case 5:09-cv-00230-cr document 580-1 filed 10/03/14 page 1...

Case 5:09-cv-00230-cr Document 580-1 Filed 10/03/14 of 35

UNITED STATES DISTRICT COURTFOR THE DISTRICT OF VERMONT

ALICE H. ALLEN, et al.,

Plaintiffs,

V. ) Civil Action No. 5:09-CV-00230-cr

DAIRY FARMERS OF AMERICA, INC., andDAIRY MARKETING SERVICES, LLC,

Defendants.

MEMORANDUM OF LAW IN SUPPORT OF THEDAIRY FARMER SUBCLASSES' RENEWED MOTION FOR PRELIMINARY

APPROVAL OF PROPOSED SETTLEMENT WITH DEFENDANTS DAIRYFARMERS OF AMERICA. INC. AND DAIRY MARKETING SERVICES. LLC

Case 5:09-cv-00230-cr 10/03/14 of 35

P a ege

INTRODUCTION .......................................................................................................................... 1

BACKGROUND ............................................................................................................................ 4

The Parties' Vigorous Litigation .............................................................................................. 4

Settlement Negotiations and Involvement of Class Representatives ........................................ 5

Terms of Proposed Settlement .................................................................................................. 8

ARGUMENT ................................................................................................................................ 10

I. SUBCLASS COUNSEL WERE AUTHORIZED TO ENGAGE IN SETTLEMENTDISCUSSIONS WITH DFA/DMS ................................................................................... 10

II. THE PROPOSED SETTLEMENT SATISFIES THE CRITERIA FOR PRELIMINARYAPPROVAL ..................................................................................................................... 15

A. The Proposed Settlement Resulted from Serious, Informed, Non-CollusiveNegotiations between Experienced and Capable Counsel ........................................ 16

B. The Proposed Settlement Falls Within the Range of Possible Approval by the Courtas Fair, Reasonable, and Adequate ............................................................................ 17

C. The Proposed Settlement Has No Obvious Deficiencies .......................................... 20

III. THE SUBCLASS REPRESENTATIVES' ISSUES DO NOT PRECLUDEPRELIMINARY APPROVAL AND PRESENTATION OF THE PROPOSEDSETTLEMENT TO THE SUBCLASSES ........................................................................ 22

A. Positions of the Subclass Representatives ................................................................. 22

B. Financial Terms ......................................................................................................... 22

C. Scope of the Settlement Subclasses ........................................................................... 24

D. Equitable Relief ......................................................................................................... 25

E. Role of Objections in the Class Settlement Process .................................................. 27

F. Disclosure of Defendants' Documents ...................................................................... 27

G. Notice to the Subclasses Regarding Potential Attorneys' Fees ................................. 28

IV. THE PROPOSED NOTICES AND NOTICE PLAN SATISFY RULE 23 ..................... 28

V. PROPOSED DATES FOR NOTICES, SETTLEMENT ADMINISTRATION, ANDFAIRNESS HEARING ..................................................................................................... 29

CONCLUSION... .. 29


TABLE OF AUTHORITIES

Cases

Page(s)

In re Airline Ticket Com 'n Antitrust Li tig.,953 F. Supp. 280 (D. Minn. 1997) 21

In re BankAmerica Corp. Sec. Litig.,210 F.R.D. 694 (E.D. Mo. 2002) 12

Banyai v. Mazur,2007 U.S. Dist. LEXIS 22343 (S.D.N.Y. Mar. 27, 2007) 17

Blanchard v. Edgemark Fin. Corp.,175 F.R.D. 293 (N.D. 111. 1997) 13

Blessing v. Sirius XM Radio Inc.,2011 WL 3739024 (S.D.N.Y., August 24, 2011) 18

Blessing v. Sirius Xm Radio, Inc.,507 F.App'x 1 (2d Cir. 2012) 17

Boeing Co. v. Van Gemert,444 U.S. 472(1980) 28

Bourlas v. Davis Law Assocs.,237 F.R.D. 345 (E.D.N.Y. 2006) 16

In re Cardizem CD Antitrust Litig.,218 F.R.D. 508 (E.D. Mich. 2003) 21

Charron v. Wiener,731 F.3d241 (2d Cir. 2013) 2, 12, 14

City of Detroit v. Grinnell Corp.,495 F.2d 448 (2d Cir. 1974) 16, 18

Commissioner of Internal Revenue v. Banks,543 U.S. 426 (2005) 12

County of Suffolk v. Long Island Lighting,907 F.2d 1295 (2d Cir. 1990) 18

In re Currency Conversion Fee Antitrust Litig.,263F.R.D. 110 (S.D.N.Y. 2009) 18

n


Hall v. Children's Place Retail Stores, Inc.,669 F. Supp. 2d 399 (S.D.N.Y. 2009) 19

