throbber
Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 1 of 77
`
`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
`
`TABLE OF CONTENTS
`
`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
`
`1. Basics of Raw Grade A Milk ........................................................................................ 12
`
`2. The Southwest Dairy Production Market Is Worth More than $3.5 Billion Annually 13
`
`3. There Are No Significant Substitutes for Milk and Milk Products .............................. 13
`
`4. The Capper-Volstead Act ............................................................................................. 13
`
`5. Milk Balancing and Milk Classes ................................................................................. 15
`
`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
`
`11. Federal Milk Marketing Orders .................................................................................... 29
`
`B. The Structure and Characteristics of the Southwest Dairy Market Render the Conspiracy
`Economically Plausible ..................................................................................................... 31
`
`1. Milk Is a Commodity .................................................................................................... 31
`
`2. The Market Is Characterized by Inelastic Demand ....................................................... 31
`
`
`
`i
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 3 of 77
`
`3. The Southwest Dairy Industry Is Highly Concentrated and Has Experienced High
`Consolidation ........................................................................................................ 31
`
`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
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 4 of 77
`
`Plaintiffs 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, (“Plaintiffs”),
`
`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
`
`farmers, whether individuals or entities, who produced Grade A milk and sold Grade A milk
`
`independently or directly or through an agent to Defendants, Dairy Farmers of America, Inc.
`
`(“DFA”) and Select Milk Producers, Inc. (“Select Milk”) or Co-Conspirators within DFA’s
`
`Southwest Area region any time from at least January 1, 2015 until present (the “Class Period”).
`
`Plaintiffs also allege claims against Defendant Greater Southwest Agency (“GSA”). Plaintiffs
`
`bring this action for treble damages under the antitrust laws of the United States against
`
`Defendants, and demand a trial by jury.
`
`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,
`
`have conspired in violation of the Sherman Act to suppress pay to dairy farmers. DFA and Select
`
`Milk control at least 75% of the Southwest market, and together have used that control to
`
`significantly depress the price dairy farmers receive for their raw milk. The effect of Defendants’
`
`conspiracy has been devastating to many dairy farmers, causing numerous farmers to borrow from
`
`generations of equity built up in their land, relying on that equity to pay themselves and keep their
`
`farms in operation. Many Southwestern dairy farmers have been forced to declare bankruptcy and
`
`completely closed their operations.
`
`2.
`
`Upon information and belief, as alleged herein, DFA and Select Milk have
`
`conspired with one another to stabilize and depress the prices paid to these cooperatives’ farmers
`
`
`
`1
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 5 of 77
`
`for the raw Grade A milk they produce in several ways, including: (a) unlawfully sharing pricing
`
`information though, inter alia, their various commercial joint ventures as well as Defendant GSA;
`
`(b) driving down take-home pay for dairy farmers through selective and increasingly frequent non-
`
`pooling of milk, allowing the cooperatives as entities to market members’ milk at higher prices
`
`without passing those increases on to farmers; and (c) unlawfully coordinating pricing and pricing-
`
`related decisions. Upon information and belief, DFA’s and Select Milk’s monthly rates to their
`
`respective member-farmers – what Plaintiffs and Class members actually receive – are almost
`
`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
`
`Grade A milk their member-farmers have produced have been unlawfully and artificially
`
`depressed as a result of the conduct alleged herein, even though these Defendants’ revenues and
`
`profits have increased. As a direct result of this unlawful conspiracy, the percentage of their
`
`revenues that DFA and Select Milk are paying to Plaintiffs and the Class has dwindled.
`
`4.
`
`DFA and Select Milk are organized as member-owned, non-profit dairy
`
`cooperatives, obligated to operate for the benefit of their farmer-members. Their members are
`
`obligated to deliver all of their milk to the cooperative to market on their behalf. In turn, the
`
`cooperatives must market or process their member-farmers’ raw Grade A milk to obtain the best
