Scott Dairy Farm, Inc. et al v. Dean Foods Company et al

Filing 1322

MEMORANDUM OPINION, GRANTING: 1300 PLAINTIFFS' MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENTS WITH DEAN, SMA, AND BAIRD and APPROVING the settlement agreements. A separate order will issue and the Clerk is DIRECTED to enter final judgment. See Memorandum for details. Signed by District Judge J Ronnie Greer on 6/15/2012. (FMM, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TENNESSEE
GREENEVILLE DIVISION

IN RE: SOUTHEASTERN MILK
ANTITRUST LITIGATION

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THIS DOCUMENT RELATES TO:
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Sweetwater Valley Farm, Inc., et al.
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v. Dean Foods Company, et al., No. 2:07-CV-208 )

Master File No. 2:08-MD-1000
Judge J. Ronnie Greer

MEMORANDUM OPINION
This matter is before the Court to address the “Plaintiffs’ Motion for Final
Approval of Class Action Settlements with Dean, SMA, and Baird.” [Doc. 1856].1
In this motion, the Plaintiffs seek final approval of the class action settlements with
Defendants Dean Foods Co. (“Dean”), Southern Marketing Agency, Inc. (“SMA”)
and James Baird (“Baird”) pursuant to Federal Rules of Civil Procedure 23(e).
After finding that the proposed settlements were “sufficiently fair, reasonable
and adequate,” this Court preliminarily approved the Dean Settlement on July 14,
2011, and then again on February 14, 2012, following appointment of separate
counsel for the DFA sub-class, i.e., Gary E. Brewer, Esq. The Court preliminarily
approved the SMA/Baird Settlement on July 28, 2011.

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Also pending before the Court is a motion for an award of attorney’s fees, reimbursement of
expenses, and incentive awards for class representatives. That motion will be addressed in a separate
memorandum and order.

Following the Court’s preliminary approval of the settlements, Plaintiffs caused
notice of the settlements to be provided in accordance with the procedure approved
by the Court. Rust Consulting sent notice packages to 7,452 potential class members
and published notice in the March 2012 issue of Hoard’s Dairymen. Pursuant to these
notices, the Court conducted a fairness hearing on May 15, 2012, and the matter is
now ripe for disposition. For the reasons which follow, the motion will be granted.
I. BACKGROUND
Under the terms of the settlement agreement, Dean agreed to pay $140,000,000
into a settlement fund over approximately four years. Dean has made an initial
payment into escrow of $60,000,000 and will pay $20,000,000 each year for four
years on or about the anniversary of the Court’s final approval of the settlement
agreement and entry of judgment dismissing the claims as to Dean.
The SMA/Baird settlement requires SMA/Baird to pay $5,000,000 into a
settlement fund and make certain structural changes in the way SMA is operated and
managed and the way milk is marketed in the Southeastern United States. The
structural relief includes:
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An audit of SMA’s activities by an independent
auditor with the results made publically available.

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Efforts by SMA to increase Class I utilization
percentages in Federal Orders 5 and/or 7 by reducing
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milk supply commitments to certain manufacturing
plants in Federal Orders 5 and/or 7 (it is estimated
that this change may generate value to Southeast
dairy farmers of approximately $0.10 to $0.12 per
hundredweight of milk).
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Establishment of a production incentive program for
dairy farmer members of SMA’s member
cooperatives for a minimum of three years.

•

Changes in the procedures for the election of SMA’s
board of directors, implementation of term limits,
and disclosure of conflicts of interest.

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SMA will no longer handle, pool, or otherwise be
involved with milk marketed by Dairy Marketing
Services, LLC.

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The management agreement between SMA’s
member cooperatives and VFC Management, LLC
(Baird’s management company) will be terminated
and a competitive bidding process implemented for
the selection of SMA’s general manager.

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The establishment of a dispute resolution committee
to hear and resolve certain complaints and disputes
from dairy farmer members of SMA’s member
cooperatives.

II. ANALYSIS
In order to approve a proposed settlement, the Court must first determine if that
settlement is “fair, reasonable, and adequate.” Fed.R.Civ.P. 23(e)(2). Relevant
factors to be considered by the Court in that approval process include: (a) the

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likelihood of success on the merits weighed against the amount and form of the relief
offered in the settlement; (b) the risks, expense, and delay of further litigation; (c) the
judgment of experienced counsel who have competently evaluated the strength of their
proofs; (d) the amount of discovery completed and the character of the evidence
uncovered; (e) whether the settlement is fair to the unnamed class members; (f)
objections raised by class members; (g) whether the settlement is the product of arm's
length negotiations as opposed to collusive bargaining; and (h) whether the settlement
is consistent with the public interest. Williams v. Vukovich, 720 F.2d 909, 922-23 (6th
Cir.1983)

In re Cardizem CD Antitrust Litigation, 218 F.R.D. 508, 522

(E.D.Mich.,2003); (citing Granada Invs., Inc. v. DWG Corp., 962 F.2d 1203, 1205
(6th Cir.1992) Kogan v. AIMCO Fox Chase, L.P., 193 F.R.D. 496, 501-02
(E.D.Mich.2000); Steiner v. Fruehauf Corp., 121 F.R.D. 304, 305-06 (E.D.Mich.1988)).
When evaluated under the foregoing standards, the Court FINDS that the
proposed settlement is a “fair, reasonable, and adequate” resolution of this very
complex class action case for the reasons that follow.
(A)

