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Dean seeks to vacate ‘SE Milk’ settlement

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Source: Julia Walker, AgriVoice Enterprises 

 

The lawsuit saga known as “Southeast Milk” has taken another turn, with Dean Foods asking the judge to vacate a previous $140 million settlement. The trial, in the U.S. District Court for the Eastern District of Tennessee, has been continued until Tuesday, Sept. 13.

 

Dean asked U.S. District Judge Ronnie Greer to vacate the settlement in a motions hearing, Aug. 12, after members of Dairy Farmers of America Inc. (DFA) were “decertified” as “class” members in the class-action lawsuit on July 28. DFA is also a defendant in the case.

 

Under the proposed $140 million settlement, which required approval by the court, Dean agreed to make an initial payment of $60 million, with additional annual payments of $20 million in each of the next four years, to be distributed to members of the class. However, decertification of DFA members may sharply lower that number.

 

According to a previous press release from Baker Hostetler, lead attorney for the plaintiffs (listed as Southeast Dairy Farmers), the class included 7,200 members. According to its website, DFA’s Southeast Area includes 2,810 members.

 

Judge Greer heard oral arguments from both farmer/plaintiffs and defendants on two recent motions, both pertaining to the court's order which removed DFA producer/members from the class. DFA board members had previously been excluded from the group of dairy farmers entitled to monetary or injunctive relief via settlement or jury verdict. 

 

If the previous $140 million settlement agreement is vacated, one of two things may happen: 

 

a.) Dean Foods will have the opportunity to renegotiate a new settlement based on a class which may have fewer members; or 

 

b.) Dean Foods could proceed to trial as a defendant, along with Dairy Farmers of America (DFA), Dairy Marketing Services (DMS), National Dairy Holdings (NDH), Mid-Am Capital, and Gary Hanman, formerly DFA CEO.

 

In the motions hearing, plaintiff attorneys asked the court to reverse the DFA decertification ruling, both for purposes of maintaining the Dean settlement agreement and for trial. Plaintiff attorneys argued Dean knew decertification was possible when it entered the settlement.

 

Citing events and wording from a Dean settlement in a Northeast U.S. lawsuit, in the U.S. District Court of Vermont, plaintiffs attorneys noted that a "settlement class" could be determined to exist in the Southeast case due to “monetary only” language in the Northeast document, with DFA members possibly remaining eligible for any monetary share of the Dean settlement funds. Plaintiff attorneys also argued that harm was done to all farmers – including DFA members – due to the allegations contained in the original complaints, and that two alleged conspiracy actions (involving Dean Foods and other defendants) have been left in place for consideration by the jury. 

 

The court indicated – in the July 28 decertification order and in the courtroom on Aug. 12 – that DFA members were decertified from the class because DFA producers were duly represented by their governance system of electing representatives and board members and, based on court affidavits, DFA had received benefits including, but not limited to: full-supply agreements, extensive holdings of real estate (processing plants), and large financial reserve accounts. 

 

Judge Greer indicated he had difficulty balancing “benefits to membership” vs. “harm to membership”, noting inherent conflict of interest in leaving DFA members in the class if they are indeed beneficiaries, especially in consideration of what he termed as legally “antagonist” positions. 

 

SMA settlement affected?

Southern Marketing Agency (SMA), which also previously announced a settlement of $5 million, participated in the hearing by telephone. SMA attorneys indicated they may wish to renegotiate their settlement agreement, pending outcome of decisions about the Dean settlement. Attorneys for both SMA and James Baird, SMA manager, said they wanted to review their agreements to ensure there could be no “collateral damage” to their positions. 

 

Judge Greer said he hoped to have decisions made and orders written in the next few days, before the case goes to trial. 

 

 

Editor’s note:

Julia G. Walker, d/b/a AgriVoice Enterprises, has been following this litigation since it was initiated in 2007. She can be reached at agrivoice@yahoo.com, or by phone or text at 423-341-1745. She reports over 5 million pages of various legal documents and exhibits have been submitted to the court to date, with 90% of it remaining under seal.

 For additional information about both the Southeast and Northeast class-action lawsuits, court-monitored websites are available: In the Southeast: www.southeastdairyclass.com, and for the Northeast Dean settlement, www.nedairysettlement.com

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