`
`possible price for the product. DFA and Select Milk have utterly forsaken this obligation, and have
`
`conspired to stabilize, fix, and maintain at artificially depressed rates the raw Grade A milk prices
`
`paid to Plaintiffs and Class members.
`
`5.
`
`The vast majority of milk marketed in the Southwest, approximately 85-90%, is
`
`marketed via a dairy cooperative. DFA is the largest dairy cooperative both in the Southwest and
`
`
`
`2
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 6 of 77
`
`nationwide, and Select Milk is the second largest cooperative in the Southwest. The only other
`
`cooperative with any significant presence in the Southwest is Co-Conspirator Lone Star Milk
`
`Producers. Lone Star, however, markets far less milk than DFA and Select Milk. DFA and Select
`
`Milk control at least 75% of all raw Grade A milk market in the Southwest. Accordingly, DFA
`
`and Select Milk play a vital role in the Southwest dairy industry. These cooperatives largely control
`
`Southwestern dairy farmers’ access to the market.
`
`6.
`
`The dairy industry is particularly susceptible to a conspiracy due, at least in part, to
`
`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
`
`(“FMMO”) in the Southwest (FMMO No. 126), DFA and Select Milk contract for the sale of their
`
`members’ milk with their customers at whatever rates are privately negotiated. The FMMO-
`
`established prices serve as reference points and do not dictate what the cooperatives pay their
`
`members. Often enough, the ultimate purchasers of the raw Grade A milk are joint ventures,
`
`subsidiaries, or other affiliates of DFA and Select Milk. Put differently, in many circumstances
`
`DFA and Select Milk are selling their members’ milk to the cooperatives’ own commercial
`
`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
`
`creating and exploiting this division.
`
`7.
`
`As entities, DFA and Select Milk financially benefit from reducing raw milk prices
`
`paid to farmers while maintaining the supply of as much raw milk volume as possible. This is
`
`because these cooperatives’ commercial operations use raw milk as an input. Cheaper raw milk
`
`means they can produce their value-added dairy products (cheese, yogurt, milk powder, etc.) more
`
`
`
`3
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 7 of 77
`
`profitably. Yet, as explained herein, DFA’s and Select Milk’s processing-side profits fail to make
`
`their way back to their member dairy farmers. For just one example, in 2020, DFA as an entity
`
`enjoyed EBITDA of approximately $515 million, yet DFA reported that it only paid its member-
`
`farmers $46 million, or just 8.9% of DFA’s EBITDA. As alleged in greater detail herein, the sums
`
`that Defendants DFA and Select Milk have paid their member-farmers for the raw Grade A milk
`
`they produced have remained consistently low, even while these cooperatives are enjoying record
`
`profits from their commercial divisions. DFA and Select Milk are exploiting their members for
`
`cheap milk to supply the cooperatives’ commercial divisions, yet failing to pass on the increased
`
`commercial revenues to their farmers.
`
`8.
`
`Moreover, by paying dairy producers less, DFA and Select Milk are able to present
`
`their annual performance as stable and continuously profitable, thereby portraying their
`
`management as successful leaders worthy of high compensation and bonuses. DFA and Select
`
`Milk’s executives (such as Co-Conspirators Smith and Rodenbaugh) are frequently conflicted,
`
`being not only the highest ranking employees of the cooperatives themselves, but also serving on
`
`the boards of and/or working for or with joint ventures and even competitors. Upon information
`
`and belief, these executives receive outsized compensation for serving in these various capacities.
`
`9.
`
`As the dominant players in the dairy industry in the Southwest, DFA and Select
`
`Milk dictate the prices paid to all Southwestern dairy farmers. This, in turn, has caused the entities
`
`that control the remaining minority of the market to follow DFA and Select Milk’s lead.
`
`10.
`
`DFA and Select Milk may and do pay their members less than the FMMO price.
`
`Indeed, DFA and Select Milk deduct numerous costs and expenses from their members’ milk
`
`checks, with little or no explanation as to how the cooperatives arrive at those calculations or
`
`
`
`4
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 8 of 77
`
`assessments. These cooperatives are massive, vertically integrated entities that have conspired to
`
`artificially depress the rates at which Southwestern dairy farmers are compensated.
`
`11.
`
`Defendants’ wrongful and anticompetitive actions had the intended purpose and
`
`effect of artificially fixing, depressing, maintaining, and stabilizing the price paid to Plaintiffs and
`
`Class members for the raw Grade A milk these farmers produced.
`
`12.
`
`The problems posed by the anticompetitive misconduct of Defendants within the
