SALEM, Ohio — Although it “makes no admission of wrongdoing,” Dairy Farmers of America (DFA) has agreed to pay $158.6 million to settle a class action lawsuit that alleged raw milk price-fixing in a 14-state region stretching from southern Indiana through the southeastern United States.
This agreement, the third and final settlement in the Southeast Milk Antitrust Litigation, was announced Jan. 22, the day the case had been scheduled to go to trial.
The Cleveland-based law firm BakerHostetler, which represented the plaintiffs (mostly dairy farmers), said the DFA settlement agreement brings the total award to more than $300 million, as well as substantial changes to how business will be conducted in the Southeast dairy industry.
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 class-action lawsuit was filed in 2007 after farmers in the region alleged a price-fixing conspiracy between Dairy Farmers of America and its major commercial milk buyers and bottlers, including Dean Foods.
“The Southeast milk market has been reformed to the benefit of dairy farmers,” said Robert G. Abrams of BakerHostetler, lead attorney for the plaintiffs. “The monetary recovery itself is very substantial and the resulting conduct changes will significantly and positively impact competition in the Southeast dairy industry.”
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, the Appalachian and Southeast marketing areas headquartered in Louisville, Ky., and Atlanta, respectively.
“Our board and management team have worked diligently to put certain old issues behind us,” said Rick Smith, president and chief executive officer. “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.”
Changes made
Included in the agreement are remedial elements regarding reporting, accounting and communication of certain business information and functions.
DFA says many of the changes are consistent with new policies and procedures DFA management developed and implemented previously.
DFA says the payment of the settlement “will not affect the cooperative’s day-to-day operations or its ability to market members’ milk or pay them a competitive price for that milk. Member milk checks and the member equity program will not be impacted.”
Included in the agreement are remedial elements regarding reporting, accounting and communication of certain business information and functions.
In 2008, DFA and its former CEO Gary Hanman, and former Chief Financial Officer Gerald Bos were fined $12 million for attempting to manipulate the Chicago Mercantile Exchange Class III milk futures contract.
