Lawyers recommend new $50 million settlement in milk price lawsuit

Dairy cows munch hay at Fairmont Farms in East Montpelier. Photo by John Herrick/VTDigger

Dairy cows. Photo by John Herrick/VTDigger

A class action lawsuit that accused two dairy groups of manipulating the Northeast milk market and driving small farmers out of business is one step closer to being settled.

Attorneys for the plaintiffs in the antitrust lawsuit Allen v. Dairy Farmers of America have asked U.S. District Court Judge Christina Reiss to approve a new $50 million settlement to put the case to rest.

Lawyers proposed a $50 million settlement last year, but Reiss denied it in March because 35 farmers representing 28 farms objected to the proposed settlement.

Reiss wrote in her March 31 denial that the court needed to make sure that the settlement was procedurally fair and not the result of collusion. Several farmers had alleged collusion between their lawyers and defendants, Reiss wrote, and said they were concerned about potential retaliation from Dairy Farmers of America for accepting the settlement.

The class-action case has gone on for six years against Dairy Farmers of America and Dairy Marketing Services. The plaintiffs are 8,900 farms, which have largely agreed to end the dispute without a trial. A little under 1 percent remain opposed.

The $50 million works out to about $4,000 per farm, which are often owned by a single family. Farms would be allowed to leave the Dairy Farmers of America and join another cooperative. The settlement also requires the dairy cooperative to make its business practices more transparent to members.

The antitrust case started in U.S. District Court in Burlington in 2009. Plaintiffs alleged that the nonprofit cooperative Dairy Farmers of America Inc. conspired to become the sole seller of Grade A milk in the Northeast. Farmers further alleged that the cooperative used its closely affiliated for-profit company, Dairy Marketing Services, to become the sole buyer of Grade A milk in the Northeast.

The nonprofit cooperative, according to the lawsuit, is not member-focused, and it forced small farmers to join in order to avoid market pressures that would put them out of business. Plaintiffs alleged that the two defendants violated federal antitrust laws, and, when directed to take action to remedy the situation, thwarted instructions by the U.S. Department of Justice and several state attorneys general.

In the past six years, several other defendants in the lawsuit have settled. Dean Foods settled for $30 million in 2011, and the 8,900 farmers across the Northeast all received small sums of money. The Vermont Attorney General’s Office filed two friend-of-the-court briefs in 2011 but has not been involved since.

In June 2013, lawyers for the dairy farmers were preparing to go to trial on the antitrust claims. But they reached a settlement with Dairy Farmers of America and Dairy Marketing Services the night before the trial would have started. They submitted the first $50 million proposal July 1, 2013, to end the lawsuit and avoid a trial. Reiss rejected it.

Six thousand farms had signed onto the new settlement as of June. In July, 7,550 farms, or about 85 percent of farms represented in the case, had filed claims under the settlement. A “tiny fraction” of farms raised objections, according to the settlement.

“We think it’s a fair and reasonable settlement, and we think it’s in the best interest of farmers,” Kit Pierson, the lead attorney on the case, said of the latest settlement proposal.

A spokesperson for the Dairy Farmers of America, Marjie Knust, issued a statement saying the new settlement addresses the “several concerns” that Reiss had with the original settlement. “The attorneys for both the plaintiffs and defendants recently discussed and agreed to certain amendments to the original settlement … and we look forward to a final conclusion of the matter.”

In addition to the money and the transparency measures, the settlement stops Dairy Farmers of America and Dairy Marketing Services from participating in any illegal activity that limits competition in the Grade A milk market. Some farmers oppose the injunctive relief against illegal activity, but their attorneys said the defense would argue that the activity is “legal and beneficial” if the case went to trial.

The injunctive relief order is also more sweeping than the one reached with Dairy Farmers of America in a similar case in the Southeast milk marketing region, according to the settlement. The settlement prohibits Dairy Farmers of America from making deals with outside cooperatives that would prevent those organizations from negotiating with the plaintiffs in the lawsuit. The settlement says those actions have been a “major” problem that has held down milk prices for years.

Representatives for one of the lawsuit’s four subclasses of plaintiffs still oppose the settlement. Ralph Sitts, Garret Sitts, Jonathan Haar, Claudia Haar and Richard Swantak, all of New York, almost immediately filed documents reiterating their opposition to the settlement.

“We wish to present evidence that has come up over the past few weeks which shows that this renewed settlement is not eligible for either preliminary or final approval,” the documents from Sitts and others say.

Those are the same parties who, in June, effectively put their high-profile, class action lawyers on trial in Burlington court in an effort to have them fired. The class representatives accused lawyers of misconduct and said the lawyers were focused on a cash settlement. Reiss declined that request on June 30.

Pierson, who works for Cohen Milstein in Washington, D.C., declined in an interview to discuss the allegations the farmers made against his legal team. In June, he said the allegations weren’t true, but that he respects his clients.

“As attorneys, our responsibility is to make a decision that’s beneficial to the farmers as a whole,” Pierson said in June. “The subclass representatives are important, and we respect it, but our obligation in the case is to the 8,900 farmers.”

Erin Mansfield

Erin Mansfield covers health care and business for VTDigger. From 2013 to 2015, she wrote for the Rutland Herald and Times Argus. Read more


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