of the court, opinion "unreasonable, arbitrary and discriminatory" entitling the applicant to the relief granted. The court also concluded that any person had "a right to become and remain a member" if he used electric energy supplied by the cooperative and complied with the terms and conditions of membership contained in the bylaws "which terms and conditions shall be nondiscriminatory." An important means of protecting the cooperative character of an organization is to limit membership to those with whom and for whom the cooperative will conduct its affairs. Frequently there are other conditions attached to membership. For example, they may relate to residence, occupation, nationality, financial requirements, or agreements to give rights of way. Where there is no conflict with statutory requirements or public policy, such conditions will be upheld. Thus, the Supreme Court of Minnesota has held valid a limitation of membership to persons of a certain nationality.247 And the courts have upheld a bylaw provision requiring an electric cooperative member to give the cooperative a right of way for power lines as the cooperative might need.248 Courts have on occasion forced an association to take in members or provide service to them because of the serious impact of a interference with their rights under the constitution and the Civil Rights Act, 42 U.S.C. 1983. Kadlec v. Illinois Bell Telephone Co., 407 F. 2d 624 (7th Cir. 1969), certiorari denied, 396 U.S. 846 (1969); Morgan v. Kennedy, 331 F. Supp. 861 (D. Neb. 1971); Ihrke v. Northern States Power Company, 459 F.2d 566 (8th Cir. 1972), certiorari granted, judgment vacated, case remanded to the Court of Appeals with instructions to dismiss as moot, 409 U.S. 815 (1972); Lucas v. Wisconsin Electric Power Co., 466 F. 2d 638 (7th Cir. 1972), certiorari denied 409 U.S. 1114 (1973). But Palmer v. Columbia Gas Company of Ohio, 342 F. Supp. 241 (N.D. Ohio 1972), and Stanford v. Gas Service Company, 346 F. Supp. 717 (D. Kan. 1972), hold to the contrary. And Van Daele, et al. v. Vinci, et al., 51 Ill. 2d 389, 282 N.E. 2d 728 (1972), certiorari denied, Certified Grocers of Ill. v. Sparkle Food Center, 409 U.S. 1007 (1972), holds that expelled members of a grocery cooperative were denied due process because of lack of impartiality of the cooperative's board and the expulsion from membership was invalid even though the board followed the procedure prescribed by the bylaws for a disciplinary hearing. See footnotes 195, 250 and 251 in this section. 247 Blien v. Rand, 77 Minn. 110, 79 N. W. 606, 46 L.R.A. 618 (1899). See Moose Lodge No. 107 v. Irvis, 407 U.S. 163 (1972). See also Mills, Labor Law-Right of Union to Deny Membership to Applicant, 40 Mich, L. Rev. 310 (1941); Hewitt, The Right to Membership in a Labor Union, 99 U. Pa. L. Rev. 919 (1951). But see footnotes 195, 249 and 250 in this section. 248 King v. Farmers Electric Cooperative, 56 N.M. 552, 246 P. 2d 1041 (1952); Sutton v. Hunziker, 85 Idaho 395, 272 P. 2d 1012 (1954). denial of membership and service and because of possible public interests. Thus, a cooperative that has been given special statutory privileges, public aid, or "Federal financial assistance"249 ought not to be free to deny membership arbitrarily. 250 But if the only privilege given the cooperative is to operate as a corporation, the right to pass on membership, absent an undue restraint on trade or an unlawful discrimination, should be preserved. 251 249 See Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d. This section provides "No person in the United States shall on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance." Such assistance is broadly defined in agency regulations under Title VI (see e.g., Agriculture, 7 C.F.R. Part 15; Small Business Administration, 13 C.F.R. Part 112; Commerce, 15 C.F.R. Part 8; Housing and Urban Development, 24 C.F.R. Part 1), and recipients of loans, grants, or technical assistance must show that there is no discrimination on the ground of "race, color, or national origin." 