Autauga Quality Cotton Association v. Crosby

Autauga Quality Cotton Association (plaintiff) was a nonprofit marketing association that pooled cotton from many farms for sale. The Crosby family’s cotton farm, (Crosby) (defendant) entered into a marketing agreement with Autauga to participate in this communally beneficial pooling. In the marketing agreement, Crosby agreed to provide all its cotton from certain farming parcels in a given year to Autauga. In exchange, Autauga would sell the cotton, keep a portion to cover Autauga’s operating expenses, and then give the rest of the sale proceeds to Crosby. The marketing contract also had a liquidated-damages provision. This provision said that, if Crosby breached the contract and equitable relief was unavailable, then Crosby would owe Autauga the difference between: (1) the price of cotton on the New York futures market after the breach, and (2) the highest price that Autauga received for any cotton from that year’s crop. One year, Crosby sold its promised cotton to someone else, breaching the marketing contract. Autauga sued Crosby, claiming that Crosby owed approximately $1.3 million under the liquidated-damages provision. In the lawsuit, Autauga changed the claimed amount of liquidated damages several times, eventually settling on a claim of approximately $1.696 million. This amount was greater than 80 percent of the total value of the crop that Crosby was supposed to have provided to Autauga. This requested amount was also three times the total of Crosby’s net earnings from the year of the breach. During the dispute, Autauga’s own expert testified that the purpose of the liquidated-damages clause was not to approximate Autauga’s actual losses from the breach, but rather to create a “disincentive for a farmer to not perform.”