Antitrust Law Daily Wrap Up, TOP STORY—EDTenn: Milk Cooperative Agrees to Pay $140 Million to Resolve Southeastern Dairy Farmers' Antitrust Suit, (Jan 22, 2013)

By Jeffrey May, J.D.

Dairy Farmers of America, Inc. (DFA), a national milk marketing cooperative, has agreed to pay $140 million to a certified class of Southeastern dairy farmers to settle an antitrust action that was about to go to trial. In addition to the monetary payment, DFA has agreed to implement changes to how the cooperative conducts its business in the Southeast. Today, the federal district court in Nashville, Tennessee, granted the plaintiffs' motion for expedited preliminary approval of the proposed settlement (In Re: Southeastern Milk Antitrust Litigation, January 22, 2013, Greer, J.).

The settlement was sufficiently fair, reasonable and adequate to authorize dissemination of notice to the class. A hearing on final approval is scheduled for April.

The class alleged that DFA, Dean Foods Co., Southern Marketing Agency, Inc., and others conspired to refuse to compete for the purchase of raw Grade A milk produced, marketed, and processed in the Southeast; restricted farmers’ access to raw Grade A milk bottling plants in the Southeast; eliminated and stifled competition from cooperatives and Grade A milk bottlers; monopsonized and monopolized raw Grade A milk and milk marketing services in the Southeast; and engaged in other unlawful activities designed to depress the prices received by Southeast dairy farmers for their raw Grade A milk.

In June 2012, the federal district court in Nashville approved a $140 million settlement with Dean and a $5 million settlement with Southern Marketing Agency (2012-1 Trade Cases ¶77,951). The current proposed settlement would resolve the allegations against the remaining defendants and end five and a half years of vigorously-contested litigation.

As explained in the plaintiffs' motion for preliminary approval of the settlement, DFA has agreed to take steps to increase Class I utilization and uniform milk prices; remove cancellation penalties on certain full-supply agreements with bottling plants and not enter any such new agreements during the settlement’s term; modify membership agreements to improve farmer ability to change cooperatives; enhance price-related information on milk checks; boost transparency through auditing and disclosure commitments; and facilitate delegate votes on additional meaningful changes to conduct.

DFA will pay $9.3 million into a settlement fund escrow account in 2014 and 2015 to guarantee stronger Class I utilization rates in Federal Orders 5 and 7. Thus, under the settlement, DFA has agreed to make payments totaling $158.6 million. DFA did not admit to any wrongdoing under the settlement.

The case is Master File No. 2:08-MD-1000, MDL No. 1899.

Attorneys: Robert G. Abrams (Baker Hostetler LLP) for plaintiffs.

Companies: Dairy Farmers of America, Inc.

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