Heit v. Van Ochten,126 F. Supp. 2d487 (W.D. Mich. 2001) 13

Hicks v. Morgan Stanley,2005 WL 2757792 (S.D.N.Y. Oct. 24, 2005) 19

In re High-Tech Employee Antitrust Litig.,2014 WL 3917126 (N.D. Cal. Aug. 8, 2014) 19

In re Initial Pub. Offering Sec. Litig.,671 F. Supp. 2d467 (S.D.N.Y. 2009) 18

In re Ivan F. Boesky Sec. Litig.,948 F.2d 1358 (2d Cir. 1991) 2, 11

Kincade v. Gen. Tire & Rubber Co.,635F.2d501 (5th Cir. 1981) 2, 11, 12

Lazy Oil Co. v. Witco Corp.,166 F.3d 581 (3d Cir. 1999) 13

Lowery v. City of Albuquerque,2013 U.S. Dist. LEXIS 35626 (D.N.M. Feb. 27, 2013) 12

Maywalt v. Parker & Parsley Petroleum Co.,67 F.3d 1072 (2d Cir. 1995) 12

Maywalt v. Parker & Parsley Petroleum Co.,864 F. Supp. 1422 (S.D.N.Y. 1994) 13

In re Med. X-Ray Film Antitrust Litig.,No. 9805904, 1998 WL 661515 (E.D.N.Y. Aug. 7, 1998) 18

Menkes v. Stolt-Nielsen S.A.,270 F.R.D. 80 (D. Conn. 2010). 18

In re Merrill Lynch Tyco Research Sec. Litig.,249F.R.D. 124 (S.D.N.Y. 2008) 19

In re Michael Milken & Assoc. Sec. Litig.,150 F.R.D. 57 (S.D.N.Y. 1993) 17

Newman v. Stein,464 F.2d 689 (2d Cir. 1972) 17

in


Parker v. Anderson,667 F.2d 1204 (5th Cir. 1982) 11, 13

In re Payment Card Interchange Fee andMerch. Discount Antitrust Litig.,2014 U.S. LEXIS 3351 (E.D.N.Y. Jan. 10, 2014) 28

In re Payment Card Interchange Fee andMerch. Discount Antitrust Litig.,986 F. Supp. 2d 207 (E.D.N.Y. 2013) i:

Staton v. Boeing Co.,327 F.3d 938 (9th Cir. 2003) 13

In re Tableware Antitrust Litig.,484 F. Supp. 2d 1078 (N.D. Cal. 2007) 20

Vazquez v. Lamont Fruit Farm, Inc.,2011 U.S. Dist LEXIS 144167 (W.D.N.Y. Dec. 12, 2011) 21

In re Visa Check/Mastermoney Antitrust Litig.,297 F. Supp. 2d 503 (E.D.N.Y. 2003) 20

In re W. Union Money Transfer Litig.,2004 WL 3709932 (E.D.N.Y. Oct. 19, 2004). .18

Wal-Mart Stores, Inc. v. Visa U.S.A. Inc.,396 F.3d 96 (2d Cir. 2005) 16

Walse v. Great All. & Pac. Tea Co.,726 F.2d 956 (3d Cir. 1983) 13

White v. NFL,836 F. Supp. 1458 (D. Minn. 1993) 20

Statutes

Fed. R. Civ. P. 23 3, 4, 14, 15, 22, 27, 28, 29

Other Authorities

Fed. R. Civ. P. 23 Advisory Committee Notes 2, 12,13

Alba Conte & Herbert Newberg, Newberg on Class Actions at § 3:52 (5th ed.2014) 12

Manual for Complex Litig., Fourth, at § 13.14 17

Manual for Complex Litig., Fourth, at § 21.642 11

IV


INTRODUCTION

After five years of hard-fought litigation, over a year of intense negotiations, and at least

160 in-person and telephone conferences with Subclass Representatives, the DFA/DMS and

Non-DFA/DMS Subclasses reached a proposed settlement with the remaining Defendants, DFA

and DMS, for $50 million plus substantial injunctive relief. See Ex. A, Agreement. The

proposed settlement goes far beyond what any law enforcement agency has pursued or achieved

in the past decade and constitutes the largest antitrust settlement in the history of Vermont.

