As 800,000 past and present tobacco farmers or their heirs seek part of a $340 million reserve held by a much-shrunken tobacco marketing cooperative, North Carolina's Supreme Court was asked Monday to decide if the group is simply too big and diverse for one class-action lawsuit.
The court heard from attorneys about the fight over money built up for decades by the Flue-Cured Tobacco Cooperative Stabilization Corp. The justices must decide whether it's possible to sort out claims involving so many people across North Carolina, South Carolina, Florida, Georgia, and Virginia.
The Raleigh-based nonprofit created in the 1940s said the millions it's holding represent a reasonable reserve, though membership is down 99 percent since U.S. taxpayers quit underwriting crop prices in 2004.
The co-op culled its membership rolls to about 1,000 tobacco farmers because it said the rest were no longer active growers. The current and former members behind the lawsuit said the co-op is holding on to too much money.
"The question becomes what amount, if any, of this accumulated money" should be disbursed or held in reserve, Justice Paul Newby said. "Isn't the problem that these are members and membership has certain benefits that should go with that?"
An attorney representing the co-op's managers said the court should use the case to limit the size and scope of class-action lawsuits, which allow many people with a shared interest in a dispute to sue as a group.
The wide range of interests at play covers not only current and former members but members who signed different agreements, were subject to different deadlines to make payment claims and after their deaths passed on their stakes in the co-op to heirs, partnerships or incorporated entities, Washington attorney Derek Shaffer said.
"This case can serve as the court's Exhibit A for a class that simply goes too far," he said.
For most of its history, the co-op carried out the federal government's tobacco price-support program. The government annually set a minimum price for the crop and quotas limiting how much tobacco farmers could grow.
Farmers who couldn't get a better price for their crop from cigarette-makers knew they could sell to the cooperative. The co-op often resold the tobacco for less than the federally set minimum price it paid growers and taxpayers bore those losses.
The tobacco program ended in 2004 and over the next 10 years tobacco farmers and landowners shared about $10 billion in transition payments that ended last year.
The co-op continues to play an important role as a leaf buyer, competing against the for-profit cigarette-makers and helping drive up the price that growers could otherwise fetch, Shaffer said.
That's contrary to the view of former members behind a separate, federal lawsuit that says the co-op as has outlived its original purpose and it should be dissolved and its assets distributed.
The case before the state Supreme Court says the co-op should have enough financial resources to survive, while distributing the rest to farmers who deserve payouts, attorneys said.
"The disputes are not going to go away. There are hundreds of thousands of growers, some of whom are not farming tobacco and have gone to cabbage and other things, who are still around and still have an interest to look after," said C. Alan Runyan, a Beaufort, South Carolina, attorney representing growers and others seeking a payout.
Emery Dalesio can be reached at http://twitter.com/emerydalesio