A Ford County man is suing Dairy Farmers of America, alleging that the dairy cooperative manipulated the price of raw milk and artificially inflated the cost of dairy products.
Phil Ochs is seeking class-action status for the lawsuit, which was filed Dec. 31 in Ford County District Court. The court has not yet ruled on whether the case should proceed as a class-action lawsuit, which is brought by one or more members of a large group on behalf of all members.
In this case, the class would be all Kansans who bought dairy products from Kansas retailers between April 1, 2004, and the present.
The lawsuit said the individual class members would seek less than $75,000 apiece in damages.
Dodge City attorney Dave Rebein told the Globe on Friday that although the damages for individual plaintiffs would be small, the overall damages would be much larger for the entire class.
"Really, the purpose of the lawsuit is to punish cheaters and to protect the free-market system," said Rebein, who is serving as co-counsel for the plaintiffs along with Prairie Village attorney Rex Sharp.
The lawsuit alleges that Dairy Farmers of America bought large quantities of cheese from the Chicago Mercantile Exchange, the primary market for spot prices for dairy products, in the spring and summer of 2004 in an attempt to manipulate the market.
Additionally, the lawsuit says that the cooperative sometimes bought large quantities of cheese from the Exchange and sold it at a loss, knowing that the cooperative could recover the loss from artificially high prices for raw milk and other dairy products.
The lawsuit also says that the cooperative's attempt to manipulate the market was not intended to influence the price of cheese but was aimed at the price of raw milk, which would move in tandem with cheese prices.
"DFA illegally used the CME to purchase huge amounts of cheese in an effort to 'corner the market' and spike the spot price of cheese, which, since it is made primarily from raw milk, would in turn cause an artificial rise in the price of raw milk and processed dairy products made therefrom," the lawsuit says. "Thus, DFA was able to reap substantial supra-competitive prices for the sales of raw milk sold through its network of dairy facilities and even nonaffiliated dairy facilities throughout the country to cheese and milk processors."
The lawsuit was filed about two weeks after the DFA and two former executives agreed to pay a $12 million fine under a settlement agreement with the Commodity Futures Trading Commission, which was investigating the cooperative's trading activities on the Chicago Mercantile Exchange in 2004.
As part of the settlement agreement, the cooperative said that it would not engage in speculative trading in milk futures contracts for two years. Additionally, the cooperative said it would retain a monitor to review its trading activities on the Chicago Mercantile Exchange during that period.
The cooperative said in a Dec. 16 news release that it was neither admitting nor denying the commission's findings. The cooperative's president CEO, Rick Smith, also said that agreeing to the settlement was in the organization's best interests, as the investigation was diverting time and resources from the cooperative's mission of serving its members.
Rebein told the Globe that the commission's findings helped prompt Ochs' lawsuit.
DFA's vice president of corporate communications, Monica Massey, said Friday that she was unaware of the lawsuit and could not comment on it.
Reach Eric Swanson at (620) 408-9917 or e-mail him at eric.swanson@dodgeglobe.com.
DODGE CITY —
