`
`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF NEW MEXICO
`
`
`
`
`Case No. ________________
`
`CLASS ACTION COMPLAINT
`
`
`
`OTHART DAIRY FARMS, LLC, PAREO
`FARM, INC., PAREO FARM II, INC.,
`DESERTLAND DAIRY, LLC, DEL ORO
`DAIRY, LLC, BRIGHT STAR DAIRY, LLC,
`and SUNSET DAIRY, LLC, individually and
`on behalf of all others similarly situated,
`
`
`
`
`
`DAIRY FARMERS OF AMERICA, INC.,
`SELECT MILK PRODUCERS, INC., and
`GREATER SOUTHWEST AGENCY,
`
`
`
`
`Defendants.
`
`
`
`
`
`Plaintiffs,
`
`
`
`vs.
`
`
`
`
`
`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 2 of 77
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`TABLE OF CONTENTS
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`I.
`II.
`III.
`
`NATURE OF ACTION ...................................................................................................... 1
`JURISDICTION AND VENUE ......................................................................................... 5
`PARTIES ............................................................................................................................ 7
`
`A. Plaintiffs .............................................................................................................................. 7
`
`B. Defendants .......................................................................................................................... 8
`IV.
`AGENTS AND CO-CONSPIRATORS ............................................................................. 9
`V.
`TRADE AND COMMERCE ............................................................................................ 11
`VI.
`FACTUAL ALLEGATIONS ........................................................................................... 12
`
`A. Background on the Dairy Industry .................................................................................... 12
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`1. Basics of Raw Grade A Milk ........................................................................................ 12
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`2. The Southwest Dairy Production Market Is Worth More than $3.5 Billion Annually 13
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`3. There Are No Significant Substitutes for Milk and Milk Products .............................. 13
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`4. The Capper-Volstead Act ............................................................................................. 13
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`5. Milk Balancing and Milk Classes ................................................................................. 15
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`6. Dairy Production in the United States .......................................................................... 16
`
`7. History of and Background on DFA and Select Milk .................................................. 17
`a.
`DFA....................................................................................................................... 17
`b.
`Select Milk ............................................................................................................ 18
`
`8. DFA’s Regions.............................................................................................................. 19
`
`9. Dairy Industry History .................................................................................................. 21
`
`10. Federal Milk Policy and Pricing ................................................................................... 24
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`11. Federal Milk Marketing Orders .................................................................................... 29
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`B. The Structure and Characteristics of the Southwest Dairy Market Render the Conspiracy
`Economically Plausible ..................................................................................................... 31
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`1. Milk Is a Commodity .................................................................................................... 31
`
`2. The Market Is Characterized by Inelastic Demand ....................................................... 31
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`i
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 3 of 77
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`3. The Southwest Dairy Industry Is Highly Concentrated and Has Experienced High
`Consolidation ........................................................................................................ 31
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`4. The Southwest Dairy Industry Is Characterized by a Lack of Pricing Transparency and
`Asymmetric Access to Key Market Information .................................................. 33
`
`5. DFA Has Previously Been Investigated by the Government for Collusive Action and
`Has Been Repeatedly, Successfully Sued for Violations of the Federal Antitrust
`Laws ...................................................................................................................... 34
`DFA’s History of Wrongdoing ............................................................................. 34
`Prior Antitrust Class Litigation Against DFA ...................................................... 38
`
`a.
`b.
`
`i. Southeast and Appalachian FMMOs ............................................................ 38
`
`ii. Northeast FMMO .......................................................................................... 40
`
`6. Defendants Had and Have Numerous Opportunities to Collude .................................. 43
`
`7. There Are High Barriers to Entry in the Southwest Dairy Market ............................... 45
`
`C. DFA and Select Milk Conspired With One Another to Depress Prices Paid to
`Southwestern Dairy Farmers. ............................................................................................ 47
`
`1. DFA’s and Select Milk’s Coordination as Part of GSA ............................................... 50
`
`D. The Prices Paid to Southwestern Dairy Farmers for Their Raw Grade A Milk Fell
`Beginning in At Least January 2015 and Have Remained Low. ...................................... 52
`
`E. DFA’s and Select Milk’s Decreased Pooling of Milk. ..................................................... 56
`
`F. DFA’s and Select Milk’s Self-Dealing ............................................................................. 61
`VII. CLASS ACTION ALLEGATIONS ................................................................................. 63
`VIII. ANTITRUST INJURY ..................................................................................................... 66
`IX.
