DAVIS SUBMITS HIS CASE
ON BEHALF OF CO-OP
Attorney Ed Davis of An
chorage had today filed in the
district court his arguments as
counsel for the Matanuska Val
ley Farmers Co-operating As
sociation. Davis answered At
torney George Grigsby who re
presents the 22 dairy farmers
who have sued the Co-op.
Grigsby must still reply to
Davis’ lengthy brief and then,
after re-examining all the writ
ten arguments and pondering
the weighty mass of testimony,
Judge Anthony P. Dimond will
make his decision.
The volume of data has en
tailed an enormous amount of
work for both Grigsby and Davis
and the case has stretched out
longer than any civil case of re
cent years.
Co-op's Side of Issue
„ Davis’ arguments, which na
turally are a summing up of the
Co-op’s side of the case, main
tain that there are three pertin
ent questions for the court to
consider: (1) Did the defendant
(the Co-op) purchase milk from
the producers in 1945 at a flat
rate per 100 pounds or did the
association merely advance so
much per hundred pounds with
all the proceeds to go to the
dairy producers at the end of
the year after certain deductions
were made; (2) if it is an ad
vance, then are the deductions
authorized and set forth in the
contract to apply only to ex
penses of handling the milk; in
other words, do they apply to
the expenses of the entire associ
ation; and (3) is the court to con
sider the “so-called profit” of the
dairy-creamery association for
1945, or the profit of the associ
ation as a whole?
Davis asserts that it is vital
to find out whether or not milk
was processed or manufactured
into a new or changed product
“on the account of the defend
ant” and if so “whether the Co
op exercised its option to pur
chase the food on its own ac
count and pay therefore a flat
delivery price or whether it
handled the milk on a pool ba
sis.”
Davis' Contention
The plaintiff claims the milk
was not processed into a new
product, Davis contends, while
he insists that it was purchased
at the flat delivery rate and pro
cessed into a “changed or new”
product, and therefore the Co
op “owes the plaintiff nothing by
means of such transaction . . .
except their proportionate share
of the profits of the association.”
Davis maintains that witnesses
for the plaintiff sharply dis
agreed over the marketing
agreement. He claims that the
producers themselves admit they
received money each two weeks
based on a flat delivery price
and they were to receive more
money at the end of the year.
Other witnesses for the plain
tiff were just as emphatic, ac
cording to Davis, that milk had
always been bought by the Co
op at a flat delivery price, and
that “never in the history of the
association had the producer
been paid all the proceeds of his
milk, less the particular deduc
tions authorized.”
Only Small Profit
t The Co-op, Davis continues,
made only a relatively small
profit for 1945. He says the Co
op offered to pay the dairy farm
ers their proportionate share of
the net profits, but the offer was
turned down.
Paragraph 7 of the marketing
agreement allows the Co-op on
pooled products to deduct both
repayment of advances made to
Jhe producer . . . with interest
on such advances and also pro
vides that the association can de
duct reasonable charges for the
handling of the products. De
fendant didn’t make these de
ductions, Davis claims.
The Co-op counsel says that
plaintiff contends that the actual
cost of handling the products is
“such reasonable charge for
services rendered.” Davis dis
agrees.
He claims the actual cost of
handling the product can’t be
called a “reasonable charge for
the service.” “Any corporation
which charges its customers only
the cost of a service without
making provision for overhead,
interest, depreciation, insurance,
and other items will ultimately
‘go broke,’ the Co-op lawyer an
nounces.
Repeats Assertion
In 1945, the Co-op proceeded
exactly as in former years, Davis
goes on. There simply was only
a small amount to re-distribute,
he repeats, and the dairymen
have claimed they are entitled
to receive all the proceeds of
their department, as per the Co
op books, he alleges.
Davis then flails Grigsby’s
arguments, calling them “Villi
fication of the defendant.” Grigs
by had claimed that the defense
had abandoned its case. Davis
derides this statement. He says
plaintiff ignored the fact that
his own witnesses testified that
all the milk received was pro
cessed within the meaning of the
marketing agreement and that
defendant never made the de
ductions provided for in the con
tract.
• The defense never abandoned
the case, Davis insists, claiming
there was no need to call witness
es since the plaintiff’s own wit
nesses bolstered the defense’s
case.
Milk Statistics
Davis contends further that
there was no proper basis for
distinguishing between what he
terms the “so-called” creamery
and the “so-called” dairy nor
was there any reason to try to
segregate revenue into separate
channels.
All the milk producers in
1945 sold both Grade A and B
milk to the Co-op. They received
$136,143.47. Plaintiff received
$84,867.90, Davis says. In other
words, plaintiff furnished the
Co-op with 62.3 percent in dollar
value of all the milk produced
by the Co-op.
Davis claims that Witness
Snodgrass testified that all over
the U. S. the milk producer re
ceived about 50 percent of the
consumer’s dollar for his pro
duct. “In this case,” Davis main
tains, “taking the average figure
for Grade A milk at $6.93 per
hundred pounds, and figuring
milk at 8.3 pounds per gallon,
we find the producer in this case
has received 57.5 cents per gal
lon or 14.25 cents per quart for
his milk in 1945 or approximate
ly 57.5 per cent of the consumer’s
dollar . . .”
Alaska Corporate Law
In the compiled laws of Al
aska under the section dealing
with distribution of net earnings
of a corporation, the law states
that the distribution is based on
net earnings of all the corpora
tions and not on any sub-division
of the corporation, Davis af
firms. He then quotes from the
law as follows: “Dividends are
not guaranteed, but are declared
payable when, and if, in the
opinion of the Board of Direc
tors, net earnings justify it.”
Summings up his argument,
Davis says in part: “. . . Most,
if not all the milk producers, to
some extent at least, are also
sellers of other produce or at
least deal with the Trading Post
and with the garage, and if the
produce department and the ga
rage and the Trading Post actual
ly lost money in the year 1945,
each of the claimants to some
extent contributed to that loss.
“Plaintiff’s real complaint is
not that he is entitled to more
money, but that he believes the
corporation has been mismana
ged. The plaintiff and his as
signors have the same right . . .
as every other members of the
corporation to see that the board
of directors operates the corpor
ation in the manner provided by
law ... If plaintiff believes
they have been aggrieved by the
actions of the Board of Didec
tors, their procedure is to elect
a board of directors which will
carry out the policies which they
want carried out and not to
bring suit to attempt to collect
the so-called net profits of their
department of the corporation. .'
“The undisputed testimony is
that the facilities used in making
the dairy-creamery profit were
purchased and paid for by the
defendant as a whole, and not
by the dairy-creamery portion of
the defendant . . . The defend
ant corporation is a unit. THfe
dairy-creamery department of
defendant does not exist except
as a part of the activities of
the defendant corporation.
“The claim of the plaintiff is
without foundation in fact and
his suit should be dismissed with
costs to the defendant.”
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