The Court previously declined to grant an expedited motion for preliminary approval of

the proposed settlement due to certain issues with the draft class notice and because the Court

desired information "regarding the basis for the Subclass Representatives' objections."1 The

class notice issues were addressed in a July 23, 2014 submission,2 and the Subclass

Representatives' objections were addressed in detail in a July 23, 2014 in camera submission3

and in general in a July 29, 2014 submission.4 A status conference followed on September 9,

2014, where the Court requested additional information about the settlement, particularly

Subclass Counsel's authorization to settle, and invited a new motion for preliminary approval.

In response to the Court's September 9 request for information and a new motion,5

Subclass Counsel, in this Memorandum, (1) address the Court's questions raised during the

conference, (2) outline the authorities that support preliminary approval of the proposed

' Order Denying Without Prejudice Expedited Motion for Preliminary Approval ofSettlement Between Dairy Farmers of America, Inc., Dairy Marketing Services, LLC, and DairyFarmer Subclasses [Dkt. No. 569].

2 See Subclasses' Response to Court's Order Regarding Motion for Preliminary Approval ofProposed Settlement with Defendants DFA and DMS [Dkt. No. 570].

3 See Motion to Submit Materials for In Camera Review [Dkt. No. 571]. The Court deniedthis motion and has not reviewed the materials submitted for in camera review.

4 See Dairy Farmer Subclasses' Supplemental Filing Regarding Motion for PreliminaryApproval of Settlement [Dkt. No. 572].

5 See Minute Entry for September 9, 2014 Status Conference [Dkt. No. 577].


settlement, and (3) submit points regarding the Subclass Representatives' objections.

First, Subclass Counsel were authorized to engage in settlement discussions and present

the proposed settlement to the Court. Subclass Representatives were apprised of settlement

negotiations throughout the course of this litigation and did not object to the negotiations or

suggest that Subclass Counsel were not authorized to negotiate toward the proposed settlement,

as reflected in the attached attorney declarations. See Exs. E-I. Moreover, the law in both the

Second Circuit and other jurisdictions is quite clear that Subclass Counsel do not need

authorization from Subclass Representatives prior to negotiating or presenting a settlement to the

Court. This is because "the 'client' in a class action consists of numerous unnamed class

members as well as the class representatives" and, due to "the unique nature of the attorney-

client relationship in a class action, the cases [] holding that an attorney cannot settle his

individual client's case without the authorization of the client are simply inapplicable"

Kincade v. Gen. Tire & Rubber Co., 635 F.2d 501, 508 (5th Cir. 1981) (emphasis added) (cited

with approval by Charron v. Wiener, 731 F.3d 241, 254 (2d Cir. 2013)). Indeed, it is class

counsel's duty to negotiate and present a settlement determined to be in the best interest of a

class, even if class representatives are opposed. See Fed. R. Civ. P. 23(g)(l)(B) Advisory

Committee Notes; see also In re Ivan F. Boesky Sec. Litig., 948 F.2d 1358, 1365 (2d Cir. 1991).

Second, the proposed class settlement satisfies the requirements for preliminary approval

- which are "meaningfully lower" than the threshold for final approval. July 9 Order at 7. The

proposed settlement is the result of serious, informed, non-collusive negotiations. The settlement

was reached after completion of discovery, years of litigation and negotiations between

experienced attorneys, and on the eve of trial. Settlements reached in this context are

presumptively fair. This fairness is corroborated by the fact that counsel with the five law firms


that represent the Subclasses -- including attorneys with a thorough understanding of the

voluminous record and complex legal issues presented by the case; lead counsel from

Southeastern Milk; counsel with experience trying antitrust class actions; and counsel with

experience litigating antitrust matters for the Department of Justice and the Federal Trade

Commission - support the proposed settlement after careful consideration of its benefits and

compromises weighed against the risks and benefits of trying the case to a jury. See Exs. E- L.