`ACTIVE CONCEALMENT ............................................................................................. 67
`X.
`CAUSE OF ACTION ....................................................................................................... 70
`XI.
`REQUEST FOR RELIEF ................................................................................................. 72
`XII.
`JURY TRIAL DEMANDED ............................................................................................ 73
`
`
`
`ii
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 4 of 77
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`Plaintiffs Othart Dairy Farms, LLC, Pareo Farm, Inc., Pareo Farm II, Inc., Desertland
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`Dairy, LLC, Del Oro Dairy, LLC, Bright Star Dairy, LLC, and Sunset Dairy, LLC, (“Plaintiffs”),
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`bring this action on behalf of themselves individually and on behalf of a plaintiff class (the
`
`“Class”), pursuant to Rule 23 of the Federal Rules of Civil Procedure consisting of all dairy
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`farmers, whether individuals or entities, who produced Grade A milk and sold Grade A milk
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`independently or directly or through an agent to Defendants, Dairy Farmers of America, Inc.
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`(“DFA”) and Select Milk Producers, Inc. (“Select Milk”) or Co-Conspirators within DFA’s
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`Southwest Area region any time from at least January 1, 2015 until present (the “Class Period”).
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`Plaintiffs also allege claims against Defendant Greater Southwest Agency (“GSA”). Plaintiffs
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`bring this action for treble damages under the antitrust laws of the United States against
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`Defendants, and demand a trial by jury.
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`I. NATURE OF ACTION
`
`1.
`
`Dairy cooperatives are meant to serve dairy-farmer owners. However, as alleged
`
`herein, in the Southwest United States the two largest dairy cooperatives, DFA and Select Milk,
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`have conspired in violation of the Sherman Act to suppress pay to dairy farmers. DFA and Select
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`Milk control at least 75% of the Southwest market, and together have used that control to
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`significantly depress the price dairy farmers receive for their raw milk. The effect of Defendants’
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`conspiracy has been devastating to many dairy farmers, causing numerous farmers to borrow from
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`generations of equity built up in their land, relying on that equity to pay themselves and keep their
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`farms in operation. Many Southwestern dairy farmers have been forced to declare bankruptcy and
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`completely closed their operations.
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`2.
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`Upon information and belief, as alleged herein, DFA and Select Milk have
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`conspired with one another to stabilize and depress the prices paid to these cooperatives’ farmers
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`1
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 5 of 77
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`for the raw Grade A milk they produce in several ways, including: (a) unlawfully sharing pricing
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`information though, inter alia, their various commercial joint ventures as well as Defendant GSA;
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`(b) driving down take-home pay for dairy farmers through selective and increasingly frequent non-
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`pooling of milk, allowing the cooperatives as entities to market members’ milk at higher prices
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`without passing those increases on to farmers; and (c) unlawfully coordinating pricing and pricing-
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`related decisions. Upon information and belief, DFA’s and Select Milk’s monthly rates to their
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`respective member-farmers – what Plaintiffs and Class members actually receive – are almost
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`always within a few pennies of each other. This would not be the case absent the conspiracy alleged
`
`herein.
`
`3.
`
`Since at least January 2015, the prices paid by DFA and Select Milk for the raw
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`Grade A milk their member-farmers have produced have been unlawfully and artificially
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`depressed as a result of the conduct alleged herein, even though these Defendants’ revenues and
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`profits have increased. As a direct result of this unlawful conspiracy, the percentage of their
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`revenues that DFA and Select Milk are paying to Plaintiffs and the Class has dwindled.
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`4.
