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MCCREERY ANGUS FARMS v. AMERICAN ANGUS ASS'N

February 15, 1974

MCCREERY ANGUS FARMS, A PARTNERSHIP, MASON CITY, ILLINOIS, ET. AL., PLAINTIFFS,
v.
AMERICAN ANGUS ASSOCIATION, A CORPORATION, ST. JOSEPH, MISSOURI, DEFENDANTS.



The opinion of the court was delivered by: Harlington Wood, Jr., District Judge.

MEMORANDUM, FINDINGS OF FACT, AND CONCLUSIONS OF LAW

In a preliminary way, this case involves an internal dispute of a private association, the American Angus Association, a not for profit organization. Plaintiffs, successful purebred Black Aberdeen Angus breeders, are indefinitely suspended members for allegedly failing to obey an Association rule relating to blood typing, and of one of its animals in particular. The Plaintiffs have in effect been put out of business by the Association's action, a group boycott. But there is more to this story.

The function of this Court is limited as it does not intend to sit generally as a Court of Review as to the merits of the Association's actions nor to substitute its judgment as to the merits of the allegations. That is purely Association business.

That does not mean, however, in circumstances as will be seen to exist in this case, that this Association is free from all judicial interference in its treatment of its own members.

It must be recognized that this Association, dedicated to the development of purebred cattle of a particular, valuable and outstanding type, performs an important service not only to its members, but it also involves strong elements of public interest. Similar associations for other breeds of animals have likewise helped to advance the quality of American livestock.

Some of the associations have competing associations, but the American Angus Association does not. It is a complete and absolute monopoly. Purebred Black Aberdeen Angus is big business, but a person is not in the purebred Black Aberdeen Angus business in any degree unless he is a member in good standing of this Association. This Association holds the reputations and the livelihood of its members within its absolute grasp. Such an Association admittedly must have the power to police itself and its members to accomplish its legitimate purposes. Therefore, the Association argues that, "If it cannot enforce its rules, the Association cannot serve its purposes and might as well fold up." That is true as far as it goes, but there is more to it than that as can be seen in the circumstances of this case. This is not a local social club, but an association of immense power and importance.

With that power and prestige, which the Association has developed over the years and no doubt deserves, goes an equal responsibility to clearly define and to use that power fairly and in accordance with at least the minimum requirements of due process.

This does not imply that the same technical judicial standards as exist in Court trials must be applied to Association rules and hearings, but it does mean that associations of this size and power must adhere to certain basic principles of fairness and due process which laymen can understand and administer. As has been said in other contexts, what affects the rights of one of its members affects all the members. This Association will be strengthened, not harmed, by a judicial requirement that the Association's rules, such as it determines to best serve its purposes, be clear, fair and adequate, and, secondly, that they be enforced with openness and fairness and with procedural due process.

No wrongdoing attributable to personal malice is intended to be found against any of the individual Defendants involved. That is to be distinguished, however, from fault, negligence and a lack of understanding of their own powers and responsibilities. The Association officers must recognize in particular the gravity of any but the most considered and judicial use of their powers. Old, ad hoc, informal and pro forma committee procedures bordering on the arbitrary, without the opportunity for the challenged member to know exactly what the full charge is and to test and to meet it if he can in a full, fair, and open hearing before the decision is reached are outmoded and dangerous. Those who conduct the hearings and make the decisions must be unbiased and maintain open minds until they have heard the whole story in open hearings with the challenged member, who has been given adequate notice and time to prepare. This Court differs with the view of Defendants as to what standards are now required for such an Association in such matters in the light of current and expanding concepts of due process. It is time for such associations to re-evaluate their practices so that the pursuit of their worthy goals will be furthered by reasonable, fair and just rules and procedures.

