Northeastern DairyPractice Area: Antitrust
In November 2012, Chief Judge Reiss certified two sub-classes against the non-settling defendants: one consisting of those farmers who are members of DFA or who otherwise sell milk through DMS, and one consisting of those farmers who are not members of DFA and who do not sell milk through DMS. In doing so, the Court held that, “Examining the totality of Plaintiffs’ evidence presented regarding antitrust impact, the court concludes that plaintiffs have established by a preponderance of the evidence a means of establishing antitrust impact through a common body of admissible proof and through common questions of law and fact which clearly predominate over individual questions.” Now that two subclasses have been certified, the parties will proceed to summary judgment briefing.
On August 30, 2010, Judge Christina Reiss of the United States District Court for the District of Vermont, issued the below order in the Northeastern Milk litigation, denying, in part, the motion to dismiss:
Motion to Dismiss Order - August 30, 2010 [PDF]
Cohen Milstein has filed an antitrust class action lawsuit on behalf of Northeast dairy farmers against the Dairy Farmers of America (DFA) and Dean Foods Company (“Dean”) in U.S. District Court in Burlington, Vt.
The suit charges DFA and Dean each with monopolizing a level of distribution of fluid milk in the Northeast and forcing dairy farmers to join DFA or its affiliate Dairy Marketing Services (DMS) to survive. DMS and milk processor HP Hood also were named in the suit for aiding DFA’s and Dean’s monopolization and, in the case of DMS for price-fixing with DFA.
Northeast dairy farmers blame DFA, the nation’s largest cooperative, and Dean, the nation’s largest processor, for lowering the price they receive for fluid milk by making DFA and its affiliates the exclusive suppliers of milk to Dean and HP Hood. Together the two processors bottle about 90 percent of the fluid milk in the Northeast.
“Monopolization and price-fixing have contributed to the milk-pricing crisis dairy farmers—especially small, family-owned dairies in the Northeast—face today,” says Partner Benjamin Brown. “Many dairy farmers have been forced to choose between joining DFA or DMS or going out of business. If they join, they have to pay a fee to continue to market to their own customers at prices fixed by DFA, DMS and other cooperatives. Meanwhile major milk processors Dean and HP Hood, which is part-owned by DFA, enjoy the economic benefits.”
The DFA, DMS, Dean and HP Hood domination of the milk distribution system resulted from an unlawful series of contracts, agreements and understandings that defied restrictions that the U.S. Department of Justice (DOJ) and various state attorneys general offices imposed, says Brown.
The suit, Alice H. Allen, et al. vs. Dairy Farmers of America, which seeks both monetary damages and injunctive relief that could have far-reaching effects on the American dairy industry, charges that:
- DFA and others engaged in a string of unlawful mergers, acquisitions and closures of bottling plants—many of which violated conditions imposed by the DOJ —to strengthen their control of the fluid Grade A milk market.
- Defying the explicit instructions of the DOJ, DFA entered into unlawful agreements with Dean Foods, which controls approximately 70 percent of the Northeast market for bottling fluid Grade A milk, and HP Hood, which controls approximately 20 percent of the market. This ensures that DFA and DMS would supply virtually all of the fluid Grade A milk bottled in the Northeast by Dean and HP Hood.
- Independent dairy cooperatives and independent dairy farmers have been forced to pay membership fees and dues to join DFA or DMS so they can obtain access to bottling plants. Access to such plants is the only way they can quality to receive minimum monthly payments on Grade A milk sales set by the United States Department of Agriculture.
- DFA and DMS suppressed and fixed milk prices for Northeast dairy farmers, thus increasing the profits of Dean and HP Hood, and permitting DFA’s management to divert revenue from farmers to themselves and outside business partners
“At virtually every stage of this conspiracy, the Department of Justice or state attorneys general intervened to place conditions on major transactions to preserve competition,” says Brown. “Yet time and time again, DFA and others circumvented and thwarted the conditions imposed by DOJ and state antitrust authorities. Now, these Defendants are using their resulting market power to deny farmers the benefits of competition. This has got to stop, which is why we have filed this lawsuit on behalf of all Northeast dairy farmers.”