- Associated Press - Saturday, April 18, 2015

RALEIGH, N.C. (AP) - North Carolina’s highest court will take up how many current and former tobacco growers in the Southeast have a stake in the $340 million reserve held by a nonprofit cooperative established during an era of taxpayer subsidies killed a decade ago.

The state Supreme Court on Monday takes up a money fight already 10 years old and likely to take years more before it’s settled. At stake is money built up over decades by the Flue-Cured Tobacco Cooperative Stabilization Corp.

The Raleigh-based nonprofit was created in the 1940s to buy, process and warehouse the flue-cured variety of tobacco from growers when cigarette-makers wouldn’t pay the government-backed minimum price. The cooperative has said the millions it’s holding is a reasonable cushion, though it’s lost 99 percent of its membership in the decade since U.S. taxpayers quit underwriting crop prices.

The main issue before the Supreme Court is whether it’s possible to sort out claims involving 800,000 past and present tobacco farmers or their heirs across five states - North Carolina, South Carolina, Florida, Georgia, and Virginia.

“Apart from seeking money from the same Defendant,” the co-op’s lawyers said in a court filing, “these class members are more different than they are alike.”

The lawsuit’s long-term goal is getting judges to decide how much of that $340 million the cooperative, now renamed the U.S. Tobacco Cooperative Inc., needs to continue its work while distributing any excess to members who paid in. The cooperative now has about 1,000 members after culling its membership rolls, about a quarter of the country’s active flue-cured tobacco farmers.

Long-time tobacco farmer Jerry Murrell, 74, of Gibsonville, was stunned to hear how large the cooperative’s reserves have grown and would like some of that money back. But he said he shares the desire of all involved in the case that distributions shouldn’t be so large that the cooperative can’t operate.

“I wouldn’t want to see it (the money) took to the extent that it busted the co-op wide open to where there was no U.S. Tobacco organization anymore,” said Murrell, who’s growing 50 acres of tobacco this year. But “you would think that they could still divide up some of that and still have enough to float their operation.”

The co-op serves farmers of a lighter strain of tobacco dominant in North Carolina that is cured with heat transmitted through a flue. North Carolina produces about 75 percent of the U.S. flue-cured crop and the other four states combine for the rest.

Growers became co-op members by paying $5 and selling it some tobacco. For most of its history, it carried out the federal government’s price-support program for tobacco, which set a minimum price for the crop. Farmers who couldn’t get a better price 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. Taxpayers bore those losses and the effective government subsidy kept money flowing into rural communities. The losses were limited by government-set quotas on how much tobacco farmers could grow.

The government ended the price-support and quota system in 2004 and started a ten-year transition that sent tobacco farmers and landowners about $10 billion by the time the last transition payments ended last year.

The number of tobacco farms dropped from 124,270 in 1992 to 5,132 during the last federal crop census in 2012. Only 18 percent of U.S. adults now smoke, down from 42 percent in 1964.

The co-op continues to try driving a higher price for flue-cured tobacco by buying the leaf from members without government support, even running its own cigarette factory to add value.

But the current and former members behind the lawsuit said the co-op is holding on to too much money.

“Earnings belong to the members not to the cooperative,” attorneys for the suing parties wrote in court papers. “The only portion of those earnings that does not belong to the members individually is that portion held in trust for the benefit of them collectively - a reserve, and it must be reasonable.”

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Emery Dalesio can be reached at https://twitter.com/emerydalesio

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