`
`DFA and Select Milk are organized as member-owned, non-profit dairy
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`cooperatives, obligated to operate for the benefit of their farmer-members. Their members are
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`obligated to deliver all of their milk to the cooperative to market on their behalf. In turn, the
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`cooperatives must market or process their member-farmers’ raw Grade A milk to obtain the best
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`possible price for the product. DFA and Select Milk have utterly forsaken this obligation, and have
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`conspired to stabilize, fix, and maintain at artificially depressed rates the raw Grade A milk prices
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`paid to Plaintiffs and Class members.
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`5.
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`The vast majority of milk marketed in the Southwest, approximately 85-90%, is
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`marketed via a dairy cooperative. DFA is the largest dairy cooperative both in the Southwest and
`
`
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`2
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 6 of 77
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`nationwide, and Select Milk is the second largest cooperative in the Southwest. The only other
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`cooperative with any significant presence in the Southwest is Co-Conspirator Lone Star Milk
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`Producers. Lone Star, however, markets far less milk than DFA and Select Milk. DFA and Select
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`Milk control at least 75% of all raw Grade A milk market in the Southwest. Accordingly, DFA
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`and Select Milk play a vital role in the Southwest dairy industry. These cooperatives largely control
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`Southwestern dairy farmers’ access to the market.
`
`6.
`
`The dairy industry is particularly susceptible to a conspiracy due, at least in part, to
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`a lack of pricing transparency and the complicated way in which milk purchase and sale prices are
`
`calculated. As alleged in greater detail herein, although the United States Department of
`
`Agriculture (USDA) establishes monthly prices under the Federal Milk Marketing Order
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`(“FMMO”) in the Southwest (FMMO No. 126), DFA and Select Milk contract for the sale of their
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`members’ milk with their customers at whatever rates are privately negotiated. The FMMO-
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`established prices serve as reference points and do not dictate what the cooperatives pay their
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`members. Often enough, the ultimate purchasers of the raw Grade A milk are joint ventures,
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`subsidiaries, or other affiliates of DFA and Select Milk. Put differently, in many circumstances
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`DFA and Select Milk are selling their members’ milk to the cooperatives’ own commercial
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`divisions. An inherent conflict exists between DFA and Select Milk and the member-farmers who
`
`own these cooperatives. It is the cooperatives themselves, as entities, who are responsible for
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`creating and exploiting this division.
`
`7.
`
`As entities, DFA and Select Milk financially benefit from reducing raw milk prices
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`paid to farmers while maintaining the supply of as much raw milk volume as possible. This is
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`because these cooperatives’ commercial operations use raw milk as an input. Cheaper raw milk
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`means they can produce their value-added dairy products (cheese, yogurt, milk powder, etc.) more
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`3
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 7 of 77
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`profitably. Yet, as explained herein, DFA’s and Select Milk’s processing-side profits fail to make
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`their way back to their member dairy farmers. For just one example, in 2020, DFA as an entity
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`enjoyed EBITDA of approximately $515 million, yet DFA reported that it only paid its member-
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`farmers $46 million, or just 8.9% of DFA’s EBITDA. As alleged in greater detail herein, the sums
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`that Defendants DFA and Select Milk have paid their member-farmers for the raw Grade A milk
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`they produced have remained consistently low, even while these cooperatives are enjoying record
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`profits from their commercial divisions. DFA and Select Milk are exploiting their members for
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`cheap milk to supply the cooperatives’ commercial divisions, yet failing to pass on the increased
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`commercial revenues to their farmers.
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`8.
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`Moreover, by paying dairy producers less, DFA and Select Milk are able to present
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`their annual performance as stable and continuously profitable, thereby portraying their
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`management as successful leaders worthy of high compensation and bonuses. DFA and Select
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`Milk’s executives (such as Co-Conspirators Smith and Rodenbaugh) are frequently conflicted,
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`being not only the highest ranking employees of the cooperatives themselves, but also serving on
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`the boards of and/or working for or with joint ventures and even competitors. Upon information
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`and belief, these executives receive outsized compensation for serving in these various capacities.
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`9.
`
`As the dominant players in the dairy industry in the Southwest, DFA and Select
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`Milk dictate the prices paid to all Southwestern dairy farmers. This, in turn, has caused the entities
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`that control the remaining minority of the market to follow DFA and Select Milk’s lead.
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`10.
`
`DFA and Select Milk may and do pay their members less than the FMMO price.