250 See Falcone v. Middlesex County Medical Society, 34 N.J. 582, 170 A. 2d 791 (1961); Everett v. Riverside Hose Co., No. 4, Inc., 261 F. Supp. 463 (S.D.N.Y. 1966); Meyers v. Lux, 75 N.W. 2d 533 (S. Dak. 1956); Choctaw Electric Cooperative v. Redman, 293 P. 2d 564 (Okla. 1954); Capital Electric Power Ass'n v. McGuffee, 83 So. 2d 837 (Miss. 1955); Trico Electric Cooperative, Inc. v. Arizona Corp. Commission, 92 Ariz. 373, 377 P. 2d 309 (1962). In Kadlec v. Illinois Bell Telephone Co., 407 F. 2d 624 (7th Cir. 1969), certiorari denied, 306 U.S. 846 (1969), a telephone user unsuccessfully brought suit under the Civil Rights Act, 42 U.S.C. 1983, for damages claiming that the company had improperly terminated his service in violation of his constitutional rights. The "company action" was not found to be "done under color of state law." Accord, Lucas v. Wisconsin Electric Power Co., 466 F. 2d 638 (7th Cir. 1972), certiorari denied, 409 U.S. 1114 (1973). See also Moose Lodge No. 107 v. Irvis, 407 U.S. 163 (1972), holding a State's issuance of a liquor license to a private social club does not render the club's discriminatory policies “state action” prohibited by the equal protection clause of the 14th amendment. However, in Ihrke v. Northern States Power Company, 459 F. 2d 566 (8th Cir. 1972), a utility customer obtained a declaratory judgment holding that rules and regulations of the utility were unconstitutional in that they permitted termination of service without adequate prior notice and without a fair, impartial hearing. The action of the utility in threatening to terminate service was held to be "under color of law" within the meaning of the Civil Rights Act, 42 U.S.C. 1983. The Supreme Court granted certiorari in this case Oct. 10, 1972, and on the same day ordered the judgment vacated and the case remanded to the Court of Appeals with instructions to dismiss as moot, 409 U.S. 815 (1972). Compare Palmer v. Columbia Gas Company of Ohio, 342 F. Supp. 241 (N.D. Ohio 1972); Stanford v. Gas Service Company 346 F. Supp. 717 (D Kan. 1972); Lynch v. Household Finance Corp., 405 U.S. 538 (1972). 251 See Moose Lodge No. 107 v. Irvis, 407 U.S. 163 (1972); Branagan v Buckman, 67 Misc. 242, 122 N.Y.S. 610 (1910), affirmed, 207 N. Y. 719, 10 N.E. An applicant for membership is not entitled to the rights of membership until he has fulfilled all the prerequisites for membership. Thus, in a case in which applicants were required to make payment in full for stock at the beginning of the season, the association had a right to deny patronage dividends to those who had failed to do so.252 When a marketing contract was signed by two parties “as joint tenants," it was held that they were members of the cooperative and that the contract was enforceable against them. 253 Rights of Members In a practical and nonlegal sense the members are the association. Members have the right (1) to choose and to remove the directors of an association;254 (2) to adopt or change its bylaws;255 (3) to require the officers and directors (agents) to keep within the limits of law, the association's charter, its bylaws, and its marketing contracts;256 (4) to held the officers and directors who fail to do so accountable for any losses suffered by members by reason of any departure;257 (5) to bring a suit to protect the interests of an association when the directors, or a majority of 1095 (1913); American Live-Stock Commission Co. v. Chicago Live-Stock Exchange, 143 III. 210, 32 N.E. 274 (1892); Twilley v. Pennypack Woods Home Ownership Ass'n, 180 Pa. Super. 20, 117 A. 2d 788 (1955); Schumacher v. Railroad Commission, 185 Wis. 303, 201 N. W. 241 (1924). See also footnotes 246 and 250 in this section. 252 Farmers Truck Association v. Strawberry & Vegetable Auction, Inc., 163 So. 181 (La. App. 1935). 253 Lennox v. Texas Cotton Co-op Association, 55 S.W. 2d 543 (Tex. Com. App. 1932). 254 See, for example, Kentucky Agricultural Cooperative Associations Act, KRS 272.171. 255 See also KRS 272.151. 256 McCauley v. Arkansas Rice Growers' Co-op Association, 171 Ark. 1155, 287 S.W. 419 (1926); Galloway v. Mitchell County Electric Membership Corporation, 190 Ga. 428, 9 S.E. 2d 903 (1940). See also Range v. Tennessee Burley Tobacco Growers Association, 41 Tenn. App. 667, 298 S. W. 2d 545 (1955), in which it was held that the evidence did not establish the charges of waste and mismanagement made by the complainants. 