carry on the operation of said association, which liability existed at the time he becomes a member, or which is created during his membership, but, if any member's share of such liability for work and labor done shall prove to be uncollectible, each remaining member shall be responsible, as an individual liability, for such unpaid share or part thereof, to an amount equal to such remaining members' original liability or to such further amount as may be prescribed in the articles of association. No member shall be liable to the association for any work or labor done as aforesaid until all the property of said association, if it be found to be in the county where the chief business of the same is carried on, is first exhausted to satisfy said claim for work and labor done as aforesaid. The proceedings to enforce any liability against the individual member of said association to collect any sum or sums due for work or labor done for said association, as hereinbefore provided, shall be in accordance with, and such action shall be brought in the manner and form designated by, the fifteenth section of the act, approved the twenty-ninth day of April, one thousand eight hundred seventy-four (Pamphlet Laws, seventythree), entitled "An act to provide for the incorporation and regulation of certain corporations," and the supplements thereto: Providing, however, That in the enforcement of such liability, where in the corporation act of one thousand eight hundred and seventy-four and the supplements thereto, the word stockholders" is used, for the purposes of this act the same shall be taken to mean "member or "members" as the same may be used and defined in this act. In all cases any member who voluntarily or otherwise contributes to the debt or obligation of another member or members shall have an action, several or joint, against such defaulting member or members for reimbursement. 46 Any association may, in its article of association, limit the amount of indebtedness or obligations which may be incurred by or on behalf of this association, and no member shall be liable for any debt or obligation in excess of the terms of such limitations. SEC. 11. The association, as agent for a nonmember, may buy farm supplies for him and sell his agricultural, dairy, or horticultural products; and, as a condition of its contract with such nonmember, may impose upon him any liability for the contracts, debts, and engagements of the association which does not exceed the liability of a member; but in no case shall the association charge a nonmember for such services more than the actual cost thereof, including the pro rata part of all overhead expenses. SEC. 12. Within thirty days after the recording of the articles of association and letters patent in the office of the recorder of deeds as prescribed in section four of this act, a call signed by not less than a majority of the directors shall be issued for a meeting of the members. At such meeting or any adjourned session or sessions thereof by-laws regulating and conducting the management of the association shall be adopted. Such by-laws shall, within the limits of this act, prescribe- 1. The time, place, and manner of calling and holding meetings. 2. The number and qualifications of members, the conditions under which membership shall be granted and terminated. Rules governing the exercise of the privileges of members and the issuance, transfer, and cancellation of membership certificates, and the manner of ascertaining the interests of members in the assets, if any, of the association. 3. The number of directors, the time and manner of their election and removal and their powers and duties, the number-not less than a majoritynecessary to the exercise of their powers, and their compensation, if any. 4. The officers, their terms of office, the time and manner of their appointment and removal, their powers, duties, and compensation, if any. 5. The manner of fixing and collecting fees, dues, and other assessments or charges for services to its members. 6. Any other provisions proper and necessary to carry out the purposes for which the association was formed. The by-laws of such association so created under the provision of this statute shall be deemed to be taken as the law, subordinate to this statute, the articles of association of the same and letters patent issued thereon, the constitution and laws of this Commonwealth, and the Constitution and laws of the United States. SEC. 13. The by-laws may require a member to sell all or any part of their specifically enumerated agricultural, dairy, and horticultural products, and to buy all or any part of their specifically enumerated supplies exclusively through the association; but, in such case, shall specify a reasonable period in each year during which any member, by giving notice prescribed in the by-laws, may withdraw and be released from his obligation to employ the services of the association in respect to such products and supplies. The by-laws may fix, as liquidated damages, specific reasonable sums in amounts fairly relating to the actual damages ordinarily suffered in like circumstances to be paid to the association to reimburse it for any damages which it or the members may sustain by the failure of any members to perform any obligation to the association under the articles of association, the by-laws, or any contract