In this particular case, all parties agreed the narrow issue to be decided had to do only with whether and under what circumstances an Association rule about blood typing had allegedly been violated by Plaintiffs as determined by Association hearings resulting in Plaintiffs' indefinite suspension. But underlying all the actions and circumstances made known to this Court runs the strong underlying and coloring current, sometimes openly, that Plaintiffs had two bulls, one with pure blood and one without, and the one without was the prize winner taken to shows and the other was the one used to pass the prior blood tests. This Court is not going to pass on whether any rule was in fact broken by the Plaintiffs, and certainly will not now attempt to resolve any question about the existence or identity of two bulls. It will confine itself only to the adequateness and fairness of the rules and the due process aspects of the hearings. However, as a practical matter, this underlying current, even though unsubstantiated in this record, cannot be entirely overlooked. This Court sees the resolution of those substantive matters to be only for Association determination, provided "due process" is followed. That the Association may have in fact arrived at a correct determination and have fully adequate reasons for its actions is not controlling here. Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963).

In this difficult practical situation, the Court is earnestly endeavoring only to apply a little horse sense to this bull situation.

Against this brief general background, the case is now considered in more detail.

This opinion will constitute the Court's findings of fact and conclusions of law for the purposes of Federal Rules Civil Procedure 52(a).

FINDINGS OF FACT

1. The Defendant, American Angus Association, is an Illinois not for profit corporation engaged in interstate commerce and maintaining offices in St. Joseph, Missouri.

2. This Association is the sole entity in the United States for the registration of pedigrees of purebred Black Aberdeen Angus cattle. By the fact of such registration, Black Aberdeen Angus cattle are most desirable and the value of the animals is significantly increased thereby.

3. The Association has a total monopoly on the registration of pedigrees of purebred Black Aberdeen Angus cattle in the United States. If one desires to engage in the business of breeding, raising, showing, and selling registered purebred Black Aberdeen Angus cattle, he must be a member of the American Angus Association.

4. Plaintiffs are an Illinois partnership, McCreery Angus Farms, formed in 1971, and engaged in the business of breeding, registering, raising, exhibiting, purchasing, and selling registered purebred Black Aberdeen Angus cattle. John McCreery is the managing partner.

5. During the years 1972 and 1973, McCreery Angus Farms made great strides and developed a highly favorable reputation in the Black Aberdeen Angus breeding business.

6. Of particular significance to the success of the show activities of McCreery Angus Farms was its November, 1972, bull calf, Billerose Lad 932, Tattoo 3634. Billerose Lad was designated bull calf champion at every exhibition where he was shown during 1973.

7. As Plaintiffs began to achieve success, rumors concerning purity and authenticity of Plaintiffs' show herd reached the American Angus Association's offices. To dispel such rumors, Plaintiffs allowed for blood typing of their entire show herd in April of 1973 under supervision agreed to by Plaintiffs and the Association.

8. Blood samples were drawn from all 48 animals in Plaintiffs' show herd on or about April 30, 1973, under the supervision of Wayne Cooper, the Registrar of the Association, and Dale Baird, the Regional Representative of the Association. The samples were labeled by Cooper and mailed by him to the Department of Dairy Science Laboratory of Ohio State University at Columbus, Ohio. The Department of Dairy Science Laboratory of Ohio State University, under the supervision of Dr. H.C. Hines, is the Association's exclusive agency for laboratory analyses to determine purity of breed and accuracy of recorded parentage of blood samples from Black Aberdeen Angus cattle.

9. Following a telephone conversation between Wayne Cooper and Dr. H.C. Hines on May 30, 1973, Hines sent Cooper a letter dated June 1, 1973 (Pl. Ex. 1), which Cooper received on June 4, 1973. Plaintiffs were not sent a copy of that letter. That letter, with accompanying laboratory analysis reports, reported to Cooper the results of the blood typing of Plaintiffs' show herd. Following a second telephone conversation between Cooper and Hines on June 5, 1973. Hines sent the identical laboratory analysis reports to Plaintiffs with a different covering letter dated June 7, 1973 (Pl. Ex. 2). Hines' letter to Plaintiffs omitted certain conclusions favorable to Plaintiffs and changed the wording with respect to certain questioned animals from a neutral to a totally negative tenor.

