Court Withholds Approval from $50 Million Milk Monopoly Settlement

While the Dairy Farmers of America (DFA) and affiliated Dairy Marketing Services have agreed to pay $50 million to settle class claims that they conspired to monopolize the market for raw milk in the Northeast, a federal court in Vermont has denied preliminary approval of the proposed settlement without prejudice. Allen v. DFA, Inc., No. 09-0230 (U.S. Dist. Ct., D. Vt., order entered July 9, 2014). Details about the litigation appear in Issue 323 of this Update.

The court pointed to a number of flaws in the draft class notice, including that it released the defendants and a number of related entities and extended beyond the legal claims in the lawsuit without making this clear to class members. The basis for its ruling, however, was that some class members apparently plan to object to the settlement, but no information about their objections was provided in the expedited motion for preliminary approval filed by their counsel. The court determined that it could not preliminarily approve the settlement without “information regarding the basis for the Class Representatives’ objections.”

Dairy farmers alleged that DFA and its co-defendants tied up access to milk bottling plants in the Northeast by means of unlawful exclusive supply agreements that forced independent farmers in the region to join DFA or market their raw milk through Dairy Marketing Services. The farmers claimed that this allowed DFA to reduce the raw milk prices paid to farmers resulting in windfalls to the defendants and their non-defendant co-conspirators. Discussing the proposed settlement, a DFA spokesperson reportedly said that while the cooperative admitted no wrongdoing, “the cost to defend ourselves has become too great.” See Law360, July 15, 2014.

Issue 530