257 Fergus Falls Woolen Mills Co. v. Boyum, 136 Minn. 411, 162 N. W. 516, L.R.A. 1918A 919 (1917). them, are parties to the wrongdoing;258 (6) to require associations of which they are members to account to them correctly and in adequate detail;259 and to deal with them without discrimination;260 (7) to challenge the right of directors or officers to act as such;261 and (8) to examine the books262 and property263 of the association. The last right is subject to such restrictions as may have been agreed to and is subject to the further restriction that the request to examine the books and property of the association is made in good faith and with a view to its exercise at a proper time. The Supreme Court of Ohio has said Our conclusion from an examination of many 258 Loftus v. Farmers' Shipping Association, 8 S.D. 201, 65 N.W. 1076 (1896); Browne v. Hammett, 133 S.C. 446, 131 S.E. 612 (1926); Morton v. Morton Realty Co., 41 Idaho 729, 241 P. 1014 (1925). 259 Brown v. Georgia Cotton Growers' Co-op Association, 164 Ga. 712, 139 S.E. 417 (1927); Johnson v. Staple Cotton Co-op Association, 142 Miss. 312, 107 So. 2 (1926); Reinert v. California Almond Growers Exchange, 9 Cal. 2d 181, 63 P. 2d 1114 (1936), 70 P. 2d 190 (1937); Rhodes v. Little Falls Dairy Company, Inc., 230 App. Div. 571, 245 N.Y.S. 432 (1930), affirmed in 256 N. Y. 559, 177 N.E. 140 (1931). 260 Wheelwright v. Pure Milk Association, 208 Wis. 40, 240 N. W. 769 (1932), 242 N.W. 486 (1932). 261 In re O'Shea, 241 App. Div. 699, 269 N.Ÿ.S. 840 (1934); Fritz v. Superior Court, 18 Cal. App. 2d 232, 63 P. 2d 872 (1936). 262 In re Steinway, 159 N. Y. 250, 53 N. E. 1103, 45 L.R.A. 461 (1899). But the existence of this right does not, alone, justify the appointment of a receiver. Indianapolis Dairymen's Cooperative, Inc. v. Bottema, 226 Ind. 237, 79 N.E. 2d 399, 226 Ind. 260, 79 N.E. 2d 409 (1948). 263 Hobbs v. Tom Reed Gold Min. Co., 164 Cal. 497, 129 P. 781, 43 L.R.A. (N.S.) 1112 (1913). 264 American Mortgage Company v. Rosenbaum, 114 Ohio St. 231, 151 The principles stated in the foregoing quotation are applicable to a cooperative whether formed with or without capital stock. 265 In determining whether a member of an association should be allowed to obtain information with respect to the business of the association, the purpose for which the member is seeking the information and the use to which the information will be put after being obtained should be considered. If the information sought does not relate squarely to the products of the member, or if the effect on the rights and the financial returns of the membership as a whole will be adverse, the officers of an association should hesitate giving the member access to the books and records of the association. In a Wisconsin case, a cooperative brought suit to compel a member to perform his marketing contract.266 The member sought the unrestricted right to examine the books and papers of the association to obtain information with which to defend the suit. The lower court held that the member had the right to examine the books and papers secretly, but on appeal the Supreme Court of the State said: The order, when granted, should be upon affidavit of Under proper circumstances a shareholder in a cooperative can bring a derivative action to redress wrongs committed against the cooperative. In one such case, it was held that shareholders in a cooperative are not subject to the usual rule restricting actions by shareholders "in right of corporation." The court pointed to N.E. 122, 124, 59 A.L.R. 468 (1926). See also Otis-Hidden Co. v. Scheirich, 187 Ky. 423, 219 S. W. 191, 22 A.L.R. 19 (1920), and the annotation at p. 24. 265 State ex rel. Boldt v. St. Cloud Milk Producers' Association, 200 Minn. 1, 273 N.W. 603 (1937); Funck v. Farmers' Elevator Company, 142 lowa 621, 121 N.W. 53, 24 L.R.A. (N.S.) 108 (1909). 266 Northern Wisconsin Co-op Tobacco Pool v. Oleson, 191 Wis. 586, 211 N. W. 923, 926 (1927). |