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NMPF reaches $220 million settlement agreement over CWT herd retirement program

Progressive Dairy Editor Dave Natzke Published on 04 December 2019

The National Milk Producers Federation (NMPF) will pay $220 million in a settlement agreement to close a class action lawsuit concerning a herd retirement program that ended in 2010.

The herd retirement program was administered through NMPF’s Cooperatives Working Together (CWT) initiative between 2003-10. The 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 and help struggling dairy farmers.

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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 alleged the herd retirement program was not covered under Capper-Volstead protection because it controlled pre-production milk supply by removing cows from production. The plaintiffs – generally larger retailers and companies who directly purchased butter and cheese from CWT member cooperatives – alleged dairy cooperatives and their producer members conspired to raise milk and dairy product prices by sending dairy cows to slaughter to reduce milk supplies. The lawsuit (First Impressions Salon Inc. v. National Milk Producers Federation et al.) was pending in the U.S. District Court for the Southern District of Illinois.

NMPF agreed to a settlement of $220 million in exchange for a release from all claims. Based on antitrust rules that mandate a tripling of any damages, that amount is less than 6% of the damages sought by plaintiffs, according to NMPF.

The settlement amount will be paid through existing CWT mechanisms, ensuring no disruption to other business operations, the NMPF release said.

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Neither NMPF nor any of its member cooperatives admit any wrongdoing as a result of this settlement. NMPF is the sole defendant to be a party to the settlement, but the settlement extinguishes claims against all the defendants.

According to NMPF officials, the decision to enter into the settlement recognized the uncertainties inherent in any jury trial, the very large damages sought by the plaintiffs and the fact that the CWT Export Assistance Program is unaffected by the settlement.

“There is no way to sugarcoat a settlement of this size, especially given that the Herd Retirement Program was a well-publicized effort designed to serve dairy producers in difficult times and was praised by two secretaries of agriculture as well as leading members of Congress,” said Jim Mulhern, president and CEO of NMPF, the nation’s largest organization representing dairy farmers. “Given the potential damages and the uncertainties surrounding any jury trial, resolving this case eliminates the possibility of a truly crippling outcome. Lifting this cloud will aid us in our work advancing the well-being of U.S. dairy producers, which includes the current robust CWT export assistance program.”

In 2018, CWT export assistance aided 57% of American-type cheese exports, 44% of butter exports and 39% of whole-milk powder shipments, helping U.S. dairy producers expand trade relationships in an extremely challenging world trade environment.

In the press release, NMPF said “the settlement will safeguard ongoing efforts to aid U.S. dairy producers, lift a years-long legal cloud and allow NMPF member cooperatives and the current CWT program to move forward with greater legal and fiscal certainty.”

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.) Those lawsuits represented consumers who alleged the herd retirement program drove prices for dairy products higher.  end mark

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Dave Natzke
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