The Oregon legislature has enacted laws for the express
purpose of protecting cooperatives in the event of the breach or
threatened breach of cooperative contrcacts.
ORS 62.365.
The
Oregon Supreme Court has also recognized the importance of
enforcing agricultural cooperative member contracts:
[An agricultural cooperative's] success, therefore, and
the benefits to be derived by the members thereof, is
wholly dependent upon the performance, by all of the
contracting parties, with the terms and conditions of
their respective ~ontracts. In order to carry o~t the
objects and purposes for which it was organized, it.is
necessary for the association to enter into contracts
for the disposal of the products of its members. Before
it can safely make such contracts, it must be assured
that it will obtain the products contracted for. It must
also be able to form a reasonable estimate, in advance,
of the amount of products which will be grown on the
acreage stipulated~ and maintain a sufficient
organization and force to prepare the same for market.
It is also necessary to secure the capital or credit
required to discharge its obligations to the growers and
to conduct ~nd carry on its business. The perishable
nature of the products handled; the uncertainty' of the
market conditions and prices, its inability to buy these
products from nonmembers, and the limited time in which
its business for each season must be conducted and
2
The record indicates that Plaintiff's projections were that
it would pay its member farms $35 .. 99 per hundredweight of organic
milk.
Defendants' January 12 contract contemplated a rate of
$36.60 per hundredweight.
11- ORDER
completed, makes it essential that each member of the
association should perform his contract according to its
terms. From these considerations, it must be obvious
that an action at law to recover th~ stipulated damages
would not ~fford to the plaintiff a full, adequate, and
complete,remedy for the wrong done to the.association,
and indirectly to it~ members by a member's breach of
his contract.
·
Or. Growers' Co-op. Ass'n v. Lentz, 107 Or. 561, 580-81 (1923)
In light of the steps
t~ken
by the Oregon legislature to
protect and support agricultural cooperatives, combined with the
general public interest in the enforcement of valid contracts, I
conclude that an.injunctiori is in the public interest.
V. ORS 62.365
Plaintiff argues that it is entitled to an injunction
pursuant to ORS 62~365, which provides that:
In the event of a breach or threatened breach of a
cooperative contract authorized by ORS 62.355, the
cooperative is entitled to an injunction to prevent the
breach or any further breach thereof, arid to a judgment
of specific performance thereof. Upon filing of a
verified complaint showing the breach or threatened
breach, and, upon filing a sufficient bond, the
cooperative is entitled to a temporary restraining
order.
ORS 62.365(1)
Defendants contend that Federal Rule of Civil Procedure 65
and not ORS 62.365 is the appropriate standard for the issuance of
a preliminary injunction in this case.
It is not necessary to
resolve the issue of whether ORS 62.365 applies, as I have
concluded that flaintiff is entitled to a preliminary injunction
under Rule 65.
12- ORDER
Conclusion
Plaintiff's Motion for a Preliminary Injunction (#6) is
GRANTED.
The injunction previously ordered by this Court (#12) on
February 5, 2015, is continued on the same terms through August 4,
2015.
The Nbble Dairy Defendants are hereby enjoined from selling
organic milk to any third parties, including Defendant Organic
West Milk, Inc.
The Noble Dairy
Def~ndants
are hereby required to
deliver all the organic milk they produce to Plaintiff, pursuant
to the terms of the August 14, 2014, Marketing Agreement between
the parties.
Plaintiff shall pay the Noble Dairy Defendants for
the organic milk as provided by the Marketing Agreement.
As
security, Plaintiff shall maintain the bond previously entered in
'
this case.
IT IS SO ORDERED.
DATED this
~~day
of February, 2015.
OWEN M. PANNER
U.S. DISTRICT JUDGE
13- ORDER
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