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Sides agree on settlement in dairy antitrust litigation
By TIM THORNBERRY
Kentucky Correspondent

FRANKFORT, Ky. — A long-awaited resolution in the Southeast Milk Antitrust Litigation case may finally be coming, as a settlement agreement was reached between dairy farmer plaintiffs and Dairy Farmers of America (DFA) and related defendants.

The settlement involved farmers from 14 Southeastern states and totaled $158.6 million, according to information from BakerHostetler, the law firm representing the plaintiffs.

“The Southeast milk market has been reformed to the benefit of dairy farmers,” said Robert G. Abrams of BakerHostetler, lead attorney. “The monetary recovery itself is very substantial and the resulting conduct changes will significantly and positively impact competition in the Southeast dairy industry.”

A press release from the law firm further stated: “The settlement was reached in advance of the Jan. 22, 2013, trial date and brings the total award for the certified class to more than $300 million. Previous settlements were reached in July 2011 with defendants Dean Foods for $140 million, as well as Southern Marketing Agency and James Baird for $5 million plus changes in milk marketing conduct.”

The funds from the Dean Foods settlement were distributed on Jan.18.

Information contained in the Southeast Milk Antitrust Litigation states: “The lawsuit claims defendants and alleged co-conspirators violated federal antitrust laws in the purchase, sale and marketing of raw Grade A milk in Federal Milk Marketing orders 5 and 7.
“The lawsuit also claims defendant Dairy Farmers of America, Inc. breached the contractual terms of its membership agreement and bylaws by failing to operate for the benefit and advantage of its members as farmers. As a result, the lawsuit claims prices paid to dairy farmers in orders 5 and 7 for raw Grade A milk were lower than they otherwise would have been.”

DFA released its own statement after the settlement was reached. It read, in part, the “board of directors and management announced the cooperative has reached a settlement agreement in the class action lawsuit against DFA in the southeastern United States. Trial for the suit was scheduled to begin this month.”

The statement also noted: “DFA makes no admission of wrongdoing in this settlement. Under the terms of the settlement, filed … with the U.S. District Court for the Eastern District of Tennessee, DFA will pay $140 million to the plaintiff class. An additional, refundable $9.3 million per year for two years will be placed in a fund to incentivize stronger Class I utilization rates in federal orders 5 and 7.”

DFA President and CEO Rick Smith said the board and management team have worked diligently to put certain old issues behind them.
“This outcome positions DFA to fulfill a commitment to our members to resolve pending litigation, to remove a source of distraction for our leadership and to avoid additional legal fees,” he said.

Smith also said the cooperative remains healthy and poised for a bright future. “We continue to develop new member programs and invest in plants and new products. We also continue to seek out new opportunities and innovative ways to increase value to our dairy farmer owners,” he said.

Highlights of the settlement, provided by AgriVoice Enterprises, include:

•The $140 million monetary settlement will be payable in one lump sum to Class Members immediately following a claims period, similar to the Dean/SMA claims process; $70 million will come from DFA, $50 million from National Dairy Holdings and $20 million from Mid-Am Capital.

•Injunctive relief in the marketplace designed to raise Class I utilization in orders 5 and 7, coupled with an $18.6 million penalty account to be placed in escrow; if utilization goals aren’t achieved per benchmarks and dates outlined in the agreement, the escrow funds will be distributed to the class at varying levels.

•Some of the previously sealed documents will be opened for public review, per a spring of 2012 motion.

•DFA will reconfigure member milk checks to reflect revenues, agency deductions, applicable premiums, deductions or incentives, mailbox price and the average Federal Order blend price for member’s pay zone.

•Resolutions will be presented at the next DFA annual meeting to disclose compensation and incentives for top five senior executives, along with per diem compensations of board members.

•Resolution or consideration of whether DFA members should be permitted to opt out of DFA’s block vote, consistent with Senate Bill 457 (Democracy for Dairy Producers Act of 2011).

•Resolution will be proposed at next DFA annual meeting for increased transparency and options in the DFA/SEAC election process.

“We have always believed strongly in the Southeast farmers’ case – a belief that has now been vindicated by three excellent settlements,” said Abrams.

For more information, go online to www.southeastdairyclass.com
2/7/2013