`
`dairy industry and by others across other livestock and poultry sectors have grown so severe that
`
`this year, the DOJ and USDA launched an online tool that allows farmers to anonymously report
`
`potentially unfair and anticompetitive practices.1
`
`13.
`
`As a result of Defendants’ unlawful conduct, Plaintiffs and other Class members
`
`were artificially underpaid for the raw Grade A milk they produced during the Class Period. Such
`
`prices were below the amount Plaintiffs and the Class would have been paid if the price for raw
`
`Grade A milk had been determined by a competitive market. Plaintiffs and Class members were
`
`therefore directly injured by Defendants’ misconduct.
`
`II. JURISDICTION AND VENUE
`
`14.
`
`Plaintiffs bring this action under Sections 4 and 16 of the Clayton Act (15 U.S.C.
`
`§§ 15 and 26), to recover treble damages and the costs of this suit, including reasonable attorneys’
`
`fees, against Defendants for the injuries sustained by Plaintiffs and Class members by virtue of
`
`Defendants’ violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, and to enjoin further
`
`violations.
`
`
`1 https://www.justice.gov/opa/pr/justice-department-and-us-department-agriculture-launch-
`online-tool-allowing-farmers-ranchers.
`
`
`
`5
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 9 of 77
`
`15.
`
`This Court has subject matter jurisdiction over Plaintiffs’ claims pursuant to 28
`
`U.S.C. §§ 1331 & 1337, and Sections 4 and 16 of the Clayton Act 15 U.S.C. §§ 15 and 26.
`
`16.
`
`Venue is appropriate in this District under Sections 4, 12, and 16 of the Clayton
`
`Act, 15 U.S.C. §§ 15, 22, and 26, and 28 U.S.C. § 1391(b), (c), and (d), because one or more
`
`Defendants resided or transacted business in this District, is licensed to do business, or is doing
`
`business in this District, and because a substantial portion of the affected interstate commerce
`
`described herein was carried out in this District.
`
`17.
`
`This Court has personal jurisdiction over each Defendant because, inter alia, each
`
`Defendant: (a) is headquartered and/or incorporated within this District; (b) transacted business in
`
`this District; (c) marketed, processed, and/or shipped raw Grade A milk in this District; (d) had
`
`substantial contacts with this District; and/or (e) engaged in an antitrust conspiracy that was
`
`directed at and had a direct, foreseeable, and intended effect of causing injury to the business or
`
`property of persons residing in, located in, or doing business in this District.
`
`18.
`
`Defendants market, process, and ship Grade A milk across state lines. Defendants
`
`receive substantial payments across state lines from the sale of fluid Grade A milk, and
`
`Defendants’ business activities that are the subject of this Complaint are within the flow of, and
`
`have substantially affected, interstate trade and commerce.
`
`19.
`
`The activities of the Defendants and their co-conspirators, as described herein, were
`
`within the flow of, were intended to, and did have direct, substantial and reasonably foreseeable
`
`effects on the interstate commerce of the United States.
`
`20.
`
`No other forum would be more convenient for the parties and witnesses to litigate
`
`this case.
`
`
`
`6
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 10 of 77
`
`A.
`
`Plaintiffs
`
`III. PARTIES
`
`21.
`
`Othart Dairy Farms, LLC (“Othart”), is a New Mexico limited liability company,
`
`organized and existing under the laws of the State of New Mexico, and located in Veguita, New
`
`Mexico. During all times relevant to the Complaint, Othart marketed its raw Grade A milk through
`
`Defendant DFA and was paid artificially depressed prices.
`
`22.
`
`Pareo Farm Inc. and Pareo Farm II Inc. (“Pareo”) are domestic profit corporations,
`
`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
`
`ceased to function as a dairy. In March 2022, Pareo Farm II Inc. was forced to sell off its dairy-
`
`production assets and ceased to function as a dairy. Before these sales, Pareo marketed its raw
`
`Grade A milk through Defendant DFA and was paid artificially depressed prices for the milk it
`
`produced.
`
`23.
`
`Desertland Dairy, LLC (“Desertland”) is a New Mexico limited liability company,
`
`organized and existing under the laws of the State of New Mexico, and located in Vado, New
`
`Mexico. During all times relevant to the Complaint, Desertland marketed its raw Grade A milk
`
`through Defendant DFA and was paid artificially depressed prices.
`
`24.
`
`Del Oro Dairy, LLC (“Del Oro”) is a New Mexico limited liability company,
`
`organized and existing under the laws of the State of New Mexico, and located in Mesquite, New
`
`Mexico. During all times relevant to the Complaint, Del Oro marketed its raw Grade A milk
`
`through Defendant DFA and was paid artificially depressed prices.
`
`25.
`
`Bright Star Dairy, LLC (“Bright Star”) is a New Mexico limited liability company,