The Likelihood of Success on the Merits Weighed Against the
Amount and Form of the Relief Offered in the Settlement

The fairness of each settlement turns in large part on the strength of the parties'
legal dispute. “Although this inquiry understandably does not require [the court] to

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‘decide the merits of the case or resolve unsettled legal questions,’ [the court] cannot
‘judge the fairness of a proposed compromise’ without ‘weighing the plaintiff's
likelihood of success on the merits against the amount and form of the relief offered
in the settlement.’”

International Union, United Auto., Aerospace, and Agr.

Implement Workers of America v. General Motors Corp., 497 F.3d 615, 631 (6th Cir.
2007) (quoting Carson v. American Brands, Inc., 450 U.S. 79, 88 n. 14 (1981)).
In this case, the settlements provide for specific cash relief which averages
about $13,000.00 per class member or approximately 1/3 2 of the actual damages
calculated by Dr. Rausser, plaintiffs’ damages expert, in August of 2011. If the 10
to 12 cents per hundredweight of milk representing about eleven million to thirteen
million dollars a year offered by the SMA/Baird Structural Relief Settlement is
included, the amount of recovery approaches 50% of the damages calculated by Dr.
Rausser. Obviously, any adverse finding in regard to the relevant market in this case,
which has been hotly contested, poses a substantial risk to the recovery of any
portion of the damages calculated by Dr. Rausser. Thus, weighing the amount and
form of the relief offered in the settlements against plaintiffs' likelihood of success on

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While there is no benchmark for the percentage of the total potential recovery represented by the
settlement amount, courts can, and do, approve settlements representing a much smaller percentage of the
potential recovery. See Detroit v. Grinnell Corp., 495 F.2d 448, 455 n.2 (2d Cir. 1974).

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the merits3 preponderates in favor of the fairness of the proposed settlements.
(B)

The Risks, Expense, and Delay of Further Litigation

In general, “[m]ost class actions are inherently complex and settlement avoids
the costs, delays, and multitude of other problems associated with them.” In re
Telectronics Pacing Sys., Inc., 137 F.Supp.2d 985, 1013 (S.D. Ohio 2001) (quoting
In re Austrian and German Bank Holocaust Litig., 80 F.Supp.2d 164, 174
(S.D.N.Y.2000)). This case is no different and its complexity was enhanced by
somewhat novel factual and legal issues which have been hotly contested and
aggressively litigated by all parties. Here, the possible difficulties Plaintiffs would
encounter in proving their claims, the substantial litigation expenses, and the assured
delay in recovery due to the appellate process, provide justification for this Court's
approval of the proposed settlements. Wess v. Storey , 2011 WL 1463609, * 3 -4
(S.D.Ohio,2011).
(C)

The Judgment of Experienced Counsel Who Have Competently
Evaluated the Strength of Their Proofs

(D) The Amount of Discovery Completed and the Character of the
Evidence Uncovered
In this case, there have been years of extensive discovery where counsel

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This Court has previously observed that the “parties face enormous risk if the case is tried,” [Doc.
1735 at 2], and, given the complexity of the issues in this litigation and their hotly contested nature, as well
as the inherently unpredictable nature of a jury trial, there is clearly risk of recovery of little or nothing at trial.

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reviewed, analyzed, and organized five million pages of documents from the
defendants and ninety-five thousand pages from third parties. Hundreds of hours
were spent negotiating with defendants regarding discovery, and thousands of pages
of discovery were produced by the plaintiffs. Plaintiffs took eighty (80) depositions
and defendants took thirty (30). There was extensive discovery involving multiple
experts. The case has been settled, in other words, at a time when the class
representatives and their counsel were thoroughly familiar with the evidence and the
issues in the case and could realistically evaluate the strengths and weaknesses of their
case.
“[W]hen significant discovery has been completed, the Court should defer to
the judgment of experienced trial counsel who has evaluated the strength of his case.”
Bronson v. Board of Educ., 604 F.Supp. 68, 73 (S.D.Ohio 1984)(citing Williams, 720
F.2d at 922–23 (6th Cir.1983)). Obviously, there has been extensive discovery in this
case involving experienced trial counsel. Based upon that discovery, plaintiffs’
counsel have made a judgment that the settlements are fair, reasonable, and adequate.
Accordingly, this Court will give substantial weight to the opinion of plaintiffs’
experienced trial counsel, and concur that the settlements are fair, reasonable and
adequate.

