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Northeast milk marketing antitrust lawsuit settlement agreement revised

Progressive Dairyman Editor Dave Natzke Published on 14 March 2016

A settlement agreement in a six-year-old northeast U.S. milk marketing antitrust lawsuit is near – maybe.

The class-action lawsuit (Allen v. Dairy Farmers of America, Inc., No. 5:09-CV-230) was initially filed in 2009. It alleged Deans Foods, dairy cooperative Dairy Farmers of America (DFA) and its marketing arm, Dairy Marketing Services (DMS) were involved in anticompetitive milk marketing conduct within Federal Milk Marketing Order (FMMO) 1.

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Dean Foods agreed to a $30 million settlement in 2011.

DFA reached a $50 million settlement agreement in late 2014.

However, in April 2015, Judge Christina Reiss, of the U.S. District Court for the District of Vermont, rejected the DFA/DMS settlement after a majority of dairy farmers testifying at a “fairness hearing” expressed opposition.

Financial settlement unchanged

At $50 million, the revised settlement is not different than the original. Shares depend on the amount of raw Grade A milk produced in and pooled on FMMO Order 1 by individual farms from Jan. 1, 2002 to Dec. 31, 2014. It is estimated the average payment per farmer would be about $4,000 if an estimated 8,000 dairy farmers filed claims.

"We received preliminary approval on a revised settlement in a class-action lawsuit filed in 2009 on behalf of dairy farmers in the Northeast region,” said Monica Massey, DFA’s senior vice president and chief of staff. “Under the agreed terms, we did not admit wrongdoing and have agreed to pay $50 million, which will be shared between DFA and Dairy Marketing Services.”

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Farmers urge agreement approval

The revised agreement is preliminary until approved by the court.

In a letter to fellow Northeast dairy farmers, Peter and Marilyn Southway of Springhouse Dairy in Fredon, N.J., urged approval. The Southways, independent dairy producers marketing milk through DMS, were among court-appointed farmer representatives tasked with negotiating a new settlement.

“We firmly believed in the merits of this litigation at its start, and we still do today, but the time has to come to settle the case,” they wrote. “Without this settlement, this case will likely take years to resolve at trial and in appeals, and at the end, farmers may get nothing at all.”

While the financial component of the settlement hasn’t changed, the Southways detailed other aspects of the agreement. Among those provisions:

- DFA/DMS could not enter into full supply agreements with dairy plants (unless limited conditions apply).

- DFA/DMS would create and pay for a DFA advisory council member, with the responsibility to enhance producer pay prices. The advisory council member would have access to DFA/DMS management and financial records.

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- DFA/DMS would create and pay for a farmer ombudsperson, charged with advocating for farmers and mediating disputes.

The settlement agreement would allow DFA/DMS farmers to terminate their relationship with the co-op on 90 days notice. It also requires DFA/DMS to provide adequate notice and cause before terminating a relationship with a farmer, and allows the farmer to appeal the termination to the court-mandated farmer ombudsperson.

NDPO opposes settlement

Leadership of the National Milk Producers Organization (NDPO) opposes the agreement. In its own letter to affected producers, NDPO contend both the agreement’s financial payment of $50 million, and requirements steering DFA/DMS marketing practices, are inadequate.

In addition, NDPO is seeking provisions that include requiring DFA/DMS to pay producers a minimum price that covers cost of production.

NDPO asked producers to sign a letter opposing the agreement by April 15. Rejecting the agreement would extend the lawsuit further.

The Southways said continued pursuit of litigation – with the goal to break up DFA/DMS in the Northeast – would be both “unachievable and unproductive.”

Farmers who cannot accept the agreement can ”opt out” of the settlement, sacrificing their share of the payment, but retaining any legal claims to pursue further litigation, they noted.

The Southways urged dairy farmers to send letters of support to Judge Reiss, in the U.S. District Court for the District of Vermont, by April 29. They also asked farmers to attend the settlement agreement fairness hearing, May 13, in Burlington, Vt.

“We believe now is the time to be peacemakers and to focus on strengthening the dairy market in other ways,” the Southways said. “The settlement provides a new way forward.”

DFA is also ready to move on.

“As a farmer-owned cooperative, we work hard to ensure the success and profitability of dairy farmers. We believe the milk marketing structure created in the Northeast — one that enables dairy farmers to work together to market milk — has benefitted all dairy farmers,” DFA’s Massey said.  PD

Read the letter from Vermont dairy farmer Alice Allen, one of the plaintiffs filing the original lawsuit, to dairy farmers about the settlement agreement.

Dave Natzke
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