Dairy Farmers of America Inc., the top U.S. milk producer, settled a lawsuit in a North Carolina federal court over its $433 million deal for the assets of bankrupt Dean Foods Co., the country’s top milk processor.
The lawsuit sought plant divestitures from DFA, a nationwide marketing co-operative representing 7,500 farms in 47 states, to complete the rescue buyout.
An attorney for DFA disclosed the deal to the U.S. District Court for the Middle District of North Carolina, according to a docket entry.
The agreement would resolve a partial challenge to the rescue buyout brought by regional supermarket chain Food Lion LLC and Maryland and Virginia Milk Producers Cooperative Association Inc., which narrowly targeted several Dean processing plants.
The settlement’s details weren’t publicly available. Lawyers for both sides didn’t immediately respond to requests for comment Thursday.
The deal, disclosed Wednesday, comes a week after a novel ruling in an unrelated case by a federal appeals court that for the first time upheld a divestiture order in a private antitrust suit brought by an industry rival, rather than an enforcement action by a government regulator.
The suit against DFA sought a similar remedy. It assailed the buyout with broad rhetoric but confined its legal claims to seeking divestiture of Dean plants in the Carolinas beyond what DFA and Dean had accepted to get antitrust clearance from the Justice Department.
The consolidation of “market power at two levels of the supply chain” would lead to “particularly acute” harm in the region, letting DFA “wipe out any remaining pockets of competition” and leading “inevitably” to “the death of the independent, family-owned dairy farm,” the suit said.
DFA moved to dismiss the suit in July, arguing that its regional focus “defies common sense.” The claims were also foreclosed by the “failing company” doctrine, which shields acquirers from antitrust liability when a buyout was the only plausible way to save a distressed business, the filing said.
Judge Catherine C. Eagles rejected those arguments in July, calling them premature. The DFA’s defenses “are more suited for evaluation on a better developed factual record,” Eagles said at the time.
The suit came nearly a decade after DFA and Dean paid more than $350 million total in multiple separate settlements resolving a series of class actions claiming they fixed prices through a scheme to control the milk supply chain.
A related suit in a Vermont federal court, on behalf of plaintiffs that opted out of those cases, settled in September.
The case is Food Lion LLC v. Dairy Farmers of Am. Inc., M.D.N.C., No. 20-cv-442, settlement reported 2/24/21.
To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com
To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com