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(E)

Whether the Settlements Are Fair to the Unnamed Class Members

In this case, out of seven thousand four hundred and fifty- two (7,452) notices
that were mailed, six thousand eight hundred and fifty-six (6,856) claim forms were
received. An additional twenty-one (21) opt-outs were received to add to the three
hundred and sixty- four (364) opt -outs which had previously been received, for a
total of three hundred and eighty-five( 385) opt-outs. There were also thirteen (13)
requests to opt-in.4 Significantly, there was only one objection and over 90% of the
potential class members have submitted claim forms, a very high response rate for a
class action settlement. This Court finds that the overwhelming positive class
response highlights the fairness of the settlements to unnamed class members and
weighs heavily in favor of approval of the settlements. Kogan v. AIMCO Fox Chase,
L.P., 193 F.R.D. 496, 502 (E.D.Mich.2000).
(F)

Objections Raised by Class Members

As previously noted, there was only one objection filed in this case. The lack
of objections by class members in relation to the size of the class also highlights the
fairness of the settlements to unnamed class members and supports approval of the
settlements. In re Cardizem, 218 F.R.D. at 527. See also In re NASDAQ Market4

All these numbers differ slightly from the numbers in the motion for final approval, though not
significantly so. These numbers were announced at the fairness hearing on May 15, 2012. [Doc. 1874 at 10].

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Makers Antitrust Litig., 187 F.R.D. 465, 478 (S.D.N.Y.1998) (observing that “[i]n
litigation involving a large class, it would be ‘extremely unusual’ not to encounter
objections.”). The small number of objections received can be viewed as indicative
of the adequacy of the settlement. Id. at 478-79. 5 Once preliminary approval has been
granted, a class action settlement is presumptively reasonable, and an objecting class
member must overcome a heavy burden to prove that the settlement is unreasonable.
Williams, 720 F.2d at 921.
Dr. Sam Galphin filed the sole objection to the settlements in this case and
spoke at the fairness hearing. He did not dispute the reasonableness of monetary
settlement that counsel have carved out; he, in fact, opined that it was fair and
reasonable. He argued, however, that various elements of “structural” relief should
be included in the settlement. Rule 23(e) does not give the court the power, in
advance of trial, to modify a proposed consent decree and order its acceptance over
either party's objection. The options available to this Court are essentially the same as
those available to the settling parties: it can accept the proposed settlement; it can

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The number of objections here is miniscule when compared to the number of objections usually
received. See, e.g., Stoetzner v. U. S. Steel Corp., 897 F.2d 115, 118-19 (3d Cir. 1990) (10% of the class
objected-a fact that “strongly favors settlement”); County of Suffolk v. Long Island Lighting Co., 907 F.2d
1295, 1325 (2d Cir. 1990) (approval appropriate despite objections by majority of class representatives);
Maywalt v. Parker & Parsley Pet. Co., 864 F. Supp. 1422, 1426-33 (S.D. N.Y. 1994), aff’d, 67 F.3d 1072
(2d Cir. 1995) (approval appropriate despite objections from 2700 class members, including class
representatives); Boyd v. Bechtel Corp., 485 F.Supp. 610, 624 (N.D. Cal. 1979) (that only 16% of class
objected “persuasive” of adequacy of settlement).

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reject the proposal and postpone the trial to see if a different settlement could be
achieved; or it can decide to try the case. Evans v. Jeff D., 475 U.S. 717, 727 (1986).
Thus, this Court does not have the authority to grant the relief sought by the sole
objector, and based upon the other factors set out herein, the Court finds that the
settlements are “fair, adequate, and reasonable” in spite of the objection of Dr. Galphin.
(G)

Whether the Settlement Is the Product of Arm's Length Negotiations
as Opposed to Collusive Bargaining

The Court must also make sure that any settlement is the product of arm's length
negotiations as opposed to collusive bargaining. Bronson, 604 F.Supp. at 73. In this
case, this Court has previously found that “[t]he settlement agreement was arrived
after the parties’ claims and defenses had been subject to an intense three-year long
adversarial process.”

There is no evidence whatsoever that negotiations were not

made at arm’s length or that there was any collusive bargaining.6
(H) Whether the Settlement Is Consistent with the Public Interest
Generally speaking, there is a public interest in settlement of disputed cases that
require substantial federal judicial resources to supervise and resolve. In the instant
case, the proposed settlements end potentially long and protracted litigation among

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Another factor which supports the Court’s conclusion on this point is that the negotiations which
led to this settlement have included the participation of the Court appointed mediator, W.J. Michael Cody,
a former Attorney General and Reporter for the State of Tennessee. General Cody is well respected for both
his knowledge and ability and his integrity.

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these parties and frees the Court's valuable judicial resources. In re Broadwing, Inc.
ERISA Litigation, 252 F.R.D. 369, 376 (S.D.Ohio,2006). The Court finds that this
factor weighs in favor of approving the proposed settlements because the public
interest is served by resolution of this action.
CONCLUSION
After reviewing the relevant factors, the Court FINDS that the settlement
agreements are “fair, adequate, and reasonable, as well as consistent with the public
interest.” Bailey v. Great Lakes Canning, Inc., 908 F.2d 38, 42 (6th Cir.1990).
Therefore, the Court hereby GRANTS plaintiffs’ motion and APPROVES the
settlement agreements.
A separate order will issue and the Clerk is DIRECTED to enter final judgment.
ENTER:
s/J. RONNIE GREER
UNITED STATES DISTRICT JUDGE

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