with the association, and such provision shall be valid and enforceable in the courts of this State. SEC. 14. The board of directors of each association shall consist of not less than five members. At the first regular meeting of the association a quorum, as specified by the by-laws, being present the members shall elect from among themselves directors for the term of one year. At the expiration of the terms of directors so elected, their successors shall be elected in like manner for terms of one year. Directors shall hold office until their successors have been elected and qualified and until their successors shall enter upon the discharge of their duties. Vacancies shall be filled for the unexpired terms at any regular meeting or at any special meeting called for the purpose in the same manner as provided for the original election of directors. The board of directors shall man age the affairs of the association and shall perform such other duties as may be specifically imposed upon the board by this act. SEC. 15. Any member, director, or officer of the association may, for cause, at any regular meeting or any special meeting called for the purpose at which a majority of the members shall be present, be removed from office by vote of not less than two-thirds of the members present. Reasonable notice of the time, place, and object of any such meeting shall be given, in the manner prescribed in the by-laws, to the members and other directors or officers against whom charges are to be presented. Such directors, members, or officers shall, at the same time, be informed of such charges, and at such meeting shall have an opportunity to be heard in person or by counsel and by witnesses in regard thereto. SEC. 16. The officers of every association shall include a president, vice president, secretary, and treasurer, who shall be appointed annually by the board of directors. The president and vice president shall be appointed from among the directors. The secretary and treasurer may be nonmembers. The office of secretary and treasurer may be combined and one individual appointed thereto. Vacancies in said offices shall be filled for the unexpired term by the board of directors in the manner provided for the original appointment of offiSuch officers shall hold their offices until their successors are appointed and qualified and shall have entered upon the discharge of their duties. The board of directors shall require the treasurer, and may require such other officers, agents, and employees charged by the association with responsibility for the custody of funds or property, to give bond with sufficient surety for the faithful performance of their duties as such. The premium on such bond to be paid by the association. cers. SEC. 17. An association may provide for the payment of expenses necessary in the performance of its services to its members, by the creation of a working fund or otherwise, through fees, dues, assessments, or charges for the services, to be fixed and collected in such manner as may be prescribed in the by-laws. Such dues, fees, assessments, or charges shall be limited to the amounts necessary to meet expenses already incurred or reasonably estimated as essential to be incurred by the association in conducting its operations. Whenever any association shall find that it has accumulated funds in excess of those necessary to meet expenses already incurred and reasonably estimated as essential to be incurred by it in conducting its operations, it shall return such excess to or deduct from future fees, dues, assessments, or charges of the members who contributed to such excess in the proportion of their respective contributions. SEC. 18. Every association shall, from time to time, appoint an auditing committee of three persons, who shall not be directors, officers, agents, or employees of the association, but who may or may not be members of said association. Said committee shall, once in every quarter of each fiscal year of such association, examine its records and property, and within one month after such examination report in writing the results thereof to the association. At the close of each fiscal year a complete audit of the operations of the association shall be made, the written report of which shall include statements of services rendered by the association, the balance sheet, the receipts and disbursements, and the assets and liabilities, the members admitted and withdrawn, the total number of members, and other proper information, and shall be submitted to the members at the next regular meeting. Within three months after the expiration of the fiscal year for which made the secretary of said association shall file one copy of said report of the audit with the secretary of agriculture of this Commonwealth and one copy with the dean of the school of agriculture of the Pennsylvania State College. No person shall, without consent of the association, except in obedience to judicial process, make or permit any disclosure whereby any information contained in said report may be identified as having been furnished by said association. Any person violating or failing to comply with this section shall be guilty of a misdemeanor, and, upon conviction thereof, shall be punished by a fine of not more than three hundred dollars or imprisonment for not more than six months, or both, at the discretion of