County Creamery (TCCA) sued Cheese & Dairy (TC&DA), claiming improper use of the Tillamook brand on Premium Brand cheese. The judge in the case urged arbitration. Cheese & Dairy agreed. County Creamery did not. Del Mayer wrote a letter to the editor of the Tillamook, Oregon Headlight-Herald, recapping the causes of disagreement and wondering why County Creamery would not agree to arbitrate the two cooperatives’ issues.
May 24, 1964
To ‘Doc’ Tillamook:
Recent radio announcements and news releases of TCCA which label the supporters of TC&DA “irresponsible” are of such a serious nature that I feel a brief summary of TC&DA’s position is justified. Certainly the slanted statements they have made do not give the people in the county enough facts to enable them to judge for themselves whether or not the problems we have could be solved fairly by arbitration. The issues which divide TCCA and TC&DA are:
We disagreed with the TCCA manager’s policy of making newspaper statements advocating lower grade ‘A’ milk prices without authorization from the TCCA board of directors or from TC&DA whose members produced all of Tillamook’s grade ‘A’ milk. In these days of rising costs and shrinking profits on the farm, it is disturbing to dairymen, to say the least, when the manager of their co-op advocates cutting the price even lower.
The second issue developed out of the concern of TC&DA directors about whether the practice of making loans to stores in Portland was sound and should be continued. This arrangement provided that for every additional 20,000 pounds of milk we sold to Alpenrose dairy we agreed to provide up to $200,000 for making additional loans to stores. The terms of these loans provided that in the event a store failed to repay their loan, TC&DA could not collect the balance due from Alpenrose – these notes were WITHOUT RECOURSE. Milk sales increased rapidly and so did the balance we had loaned. Finally TC&DA directors stopped the loan arrangement while they compared the risks and benefits of the program more carefully. Shortly thereafter, TCCA itself re-established the loaning program. Since the funds of TCCA consist primarily of capital contributions made by the factories who are members of TCCA, once again TC&DA found itself in the loaning game. This time against its wishes and very, very limited control of the terms.
About this time an effort was being made by dairymen throughout Oregon to establish a voluntary milk marketing program. TC&DA directors supported this because they felt Tillamook dairymen could market milk more profitably under such a program than through the loan arrangement with Alpenrose. Management of TCCA was not in agreement, however, and additional controversy developed.
In any manufacturing process one must expect to have waste and product loss. Cheese making and milk processing are no exception. However, TC&DA directors noted that over the last few years these losses had increased alarmingly as compared to the increase int he amount of products being processed. For example, in 1952 a total loss of 15,913 pounds of cheese occurred out of a total of 9,830,969 pounds produced as compared to 225,117 pounds lost out of 10,225,530 pounds produced in fiscal year 1962-63. When TC&DA directors attempted to find and eliminate the cause of these increased losses and attempted to determine how they were being charged to the factories, they met opposition from TCCA officials and to date it appears that TCCA still has done nothing to determine the cause of these abrupt increases in product loss.
At the annual meeting of TC&DA in February 1963, the members and the board of directors of the association were astonished to learn that Tillamook cheese was being marketed in a pressurized can. This fact was brought to our attention by a member whose sister had sent him a newspaper story about it from California. If TCCA is now concerned that the name Tillamook might fall into irresponsible hands, perhaps they can appreciate the concern of TC&DA members when they learned that the Granny Goose Company had been given the exclusive right to use “Tillamook” on their product. This right was granted without the authorization or knowledge of either TC&DA or of the board of directors of TCCA. It is amazing that this group which showed so little concern about the Granny Goose deal, now stands with righteous indignation and complains of infringement when TC&DA tries to market its products as “Premium Brand – made and aged by Tillamook Cheese and Dairy Association” which our trademark attorneys tell us we have the right to do.
TCCA concern about the control of the Tillamook name falling into irresponsible hands is very interesting in light of a recent development. We speak of the Minnesota cheese imported by TCCA. Every resident of this county should be gravely concerned about the cheapening of the Tillamook reputation which has undoubtedly occurred as a result. Perhaps if TCCA had been more concerned with accepting the responsibilities which it bears, this unfortunate incident would not have occurred.