`
`organized and existing under the laws of the State of New Mexico, and located in Mesquite, New
`
`
`
`7
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 11 of 77
`
`Mexico. During all times relevant to the Complaint, Bright Star marketed its raw Grade A milk
`
`through Defendant DFA and was paid artificially depressed prices.
`
`26.
`
`Sunset Dairy, LLC (“Sunset”) is a New Mexico limited liability company,
`
`organized and existing under the laws of the State of New Mexico, and located in Mesquite, New
`
`Mexico. During all times relevant to the Complaint, Sunset marketed its raw Grade A milk through
`
`Defendant DFA and was paid artificially depressed prices.
`
`B.
`
`Defendants
`
`27.
`
`Defendant Dairy Farmers of America, Inc. (“DFA”) is a not-for-profit corporation
`
`organized and existing under the laws of the State of Kansas, with its principal place of business
`
`at 1405 N. 98th Street, Kansas City, Kansas 66111. DFA’s Southwest Area office is located at
`
`3500 William D. Tate Avenue, Suite 100, Grapevine, TX 76051. Pursuant to the Kansas
`
`Cooperative Marketing Act, DFA is organized as a “nonprofit, as [it is] not organized to make a
`
`profit for [itself] . . . but only for [its] members as producers.” K.S.A. § 17-1602(b).
`
`28.
`
`Defendant Select Milk is a not-for-profit marketing cooperative association
`
`organized and existing under the laws of the State of New Mexico, with its principal place of
`
`business located at 320 W. Hermosa Drive, Artesia, New Mexico 88210. Select Milk was formed
`
`in 1994, and is presently composed of 99 dairy farm members. In September 2014, Select Milk
`
`merged with Continental Dairy Products (an Ohio-based cooperative), with the combined entity
`
`retaining the Select Milk name, and keeping Select Milk’s existing headquarters in New Mexico.
`
`29.
`
`Defendant Greater Southwest Agency, Inc. (“GSA”) was founded in 1998 by DFA,
`
`Select Milk, Lone Star Milk Producers (“Lone Star”), and Zia Milk Producers. As alleged infra,
`
`Zia Milk Producers ceased to exist in late 2018, with its members joining DFA. Accordingly, GSA
`
`
`
`8
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 12 of 77
`
`is owned by DFA, Select Milk, and Lone Star.2 Thus, the members of GSA’s three cooperative-
`
`owners supply nearly 100% of all milk marketed in the Southwest through cooperatives, and
`
`therefore, approximately 85-90% of all raw Grade A milk from the Southwest. According to the
`
`Texas Comptroller of Public Accounts’ website, GSA shares its mailing address with DFA’s
`
`Southwest Area office, located at 3500 William D. Tate Avenue, Suite 100, Grapevine, TX 76051.
`
`30. Whenever reference is made to any act of any corporation or cooperative, the
`
`allegation means that the cooperative engaged in the act by or through its officers, agents,
`
`employees or representatives while they were actively engaged in the management, direction,
`
`control, or transaction of the cooperative’s business or affairs.
`
`31.
`
`Each Defendant named herein acted as the agent or joint-venturer of or for the other
`
`Defendants with respect to the acts, violations and common course of conduct alleged herein.
`
`32.
`
`Defendants are also liable for acts done in furtherance of the alleged conspiracy by
`
`companies they acquired through mergers and acquisitions.
`
`IV. AGENTS AND CO-CONSPIRATORS
`
`33.
`
`Various other persons, firms and corporations not named as defendants have
`
`participated as co-conspirators with Defendants and have performed acts and made statements in
`
`furtherance of the conspiracy. These include, but are not limited to, Richard “Rick” P. Smith,
`
`Dennis Rodenbaugh, Lone Star Milk Producers, Southwestern Cooperative Marketing Agency,
`
`the United Dairymen of Arizona, and others. The Defendants are jointly and severally liable for
`
`the acts of their Co-Conspirators whether or not named as defendants in this Complaint.
`
`
`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.
`
`
`
`9
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 13 of 77
`
`34.
`
`Richard “Rick” P. Smith is DFA’s President and Chief Executive Officer, having
`
`served in those capacities since 2006. Smith also serves as a director on the boards of Global Dairy
`
`Platform, National Milk Producers Federation, National Council of Farmer Cooperatives, and the
`
`Innovation Center for U.S. Dairy. It has been announced that effective at the end of 2022,
`
`Rodenbaugh will succeed Smith as President and CEO of DFA.
`
`35.
`
`Dennis Rodenbaugh is DFA’s Executive Vice President and President of Council
`
`Operations and Ingredient Solutions, having joined DFA in 2007. During his tenure with DFA,
`
`Rodenbaugh has served in a number of leadership roles, and presently has responsibility for
`
`overseeing U.S. milk marketing and farm services, as well as the 24 commercial manufacturing
`
`plants and global marketing operations of DFA’s Ingredient Solutions Division. Rodenbaugh
