BURLINGTON, Vt. (CN) — Unhappy with a $50 million settlement offer, representatives from over 115 dairy farms took Dairy Farmers of America and its marketing agency back to court on claims of antitrust violations.
DFA, which produces one-fifth of all milk in the United States, controlled the supply of dairy products by acquiring production facilities and liquidating them to inflate the cost of milk, without passing along any of the profits to its member farmers, according to the class-action lawsuit originally filed in 2009.
A group of farmers who rejected a proposed $50 million settlement from earlier this year have resurrected their claims in a new lawsuit filed Wednesday in Vermont federal court.
In addition to DFA, the new complaint also names Dairy Marketing Services as a defendant. DMS is controlled by DFA and markets milk for more than 5,500 farms in the Northeast, the farmers say.
“Since the class action complaint, the defendants’ vice-grip on Northeast milk industry has tightened and choked some of the last remaining vestiges of competition,” said the complaint. “Defendants’ acquisition appetite remains unsatiated.”
The complaint also alleges that DFA pressured it members to accept the settlement after only receiving three letters of support from among thousands of dairy producers in 2014.
The farmers claim that DFA inspectors were sent on unscheduled “special trips” to thousands of dairy farms to coerce the farmers into signing onto the settlement agreement in 2015, resulting in over 1,200 letters of support.
One of the stipulations of the settlement allowed members of the class who were dissatisfied with the outcome to opt out of the deal and pursue a case against the defendants on their own, which is what the plaintiffs did this week.
Through numerous acquisitions and purchases of stakes, the DFA partially controls the dairy processing facilities that its own members sell their raw milk to, essentially controlling the prices that farmers are able to receive, the plaintiffs claim.
“Instead of distributing the money back to its members, DF A/DMS use complex accounting and opaque financial records to keep the money for their executives and their cronies,” Wednesday’s lawsuit states. “As a result, DFA keeps hundreds of millions of dollars earned off the backs of its member-owners, which breaches its duties and its promise to act in the best interest of its members and provide its members with a return on investments made on their behalf.”
DFA was formed in 1998 when four regional dairy cooperatives decided to merge to create a national organization. By 2015, the DFA had a stake in 77 dairy processing facilities across the country, according to the complaint.
By 2016, DFA was producing approximately 46 billion pounds of milk, accounting for 20 percent of the total production in the US. The group also markets about 30 percent of the total milk production in the country.
In 1999, the DFA, Dairylea and St. Albans Cooperative Creamery formed DMS, a joint venture that is technically controlled by the DFA, according to the complaint.
The plaintiff farmers seek a court order divesting DFA of milk processing and balancing plants “to restore competition in the Northeast.”
They are represented by Gary Franklin of Primmer Piper Eggleston & Cramer in Burlington, Vt., and by William Nystrom, Joel Beckman, Dana Zakarian and Elizabeth Reidy of Nystrom Beckman & Paris in Boston.
DFA did not immediately respond Friday to an emailed request for comment.
CORRECTION: A previous version of this article incorrectly reported that the plaintiffs rejected a $52 million settlement from August. They actually rejected a $50 million settlement from February in a separate class action. Courthouse News regrets the error.
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