Autauga Quality Cotton Association v. Crosby

893 F.3d 1276 (11th Cir. 2018)

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Nature of the Case

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Facts

P is a not-for-profit cotton-marketing association. It pools the cotton grown by its more than 1,000 members and then markets it for sale. Members pledge all of the cotton that they grow on certain farms to P, which then, based on the members' representations, sells both commodity futures and physical product to consumers. P delivers [the cotton to the buyers and remits the sale proceeds (minus its own operating expenses) to its members. There is a marketing agreement between P and each association member. Ds are a family of cotton farmers and partners in Crosby, Crosby, Crosby, Crosby (CCCC). CCCC had been a member of (and sold a lot of cotton through) P for many years. CCCC entered into the operative marketing agreement with P in 2007. CCCC was obligated to sell to D all cotton grown on farms listed on a separately-executed 'Farm Verification Form.' The previous year's verification form would continue to apply until a new form was filed. CCCC submitted its verification form in late October. It pledged to market all cotton grown on more than 2,000 acres of land spread across 22 farms. For the 2009 crop year, this resulted in CCCC marketing more than 4,000 bales through P. CCCC never submitted a verification form for the 2010 crop year and a 2009 form governed its 2010-crop-year obligations. The 'sign-out' deadline for the 2010 crop year was March 26. D never executed a 'sign-out' notice, although, as it turns out, Tim Crosby had earlier executed contracts to sell essentially all of CCCC's 2010-crop-year cotton-some 4,000 bales-to an organization outside the association, Cargill Cotton. When it still hadn't received CCCC's verification form by November 2010, P contacted Tim Crosby by phone, and Tim reported that CCCC would be selling most if its 2010-crop-year cotton directly to Cargill. P's sent a demand letter to CCCC explaining that D's failure to deliver the cotton pledged in their 2009 verification form breached the marketing agreement, and P was entitled to liquidated damages. As per the agreement, P was entitled to an injunction to prevent further breach and to a decree for specific performance. P was also entitled to liquidated damages in an amount equal to the difference between (a) the price of such cotton on the New York futures market during the period beginning with the date of breach or default and ending with the final delivery by P of cotton sold during that year, and (b) the highest price per pound received by P for the membership cotton (of the same or nearest grade, staple, and micronaire) sold by it from the same year's crop. Three years later, P sent a second letter demanding $1,305,397 in liquidated damages. D didn't pay and P sued. P later revised the claim to $1,660,857, and then upward again to $1,712,846, and then downward to $1,696,610. D sought summary judgment on the ground that the agreement's liquidated-damages provision is an unenforceable 'penalty' clause. The court granted summary judgment. P appealed.