The proposed settlement also falls with the range of possible approval by the Court as

fair, reasonable, and adequate. With this settlement, the recovery to the Subclasses will total $80

million - the largest antitrust recovery in Vermont history. The $50 million proposed settlement

is almost 20 times greater than the largest jury verdict in this district since 2001 and will result in

average payments to farmers of $4,000, in addition to important industry changes that were

unlikely to be obtained even if the Subclasses prevailed at trial.

In addition, the proposed settlement has no obvious deficiencies. A settlement of this

magnitude is not obviously deficient, particularly when it was reached through arm's length

negotiations. Also, the proposed settlement grants no preferential treatment to the Subclass

Representatives or Subclass members. Nor would the proceeds be distributed unevenly to them.

Three, none of the issues in the Subclass Representatives' Opposition to Proposed

Settlement ("Statement"), submitted in camera on July 16, 2014, precludes preliminary approval

when, as here, the Rule 23 requirements are met. Indeed, the issues raised in the Statement are

legally and factually mistaken and are, in any event, irrelevant at the preliminary approval stage.

As this Court noted, preliminary approval "is merely the first step in a multi-step process" that

allows all the Subclass members an opportunity "to consider whether the settlement is fair,


reasonable, and adequate."6 Opinion and Order Granting Preliminary Approval of Revised Dean

Settlement and Denying Motions to Intervene ("Dean Preliminary Order") at 5-6 [Dkt. No. 297].

Subclass Representatives will have an opportunity to express their views at the final approval

hearing. Their views should not, however, veto a proposed settlement or foreclose the thousands

of absent Subclass members from being allowed to consider the proposed settlement.

Accordingly, for the reasons set forth below, the Subclasses respectfully request that the

Court enter the attached Proposed Order (see Ex. B) granting preliminary approval of the

proposed settlement so that it may be considered by all Subclass members and the Court can

ultimately determine, in a final approval hearing pursuant to Federal Rule 23, whether the

settlement is fair, reasonable, and adequate.

BACKGROUND

The Parties' Vigorous Litigation. This is not a case in which a settlement is reached

shortly after a case is filed. To the contrary, as the Court is well aware, this case has been

vigorously litigated for five years, generating a discovery record with millions of pages of

documents, over 70 depositions, and extensive expert reports. There were multiple Daubert

motions and Defendants filed an expansive motion for summary judgment, which Plaintiffs

opposed with equally extensive briefing, statements of fact, and exhibits. The intensity of the

litigation increased as the parties prepared for a trial expected to last much of two months, with

the parties filing over 20 motions in limine and preparing and exchanging trial exhibit lists

In connection with the Dean settlement, DFA/DMS argued that because of the issues raisedin affidavits they presented from a number of dairy farmers, the Court should deny preliminaryapproval and not notify the putative class of the proposed settlement. See Opposition to Motionfor Preliminary Approval [Dkt. No. 188]. The Court's response was to grant preliminaryapproval so that the entire group of potentially affected by the settlement could speak to it. See,e.g., April 15, 2011 Tr. at 62 (Court: "So why not let the process play out as opposed to let'sconsider the worst possible scenario right now and not let these class members even consider a$30 million settlement?").


totaling more than 2,500 exhibits, witness lists with 120 witnesses, and designations of over 80

depositions (including Southeastern Milk depositions).

Throughout this time, Subclass Counsel kept Subclass Representatives informed of the

progress of the litigation. For example, since 2012, BakerHostetler attorneys alone had over 90

in-person and telephone conferences regarding the litigation7 and Counsel for the DFA/DMS

Subclasses have had at least 70 in-person and telephone conferences.

Settlement Negotiations and Involvement of Class Representatives. As the litigation

continued, the parties participated in Court-ordered mediation with Michael Marks, a highly-

respected mediator. Current Subclass Representative Jonathan Haar attended the mediation on

behalf of the Plaintiff dairy farmers (mediation preceded the certification of Subclasses). The

mediation was unsuccessful.9 In addition, in early 2013, counsel from BakerHostetler and for

DFA/DMS began to discuss their views about the case in the context of possible settlement.

These discussions continued for several months without success. These discussions resumed in

early 2014, but with no success. The Subclass Representatives were aware of these discussions,

including the fact that little-to-no progress had been made toward settlement and that it appeared

the case likely would proceed to trial.' ' At no time in this process did the Subclass

Representatives suggest that settlement discussions should not continue or that Subclass Counsel

lacked "authority" to conduct or to continue to conduct such discussions.12

10

7 See Declaration of Terry L. Sullivan at ^ 3, attached as Exhibit E; Declaration of Danyll W.Foix at T)4, attached as Exhibit F.