the court. SEC. 19. The articles of association may, pursuant to an affirmative vote of two-thirds of all the members, be amended at any regular meeting or at a special meeting called for the purpose, due notice of the time, place, and object of which regular or special meeting shall have been given as prescribed in the by-laws. A copy of such amendment, signed and acknowledged by not less than three of the directors, shall be presented to the governor of the State of Pennsylvania, who shall examine the same, and, if he finds it in proper form, he shall indorse his approval thereon. Said amendment shall then be recorded in the office of the secretary of the Commonwealth in a book to be by him kept for the purpose. The said amendment, together with the indorsements thereon, shall then be recorded in the office for the recording of deeds in the county where the principal place of business is situate. SEC. 20. Any association may, at any regular meeting or at any special meeting called for the purpose, due notice of the time, place, and object of which regular or special meeting shall have been given as prescribed in the by-laws, by a vote of two-thirds of all its members, discontinue its operations and settle its affairs. Whereupon, it shall designate a committee of three members, who shall, on behalf of the association and within a time fixed and designated or any extension thereof, liquidate its assets, pay its debts and expenses, and divide any surplus among the members as may be entitled to under the article of association or by-laws. Upon final settlement by such committee, the association shall be deemed dissolved, and shall cease to exist under the act. The committee shall make a report of the proceedings under this section, which shall be signed by its members, and duly acknowledged by them, which report shall be filed and recorded with the secretary of the Commonwealth and with the recorder of deeds of the proper county. The members of said association so discontinuing its affairs and operations may, in the designation of said committee, provide that the members of said association shall receive a compensation for their services as may be provided in said designation. Said compensation to be fixed by vote of not less than two-thirds of all the members. SEC. 21. Hereafter, unless expressly authorized by law, no individual or partnership, corporation or association, formed in this State otherwise than under the provisions of this act shall adopt and use the word "cooperative," or any abbreviation or derivative thereof, as a part of the name or designation under which such individual, partnership, corporation, or association shall do business in the State. Any association shall be entitled to sue for and to obtain, in any court of competent jurisdiction in this State, by bill in equity, injunction, and other relief against the use of the word "cooperative" by any individual, firm, corporation, or association, who shall violate the provisions of this section. SEC. 22. If any clause, sentence, paragraph, or part of this act shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the remainder thereof, but shall be confined in its operation to the clause, sentence, paragraph, or part thereof directly involved in the controversy in which said judgment shall have been rendered. SEC. 23. All acts or parts of acts inconsistent herewith are hereby repealed. SEC. 24. The right to alter, amend, or repeal this act is hereby expressly reserved. Approved, the 12th day of June, A. D. 1919. WM. C. SPROUL. The foregoing is a true and correct copy of Act of the General Assembly No. 238. CYRUS E. WOODS, Secretary of the Commonwealth. Mr. STEELE. That amends the general corporation law of the State, does it not? Mr. MILLER. Yes, sir. Let me also call your attention to the fact that New York State, besides amending its penal code and antitrust law, adopted a law at the same session they amended the antitrust law authorizing the creation of organizations of farmers, clearly granting to them the express power to do these things. Now, the fact that these three great States-New York, Pennsylvania, and Illinois-which have within their borders the three greatest cities of the Union, have granted these privileges, if they may be called privileges, not rights, may be of some interest to you gentlemen as indicating the trend of the public mind and of legislative thought, and I have been informed that Wisconsin, and, I think, Minnesota have adopted similar legislation, but I am not familiar with it. Now, these laws as enacted in New York and Pennsylvania, authorizing the creation of these associations with express power to do these things, follow quite closely an act prepared by the Federal Department of Agriculture, the Bureau of Markets, which they recommend to the different States for adoption. The CHAIRMAN. Have you a copy of that? Mr. MILLER. I think I have it here. The CHAIRMAN. Will you put that in the record? The Department of Agriculture has done some valuable work along this line. This will be found in the Department of Agriculture Service and Regulatory Announcements No. 20, headed, "Suggestions for a State cooperative law designed to conform to section 6 of the Clayton Act." This is a long act with many provisions: (The proposed act follows:) [Service and regulatory announcements, No. 20.] SUGGESTIONS FOR A STATE