`
`serves on the board of directors for National Milk Producers Federation, and has been named as
`
`Smith’s successor in the roles of DFA’s President and CEO effective at the end of 2022. In
`
`addition, Rodenbaugh serves as Chairman of the Board of Newtrient, a manure-management
`
`company jointly owned by several different dairy cooperatives, including Select Milk and Co-
`
`Conspirator UDA.
`
`36.
`
`Lone Star Milk Producers (“Lone Star”) is a dairy cooperative that was formed in
`
`1997 and is headquartered in Wichita Falls, Texas. According to its website, Lone Star has
`
`approximately 125 farmers, including within New Mexico, Texas, Kansas, and Oklahoma, who
`
`collectively produce approximately 2.6 billion pounds annually. Like DFA and Select Milk, Lone
`
`Star is also a member of both the GSA and the Southwestern Cooperative Marketing Association.
`
`37.
`
`Southwestern Cooperative Marketing Agency (“SCMA,” sometimes also referred
`
`to as the Southern Cooperatives Marketing Agency) is a marketing agency with three members:
`
`DFA, Select Milk, and Lone Star. These members have used SCMA to lobby the federal
`
`
`
`10
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 14 of 77
`
`government (specifically the USDA) to implement price changes at the FMMO level, and upon
`
`information and belief, have used the SCMA as another mechanism for sharing price information
`
`to stabilize, fix, and maintain at artificially low the rates paid by DFA and Select Milk to their
`
`member-farmers for the Grade A milk those farmers produce. Tim Theisner, who serves as DFA’s
`
`Chief Operating Officer of the Southwest Area, is a member of the SCMA’s Board of Directors
`
`(in addition to being manager of GSA and serving on the board of Southwest Cheese, one of the
`
`joint ventures between DFA and Select Milk).
`
`38.
`
`United Dairymen of Arizona (“UDA”) is the only dairy cooperative that works as
`
`a handler in the Arizona FMMO (No. 131). In testimony before the USDA, DFA stated: “[w]e do
`
`not pool milk in [the Arizona FMMO] but have an extensive marketing arrangement with the dairy
`
`farmer members of United Dairymen of Arizona (UDA) for the purchase of supplemental milk
`
`supplies and to provide seasonal balancing services to DFA. UDA markets and pools milk on [the
`
`Arizona FMMO].”
`
`39.
`
`The acts alleged herein that were done by each of the Co-Conspirators were fully
`
`authorized by each of those Co-Conspirators, or ordered, or done by duly authorized officers,
`
`managers, agents, employees, or representatives of each Co-Conspirator while actively engaged
`
`in the management direction or control of its affairs. The acts charged in this Class Action
`
`Complaint as having been done by Defendants and their Co-Conspirators were authorized,
`
`ordered, and/or done by their officers, agents, employees, and/or representatives, while actively
`
`engaged in the management of their business and affairs.
`
`V. TRADE AND COMMERCE
`
`40.
`
`During the Class Period, Defendants DFA and Select Milk, directly or through their
`
`subsidiaries or other affiliates, including GSA, marketed and sold raw Grade A milk from their
`
`
`
`11
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 15 of 77
`
`member-farmers in the Southwest in a continuous and uninterrupted flow of interstate commerce
`
`and foreign commerce, including through and into this judicial district.
`
`41.
`
`During the Class Period, Defendants DFA and Select Milk collectively controlled
`
`a majority of the market for the supply of raw Grade A milk in the Southwest.
`
`42.
`
`By reason of the unlawful activities hereinafter alleged, Defendants substantially
`
`affected interstate trade and commerce throughout the United States, including within the
`
`Southwest and this judicial district, and caused antitrust injury to Plaintiffs and Class members.
`
`VI. FACTUAL ALLEGATIONS
`
`A.
`
`Background on the Dairy Industry
`1.
`
`Basics of Raw Grade A Milk
`
`43.
`
`Grade A milk is homogenous, fungible, and highly perishable. Dairy farmers
`
`produce raw Grade A milk on a daily basis, and it must be transported from their farms to Grade
`
`A milk processing facilities nearly every day. Dairy farmers milk their cows at least twice each
`
`day. Fluid Grade A milk is typically stored in refrigerated bulk tanks until it is picked up by a milk
`
`hauler who transports it in insulated trucks to fluid Grade A milk bottling plants. Fluid Grade A
`
`milk bottling plants prepare Grade A milk for human consumption by processing and packaging
`
`the raw fluid Grade A milk in bottles or cartons for wholesale or retail sale. Fluid Grade A milk is
`
`regularly shipped and sold in interstate commerce.
`
`44.
`
`Dairy farmers must find a buyer that will take their milk regardless of demand.
`
`Historically, this frequently placed dairy farmers at the mercy of large milk processors that sought
`
`to buy raw milk at the cheapest price.
`
`
`
`12
`
`