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`Indeed, DFA and Select Milk deduct numerous costs and expenses from their members’ milk
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`checks, with little or no explanation as to how the cooperatives arrive at those calculations or
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`4
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 8 of 77
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`assessments. These cooperatives are massive, vertically integrated entities that have conspired to
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`artificially depress the rates at which Southwestern dairy farmers are compensated.
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`11.
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`Defendants’ wrongful and anticompetitive actions had the intended purpose and
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`effect of artificially fixing, depressing, maintaining, and stabilizing the price paid to Plaintiffs and
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`Class members for the raw Grade A milk these farmers produced.
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`12.
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`The problems posed by the anticompetitive misconduct of Defendants within the
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`dairy industry and by others across other livestock and poultry sectors have grown so severe that
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`this year, the DOJ and USDA launched an online tool that allows farmers to anonymously report
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`potentially unfair and anticompetitive practices.1
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`13.
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`As a result of Defendants’ unlawful conduct, Plaintiffs and other Class members
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`were artificially underpaid for the raw Grade A milk they produced during the Class Period. Such
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`prices were below the amount Plaintiffs and the Class would have been paid if the price for raw
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`Grade A milk had been determined by a competitive market. Plaintiffs and Class members were
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`therefore directly injured by Defendants’ misconduct.
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`II. JURISDICTION AND VENUE
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`14.
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`Plaintiffs bring this action under Sections 4 and 16 of the Clayton Act (15 U.S.C.
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`§§ 15 and 26), to recover treble damages and the costs of this suit, including reasonable attorneys’
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`fees, against Defendants for the injuries sustained by Plaintiffs and Class members by virtue of
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`Defendants’ violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, and to enjoin further
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`violations.
`
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`1 https://www.justice.gov/opa/pr/justice-department-and-us-department-agriculture-launch-
`online-tool-allowing-farmers-ranchers.
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`5
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 9 of 77
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`15.
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`This Court has subject matter jurisdiction over Plaintiffs’ claims pursuant to 28
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`U.S.C. §§ 1331 & 1337, and Sections 4 and 16 of the Clayton Act 15 U.S.C. §§ 15 and 26.
`
`16.
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`Venue is appropriate in this District under Sections 4, 12, and 16 of the Clayton
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`Act, 15 U.S.C. §§ 15, 22, and 26, and 28 U.S.C. § 1391(b), (c), and (d), because one or more
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`Defendants resided or transacted business in this District, is licensed to do business, or is doing
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`business in this District, and because a substantial portion of the affected interstate commerce
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`described herein was carried out in this District.
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`17.
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`This Court has personal jurisdiction over each Defendant because, inter alia, each
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`Defendant: (a) is headquartered and/or incorporated within this District; (b) transacted business in
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`this District; (c) marketed, processed, and/or shipped raw Grade A milk in this District; (d) had
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`substantial contacts with this District; and/or (e) engaged in an antitrust conspiracy that was
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`directed at and had a direct, foreseeable, and intended effect of causing injury to the business or
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`property of persons residing in, located in, or doing business in this District.
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`18.
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`Defendants market, process, and ship Grade A milk across state lines. Defendants
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`receive substantial payments across state lines from the sale of fluid Grade A milk, and
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`Defendants’ business activities that are the subject of this Complaint are within the flow of, and
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`have substantially affected, interstate trade and commerce.
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`19.
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`The activities of the Defendants and their co-conspirators, as described herein, were
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`within the flow of, were intended to, and did have direct, substantial and reasonably foreseeable
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`effects on the interstate commerce of the United States.
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`20.
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`No other forum would be more convenient for the parties and witnesses to litigate
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`this case.
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`6
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 10 of 77
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`A.
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`Plaintiffs
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`III. PARTIES
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`21.
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`Othart Dairy Farms, LLC (“Othart”), is a New Mexico limited liability company,
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`organized and existing under the laws of the State of New Mexico, and located in Veguita, New
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`Mexico. During all times relevant to the Complaint, Othart marketed its raw Grade A milk through
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`Defendant DFA and was paid artificially depressed prices.
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`22.
