BY KEN LITTLE
Jury selection is scheduled to begin Wednesday in the Southeast Milk Antitrust Litigation trial in U.S. District Court in Greeneville.
The civil trial is expected to last six to eight weeks. Its outcome could have a significant impact on the way milk and other dairy products are sold in Tennessee and throughout the Southeast, legal observers said.
U.S. District Court Judge J. Ronnie Greer will preside over the complex case, which has taken a number of legal twists and turns since the multi-district legal action was filed in July 2007.
At trial, dairy farmers from across the Southeast hope to prove what they claim is a conspiracy to drive down the price they are paid for milk.
DFA IS A DEFENDANT
Defendants include the Dairy Farmers of America (DFA); Dairy Marketing Services, LLC (DMS); Mid-Am Capital, LLC; National Dairy Holdings, LP (NDH); and Gary Hanman, DFA's former chief executive officer.
DFA is the nation's largest dairy cooperative, with more than $9.87 billion in annual sales and $2.1 billion in assets, according to U.S. Department of Agriculture figures.
"Important factors are at play," according to a news release by Julia G. Walker of AgriVoice Enterprises, who has been following the case closely.
Walker's AgriVoice Enterprises, based in Newport, is an agrimarketing service.
Plaintiffs claim $419 million in damages "due to alleged activities of the DFA-related entities," Walker said.
"An automatic trebling of that amount to $1.2 billion occurs if a jury reaches a positive verdict for [the] plaintiffs," she said.
A July 2012 court supplemental order states that plaintiffs "have offered convincing proof" that DFA and DFA-related defendants "have engaged in illegal conduct in violation of the Sherman (Antitrust) Act and that the members of the DFA subclass have, across the board, suffered common injury as a result of the DFA defendants' conduct."
Plaintiffs in the class action lawsuit include about 7,500 current and former dairy farmers.
Some information long under seal in connection with the case will be opened once the trial begins, Greer has said.
The judge has encouraged mediation that has not resulted in resolution of the case.
DEAN FOODS SETTLEMENT
The case has already included an unprecedented $145 million monetary settlement between plaintiffs and Dean Foods, the Southern Marketing Agency (SMA) and defendant James Baird.
Dean Foods, a large food and beverage company, agreed to pay $140 million of that amount over four years.
Greer filed an order on Jan. 8 clearing the way for the first payments from the $145 million Dean/SMA settlement funds.
Total payments to class members are estimated to average $13,000 per claimant when payments are completed following a five-year tiered payment plan, Walker said.
The payment amounts are tied to qualified milk pounds belonging to each producer.
The claims rate of 98.8 percent includes 6,165 eligible claims out of 7,363 claim forms received, a consultant said.
A first Dean Foods settlement was announced in July 2011. Dean's $140 million settlement offer was followed by a $5 million settlement from SMA and Baird, SMA's chief executive officer.
Dean Foods is the parent company of prominent Southeast consumer brands such as Mayfield, Purity, Barber's, Louis Trauth Dairy, Pet, Dean, Shenandoah's Pride, and Broughton.
Two weeks after the settlement was announced, Greer decertified DFA members from the class eligible to receive damages, in response to a motion by DFA defense lawyers, Walker said.
The decertification put the Dean Foods/SMA settlement on hold until DFA farmer members, as plaintiffs, received separate counsel by another plaintiff lawyer team.
The appointment of the Brewer and Terry law firm of Morristown to review work done by the original lawyer team on behalf of DFA members "cured" the intraclass conflict that resulted in the decertification, and the settlement was reinstated by the court in February 2012, Walkers said.
The settlement, including the entire class of dairy producers in Federal Milk Market Order 5 (Appalachian region) and Federal Milk Market Order 7 (Southeast region), then entered a claims process in spring 2012, Walker said.
"It took 11 months to reach a conclusion to this phase of the marathon litigation, now five-and-one-half years in duration, since it was originally filed in July 2007," she said.
The civil lawsuit asks for damages for what plaintiffs claim are illegally suppressed prices for raw Grade A milk.
Plaintiffs also ask for changes they maintain are necessary to restore dairy farmer options and a competitive market.
Defendants include milk processors, milk marketers such as dairy cooperatives, and individuals who worked for one of the defendant processors or marketers.
DFA was one of the processor-defendants. The other is National Dairy Holdings, established in 2001 by DFA and three other individual defendants to acquire dairy processing plants.
Defendant milk marketers named in the 2007 lawsuit include DFA, SMA and DMS, a milk marketing agent partially owned by DFA.
Other defendants include Hanman, the Kroger Co., Prairie Farms Dairy, and eight individuals "who engaged in business dealings with the defendants," court documents state.
Baird is one of the eight individuals named in the 2007 lawsuit.
Raw milk is a perishable product that must be shipped to its destination to be processed shortly after being produced.
The price for raw milk produced by dairy farmers is regulated, in part, by minimum prices set by the federal government that processors must pay for milk.
"Dairy farmers or cooperatives, however, can negotiate prices above the minimum price. The amount by which the prices paid by processors exceed the minimum is sometimes referred to as the 'over-order premium,'" court documents state.
The amount that dairy farmers actually receive from selling their milk is called the "mailbox price," which, after deductions for costs such as hauling, can include "some portion of the over-order premiums paid by processors," court documents state.
CONSPIRING TO 'ELIMINATE COMPETITION'
The plaintiffs claim that defendants violated sections of the Sherman Antitrust Act, which prohibits monopolies, and conspiracies to unreasonably restrain trade.
Plaintiffs allege that defendants violated the law "by unlawfully conspiring to eliminate competition for the marketing, sale and purchase of raw milk within the Southeast," and "conspiring to fix and suppress prices paid to Southeast dairy farmers," the lawsuit states.
Plaintiffs claim that defendants and others associated with them control about 90 percent of all milk marketed in the Southeast.
The result was "Southeast farmers receiving prices for their milk that are lower than they would have been in a competitive market," the lawsuit states.
Defendants "deny they conspired to reduce the prices dairy farmers received for their milk," court documents state.