BURLINGTON — Federal Judge Christina Reiss has refused to approve a proposed settlement in the class action lawsuit brought by Northeast dairy farmers against Dairy Farmers of America (DFA) and Dairy Marketing Services (DMS).
The decision made by the judge on March 31 means a new settlement must be reached or the entire case may proceed to trial.
Plaintiffs, including two Vermont farmers Alice and Laurance Allen, filed suit against DFA, DMS and processor Dean Foods in 2009. They alleged that between them the corporations controlled access to processing plants and forced farmers to work through DFA and DMS to access markets for their milk.
Further, plaintiffs charged DFA and DMS were suppressing the price of milk in order to further the profits of DFA’s milk bottling operations.
The case was scheduled to go to trial last summer when the two sides announced a settlement in which DFA would pay $50 million to farmers, $16.6 million of which would be paid to the plaintiff’s attorneys.
Farmers appointed to represent the interests of dairy farmers who are not members of DFA objected to the settlement, arguing that the settlement did not adequately protect farmers from retaliation or force DFA to change its alleged anticompetitive behavior. As part of the settlement, class members would release DFA and a broadly defined group of affiliates from similar claims in the future.
The class representatives argued the release was too broad, concerns Reiss appeared to share during a fairness hearing on the settlement in January.
Reiss was charged with determining whether the settlement was fair, adequate or reasonable and not the result of collusion between the plaintiff’s attorneys and the defendants.
The proposed settlement prevents DFA from entering into new sole supply agreements in which it is the only source of milk for a bottling plant. Farmers are paid more for milk sold as fluid milk than they are for milk turned into cheese, yogurt or milk powder so access to bottling plants is critical for their livelihood.
However, DFA is only barred from entering into new agreements for 30 months and is allowed to renew existing sole supply agreements. Class representatives argued this simply allowed DFA to continue its anti-competitive behavior.
The settlement, had it been approved, also would have required some additional financial disclosure by DFA to members, including information about contracts when requested. In the past such information has been unavailable to farmers. For example, in 2009 farmers were unaware that although they were being paid less than the cost of production for their milk, DFA had agreed to pay a “competitive credit” for each hundredweight of milk Dean Foods purchased. Farmers were paying Dean a credit at a time when Dean was announcing record profits.
Class representatives argued that while the additional disclosure might have some benefit, its usefulness would be limited if the broad release included in the settlement prevents them from acting on the information.
The settlement did not touch upon other issues of concern to the representatives, such as control of milk testing and transportation, both of which are controlled by DFA and DMS and can directly impact farmers’ livelihoods, representatives argued.
Local farmers Paul Bourbeau, of St. Albans, and Bill Rowell, of Highgate, spoke at the hearing on behalf of the settlement. Bourbeau maintained DFA hadn’t done anything wrong, while Rowell spoke of DMS’s success at marketing milk under adverse conditions, including a lack of processing facilities.
Reiss did not find that the proposed financial settlement was unreasonable, given the risks plaintiffs faced at trial. However, looking at the settlement as a whole, Reiss wrote, “the court cannot conclude that the proposed settlement is substantively in the class’s best interests.”