`

`Case 2:22-cv-00251-GJF-SMV Document 1 Filed 04/04/22 Page 16 of 77
`
`2.
`
`The Southwest Dairy Production Market Is Worth More than $3.5 Billion
`Annually
`
`45.
`
`In 2020, the USDA’s Milk Production report showed that annual milk production
`
`in the United States was about 223 billion pounds. In 2020, Texas and New Mexico were the fifth
`
`and ninth largest milk producing states. In 2020, Texas dairy farmers alone produced nearly 15
`
`billion pounds of milk, and New Mexico dairy farmers alone produced over 8 billion pounds of
`
`milk. These 23 billion pounds represent 230 million hundredweight of milk, and suggest an annual
`
`market in excess of $3.5 billion.
`
`3.
`
`46.
`
`There Are No Significant Substitutes for Milk and Milk Products
`
`There are no significant substitutes for milk. Although there are potential substitute
`
`products, such as alternative “milk” products derived from plants-based sources like almonds, oats,
`
`or soybeans, the characteristics of those products lack the unique characteristics of milk. Milk is
`
`distinctive in that it can be both consumed and processed into other foods, such as cheese, milk
`
`powder, whey, ice cream, yogurt, and many others. True milk also has more protein than the
`
`alternative “milk” products, making milk a unique source of nutrition. Milk is a relatively
`
`inexpensive source of protein upon which many American consumers rely.
`
`4.
`
`47.
`
`The Capper-Volstead Act
`
`In 1922, Congress enacted the Capper-Volstead Act to give farmers greater
`
`bargaining power with processors and other corporate handlers of food products. Capper-Volstead
`
`was designed to give farmers the legal right to join together in c

This document is available on Docket Alarm but you must sign up to view it.


Or .

Accessing this document will incur an additional charge of $.

After purchase, you can access this document again without charge.

Accept $ Charge
throbber

Still Working On It

This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.

Give it another minute or two to complete, and then try the refresh button.

throbber

A few More Minutes ... Still Working

It can take up to 5 minutes for us to download a document if the court servers are running slowly.

Thank you for your continued patience.

This document could not be displayed.

We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.

Your account does not support viewing this document.

You need a Paid Account to view this document. Click here to change your account type.

Your account does not support viewing this document.

Set your membership status to view this document.

With a Docket Alarm membership, you'll get a whole lot more, including:

  • Up-to-date information for this case.
  • Email alerts whenever there is an update.
  • Full text search for other cases.
  • Get email alerts whenever a new case matches your search.

Become a Member

One Moment Please

The filing “” is large (MB) and is being downloaded.

Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.

Your document is on its way!

If you do not receive the document in five minutes, contact support at support@docketalarm.com.

Sealed Document

We are unable to display this document, it may be under a court ordered seal.

If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.


Access Government Site

We are redirecting you
to a mobile optimized page.





Document Unreadable or Corrupt

Refresh this Document
Go to the Docket

We are unable to display this document.

Refresh this Document
Go to the Docket