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CWT ‘herd retirement’ program facing lawsuits nearly a decade after it ended

Progressive Dairyman Editor Dave Natzke Published on 17 May 2019

The confounding case(s) of milk supply management in a litigious society continues.

At the center of the litigation is the “herd retirement” program, administered through the National Milk Producers Federation’s (NMPF) Cooperatives Working Together (CWT) program between 2003-10. Two class action lawsuits – one in Florida and one in Illinois – allege dairy cooperatives and their producer members conspired to raise milk and dairy product prices by sending dairy cows to slaughter to reduce milk supplies.

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Background

The CWT herd retirement program was created during a period of growing milk supplies and declining prices, culminating in historically low farmer milk prices in 2009. Under the herd retirement program, CWT announced invitations for dairy producers to submit bids to sell their dairy herds and cease milk production in an attempt to bring milk supply in closer balance with demand. CWT conducted 10 herd retirements between 2003 and 2010.

During CWT creation, NMPF leaders said they believed the program fell under provisions of the Capper-Volstead Act, a 1922 law which provides farmers and agricultural producers certain exemptions from antitrust laws when marketing, pricing and selling their products through cooperative means. NMPF contended CWT’s structure was a federation of co-ops and producers working together to achieve stable milk prices.

CWT’s activities were vetted with the USDA, and no Capper-Volstead concerns were raised at that time. The U.S. Department of Justice also raised no concerns.

However, defendant lawyers allege the herd retirement program was not covered under Capper-Volstead protection because it controlled pre-production milk supply by removing cows from production.

In August 2016, NMPF and major NMPF-member dairy cooperatives ended five years of litigation in a separate class action lawsuit, agreeing to settle for $52 million. The lawsuit (Matthew Edwards, et al. v. National Milk Producers Federation, aka Cooperatives Working Together, et al, case number 11-cv-04766) was a consolidation of multiple similar lawsuits filed in several courts. (Read: Cooperatives Working Together settles ‘herd retirement’ lawsuit for $52 million.)

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One difference between the previous and current lawsuits is that the previously settled case was a class action lawsuit representing consumers, while the current lawsuits also involve wholesale buyers of dairy products.

The Florida lawsuit (Winn-Dixie Stores Inc. v. the National Milk Producers Federation, Southeast Milk Inc., Dairy Farmers of America, Land O’Lakes, Dairylea Cooperative and Agri-Mark Inc. – case number 3:15-cv-1143-J-39PB) is filed in the U.S. District Court/Middle District of Florida, Jacksonville Division.

The Illinois lawsuit (First Impressions Salon Inc., et al. v. National Milk Producers Federation, et al. – case number 3:13-CV-00454-NJR-SCW) is in the U.S. District Court for the Southern District of Illinois.

In an email to Progressive Dairyman, NMPF’s Chris Galen, senior vice president, membership services and strategic initiatives, said the organization wouldn’t comment on active litigation but would continue to fight all claims identified in the Illinois and Florida lawsuits. By the end of May, NMPF expected to file motions for summary judgments to end both lawsuits. If not fully successful, NMPF was prepared to advance to trial, Galen said.

In that situation, it’s anticipated both lawsuits could proceed to trial in late 2019 or early 2020.

Both lawsuits were originally filed in 2015, five years after the herd retirement program ended in September 2010. The Florida court already ruled that some claims submitted by the plaintiff in that case are subject to a four-year statute of limitations under the Sherman Antitrust Act, but left other claims standing.

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The timing of the initial lawsuits was a year after dairy producers received record-high milk prices in 2014. Since that time, however, dairy farmers have seen lower milk prices, at or below the cost of production for many of them, and thousands of dairy farmers have exited the business. The 2018 U.S. all-milk price of $16.26 per hundredweight was the lowest since 2009.

The lawsuits are also advancing at a time when dairy producers and organizations are seeking other means to manage milk supplies. (Read: Dairy Together leaders seek to continue to push for industry reforms.)

Cooperative legal experts Marlis Carson, senior vice president and general counsel with the National Council of Farmer Cooperatives (NCFC), and Todd Eskelsen, Eskelsen Law Group, provided an overview of how the Capper-Volstead Act impacts a cooperative’s ability to manage commodity supplies during a dairy summit in Albany, New York, last August. (Read: Time short for supply management action, but could tariff payout provide ‘diversion’?)  end mark

Dave Natzke
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