Over alleged claims that the Dairy Farmers of America was involved in milk price fixing, the cooperative agreed to pay $140 million to plaintiffs that filed a class action lawsuit.
Under the terms of the settlement, filed Tuesday with the U.S. District Court for the Eastern District of Tennessee, the DFA said it will pay $140 million to the plaintiff class.
An additional, refundable $9.3 million per year for two years will be placed in a separate fund to incentivize stronger rates, the cooperative said.
The class action lawsuit alleged that the DFA worked with U.S. milk processor Dean Foods Co., and other groups to curb competition in more than a dozen states in the Southeast.
According to the suit, Dean Foods kept control of milk prices by allegedly allowing the DFA, working through a number of entities, to manage supply of its member farmers as well as independent producers that opted to provide milk bottlers through separate contacts.
The DFA made no admission of wrongdoing in this settlement, according to a statement from the cooperative.
In addition to Dean Foods, National Diary Holdings and Mid-Am Capital were among those named as defendants in the suit. Mid-Am Capital is DFA’s finance subsidiary and National Dairy Holdings divested from the cooperative in 2009.
The settlement came down to the wire as the case against the DFA was scheduled to go to trial on Tuesday. Filed in 2007, the settlement will be paid out to thousands of farmers in 14 states. In 2011, Dean Foods reached an additional settlement for $140 million.
Also included in the agreement are remedial elements regarding reporting, accounting and communication of certain business information and functions, the DFA said in a statement. The cooperative said many of these components are consistent with new policies and procedures the cooperative’s management voluntarily developed and implemented previously to emphasize a culture of openness and transparency.
“Our board and management team have worked diligently to put certain old issues behind us,” said Rick Smith, DFA president/CEO, in a statement. “This outcome positions DFA to fulfill a commitment to our members to resolve pending litigation, to remove a source of distraction for our leadership and to avoid additional legal fees.”
Based in Kansas City, Mo., the DFA said it serves more than 16,800 farmers.
Smith said the payment of the settlement will not affect DFA’s day-to-day operations or its ability to market members’ milk or pay them a competitive price for that milk. Member milk checks and the member equity program will not be impacted, he added.
“The cooperative remains healthy and poised for a bright future,” Smith said. “We continue to develop new member programs and invest in plants and new products. We also continue to seek out new opportunities and innovative ways to increase value to our dairy farmer owners.”