KC’s Dairy Farmers of America agrees to pay $50 million to settle milk price lawsuit

Kansas City-based Dairy Farmers of America has agreed to pay $50 million to thousands of Northeast dairy farmers to settle a long-running lawsuit accusing the group of trying to drive down milk prices.

Under the amended proposal, the national dairy marketing cooperative would pay farmers an average of $4,000. The settlement must be approved by a judge, who rejected a previous proposed deal in March.

The dairy cooperative was not immediately available for comment. However, it had said that it did not admit any wrongdoing under the terms of the previous settlement and that the cost to continue to defend itself had become too great.

The 2009 class action lawsuit accused Dairy Farmers of America; its marketing arm, Dairy Marketing Services; and Dallas-based dairy processor Dean Foods with working together to monopolize the market for raw milk in the Northeast.

Dean Foods agreed to a settlement of $30 million in 2011. It covered farmers in Delaware, Connecticut, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia and the District of Columbia.

U.S. District Judge Christina Reiss rejected the previous settlement proposal mainly because some farmers opposed it.

They argued that they could be exposed to retaliation by the groups and said the estimated financial compensation of $4,000 per farm was “functionally irrelevant,” reflecting the cost of one “tractor tire.” They also contended the proposal’s injunctive relief was insufficient and would allow the defendants to continue practices that led to the lawsuit, the judge said.

She said it appeared there was strong opposition to the proposed deal on the grounds that the monetary relief was inadequate if there were no significant changes to how defendants did business. The proposed release was overly broad. And in light of the modest per farm relief, lawyers would be the primary beneficiaries of the proposed settlement if their fees and costs were approved.

After negotiating, the two sides agreed to amend the settlement to address some of those concerns, but the settlement amount remained the same.

“We think it’s a fair and reasonable settlement and that it’s in the best interest of the farms,” said Kit Pierson, a Washington-based attorney for the plaintiffs.

This story was originally published August 6, 2015 at 2:20 PM with the headline "KC’s Dairy Farmers of America agrees to pay $50 million to settle milk price lawsuit."