DFA, milk producers challenge Northeast antitrust settlement

By Jim Webster

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Jan. 19 - Dairy Farmers of America (DFA) and its allied cooperatives in Dairy Marketing Services (DFS) say that the proposed settlement of antitrust claims against Dean Foods discriminates against their members and would mean lower milk prices for all farmers in the Northeast. DFA and DMS, supported by two dozen farmers, filed papers Tuesday asking the U.S. District Court in Burlington, Vt., to reject the $30 million deal worked out between lawyers for Dean Foods and its challengers.

Globally Positioned Agriculture

The brief says terms of the settlement filed December 23 inappropriately favor some farmers over others by literally requiring Dean to stop buying milk from one group of producers in order to buy from another group, setting up an “intractable” conflict among farmers in the region. It would force farmers who market through DMS - which markets for DFA, Dairylea Cooperative of New York and St. Alban's Cooperative Creamery in Vermont - to give up 60 million pounds a month of milk sales so that Dean instead could buy that much from non-member farms.

DFA and DMS say they understand Dean's business reasons for wanting to settle but claim that lawyers for the five dairy farmers who sued Dean, DFA, DMS and H.P. Hood (which subsequently was dismissed as a defendant) unfairly favored one group. The decision to settle with Dean, “while continuing to seek their remaining alleged damages from farmer-owned sources, is not a decision that could have been countenanced by class representatives loyal to those dairy farmers in the class who are exposed to paying that liability,” the brief said. “[A]ttorneys for the entire class of dairy farmer plaintiffs have favored one segment of the class while it penalizes another segment,” said Brad Keating, COO for DFA's Northeast Area.

The original suit and the terms of the settlement challenge the basis of farmer co-ops. “[T]he farmers and co-ops who market through DMS generally do so because they believe it benefits farmers to work together to obtain higher premiums,” the brief said. The goal of the settlement, by “limiting DMS and reducing its marketing opportunities is fundamentally irreconcilable with those farmers' beliefs about how best to manage their businesses,” it contended.

“This provision seems to undercut the very reasons why we at St. Albans decided to join DMS in the first place - to work together with other co-ops to make sure that we were able to serve an increasingly consolidating marketplace, and to do so in a way that will protect prices and premiums for dairy farmers,” said Ralph McNall, president of St. Albans. The lawyers who represented the original challengers could not have thought that it was a good deal for his co-op's farmers. “I do not believe a lawyer who represented just those farmers who are associated with DMS could have agreed to a settlement,” he said in a deposition filed with the brief.

If the settlement is approved, dairy farmers would get a lower pay price for their milk because it would allow Dean to set the market price for up to 60 million pounds of milk per month from non-member farms for 30 months, the cooperatives argued. That provision “is likely to create a downward ripple effect on current pricing for milk purchases from DFA, DMS and other milk suppliers in the Northeast,” resulting in “price erosion for all dairy farmers,” they said.

The co-ops also challenged distribution of the proposed $30 million in damages (less $10 million in attorney fees) to dairy farmers who sold milk in the region from 2002 through 2010. “We believe the per-farmer award has been highly exaggerated, but more importantly, we believe the benefit of a small one-time cash payment is far overshadowed by the long-term negative impact on farmers' wallets,” said DMS General Manager Greg Wickham. With some 13,000 dairy farmers in the market area, the average farmer stands to receive approximately $1,500.

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