Month: January 2013

DFA Defendants Settle in SE Milk Litigation: $140 Million+, Market Changes, Increased Transparency, Open Documents

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DFA Defendants Settle Pre-Trial In SE Milk Litigation:

$140 Million Lump Sum plus $18.6 million in Increased Prices for Utilization, Marketplace Changes, Transparency, Open Documents

 

At the 11th Hour with Trial looming, a proposed Settlement Agreement in the Southeast Milk Litigation has been reached by Dairy Farmer Plaintiffs and DFA & related defendants.   Appropriate motions and documents were filed with the Court on Monday, January 21, and approved by the Court this morning, January 22.

 

The proposed settlement blends the elements of a $140 Million monetary settlement, market changes to improve utilization, resolution to opt-out of block voting to be voted on by DFA membership, and increased transparency in DFA practices.  Highlights of the agreement include, but are not limited to, the following:

 

a.)   The $140 Million monetary settlement will be payable in one lump sum to Class Members immediately following a claims period, similar to the Dean/SMA claims process.   $70 Million will come from Defendant DFA, $50 Million from National Dairy Holdings, and $20 Million from Mid-Am Capital.

 

b.)   Injunctive relief in the marketplace designed to raise Class I utilization in FMMO’s 5 & 7, coupled with an $18.6 million penalty account to be placed in escrow. If utilization goals aren’t achieved per benchmarks and dates outlined in the agreement, the escrow funds will be distributed to the class at varying levels.

 

c.)   Some of the previously sealed documents will be opened for public review per a Spring 2012 motion.

 

d.)   DFA will reconfigure member milk checks to reflect revenues, agency deductions, applicable premiums, deductions, or incentives, mailbox price, and the avg. Federal Order blend price for member’s pay zone.

 

e.)   Resolutions will be presented at next DFA annual meeting to disclose compensation and incentives for top five senior executives, along with per diem compensations of Board members.

 

f.)    Resolution or consideration whether DFA members should be permitted to opt out of DFA’s block vote, consistent with Senate Bill 457 (Democracy for Dairy Producers Act of 2011).

 

g.)   Resolution will be proposed at next DFA annual meeting for increased transparency and options in the DFA/SEAC election process.

 

Typical of Settlement Agreements, the Defendants admitted no guilt. With this $140 Million Settlement, plus the $18.6 in price increases added to the previous $145 Dean Foods/SMA monetary settlement, there was a recovery of 73% of estimated damages. According to class-action experts, this is an extraordinary financial recovery of damages. Typical Class Action pre-trial settlements average 20% recovery.  Both parties faced inherent risks if they proceeded to trial. 

 

More information will be forthcoming as Settlement Agreements are more closely analyzed and examined.  A Fairness Hearing, at which farmers will be allowed to speak, has been scheduled for April 3rd at 10:00 a.m.

 

The official court-monitored website is www.southeastdairyclass.com. The Settlement Proposal and Class Notices will be found there in the next few days.

 

Farmers,  consumers, and interested parties are invited and welcome to post comments at this site. 

SEML Trial Week; Turning Point – DFA Trial, or Settlement?

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© Julia G. Walker, AgriVoice Enterprises

A Milkshed – in this instance the national Milkshed, and specifically the Southeast Milkshed  –  is affected by legal matters, some of those mammoth Federal Class Actions.

We are now on the cusp of what could be the food industry’s version of a Class Action trial that changes history.

This week, on Wednesday, Jan. 23, 2013, the long-anticipated trial in the Southeast Milk Litigation, is finally set to begin after 18 months of Trial delays.  This is a crucial turning point in this significant Antitrust and Price-Fixing Federal Lawsuit.

The remaining defendants to be publicly tried are related entities of the United States’ largest farmer-owned milk marketing co-op, Dairy Farmers of America, Inc. (DFA).   The subsidiary co-defendants are Dairy Marketing Services, LLC (DMS); Mid-Am Capital, LLC; National Dairy Holdings, LP (NDH); and Gary Hanman, an individual, the former CEO of DFA.

Legal challenges are one of the ‘checks and balances’ instituted by the Constitution to protect citizens.  In this case, the citizens seeking legal interpretation and recovery of alleged financial damages exceeding $419 million of dollars are 6,100 present and former Southeast Dairy Farmers.

The Honorable J. Ronnie Greer has been the presiding judge, and twice he has been upheld at the appellate level when defendants challenged not one, but two, certifications of DFA members as rightful members of the “Class” – present and former dairy farmers who had been ‘harmed’ by the defendants’ activities.

POTENTIAL IMPLICATIONS for DFA DEFENDANTS:

If the jury trial should proceed, and the defendants found guilty at the jury trial, there would be an automatic trebling of the damages to $1.26 Billion dollars for which the Co-op would be liable.

That huge potential liability, and the risk of payment should Defendants indeed be found guilty, will be a key factor in determining if Trial proceeds or if there will be a Settlement offer by the defendants.

