January 23, 2013

A settlement worth US$158.6 million has been agreed by the Dairy Farmers of America Inc. (DFA) and related companies to resolve claims that they fixed the price of milk.

If approved, the settlement would end an antitrust lawsuit filed in 2007 against the Kansas City-based cooperative by South-east dairy farmers. A trial in the case was set to begin Tuesday (Jan 29) in federal court in Tennessee.

DFA will pay US$70 million; its finance subsidiary, Mid-Am Capital LLC, will pay US$20 million; and National Dairy Holdings LP, which DFA sold to Mexican dairy processor Grupo Lala in 2009, will pay US$50 million, according to a Monday (Jan 21) court filing. An additional US$18.6 million, equating to a 3.3% increase in milk prices, will be paid out in two years.

Former DFA CEO Gary Hanman is among the settling defendants, though it's unclear whether he will be personally on the hook for any payments. Dan Crabtree and David Everson of Stinson Morrison Hecker LLP represent Hanman.

Claims against former DFA CFO Gerald Bos were dismissed in a July 2011 summary judgment ruling. Brandon Boulware and Charley German of Rouse Hendricks German May PC represented Bos.

The lawsuit claimed that DFA and Dean Foods Co. conspired to fix raw milk prices in the Southeast by closing bottling plants and stifling competition.

DFA admitted no wrongdoing. The company agreed to improve transparency regarding executive compensation and supply agreements, and to submit certain operating decisions to delegate votes.

Dean Foods reached a US$145 million settlement in 2011.