10. Out of 48 animals so blood typed, 43, including Billerose Lad, were found to be purebred Black Aberdeen Angus. The registration for the remaining five animals was immediately surrendered by the Plaintiffs, and none of these played any role in subsequent actions arising in this controversy.

11. Plaintiffs' Exhibit 31, the Association's Breeder's Reference Guide, contains the Bylaws and Rules of the Association as of January 1, 1973. No amendments relevant to this action were adopted between January 1, 1973, and October 23, 1973.

12. On July 27, 1973, Wayne Cooper received an anonymous letter dated July 25, 1973, which made certain charges concerning misrepresentations of the purity and authenticity of Plaintiffs' animals, specifically Billerose Lad. He came into possession of another anonymous letter dated July 30, 1973, which contained substantially identical information.

13. A meeting of the Executive Committee of the Board of Directors of the Association was convened on August 4, specifically to discuss McCreery Angus Farms and these rumors. At this meeting, these two letters were presented to the Executive Committee as a complaint against McCreery Angus Farms, purportedly pursuant to Article VII of the Bylaws of the Association. No notice of such complaints were given to Plaintiffs.

14. It was then decided to type all of the Plaintiffs' bulls, including Billerose Lad, being shown in Louisville at the American Angus Futurity from August 4 to August 7, at the conclusion of the judging on August 7 with no notice to Plaintiffs prior to that time. This action of the Executive Committee was in violation of Article VII of the Association's Bylaws, in that any investigation by the Executive Committee must, by the terms of Article VII of the Association's Bylaws, be initiated by a complaint by a member of the Association or a party in interest.

15. On August 7, 1973, a request to blood type the animals in question was made of Tom Miller, an employee of McCreery Angus Farms, who refused such request by advising that he had no authority to permit such action.

16. On August 10, 1973, the Executive Committee of the Association met by telephone and resolved to attempt the blood typing of Billerose Lad at the forthcoming Illinois State Fair in Springfield. In anticipation of a similar refusal to submit to blood typing at Springfield, a letter was drafted and dated that same day directing John McCreery to appear before the Executive Committee on August 25, 1973, to show cause why he had failed to allow blood samples to be taken from Billerose Lad in Louisville, Kentucky, and at the Illinois State Fair in Springfield. This letter was placed in a sealed envelope and delivered to the Association's regional representative in Illinois, Dale Baird, who was instructed to deliver the envelope to John McCreery or his employees at Springfield.

17. Plaintiffs John McCreery and Max Reynolds were present at the Illinois State Fair for a total of eight hours during the morning and afternoon of August 12, 1973. They observed Baird on at least two occasions during that day and exchanged greetings with him at least once during that day, but Baird said nothing to either owner concerning his instructions to request a blood sample from Billerose Lad, or the fact that he was in possession of a sealed letter addressed to John McCreery.

18. On the morning of August 13, 1973, Baird approached Tom Miller who was present at the Illinois State Fair with various animals from the McCreery show herd including Billerose Lad. Baird attempted to deliver the sealed envelope which unbeknownst to both Miller and Baird, contained the notice of hearing. Miller told Baird he had no authority to deal with him, whereupon Baird departed to find John McCreery.

19. The sealed letter dated August 10, 1973, was delivered on August 13 to John McCreery present at the Springfield Fair, requesting John McCreery to appear at a hearing before the Executive Committee to show cause why he failed to allow blood samples to be taken from Billerose Lad in both Louisville and Springfield.

20. The hearing before the Executive Committee was held on August 25, 1973. At the beginning of the hearing on August 25, 1973, Sam Fullerton, Vice President of the Association and Chairman of the Executive Committee, ...


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