Dean Foods Estate, via Stipulation and Order, to pay 90% of Post-Bankruptcy USDA Milk Marketing Obligations

As the Southern Foods Group / Deans Foods Estate winds up its affairs in their Chapter 11 Bankruptcy proceedings, a lingering question had been “were the obligations to Producer Settlement Funds ever paid, and how would they be resolved?”

An Order entered on January 15th, 2021 at the US Bankruptcy Court for the Southern District of Texas, Houston Division, provides at least a portion of that answer. This payment will not cover pre-petition obligations (obligations incurred before the Nov. 12, 2019 filing date) of approximately $16 Million, which USDA indicates it will continue to pursue.

Below is a news release posted at the USDA AMS website. The complete order can be found at the Southern Foods Chapter 11 Docket, Document 3366.

The USDA – AMS News Release in its entirety:

January 19, 2021

On January 15, 2021, the Honorable Chief Judge David R. Jones, of the United States Bankruptcy Court for the Southern District of Texas, signed and entered a Stipulation and Agreed Order (Order) between the U.S. Department of Justice (DOJ), which is serving as legal counsel of record for the United States Department of Agriculture (USDA), and Dean Foods.

The Order requires Dean Foods to pay within 30 days $29,082,182.26, which is 90 percent of its obligations to the USDA for milk marketed in April 2020 and May 2020.

On November 12, 2019, Southern Foods Group, LLC, et al., (Dean Foods) filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. At that time, Dean Foods had 43 plants regulated by the federal milk marketing order (FMMO) system. Subsequent to the filing date, Dean Foods, as the Debtor-in-Possession (Dean DIP), failed to make payments to USDA for milk marketed from April 1, 2020, through May 4, 2020, totaling $32,313,535.84. The missed payments included monies owed to the FMMO program, the National Dairy Research and Promotion Program and the National Fluid Milk Processor Promotion Program.

Upon receipt of payment, USDA will remit monies owed to FMMO-regulated handlers and the Dairy and Fluid Milk Promotion Boards. Once handlers receive payments from USDA, FMMO regulations require that the money be promptly remitted to producers.

Procedures for handler payments to producers will be communicated through the respective FMMO Market Administrators.

Dean Foods’ $16 million pre-petition debt owed to USDA is not covered by this Stipulation and Agreed Order. USDA filed timely Proofs of Claim for these pre-petition obligations and will continue to pursue payment of those claims through the bankruptcy proceeding.

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