(CN) – The 9th Circuit revived a class action accusing dairy cooperatives of manipulating the price of raw milk, causing $50 million in losses.
The federal appeals court in San Francisco on Tuesday said farmers are not barred from suing DairyAmerica and California Dairies under the “filed rate doctrine,” which aims to stabilize markets by blocking lawsuits based on government-regulated minimum prices.
Farmers claimed the dairy cooperatives incorrectly reported what they paid for non-fat dry milk in their weekly reports to the government, causing raw milk prices to be understated by $50 million from 2006 to 2007.
Raw milk prices are typically set using dairy prices collected by the National Agricultural Statistics Service (NASS), a division of the U.S. Department of Agriculture. NASS uses that information for its Federal Milk Marketing Orders, or FMMOs, which require milk processors to pay minimum milk prices and adhere to other regulations.
In their weekly reports to NASS, DairyAmerica and California Dairies allegedly reported forward-priced sales, in which the sale price was set 30 days or more before the transaction was complete.
Farmers said the inclusion of those sales was clearly prohibited by NASS and contaminated the data, driving down raw milk prices.
The U.S. Department of Agriculture acknowledged that the raw milk rates were incorrect and rejected them, but lacked the authority to sanction DairyAmerica at the time.
A federal judge dismissed the lawsuit in 2010 based on the filed rate doctrine, but the 9th Circuit partially reversed and reinstated the farmers’ claims.
The court agreed with the judge’s conclusion that the doctrine applies to agency-set minimum prices for raw milk. However, the 9th Circuit said the doctrine does not bar the farmers in this case from proceeding with their state-law claims.
“Our holding will not permit a flood of litigation such that the filed rate doctrine will be circumvented every time a milk producer has a quibble with FMMO prices,” wrote U.S. District Judge George Wu, who participated in the panel ruling.
“To the contrary, this case presents a narrow exception to the general rule that the filed rate doctrine not only applies but functions so as to bar FMMO price-related claims.”