As if 2020 didn’t bring enough chaos and uncertainty, in late November hundreds of dairy farmers across the eastern United States received letters from a law firm, ASK LLP, claiming they must repay income they received for milk sold to Dean Foods prior to the company’s bankruptcy filing.
While it may be difficult to decipher the legal jargon, anyone can see the injustice in ASK LLP’s audacious claims. Dean Foods is seeking repayment for milk they purchased from farmers, processed, and sold to customers in the normal course of business. These farmers should not be punished for the company’s financial failings, especially after they were forced to find another home for their milk when the company went belly up.
What steps should farmers take if they received a letter and have not yet responded? Stephen Carpenter from the Farmers’ Legal Action Group (FLAG) recently joined our Dairy Together conference call to offer some guidance for farmers and groups that are rallying to lend their support.
1. Don’t panic, but don’t delay.
First, what farmers should not do is ignore the letters. The letters are from a real law firm and there may be legal grounds for Dean Foods to seek repayment from farmers who conducted business with them during the 90-day “preference period” prior to the bankruptcy filing in November 2019. Ignoring the letter is the worst thing to do because that will give Dean Foods a reason to take further action. Farmers should keep calm but respond as soon as possible to avoid escalation.
Many of the letters require a response by December 19th, which is a very short window of opportunity to hire a lawyer and respond appropriately. Some farmers may feel pressured to pay the settlement offer to avoid missing the deadline. However It is important to keep in mind that December 19th is the deadline to accept the offer to pay a lesser amount than the total claim. It does not mean the claim cannot be challenged after that date. Farmers should consult with a lawyer and respond as soon as possible, but don’t panic because of the short timeline.
2. Band together
Farmers and farm advocates should call everyone they know who received a letter or may have received one to share mutual support, information, or even legal counsel. Hiring one lawyer to represent multiple clients could cut costs for everyone. Because the letters are nearly identical except for the amount of money requested, a lawyer who is already familiar with the content and course of action will be able to represent additional clients more efficiently than if everyone hires their own lawyer. Even if you don’t seek collective legal counsel, reaching out to offer encouragement can make a difference to those who are feeling stressed and overwhelmed. Be sure to also connect with organizations like the Pennsylvania Milk Marketing Board, even if you do not live in Pennsylvania, for resources to help respond to the claims. Share information about other organizations that might be able to offer assistance so more farmers have the tools and resources they need to fight back.
The preferential payment rule that the Dean Foods lawyers use as the basis for their letters to farmers is real. There are important exceptions to the rule, however. Lawyers representing farmers will be able to argue that the milk checks in question were in the “ordinary course of business” between dairy farmers and Dean Foods. If a court agrees, the farmers will not owe the money demanded in the recent letters. We do not yet know what a court will say on this question, so it is important not to assume the problem will go away on its own.
3. Share your story
The bold actions of the American Farm Bureau Federation and the Pennsylvania Milk Marketing Board are helping farmers avoid a costly and unexpected settlement, but in many cases it does not make up for the undue stress or legal costs incurred in the process. Farmers may have legal grounds for taking further action against Dean Foods if they feel they have been harmed. The best thing farmers can do in this situation is to band together, share resources, and fight back.