Not only is there the $419 Million/$1.26 Billion financial spectre looming for DFA, there are also implications that could possibly affect their Capper-Volsted standing.

The Act itself – 2 pgs.:  http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5066357

A legal perspective by Christine Varney, formerly of the DOJ:

http://www.americanbar.org/content/dam/aba/publishing/antitrust_source/Dec10_Varney12_21.authcheckdam.pdf

Judge Greer is already on record stating in July of 2012:  “The plaintiffs have offered convincing proof sufficient to meet their burden under Rule 23 that DFA and the DFA related defendants have engaged in illegal conduct in violation of the Sherman Act and that the members of the DFA subclass have, across the board, suffered common injury as a result of the DFA defendants’ conduct.”  He went on to say that final determination would be made at a jury trial.

DFA defendants’ in this case refers largely to persons in corporate management and decision-making positions, NOT the grass-roots membership of family dairy farmers. In an exchange with the defense attorneys during one hearing, Judge Greer  noted that for a conspiracy to take place, it was not necessary for all parties to know what the others were doing when several ‘conspirators’ (a legal term) were involved in the process.

The outcome (for better or worse) may affect the financial sustainability of family dairy farms which now supply consumers in the Southeast with fresh, locally-produced milk. Exactly how that could occur remains to be seen.  In addition, dairy related jobs and the economies of the southeast agricultural community may be either preserved or depleted.

Since DFA is a national co-op, any financial liability may also affect DFA members nationwide. And again, the nature and depth of such a liability are unknown and only speculation until a resolution is reached.  One DFA producer, who asked not to be identified, wryly said “If I do get a financial settlement, I’m looking at it like this is a way I will get my rightful allocations paid back much quicker than they [DFA] are doing now.”

At this writing, THE Dates are now there on the Court Calendar – two weeks’ worth of Federal Court time in an Antitrust Class Action Trial expected to last a total of 6-8 weeks.

The link, to the Court’s calendar:  http://www.tned.uscourts.gov/calendar.php

And what you’ll find, unless things change quickly, as they can with a legal proceeding at this stage of the game:

The Dates: Jan 23, 24, 25 (Wed, Thurs, Fri of this week) and Jan 29, 30, 31, Feb. 1 (Tues-Fri. of following week).   [Note: only two weeks at a time are typically posted.]

The Court Docket Notation:  “2:08MD1000 (JRG-C)JURY(6-8 WEEKS) – IN RE: SOUTHEASTERN MILK”    The key:

  • JRG – the presiding judge’s initials, The Honorable J. Ronnie Greer.
  • JURY – means this is a jury trial
  • SOUTHEASTERN MILK – the common name assigned by the Court to the Litigation – a series of filings, motions, responses, orders, notices, and other legal documents in relation to this case.

This litigation began in July of 2007 when two separate, but parallel, complaints were filed in the Columbia Division, Middle District of Tennessee.  One complaint was filed by Independent and Independent Co-op members, and one complaint was filed by DFA members.  In early 2008, the case was moved to the Greeneville Division, Eastern District of Tennessee, and the complaints were consolidated, and the roster of class representative plaintiffs consolidated and downsized.

PREDICTION?  TOTALLY INAPPROPRIATE!!!

In the past weeks, with many folks knowing that I’ve been in the courtroom at almost every hearing since Sept. of 2009, I’ve been asked on several occasions by persons from all across the country:  “Will there be a settlement, or not?”

My answer:  It is totally inappropriate and disrespectful to all parties for me to predict either Trial or Settlement, particularly given that 90% of the discovery evidence remains under seal (not available to the public, but available for the Court’s review and evaluation).

Either resolution is up to decisions made by the litigants, the attorneys, and the Court, and must be done evaluating a myriad of court cases of which a typical layperson has no knowledge.   And as with any legal case, the status and schedule can change at the drop of a hat.  Stay tuned for announcements, or reports on daily events in the courtroom.

Only time will tell how innocent, grass-roots farmers, who had no knowledge of, nor any influence on, the actions taken by people they trusted with their financial well-being will be truly affected by the outcome.

Settlement Funds Released; DFA Trial now January 22, 2013

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Southeast Dairy Farmers will finally be shown their money from the Dean Foods /Southern Marketing Agency (SMA) Settlement funds in the Southeast Milk Litigation.

The Honorable J. Ronnie Greer, presiding judge in the Federal Class action suit in which price-fixing was alleged involving Dean Foods, Southern Marketing Agency, and Dairy Farmers of America and related entities, filed an Order on Tuesday, January 8, 2013 clearing the way for the first payments from the $145 Million Dean/SMA settlement funds.

Total payments to Class Members are estimated to average $13,000 per claimant when payments are completed following a 5-year tiered payment plan.  Payments will range from less than $200 to more than $20,000 per farm, depending on qualified milk pounds belonging to each producer; an approximate net of 10-12 cents/eligible cwt.

