On September 14, 2018, the U.S. District Court for the Eastern District of California preliminarily approved a $40 million settlement to resolve putative claims for tens of thousands of dairy farms alleging that cooperative DairyAmerica Inc. and affiliate California Dairies conspired to boost profits by artificially depressing the price of milk products paid to farmers. The $40 million settlement is a remarkable recovery, considering the USDA Inspector General’s independent analysis estimated damages from the misreporting at $50 million.

On May 29, 2009, the Court appointed Cohen Milstein Sellers & Toll PLLC sole interim class counsel.  In appointing the firm interim class counsel, Magistrate Judge Dennis Beck of the Eastern District of California noted Cohen Milstein’s experience in complex litigation and pointed to the firm’s pre-trial “investigation into the alleged misconduct and identification of the legal theory of the case.”

Case Background

Originally filed on March 6, 2009, plaintiffs, dairy farmers throughout the U.S. who sold raw milk that was priced according to a Federal Milk Marketing Order between Jan. 1, 2002, and April 30, 2007, claim that DairyAmerica Inc., and affiliate California Dairies,  nation’s largest marketer of non-fat dry milk and the California-based milk processing firm inflated their own profits at the expense of America’s dairy farmers by misreporting critical data used by the government to set raw milk prices.

Specifically, Plaintiffs alleged that DairyAmerica misreported dairy product prices to the U.S. Department of Agriculture's National Agricultural Statistics Service to lower the government-set amount its members would have to pay farmers for non-fat dry milk under provisions set under what’s known as a Federal Milk Marketing Order, and that DairyAmerica had a “singular mission” to maximize the profits of its nine-member cooperatives, including California Dairies Inc. During the alleged class period, DairyAmerica marketed and sold approximately 75 percent of the non-fat dry milk produced in the United States

Non-fat dry milk is used as an ingredient in manufactured dairy products such as butter and cheese. In a survey administered by the NASS, DairyAmerica allegedly provided incorrect pricing information for non-fat dry milk that resulted in a lower rate for the product — to DairyAmerica's purchasers' advantage and to the farmers' disadvantage, according to the farmers.

Within the nine-plus years of litigation, counsel for the proposed class have revived the case via an appeal to the Ninth Circuit after its initial dismissal and defeated other attempts by DairyAmerica and California Dairies to have the case tossed. Pursuing the lawsuit also entailed voluminous document review, deposition calendar and extensive motion practice, attorneys for the plaintiffs told the court.

On August 7, 2012, after considering the briefs and oral argument delivered by Cohen Milstein’s Benjamin Brown, the United States Court of Appeals for the Ninth District reversed the lower court’s dismissal of this national class action lawsuit, thereby reviving the lawsuit. 

In overturning the February 2010 U.S. District Court ruling, the Court of Appeals considered the “filed rate doctrine,” which bars certain lawsuits from recovering damages when government agencies, such as the United States Department of Agriculture (USDA), approve rates or prices for regulated industries, including the dairy industry.  The Court of Appeals ruled that the filed rate doctrine did not preclude dairy farmers from suing the dairy firms in this case because the USDA’s National Agricultural Statistics Service had concluded that the pricing data was incorrect.

 

Case name: Carlin et al. v. DairyAmerica Inc. et al., Case No. 1:09-cv-00430, U.S. District Court, Eastern District of California