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EASTERN MILK PRODUCERS COOP. ASSN. v. LEHIGH VALLE

February 16, 1978

EASTERN MILK PRODUCERS COOPERATIVE ASSOCIATION, INC. , Plaintiff
v.
LEHIGH VALLEY COOPERATIVE FARMERS, INC., Allentown, Pennsylvania, and BERNARD HINISH, Curryville, Pennsylvania, Defendants



The opinion of the court was delivered by: DITTER, JR.

 DITTER, J.

 This case comes before the court on defendants' motion to suspend a preliminary injunction pending appeal.

 Eastern, the plaintiff, and Lehigh, the corporate defendant, are competing milk cooperatives. Following two days of testimony, I granted plaintiff's motion for a preliminary injunction the effect of which was to prohibit Lehigh's accepting milk from 16 named dairy farmers (producers), who were contractually obligated to ship to Eastern. An immediate appeal from this order was taken and Lehigh's present motion seeks to suspend the injunction until the Court of Appeals has ruled.

 Lehigh's motion is brought pursuant to Fed.R.Civ.P. 62(c). Case law requires that a party seeking such a stay must show (1) that he will likely prevail on the merits of the appeal, (2) that he will suffer irreparable injury if the stay is denied, (3) that other parties will not be substantially harmed by this stay, and (4) that the public interest will be served by granting the stay. Such a request is addressed to the discretion of the court, and, as with any exercise of discretion, the court must balance the equities presented by the particular set of facts. Resident Advisory Board v. Rizzo, 429 F. Supp. 222, 224 (E.D.Pa. 1977).

 In support of its motion, Lehigh contends, as it did at the time of the hearing, that Eastern neither showed there were breaches of contract nor, if there were breaches, that they were induced by Lehigh.

 At the conclusion of the hearing on January 31, 1978, I made oral findings of fact and stated my conclusions of law. *fn1" My findings were based on the evidence before me which included the contracts between Eastern and the 16 producers referred to in my order. These contracts were valid on their face. It was not contested that Bernard Hinish, the individual defendant and a field representative of Lehigh, had talked to each of the producers, had told them of the benefits of membership in Lehigh, and that shortly thereafter, each of these producers had ceased shipping to Eastern and had begun to ship to Lehigh. Based on this evidence and the lack of evidence to show the contracts had been terminated, I concluded that these producers had breached their contracts. Lehigh again argues that there may have been any number of reasons why these 16 producers stopped shipping to Eastern, and of course, that is true. The possibilities are without number and Eastern made no effort to exclude all of them or even the most obvious of them. On the other hand, Lehigh produced no evidence in support of its contention that Eastern had been at fault and that the producers may have been justified in refusing to ship milk to it. The names of these producers were no surprise to Lehigh -- it had had notice of Eastern's contentions and the names as of December 5, 1977. No evidence was produced by way of deposition, affidavit, or anything else to justify the refusal of these 16 producers to abide by their contracts. Although Lehigh argues that circumstantial evidence cannot be accepted to establish a breach of contract or the inducing of a breach, no legal or logical reason is presented in support of that contention.

 In stunning contrast to its failure at the time of the hearing to produce evidence from these milk producers, Lehigh has now submitted their ex parte affidavits. Whatever they may say, I am unwilling to accept the underlying assumption that they present me with an acceptable form of legal evidence to do anything. Lehigh does not contend that it gave any notice these affidavits would be sought, and the time frames are such that for all practical purposes Eastern has had no opportunity to seek counter affidavits, explanations, or make any response. In fact, the present motion, which was filed on February 14, although served on local counsel promptly, has not even been seen by Eastern's trial counsel whose office is in New York. I conclude, therefore, that I may not consider the affidavits which Lehigh has filed.

 Pennsylvania law, admittedly applicable in this matter, recognizes the sanctity of milk marketing agreements and makes anyone who knowingly induces the breach of such a contract with a dairy cooperative liable in damages. 15 Purdons Statutes, Section 12125. Hinish, Lehigh's representative who enrolled the milk producers in question with Lehigh, did so knowing they were then members of Eastern. Under some circumstances, one who interferes with the contractual arrangements of another may be privileged to do so. No such privilege was suggested in this case.

 From the evidence presented at the hearing, I concluded that Lehigh's conduct constituted inducing breach of contract under prevailing authority. The question is one of tort law. I found particular guidance in the words of Dean Prosser. In his section on "Interference With Contractual Relations," Prosser states that despite its name, "inducing breach of contract . . . does not require inducement to action as a means . . ." W. Prosser, Law of Torts, Ch. 25, ยง 129, p. 935 (4th Ed. 1971). He concedes that a difficult case is posed where defendant simply pursues his own ends with the knowledge that his conduct will most likely prevent performance of another's contract, but without any actual desire or primary intent to achieve this result. In such a case, Prosser concludes that the defendant's conduct must be deemed intentional, and thus actionable, unless it can be justified. Id. at 941-42.

 On the question of justification, Prosser explains that where defendant seeks to protect an existing economic interest, such as a final stake in the affairs of the person induced "he is privileged to prevent performance of the contract of another which threatens it." On the other hand,

 
where his interest is merely one of prospective advantage, not yet realized, he has no such privilege. The typical case is that of business competition. The courts have held that the sanctity of the existing contract relation takes precedence over any interest in unrestricted competition, and have enforced as law the ethical precept that one competitor must keep his hands off of the contracts of another. This . . . has found particular application in cases of offers of better terms to induce the breach of a contract, and of the violation of exclusive agency agreements . . .

 Id. at 944-45.

 Clearly, Lehigh's conduct fits the mold of what Prosser would call unprivileged and unjustified. Lehigh had no preexisting interest in the affairs of milk producers who were under contract to Eastern. *fn2" On the contrary, Lehigh's interest was purely prospective, and it sought to advance that interest by actively soliciting Eastern's members to become members of Lehigh. By ...


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