Categories & Search

No Use Crying Over Settled Claims?: Second Circuit Affirms Approval of Dairy Farmers’ Settlement

This week, the Second Circuit affirmed the approval of a $50 million agreement settling price-fixing claims brought by a class of farmers against a dairy cooperative and a dairy marketing company.  The settlement in Allen et al. v. Dairy Farmers of America et al. was notable for at least two reasons that were seemingly at odds: First, the unusually high number of claims filed; and second, the vociferous advocacy of two named plaintiffs who objected to the settlement.  The objectors argued that class counsel colluded with defendants’ to reach a settlement agreement, and coerced class members to support the settlement.

At oral argument before a Second Circuit panel last month, dairy farmers Jonathan and Claudia Haar represented themselves, along with their son Joshua Haar, a law school student, who delivered the rebuttal.

Jonathan Haar argued passionately that the issue before the court concerned “how defendants coerced farmers into supporting a sell-out, how class counsel colluded with their counterparts, and how the District Court covered for everyone except the absent class members.”  Haar described himself as “representing the salt-of-the earth people, these hard-working farmers,” who, he argued, were strong-armed by defendants and their affiliates into supporting a settlement that did not support their interests. 

On average, the agreement provided for about $4000 to each class member.  The panel noted that 85% of all class members had submitted claims—a “rather extraordinary number of people,” one judge remarked, when measured “by the standard of class action litigation.” 

Plaintiffs alleged in their revised consolidated amended complaint that the Dean Foods Company, a raw milk processor that was eventually dismissed from the case, Dairy Farmers of America (“DFA”), a large dairy cooperative, and Dairy Marketing Services (“DMS”) “made concerted, persistent and successful efforts to restrain competition in the supply and purchase of raw Grade A milk in the Northeast and to fix and suppress the price paid for raw Grade A milk.”  A class of dairy farmers was certified on November 19, 2012.

An initial settlement was reached on the eve of trial in July 2014, but was rejected by the District Court.  After a two-day evidentiary hearing to evaluate the settlement-negotiation process, a final agreement was approved in June 2016.  The $50 million settlement included terms that provide for review of DFA’s and DMS’s financial records, the establishment of protocols for milk testing, and the installment of a Farmer Ombudsperson that would occupy an investigative and advocacy role.  The Haars did not consider these attempted safeguards or the monetary sum adequate to protect the interests and rights of the class.  Moreover, the Haars pointed to the District Court’s refusal to approval the initial agreement as evidence of procedural unfairness in the settlement process.

The Second Circuit, however, demonstrated the typical reluctance many courts have in replacing their own judgment for that of the parties and their counsel.  As the panel explained, “[t]he question for us is really have the lawyers in good faith decided that this is the best they can do, in effect?”  Affirming the District Court’s conclusion that “the negotiations took place at arms-length and in good faith between experienced antitrust litigators who were knowledgeable about the facts and the law, the realities of the marketplace, and the risks and challenges of a trial,” the Second Circuit determined that they had.  As counsel for appellees noted, in Charron v. Wiener, the Second Circuit affirmed a settlement where as many as two-thirds of the class members wrote letters objecting to the settlement—in contrast to this case, where 90% of the 1,400 letters the court received articulated support for the settlement. 

Indeed, even though “using representatives of the defendants, to whom the farms sold their milk, to solicit the letters of support for the settlement may well have been a questionable tactic,” “there was clear evidence of substantial support for the settlement”—in particular, the fact that “[t]he overwhelming majority of class members chose to participate in the settlement by filing a claim rather than to avail themselves of the right to opt out and continue to pursue litigation.”  As the court held in Charron, “[c]lass counsel is supposed to represent the class, not the named parties.”

At oral argument, the court suggested that the Haar family’s frustration with the settlement process may reflect the disappointment inherent in the settlement process.  While acknowledging “the passionate concern of the Haars,” the panel opinion reiterated the pragmatism of the legal process: “By their nature, settlements are compromises that do not provide either side with all that they might have hoped to obtain in litigation.”  And ultimately, the court’s judgment reflected the long odds faced by any objector in overturning a settlement that appears to satisfy class counsel and defendants.