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Allen v. Dairy Farmers of America, Inc.

United States District Court, D. Vermont

June 7, 2016

ALICE H. ALLEN, LAURANCE E. ALLEN, d/b/a Al-lens Farm, GARRET SITTS, RALPH SITTS, JONATHAN HAAR, CLAUDIA HAAR, RICHARD SWANTAK, PETER SOUTHWAY, MARILYN SOUTHWAY, REYNARD HUNT, ROBERT FULPER, STEPHEN H. TAYLOR, and DARREL J. AUBERTINE, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
DAIRY FARMERS OF AMERICA, INC. and DAIRY MARKETING SERVICES, LLC, Defendants.

          OPINION AND ORDER GRANTING MOTION FOR FINAL APPROVAL OF DECEMBER 2015 PROPOSED SETTLEMENT (Doc. 2076)

          CHRISTINA REISS, CHIEF JUDGE

         Pending before the court is a motion for final approval of a proposed settlement (the "December 2015 Proposed Settlement") between Defendants Dairy Farmers of America, Inc. ("DFA") and Dairy Marketing Services, LLC ("DMS") and the DFA/DMS and non-DFA/DMS subclasses (collectively, "Plaintiffs" or the "Dairy Farmers Class"). (Doc. 2076.)[1] The Dairy Farmers Class is comprised of dairy farmers who produced and sold raw Grade A milk in Federal Milk Market Order 1 ("Order 1") between January 1, 2002 to the present. Defendant DFA is a dairy cooperative that produces, processes, and distributes raw Grade A milk. Defendant DMS is a milk-marketing agency that was formed in 1999 by DFA and Dairylea Cooperative, Inc. ("Dairylea") and is currently owned by DFA, Dairylea, and St. Albans Cooperative Creamery, Inc. ("St. Albans Coop").

         On May 13, 2016, the court held a Fairness Hearing, at which thirty-five class members or their designees appeared and addressed the court regarding whether the December 2015 Proposed Settlement is fair, reasonable, and adequate as required by Fed.R.Civ.P. 23(e)(2). The court also heard oral argument from the parties' attorneys, all of whom support the settlement.

         A total of 8, 859 farms were provided court-approved notice of the December 2015 Proposed Settlement. Approximately 7, 551 farms (85% of those notified) submitted claims.

         Prior to the Fairness Hearing, the court received and reviewed approximately 1, 400 letters regarding the December 2015 Proposed Settlement. Approximately 90% of those letters were in favor of the settlement and approximately 10% opposed it. Members of the Dairy Farmers Class were permitted to opt out of the December 2015 Proposed Settlement to initiate or continue litigation against DFA and DMS, and approximately 172 farms (1.9% of the Dairy Farmers Class) did so. The ability to opt out was not offered in any of the parties' previous settlement proposals.

         Dairy Farmers Class Representatives Alice H. Allen, Laurance E. Allen, Peter Southway, Marilyn Southway, Reynard Hunt, Robert Fulper, Stephen H. Taylor, and Darrel J. Aubertine support the December 2015 Proposed Settlement ("Supporting Class Representatives"). Class Representatives Jonathan and Claudia Haar oppose it ("Opposing Class Representatives"). Class Representatives Garrett Sitts, Ralph Sitts, and Richard Swantak have opted out of the December 2015 Proposed Settlement ("Opting Out Class Representatives").

         I. The December 2015 Proposed Settlement.

         A. Terms of the December 2015 Proposed Settlement.

         Pursuant to the December 2015 Proposed Settlement, without an admission of wrongdoing, Defendants have agreed to pay $50 million dollars to the Dairy Farmers Class in exchange for a release of the claims asserted in this action as well as claims "arising out of the conduct alleged in the Complaint" as to specified released parties.[2] (Doc. 2076-2 at 5, ¶ 1.16.) Defendants have agreed to non-retaliation safeguards for the Dairy Farmers Class; specific protocols to increase class members' ability to leave DFA/DMS without penalty; the provision of a milk marketing grace period in the event a dairy farm is terminated from DFA/DMS; disclosure of certain financial information; and a prohibition of non-solicitation agreements, which allegedly prevented class members from freely leaving their cooperatives and joining competing cooperatives.

         In addition to the injunctive relief set forth in previous proposed settlements, the December 2015 Proposed Settlement includes the following:

The extension of the prohibition on the formation or renewal of full supply agreements, except in certain circumstances, for a four-year period following final approval of the December 2015 Proposed Settlement by the court; The establishment and funding of an independent Advisory Council Member for four years to review DFA/DMS financial records, serve as an advocate within DFA for higher pay prices and farmer equity, and attend and participate in DFA Northeast Area Council Meetings as a non-voting member;
The establishment and funding of a Farmer Ombudsperson for five years to investigate and facilitate resolution of any complaints-including complaints related to testing, voting rights, or termination from DFA/DMS-and attend and participate in DFA Northeast Area Council Meetings;
The imposition of certain protocols regarding milk testing for five years, including a mechanism that allows farmers to obtain "split samples" and secure testing at independent labs up to three times per year at no cost to the farmer, the annual receipt by the Farmer Ombudsperson of a report from the Market Administrator regarding the results of its independent testing of the Dairy One laboratory, and standards regarding the reporting of adulterated milk testing results for five years;
The prohibition on DFA/DMS from obtaining a controlling interest in the Dairy One milk testing organization for ten years and the prohibition on DFA members from holding a majority of seats on Dairy One's board; The imposition of limitations on DFA's use of block voting in connection with voting on Federal Milk Market Order 1 amendments, as well as the preservation of the right to vote individually; and
The formation of an Audit Committee consisting of seven DFA members plus two independent advisors with expertise in accounting, financial reporting, and auditing to monitor compliance with the December 2015 Proposed Settlement and to report to the delegates at the DFA annual meeting.

         B. Reaction of Governmental Agencies and Others.

         Consistent with the Class Action Fairness Act of 2005 ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4 (2005), notice of the December 2015 Proposed Settlement was provided to officials at the Justice Department and each Attorneys General office located in Order 1. Only the Vermont Attorney General's Office responded to the notice. In its written submission to the court, the Vermont Attorney General's Office stated that it supported the settlement, noting that it was:

impressed by the extensive injunctive relief that the settlement obtains for the class members. The behavioral remedies go directly to the conduct alleged in the matter[.] . . . The injunctive relief appears to be on par with the sort of relief that our office would seek in a matter like this. In light of ...

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