COOPERATIVE LAW DESIGNED TO CONFORM TO SECTION 6 OF THE CLAYTON ACT. In compliance with requests from many officials and individuals, a bill for the organization of nonstock agricultural and horticultural cooperative associations, under State laws, has been drawn in the United States Department of Agriculture, in which have been embodied many suggestions for carrying out, and an effort has been made to conform to, the requirements of section 6 of the Clayton amendment of the United States antitrust laws. A copy of the draft and of the letter transmitting the same are appended. UNITED STATES DEPARTMENT OF AGRICULTURE, OFFICE OF MARKETS AND RURAL ORGANIZATION, WASHINGTON, D. C. DEAR SIR: Previous acknowledgment has been made of the receipt of your communication, in which you requested draft of a model act providing for cooperative associations under State law, both with and without capital stock. Many similar communications have been received and many interviews have been held with persons concerned. As a result, and with the object of rendering such assistance as it could, the department has prepared a bill, copy enclosed, relating to nonstock agricultural and horticultural associations, in which it has endeavored to embody the views expressed by those interested. The organization of associations having capital stock, or of associations which are neither agricultural nor horticultural, has not been dealt with. It is clear that the exemptions conferred upon specifically described agricultural and horticultural organizations and their members by section 6 of the Clayton amendment of the United States antitrust laws open untried possibilities for strictly cooperative effort on the part of the farmers, if they be utilized along sound economic lines with due regard for the rights of consumers and others. Effort has been made to draw a bill in such form that if it were enacted by a State legislature, and an association organized thereunder were to engage in interstate commerce, these possibilities might be tried out without offending Federal laws; also to shape each provision so that it may be in harmony with law. Nevertheless, those who contemplate using the material should be cautioned of the necessity for care on their part also. The antitrust laws are not committed to this department for administration. It has no power to give an authoritative ruling as to their meaning. Indeed, the final interpretation of these statutes rests with the courts. Furthermore, it is conceivable that properly organized associations, coming wholly within the terms of a statute expressly permitting their existence and operation, might conduct themselves in an unlawful way. It is suggested, therefore, that those who desire to make use of the bill being sent you, or to organize thereunder, should act in reference to the matter upon the advice of competent counsel of their own choice. Section 6 of the Clayton law provides: "That the labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade under the antitrust laws." 66 It is plain that before a cooperative association can be brought within the obvious requirements of the section it must affirmatively appear that, first, it is a labor, agricultural, or horticultural" organization; second, it is "instituted for the purposes of mutual help"; third, it does not have "capital stock"; and, fourth, it is not "conducted for profit." Only a few of the States now have laws providing for the creation of such associations. You will notice that the scheme of the bill is that every association created thereunder shall act exclusively as an agent for the member; also if it act for the nonmember, it must do so as agent and the service must be performed at cost. It is sought by this application of the principle of agency to safeguard the nonprofit feature of such an association. It is absolutely essential that this feature be adhered to both in the organization and in the conduct of the association. In addition to what has been said above with respect to the laws of the United States, it is suggested that, in every case, local counsel be consulted as to whether the provisions of the bill are in harmony with the constitution and antitrust laws of any State in which it may be proposed to put it into effect. Very truly yours, FEBRUARY 2, 1917. CHARLES J. BRAND, Chief. AN ACT To provide for the formation of cooperative agricultural or horticultural associations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, and for other purposes. [Enacting clause.] 66 SECTION 1. In this act, unless the context otherwise require, 'association' means an association formed under this act; "member" means a member of an association; "person" includes a corporation or partnership or two or more persons having joint or common interest; words used import the singular or the plural, as the case may demand. SEC. 2. Cooperative agricultural or horticultural associations instituted for the purposes of mutual help, and not having capital stock or conducted for profit, may be formed, under the provisions of this act, by any number of persons, not less than five, engaged in agriculture or horticulture. SEC. 3. An association may, as agent for its members or any of them, perform for them services connected with the production, preservation, drying, canning, storing, handling, utilization, marketing, or sale of agricultural and |