TALKING POINTS: DFA, DMS join dairy farmers in
filing objection to Dean Settlement
CONTACT: Monica Massey 816-801-6486
CONFIDENTIAL:
FOR INTERNAL USE
ONLY
DRAFT 01-19-11 9 a.m.
SITUATION:
In October 2009, a purported class action, antitrust lawsuit was filed against Dairy Farmers of
America, Inc. (DFA), Dairy Marketing Services (DMS), Dean Foods and others in the U.S.
District Court in Burlington, Vt. The lawsuit claimed to be filed on behalf of dairy farmers in the
Northeast and alleges that DFA, DMS and others, including Dean, suppressed pay prices that
dairy farmers received for their milk by forcing dairy producers to join DFA, DMS or the
Greater Northeast Milk Marketing Agency (GNEMMA) to obtain access to milk markets.
In December 2010, Dean Foods announced that it had reached a settlement with the plaintiffs.
Terms of the agreement include a payment of $30 million dollars and changes to Dean’s milk
purchasing activities. Under the agreement, Dean Foods must offer to purchase at least 10
percent and up to 20 percent of its monthly raw milk supply through sources other than DFA and
DMS at a price that Dean determines, at its sole discretion. The settlement is subject to court
approval.
On January 18, 2011, DFA and DMS filed opposition to this settlement. In addition, many dairy
farmers from across Federal Order 1 - representing diverse cooperative members and
independent producers - filed affidavits challenging the fairness of the settlement.
It is the belief of DFA, DMS and the dairy farmers challenging the settlement that attorneys for
the entire class of producers represented agreed to a settlement that does not adequately and
fairly represent the interests of all farmers in the class. In fact, the settlement favors one part of
the class at the expense of another - a clear conflict of interest by plaintiff attorneys.
Additionally, the provisions of the settlement - although claimed to be a win for dairy farmers,
actually will result in harm to them over the long term as it will create opportunity to drive down
prices paid to all farmers for their milk.
This opposition will likely be misinterpreted and widely misconstrued. There is potential for
members and others to be concerned that DFA is not acting in the best interest of dairy farmers
in Federal Order I.
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The following talking points can be used to help you respond to questions you may receive.
KEY MESSAGES:

DFA and DMS have defended themselves since the lawsuit was filed in 2009. We
continue to defend ourselves in the case as we believe it to be without merit.

The activities of DFA, DMS and other affiliated milk marketing cooperatives in the
Northeast improved pay prices and the overall business climate for cooperative members
and independent producers alike.

The hardworking, dedicated cooperative employees and farmer leaders who work for
dairy farmers in the Northeast are offended by these unfounded and unsupported
allegations that we lowered pay prices to our own members and independent dairy
farmers.

As a farmer-owned cooperative, we work hard to ensure the success and profitability of
dairy farmers. We believe the milk marketing structure created in the Northeast - one that
enables dairy farmers to work together to market milk - has benefitted all dairy farmers.

The settlement the dairy farmer plaintiff’s attorneys have reached with Dean Foods,
however, has caused us to be concerned that the dairy farmers’ best interests are not
being looked after.

As a result, DFA and DMS have filed an opposition to the proposed settlement on behalf
of its member owners.

While all dairy farmers in the Northeast’s Federal Order I are potentially members of this
class action lawsuit, not all agree with the premise of this settlement. Some producers
have also filed opposition to the settlement.

Our objections are not aimed toward Dean Foods - which has served as a secure customer
for our members’ milk. It is Dean’s job to secure its raw product at the lowest cost. It is
our job to ensure the dairy farmers we market milk for receive the best possible price.

Terms of the proposed settlement include:
o Dean must offer to purchase at least 10 percent and up to 20 percent of their
monthly raw milk supply through sources other than DFA and DMS
o Dean, at its sole discretion, is able to determine this price
o Dean must pay farmers $30 million dollars (minus one third being paid to
plaintiff’s attorneys)
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
This settlement creates both winners and losers in the class of dairy farmers that is
represented by a single law firm by taking market access from one group of dairy farmers
at the expense of another within the same class. Clearly, this is a conflict.

To purchase the 60 million pounds of raw milk called for by the agreement, Dean is at an
advantage and will look to cherry pick those farms that have easy access and are close to
its plants. By avoiding handling costs it now pays to cooperatives, Dean will almost
certainly pay a lower price for this milk and will then use this to leverage the entire
market to reduce prices further.

Under the terms of the proposed settlement, Dean Foods has agreed to pay dairy farmers
in Federal Order I $30 million, which has been widely reported as a win for dairy farms.

While this is needed money for dairy farmers who have suffered great financial harm
over the past few years, dairy farmers in the Northeast stand to lose much more than this
as a result of reduced milk pay price and market instability in the long term.

Furthermore, we believe the reports regarding the potential amount of money paid to
farmers are inflated. This amount appears to represent the proposed $30 million payment
from Dean, minus $10 million in attorney’s fees, with the remaining $20 million divided
among 8,000 farmers.

Our calculations, based on a published Market Administrator report, indicate more than
13,000 dairy farmers could be eligible for a share of this payment. This greatly reduces
the potential payout to producers.

It does not affect the $10 million plaintiff attorneys will receive.

When farmers work together, all farmers do better. This was the premise of the DMS
structure in the Northeast. DMS has served as the vehicle through which cooperative
members and independent producers alike could come together to create efficiencies and
increase bargaining power.

It is understandable that a milk processor would accept an agreement that provides them
with an opportunity to secure their raw product at the lowest possible price.

It is our job as a milk marketer owned by dairy farmers to work to get the highest
possible price for dairy farmers. We take our responsibility to our members, customers,
consumers and other stakeholders seriously. As we work to defend this matter, we will
continue to focus on our core business of marketing members’ milk, paying a competitive
price, demonstrating value and providing leadership to the dairy industry.
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