With this Order, Claims Administrator Rust Consulting can now begin the process of writing and mailing checks to producers.   Given the amount of checks to be written and verified, it could be a month before checks are received in producer mailboxes.

Recipients of the checks are encouraged to check with their accountants to learn of IRS rulings which may affect the actual dollars received, and an individual’s specific tax situation.

Report of Claims Administrator:

Charlene Young, a Senior Project Administrator with Rust Consulting, filed an Affidavit with the Court describing the methodology, statistics, and other transparent processes which verified requests by Class members claiming pounds for purposes of receiving settlement monies.

Her affidavit states:  “The resulting claims rate of 98.8% is outstanding and virtually unprecedented.”

This is how the numbers stack up:

7,452 potential claimants were originally identified

A total of 6,165 claims were deemed finally eligible out of 7,363 claims form received

Three rounds of follow-up letters were sent to claimants requesting additional information

11% of eligible claims were audited (compared to 2-5% audited in typical Class Action suits)

10 claimants/applicants were ineligible because they were board members of DFA or SMA (no specific names stated)

The detailed steps are explained in a 376-page document found at this link:

http://www.southeastdairyclass.com/PDFs/MotionToApproveAndDistributeTheSettlementFunds.pdf

 

Milk & Dollar Numbers:

$140,000,000 – Largest out-of-court settlement ever entered by Dean Foods

72,984,858,627 (Almost 73 Billion!) pounds of milk ‘harmed’ in the Class Period from Jan. 1, 2001 to May 1, 2001

$35,458,613.64 Dollars in Net Settlement for Distribution to farmers after Court Authorized costs, expenses, and attorney fees

10-12 cents/cwt. approximate net claim per pound (allowing for miscellaneous expenses to come 

 

 

History of Settlement Process:

The road to distribute the Dean Foods Settlement Fund has been 18 months long following the first Dean Foods Settlement Announcement in July, 2011. Dean’s Settlement $140 Million offer was quickly followed by a $5 Million Monetary Settlement, coupled with injunctive considerations, from SMA and its CEO, James Baird.

Dean Foods Settlement offer followed a June 2011 ‘in limine’ ruling by Judge Greer in which he ordered that the Dean-Suiza merger agreements would be allowed as evidence during the litigation trial, then scheduled for July 2011. These documents have been mentioned at numerous hearings as a piece of key evidence in this litigation.

Two weeks after the Settlement was announced, Judge Greer decertified DFA members from the Class eligible to receive damages, in response to a motion by DFA’s defense attorneys made in the spring of 2011.  This decertification put the Dean Foods/SMA Settlement (per a Dean/SMA motion) on hold until DFA farmer members, as plaintiffs, received separate counsel by a differing plaintiff attorney team.

Brewer and Terry, of Morristown, TN, were approved by the Court to serve the function of reviewing all work done by the Baker-Hostetler original attorney team (formerly of the Howrey Law firm) on behalf of DFA members.  The appointment of Brewer and Terry ‘cured’ the intraclass conflict which resulted in the decertification, and the Settlement was reinstated on February 14, 2012.

This Settlement, with the entire Class of Dairy Producers in Federal Milk Market Order 5 (Appalachian) and Federal Milk Market Order 7 (Southeast) intact, then entered a claims process in the spring of 2012.  It took 11 months to reach a conclusion to this phase of the marathon litigation, now 5 ½ years in duration since originally filed in July, 2007.

DFA Trial now set for January 22, 2013

In a related matter, the long-anticipated trial against Dairy Farmers of America (DFA) and related co-defendants Dairy Marketing Services, LLC (DMS); Mid-Am Capital, LLC; National Dairy Holdings, LP (NDH); and Gary Hanman, the former CEO of DFA has been postponed once again, this time only one week.

Trial is now set to begin January 22, 2013, and expected to last 6-8 weeks.

DFA is the nation’s largest dairy co-op, with over $9.87 billion in revenue and $2.1 Billion in Assets, according to USDA figures.

Important factors are at play:  $419 million is the assessed harm due to alleged activities of the DFA-related entities; an automatic trebling of that amount to $1.2 Billion occurs if a jury reaches a positive verdict for plaintiffs.

The Court’s made a statement in July 2012, found in a Supplemental Order:  “The plaintiffs have offered convincing proof sufficient to meet their burden under Rule 23 that DFA and the DFA related defendants have engaged in illegal conduct in violation of the Sherman Act and that the members of the DFA subclass have, across the board, suffered common injury as a result of the DFA defendants’ conduct.”

Judge Greer has stated repeatedly that all of the 90% of information remaining under seal will be opened once trial ensues. It will be interesting to watch activity unfold in the coming weeks in this historic litigation.

The Court has encouraged Mediation and Settlement throughout the litigation.  Final outcome, via either jury trial verdict or settlement, depends on application of Federal Law, the Court, and decisions of attorneys, plaintiffs and defendants.

For more information and litigation updates:

www.southeastdairyclass.com

www.milkshedsblog.com