Dairy co-op and farmers reach $159 mln settlement in milk case

NEW YORK Tue Jan 22, 2013 5:47pm EST

NEW YORK Jan 22 (Reuters) - The Dairy Farmers of America, a large marketing cooperative, and four other defendants have reached a $158.6 million settlement in a class action lawsuit that accused them of a conspiracy to control the raw milk market in the Southeast.

The settlement, which requires court approval, means the parties will avoid a trial, which was supposed to start this month in Greeneville, Tenn.

It was the third and final settlement in litigation brought by a group of dairy farmers. The milk bottler Dean Foods Co previously settled for $140 million and the Southern Marketing Agency and one of its managers settled for $5 million.

Filed in 2007, the lawsuit alleged the defendants took a variety of steps to control prices of raw milk. The plaintiffs claimed, for instance, that the Dairy Farmers of America signed exclusive supply contracts with Dean Foods. According to the plaintiffs, those deals excluded competition from independent milk farmers and cooperatives in 14 states in the Southeast.

Other settling defendants in the agreement filed electronically on Monday included National Dairy Holdings LP; Dairy Marketing Services LLC; and Mid-Am Capital LLC. Gary Hanman, the former CEO of the Dairy Farmers of America, was also part of the settlement.

The Dairy Farmers of America said it would pay $140 million to plaintiffs in the class. It added that an additional refundable $18.6 million would be paid into a fund over two years to be made available for farmers if certain market conditions go unmet.

In addition to the payments, the settlement also requires the Dairy Farmers of America to make certain changes to its business regarding its accounting, reporting and communications with members.

On a conference call with reporters on Tuesday, Richard Smith, the current president and chief executive of the Dairy Farmers of America, said the settlement would not hurt any of its farmer members and that it was not an admission of any wrongdoing.

"The cooperative remains healthy and we're looking forward to getting this behind us," Smith said.

Robert Abrams, an attorney with Baker & Hostetler who represented the plaintiffs, said the monetary settlements recovered for dairy farmers were "exceptional."

The case is In Re: Southeastern Milk Antitrust Litigation, U.S. District Court, Eastern District of Tennessee, 2:08-md-01000.