Finally there is the matter of the financial relationship between TCCA and TC&DA. Although it is mentioned last, this is the oldest and by far the most serious of the issues which divide us. It was TCCA’s unwillingness to supply TC&DA directors with the information they requested or to consider TC&DA complaints about TCCA financial policies which they felt were unfair, that finally led to the Declaratory Judgment suit in June 1963. Contrary to TCCA’s charge that this suit was an “attack on the structure and oeration of TCCA,” TIllamook Cheese & Dairy Association brought this suit to court in an attempt to determine the following points:
1. Is TC&DA a separate business which can operate without interference from TCCA?
2. Is TCCA a holding company which may dictate the policies and management and otherwise control TC&DA?
3. As between parties, who is entitled to the funds derived from the sale of TC&DA’s products?
4. Is TCCA entitled to loan the funds of TC&DA without TC&DA’s permission?
5. Is it proper for TCCA to charge TC&DA for the services of TCCA’s manager?
6. Who owns title to certain property and equipment?
The court ruled in favor of TCCA on points 5 and 6, stating that TCCA did have the right to charge TC&DA for their pro-rate share of the manager’s salary and also that legal title to the property in question was held by TCCA.
On the other hand, the court ruled that TC&DA was indeed a separate business and that TCCA was not a holding company which could dictate the policies of TC&DA. The court also ruled that TCCA could not loan TC&DA’s funds without permission of TC&DA.
On the remaining question the court ruled that while TC&DA had ownership of the proceeds from the sale of its products, TCCA had the right to receive these funds and deduct charges owing to TCCA by TC&DA prior to turning over the sale proceeds, provided an accurate accounting of credits and charges was kept.
It is on this point which the directors of TC&DA raise many questions relating to the fairness of the amount of charges made and their accuracy. The 1962 audit of TC&DA’s books also raises many questions in this same area. It has appeared for some time that an investigation of the costs charged to TC&DA for joint-use facilities is necessary. An audit of the intercompany account through which almost all TC&DA charges and credits from TCCA are made also appears to be essential.
During 1962 in excess of $5,000,000 was charged to TC&DA through this account by various cash expenditures, depreciation charges, and other charges. Since TCCA auditors have treated this account as “a management tool,” the accuracy and fairness of the charges and credits therein has never been examined. It is not reasonable to expect the patron-owners of TC&DA or the board of directors who represent them to accept this type of accounting and auditing.
These complaints existed before the declaratory judgment suit and they still exist because an amendment to the by-laws of TCCA so limited TC&DA representation on the TCCA board of directors that the issues couldn’t possibly be settled.
This was the state of affairs at the time TC&DA withdrew from TCCA and began to market its products under the Premium Brand label, an endeavor which has resulted in our being involved in a suit between TCCA and TC&DA relating to the use of the Tillamook name.
Essentially, this concludes a summary of the issue dividing our associations. And as one studies them, there appear to be no problems which the parties could not arbitrate and settle fairly. In fact, some of the things listed here are no longer problems. For example: the attempt to establish a voluntary milk marketing pool failed for lack of support; however, the ground work laid here was instrumental in the passage of the state milk stabilization law now in effect. The new law in turn seems to have eliminated the need for making Portland store loans.
According to the attorneys of TC&DA, the fastest and least expensive way to resolve all of the remaining issues is to submit to arbitration as Judge Solomon suggested. In his letter to Doc Tillamook last Friday, Mr. Craven points out the benefits which have accrued to Tillamook dairymen through unified cooperative effort. Unity, says he, is the high road of success. I believe that Judge Solomon and TC&DA have recognized this truth too. We have also recognized that the problem which confronts us is not convincing people of the necessity of unity but to find a way to achieve it. This is why TC&DA has agreed to submit to arbitration. I ask you Mr. Craven, “since you will not arbitrate what means do you propose for achieving unity?”
Certainly the route of the federal courts which TCCA has chosen to take will not give us unity. To drag on in the courts can only result in an endless round of expensive battles which will never really solve the issues which are the root of our troubles. Such a course can only widen the breach which separates us.
The statement published by TCCA in the Shopping Smiles speaks of “certain men who, if they can’t have things their way, will try to wreck it for all.” Certainly TC&DA’s directors have demonstrated that they are willing to take the ris of “not having everything their way,” for they have offered to submit to arbitration.
Who then are these “certain men, who, if they can’t have things their way, will try to wreck it for all?
(Credit: Tillamook Headlight Herald)