There is a fix for dairy farmers who received letters demanding money in connection with the Dean Foods bankruptcy case.

The Pennsylvania Milk Marketing Board announced Dec. 7 it created a form letter that farmers and milk haulers can use to respond to Dean Foods bankruptcy claims they recently received in the mail.

About 100 farmers in Pennsylvania received letters in the past week threatening legal action unless they repay a portion of milk check money paid by Dean before it declared bankruptcy in November 2019, said Doug Eberly, chief counsel for the Pennsylvania Milk Marketing Board.

While there is seemingly a way out of this mess, there are questions as to whether the letters should have been sent in the first place. The letters caused a lot of panic and distress among dairy farmers, who were blindsided by the sudden reappearance of the bankrupt Dean Foods into their lives.

“Tears immediately sprung to my eyes,” said Jess Peters, a dairy farmer near Meadville, Pennsylvania, recalling when she first read the letter that came to her family farm. “We can’t pay this.”

The letter Peters got ordered her family’s farm to pay almost $50,000. She milks about 240 cows with her brother and parents.

It came in a plain manila envelope and was full of legal jargon. She wondered if it was for real or if it was a scam or a mistake. To avoid legal action, Peters said the letter included a settlement offer to pay about $5,000 less than the original ask by Christmas Eve.

“It went from tears shooting down my face to ‘what are we going to do’ to anger,” Peters said. “When you get a document like that, you go to the worst possible scenario. They’re bullying us.”

American Farm Bureau Federation threw its weight behind the dairy farmers, calling the letters a “predatory shakedown.” The group threatened legal action if the law firm representing the Dean Foods estate doesn’t withdraw the letters by Dec. 14 and doesn’t pay back any farmers who already sent money.

“It’s ludicrous to suggest the meager profits from regularly scheduled and routine milk sales – sales that are heavily watched and regulated by the federal government – were outside the regular course of business,” said American Farm Bureau Federation President Zippy Duvall, in a statement.

In all, about 500 farmers nationwide received the letters from ASK LLP, a law firm working on behalf of the Dean Foods estate. They were sent because of a unique provision in bankruptcy law that allows a bankrupt entity to ask for money back it paid to people and businesses in the 90 days before its declared bankruptcy.

It’s called a “trustee avoidance claim.” It happens when a bankrupt entity can’t pay its creditors back in full.

The legal defense against such a claim is if the payments were made in the ordinary course of business. That’s what dairy farmers have to prove by filling out the form letter created by the Pennsylvania Milk Marketing Board.

Farmers should fill out the declaration form, which is available for download online here, and return it to ASK LLP by email, mail or fax. The form asks farmers to briefly describe their relationship with Dean, including how long they sold milk to Dean and how often milk was picked up.

Eberly said the declaration form can be used by farmers in any state.

The board worked in conjunction with the Pennsylvania Attorney General’s Office and ASK LLP to come up with the form letter that would not require any added expense for farmers, Eberly said, although farmers should still check with a lawyer if they feel more comfortable doing so.

Once ASK receives and processes the declaration, that should be the end of it. ASK will inform farmers and haulers when the file is closed.

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Industry conference call

The Center for Dairy Excellence is hosting a conference call at noon Dec. 10 to discuss the Dean Foods claims. Rob Barley and Doug Eberly from the Pennsylvania Milk Marketing Board will talk about how farmers should handle the claims and answer questions from farmers.

Dial 978-990-5000. Enter access code 553371, followed by the # sign, when prompted.
To ask a question in advance, text or call the question line at 717-585-0766 or email Zach Myers at zmyers@centerfordairyexcellence.org.
(Reporter Rachel Wagoner can be contacted at 800-837-3419 or rachel@farmanddairy.com.)