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`Pareo Farm Inc. and Pareo Farm II Inc. (“Pareo”) are domestic profit corporations,
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`organized and existing under the laws of the State of New Mexico, and located in Veguita, New
`
`Mexico. In September 2021, Pareo Farm Inc. was forced to sell off its dairy-production assets and
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`ceased to function as a dairy. In March 2022, Pareo Farm II Inc. was forced to sell off its dairy-
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`production assets and ceased to function as a dairy. Before these sales, Pareo marketed its raw
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`Grade A milk through Defendant DFA and was paid artificially depressed prices for the milk it
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`produced.
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`23.
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`Desertland Dairy, LLC (“Desertland”) is a New Mexico limited liability company,
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`organized and existing under the laws of the State of New Mexico, and located in Vado, New
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`Mexico. During all times relevant to the Complaint, Desertland marketed its raw Grade A milk
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`through Defendant DFA and was paid artificially depressed prices.
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`24.
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`Del Oro Dairy, LLC (“Del Oro”) is a New Mexico limited liability company,
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`organized and existing under the laws of the State of New Mexico, and located in Mesquite, New
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`Mexico. During all times relevant to the Complaint, Del Oro marketed its raw Grade A milk
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`through Defendant DFA and was paid artificially depressed prices.
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`25.
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`Bright Star Dairy, LLC (“Bright Star”) is a New Mexico limited liability company,
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`organized and existing under the laws of the State of New Mexico, and located in Mesquite, New
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`7
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 11 of 77
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`Mexico. During all times relevant to the Complaint, Bright Star marketed its raw Grade A milk
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`through Defendant DFA and was paid artificially depressed prices.
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`26.
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`Sunset Dairy, LLC (“Sunset”) is a New Mexico limited liability company,
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`organized and existing under the laws of the State of New Mexico, and located in Mesquite, New
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`Mexico. During all times relevant to the Complaint, Sunset marketed its raw Grade A milk through
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`Defendant DFA and was paid artificially depressed prices.
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`B.
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`Defendants
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`27.
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`Defendant Dairy Farmers of America, Inc. (“DFA”) is a not-for-profit corporation
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`organized and existing under the laws of the State of Kansas, with its principal place of business
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`at 1405 N. 98th Street, Kansas City, Kansas 66111. DFA’s Southwest Area office is located at
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`3500 William D. Tate Avenue, Suite 100, Grapevine, TX 76051. Pursuant to the Kansas
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`Cooperative Marketing Act, DFA is organized as a “nonprofit, as [it is] not organized to make a
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`profit for [itself] . . . but only for [its] members as producers.” K.S.A. § 17-1602(b).
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`28.
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`Defendant Select Milk is a not-for-profit marketing cooperative association
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`organized and existing under the laws of the State of New Mexico, with its principal place of
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`business located at 320 W. Hermosa Drive, Artesia, New Mexico 88210. Select Milk was formed
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`in 1994, and is presently composed of 99 dairy farm members. In September 2014, Select Milk
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`merged with Continental Dairy Products (an Ohio-based cooperative), with the combined entity
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`retaining the Select Milk name, and keeping Select Milk’s existing headquarters in New Mexico.
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`29.
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`Defendant Greater Southwest Agency, Inc. (“GSA”) was founded in 1998 by DFA,
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`Select Milk, Lone Star Milk Producers (“Lone Star”), and Zia Milk Producers. As alleged infra,
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`Zia Milk Producers ceased to exist in late 2018, with its members joining DFA. Accordingly, GSA
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`8
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`is owned by DFA, Select Milk, and Lone Star.2 Thus, the members of GSA’s three cooperative-
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`owners supply nearly 100% of all milk marketed in the Southwest through cooperatives, and
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`therefore, approximately 85-90% of all raw Grade A milk from the Southwest. According to the
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`Texas Comptroller of Public Accounts’ website, GSA shares its mailing address with DFA’s
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`Southwest Area office, located at 3500 William D. Tate Avenue, Suite 100, Grapevine, TX 76051.
