Aug 7 (Reuters) - Milk farmers can proceed with a class
action accusing dairy product manufacturers of manipulating the
price of raw milk, a federal appeals court ruled on Tuesday.
The U.S. Court of Appeals for the 9th Circuit in San
Francisco revived a lawsuit brought by dairy farmers accusing
milk powder supplier DairyAmerica Inc of understating its prices
to the U.S. Agriculture Department. That misinformation
depressed raw milk prices, shortchanging American dairy farmers
millions of dollars between 2002 and 2007, the suit alleged.
Manufacturers like DairyAmerica are required to report their
product prices to the USDA, which uses the information to set
prices paid to farmers under Federal Milk Marketing Orders.
In 2007, a dairy industry publication, The Milkweed,
revealed that DairyAmerica had undervalued its nonfat dry milk
by illegally incorporating the low prices from long-term
contracts in its reports to the USDA.
Four farmers, Gerald Carlin, John Rahm, Paul Rozwadowski and
Bryan Wolfe, sued DairyAmerica and its majority owner California
Dairies Inc in 2009 on behalf of milk farmers around the
country.
In 2010, a federal court in Fresno dismissed the case,
finding that suit was barred under the so-called "filed rate
doctrine" which prevents people from suing over rates filed with
and reviewed by government agencies. The judge-created law,
often used to defend against price-fixing suits, prevents courts
from second-guessing agencies' expertise.
But the 9th Circuit on Tuesday decided that the rule did not
bar the farmers' suit because the USDA had investigated
DairyAmerica's conduct and found its reported rates improper.
The total value of raw milk was understated by $50 million
between 2006 and 2007, according to an agency report.
The appeals court said the case was exceptional due to the
large and undisputed scope of the misreporting and the fact that
the USDA recognized the rates as incorrect and would not produce
a flood of cases.
"Our holding will not permit a flood of litigation such that
the filed rate doctrine will be circumvented every time a milk
producer has a quibble with FMMO prices," Judge George Wu wrote
for a unanimous three-judge panel.
Benjamin Brown, a lawyer at Cohen Milstein who represented
the farmers, welcomed the decision and the opportunity to
proceed with the case before the district court.
Neither DairyAmerica nor the company's lawyer, Charles
English of Davis Wright Tremaine, immediately responded to
requests for comment.
John Vlahos of Hanson Bridgett, who represents California
Dairies, was not immediately available to comment.
The case is Carlin et al v. DairyAmerica Inc et al, U.S.
Court of Appeals for the 9th Circuit, No. 10-16448.
For Carlin: Benjamin Brown of Cohen Milstein.
For DairyAmerica: Charles English of Davis Wright Tremaine.
For California Dairies: John Vlahos of Hanson Bridgett.
(Reporting by Terry Baynes)
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