8 See Declaration of Benjamin D. Brown at U 6, attached as Exhibit G; Declaration of Kit APierson at J 5, attached as Exhibit H.

See id. at 1fl[ 3-4.See Declaration of Robert G. Abrams at ̂ 3, attached as Exhibit I.See, e.g., Ex. E at f 3; Ex. F at f 4; Ex. G at | 6.See. e.g., Ex. E at f 6; Ex. F at 1 6-7; Ex. G at U 6; Ex. I at K 7.

10

12


As often happens, the imminence of trial crystalized the risks confronted by both sides.

In the months before trial, the Court ruled on Defendants' summary judgment motion and the

parties filed many motions in limine, which the Court had not yet ruled on but which could alter

the nature and scope of the trial and the evidence the parties were entitled to present. Although

the Court denied much of Defendants' summary judgment motion, it granted parts of it and:

• Expressed concerns about the case theories and the inferences that could be drawn fromthe factual record;

• Limited certain evidence that could be offered based on the statute of limitations;

• Limited certain types of evidence relating to relevant market definition, includingdefinition that did not consider milk supplied by farmers located outside Order 1; and

• Restricted certain types of damages claimed by class members.

The Court's Daubert rulings similarly impacted the scope of testimony permitted by Plaintiffs'

expert - and supporting materials that could be presented - on damages and other issues.

Defendants also raised many other factual and legal issues and defenses that had to be considered

carefully by Subclass Counsel in evaluating whether the Subclasses were best served by

settlement or proceeding to trial.

With both sides recognizing their respective risks associated with trial, at the end of May

2014, counsel from BakerHostetler and for DFA/DMS again discussed their views about the

case, but remained far apart in terms of settlement.13 Shortly before the scheduled final pretrial

conference, counsel for DFA/DMS indicated they were prepared to resume negotiations.14 After

further negotiations on June 20, DFA/DMS - for the first time - were willing to settle for a

financial amount that Subclass Counsel considered reasonable and an appropriate basis for a

See Ex. 1 at K 4.See id. at 1(5.


settlement if other terms could be negotiated and resolved.15

The same day, June 20, 2014, Subclass Counsel advised the Court and the Subclass

Representatives of these developments.16 Counsel agreed in principle on the financial amount

and agreed to engage in good faith negotiations on non-financial terms, subject to consultation

and approvals as needed. The Court postponed the scheduled June 23, 2014 pretrial conference

(until July 1, 2014), to give the parties time to determine if a final settlement could be negotiated.

The initial reaction of the Subclass Representatives was positive and/or receptive subject to

further discussion and negotiation of the non-financial terms of a settlement.17 The matter

remained on the Court's trial calendar as negotiations proceeded.

Over the ensuing 11 days, there were extensive discussions between Subclass

Representatives and Counsel about the pros and cons of a possible settlement and potential terms

that should be included. This included lengthy conference calls with the Subclass

Representatives (subject to their availability) on June 23, 24, 27, 30, and July 1, 2014.l8

Settlement was discussed for approximately five hours during these calls. In addition, Subclass

Counsel had many lengthy calls with individual Representatives.19

During the discussions between Subclass Representatives and Counsel, Subclass Counsel

continued to negotiate with DFA/DMS to determine whether a settlement agreement could be

reached. As in any settlement negotiation, proposals were presented, some were accepted (in

15 See id.; Ex. Hat ^6.16 A final pretrial conference was scheduled for the following Monday, June 23, 2014, at

which the Court was to consider numerous pending motions. Recognizing the ongoing work thispresented for the Court, counsel for both sides agreed it was important to advise the Court's clerkpromptly of these developments. See, e.g., id.

17 See Ex. E at U 4; Ex. F at If 5; Ex. G at 1ffl 8-9.; See Ex. E at If 5; Ex. F at f 6; Ex. G at J 10; Ex. H at f 8; Ex. I at f 6; Declaration of David

A. Balto at Tf 4, attached as Exhibit J; Declaration of Andrew D. Manitsky at f 4, attached asExhibit K; Declaration of Emily J. Joselson at If 4, attached as Exhibit L.

IX

19See Ex. E at J 4; Ex. F at If 5; Ex. G at Uf 8-9.