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`30. Whenever reference is made to any act of any corporation or cooperative, the
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`allegation means that the cooperative engaged in the act by or through its officers, agents,
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`employees or representatives while they were actively engaged in the management, direction,
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`control, or transaction of the cooperative’s business or affairs.
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`31.
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`Each Defendant named herein acted as the agent or joint-venturer of or for the other
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`Defendants with respect to the acts, violations and common course of conduct alleged herein.
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`32.
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`Defendants are also liable for acts done in furtherance of the alleged conspiracy by
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`companies they acquired through mergers and acquisitions.
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`IV. AGENTS AND CO-CONSPIRATORS
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`33.
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`Various other persons, firms and corporations not named as defendants have
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`participated as co-conspirators with Defendants and have performed acts and made statements in
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`furtherance of the conspiracy. These include, but are not limited to, Richard “Rick” P. Smith,
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`Dennis Rodenbaugh, Lone Star Milk Producers, Southwestern Cooperative Marketing Agency,
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`the United Dairymen of Arizona, and others. The Defendants are jointly and severally liable for
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`the acts of their Co-Conspirators whether or not named as defendants in this Complaint.
`
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`2 Based on publicly-available information, it is unclear if Lone Star remains a member of GSA.
`At a minimum, Lone Star was part of GSA during at least some of the Class Period alleged herein.
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`9
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`34.
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`Richard “Rick” P. Smith is DFA’s President and Chief Executive Officer, having
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`served in those capacities since 2006. Smith also serves as a director on the boards of Global Dairy
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`Platform, National Milk Producers Federation, National Council of Farmer Cooperatives, and the
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`Innovation Center for U.S. Dairy. It has been announced that effective at the end of 2022,
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`Rodenbaugh will succeed Smith as President and CEO of DFA.
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`35.
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`Dennis Rodenbaugh is DFA’s Executive Vice President and President of Council
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`Operations and Ingredient Solutions, having joined DFA in 2007. During his tenure with DFA,
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`Rodenbaugh has served in a number of leadership roles, and presently has responsibility for
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`overseeing U.S. milk marketing and farm services, as well as the 24 commercial manufacturing
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`plants and global marketing operations of DFA’s Ingredient Solutions Division. Rodenbaugh
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`serves on the board of directors for National Milk Producers Federation, and has been named as
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`Smith’s successor in the roles of DFA’s President and CEO effective at the end of 2022. In
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`addition, Rodenbaugh serves as Chairman of the Board of Newtrient, a manure-management
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`company jointly owned by several different dairy cooperatives, including Select Milk and Co-
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`Conspirator UDA.
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`36.
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`Lone Star Milk Producers (“Lone Star”) is a dairy cooperative that was formed in
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`1997 and is headquartered in Wichita Falls, Texas. According to its website, Lone Star has
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`approximately 125 farmers, including within New Mexico, Texas, Kansas, and Oklahoma, who
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`collectively produce approximately 2.6 billion pounds annually. Like DFA and Select Milk, Lone
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`Star is also a member of both the GSA and the Southwestern Cooperative Marketing Association.
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`37.
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`Southwestern Cooperative Marketing Agency (“SCMA,” sometimes also referred
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`to as the Southern Cooperatives Marketing Agency) is a marketing agency with three members:
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`DFA, Select Milk, and Lone Star. These members have used SCMA to lobby the federal
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`10
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 14 of 77
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`government (specifically the USDA) to implement price changes at the FMMO level, and upon
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`information and belief, have used the SCMA as another mechanism for sharing price information
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`to stabilize, fix, and maintain at artificially low the rates paid by DFA and Select Milk to their
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`member-farmers for the Grade A milk those farmers produce. Tim Theisner, who serves as DFA’s
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`Chief Operating Officer of the Southwest Area, is a member of the SCMA’s Board of Directors
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`(in addition to being manager of GSA and serving on the board of Southwest Cheese, one of the
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`joint ventures between DFA and Select Milk).
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`38.
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`United Dairymen of Arizona (“UDA”) is the only dairy cooperative that works as
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`a handler in the Arizona FMMO (No. 131). In testimony before the USDA, DFA stated: “[w]e do
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`not pool milk in [the Arizona FMMO] but have an extensive marketing arrangement with the dairy
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`farmer members of United Dairymen of Arizona (UDA) for the purchase of supplemental milk
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`supplies and to provide seasonal balancing services to DFA. UDA markets and pools milk on [the
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`Arizona FMMO].”
