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From Antitrust Law Daily, July 14, 2014

Dairy farmer cooperative denied preliminary approval of antitrust settlement

By Greg Hammond, J.D.

A proposed settlement intended to resolve a dispute between a milk cooperative and dairy farmers over alleged price fixing and monopsonization, which was reached on the eve of trial, was not grated preliminary approval by the federal district court in Rutland, Vermont. In denying the cooperative’s and marketing agency’s expedited motion for preliminary approval, the court determined that it could not assess whether the settlement was “fair, reasonable, and adequate” without knowing the class representatives’ grounds for opposing the settlement (Allen v. Dairy Farmers of America, Inc., July 9, 2014, Reiss, C.).

Background. A group of dairy farmers filed a putative class action against Dairy Farmers of America, Inc. (DFA) and its marketing agency, Dairy Marketing Services, LLC (DMS). DFA is a dairy cooperative that produces, processes, and distributes raw Grade A milk. The farmers alleged that DFA and DMS engaged in a conspiracy to fix, stabilize, and artificially depress prices for raw Grade A milk and to allocate markets in the Northeast United States. DFA’s and DMS’ expedited motion for preliminary approval of a proposed settlement was before the court. However, the class representatives intend to oppose the settlement agreement at a fairness hearing, but have not yet provided the court with their reasons for opposing the settlement.

Draft notices. The court first assessed the submitted draft “Notice of Proposed Settlement” and “Summary Notice of Proposed Settlement,” and found that they were incomplete, inaccurate, and potentially confusing or misleading. Specifically, the court found that: the notices lacked an end date for the share calculation; the release description in the draft notices was arguably misleading; the definition of “Released Parties” was unclear; and the draft notice wrongly suggests that class members may “exclude” themselves from the class, when that is not an option. “Both the draft Notice and the draft Summary Notice must make it clear that the Release extends beyond DFA and DMS to certain related entities, extends beyond the legal claims in this lawsuit, and that class members should carefully review a full copy of the Release and seek legal advice if they have any questions,” the court stated.

Preliminary approval denied. Proposed settlements are preliminarily approved when “it is the result of serious, informed, non-collusive (‘arm’s length’) negotiations, where there are no grounds to doubt its fairness and no other obvious deficiencies [], and where the settlement appears to fall within the range of possible approval.” The court determined that it would not be fulfilling its fiduciary role with regard to the class members if it granted preliminary approval without first hearing why the class representatives oppose the settlement. Consequently, the court concluded that the subclass’ counsel must disclose the class representatives’ grounds for opposing the proposed settlement in order for the court to determine if the settlement is “fair, reasonable, and adequate.”

The case number is 5:09-cv-230.

Attorneys: Danyll W. Foix (Baker & Hostetler LLP) for Alice H. Allen. Amber L. McDonald (Baker & Miller PLLC) for Dairy Farmers of America, Inc. and Dairy Marketing Services, LLC.

Companies: Dairy Farmers of America, Inc.; Dairy Marketing Services, LLC

MainStory: TopStory Antitrust VermontNews

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