Washington State Hop Producers, Inc. v. Goschie Farms, Inc.

From 1965 to 1985, the United States Department of Agriculture (USDA) used a marketing order requiring hop growers to obtain “federal allotments” in order to market their hopes. Federal allotments were called “hop base.” Growers could transfer excess allotments to other growers. Over time, hop base became a valuable commodity, and a secondary market developed to trade hop base among growers. A trust known as Washington State Hop Producers, Inc. (the Trust) (plaintiff) formed in 1979 for the purpose of acquiring, leasing, and selling federal hop base. Subsequent to formation of the Trust, the USDA considered doing away with its marketing order. As of June 1985, however, the marketing order was still in effect and no substantial changes were anticipated. On May 31, 1985, the Trust mailed invitations to growers to bid on two pools of hope base for sale. On June 16, 1985, the Trust received bids to purchase ranging from $0.05 per pound to $0.76 per pound. The Trust accepted bids ranging from $0.50 to $0.76 per pound. One of these bids was from Goschie Farms, Inc. (Goschie) (defendant). On June 27, 1985, however, the USDA terminated its marketing order, effective December 31, 1985. Goschie and all other successful bidders refused to perform their contracts with the Trust. The Trust was able to sell remaining hop base at prices reduced by ninety-two to ninety-eight percent of the original contractual value. The Trust brought suit against Goschie in Washington state court, seeking to enforce the terms of the purchasing contract. The trial court granted summary judgment to Goschie. The appellate court affirmed, finding that the principal purpose of the contract was to purchase a hop allotment base provided and created pursuant to a hop marketing agreement. The appellate court held that when the USDA terminated the marketing order and the price of hop base fell drastically, the principal purpose of the contract was frustrated. Thus, Goschie was excused from performance of the contract. The Trust appealed.