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`39.
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`The acts alleged herein that were done by each of the Co-Conspirators were fully
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`authorized by each of those Co-Conspirators, or ordered, or done by duly authorized officers,
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`managers, agents, employees, or representatives of each Co-Conspirator while actively engaged
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`in the management direction or control of its affairs. The acts charged in this Class Action
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`Complaint as having been done by Defendants and their Co-Conspirators were authorized,
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`ordered, and/or done by their officers, agents, employees, and/or representatives, while actively
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`engaged in the management of their business and affairs.
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`V. TRADE AND COMMERCE
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`40.
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`During the Class Period, Defendants DFA and Select Milk, directly or through their
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`subsidiaries or other affiliates, including GSA, marketed and sold raw Grade A milk from their
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 15 of 77
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`member-farmers in the Southwest in a continuous and uninterrupted flow of interstate commerce
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`and foreign commerce, including through and into this judicial district.
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`41.
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`During the Class Period, Defendants DFA and Select Milk collectively controlled
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`a majority of the market for the supply of raw Grade A milk in the Southwest.
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`42.
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`By reason of the unlawful activities hereinafter alleged, Defendants substantially
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`affected interstate trade and commerce throughout the United States, including within the
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`Southwest and this judicial district, and caused antitrust injury to Plaintiffs and Class members.
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`VI. FACTUAL ALLEGATIONS
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`A.
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`Background on the Dairy Industry
`1.
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`Basics of Raw Grade A Milk
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`43.
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`Grade A milk is homogenous, fungible, and highly perishable. Dairy farmers
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`produce raw Grade A milk on a daily basis, and it must be transported from their farms to Grade
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`A milk processing facilities nearly every day. Dairy farmers milk their cows at least twice each
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`day. Fluid Grade A milk is typically stored in refrigerated bulk tanks until it is picked up by a milk
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`hauler who transports it in insulated trucks to fluid Grade A milk bottling plants. Fluid Grade A
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`milk bottling plants prepare Grade A milk for human consumption by processing and packaging
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`the raw fluid Grade A milk in bottles or cartons for wholesale or retail sale. Fluid Grade A milk is
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`regularly shipped and sold in interstate commerce.
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`44.
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`Dairy farmers must find a buyer that will take their milk regardless of demand.
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`Historically, this frequently placed dairy farmers at the mercy of large milk processors that sought
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`to buy raw milk at the cheapest price.
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`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 16 of 77
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`2.
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`The Southwest Dairy Production Market Is Worth More than $3.5 Billion
`Annually
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`45.
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`In 2020, the USDA’s Milk Production report showed that annual milk production
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`in the United States was about 223 billion pounds. In 2020, Texas and New Mexico were the fifth
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`and ninth largest milk producing states. In 2020, Texas dairy farmers alone produced nearly 15
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`billion pounds of milk, and New Mexico dairy farmers alone produced over 8 billion pounds of
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`milk. These 23 billion pounds represent 230 million hundredweight of milk, and suggest an annual
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`market in excess of $3.5 billion.
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`3.
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`46.
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`There Are No Significant Substitutes for Milk and Milk Products
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`There are no significant substitutes for milk. Although there are potential substitute
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`products, such as alternative “milk” products derived from plants-based sources like almonds, oats,
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`or soybeans, the characteristics of those products lack the unique characteristics of milk. Milk is
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`distinctive in that it can be both consumed and processed into other foods, such as cheese, milk
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`powder, whey, ice cream, yogurt, and many others. True milk also has more protein than the
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`alternative “milk” products, making milk a unique source of nutrition. Milk is a relatively
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`inexpensive source of protein upon which many American consumers rely.
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`4.
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`47.
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`The Capper-Volstead Act
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`In 1922, Congress enacted the Capper-Volstead Act to give farmers greater
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`bargaining power with processors and other corporate handlers of food products. Capper-Volstead
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`was designed to give farmers the legal right to join together in c