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California Federal Court Rejects Dairy LLC’s Effort to Dismiss Federal and State Antitrust Claims Against It

On Friday, May 12, a Federal Court in California denied the effort by dairy software industry giant Dairy LLC (which operates Dairy.com, now rebranded as Ever.Ag) to dismiss the antitrust claims brought against it by Milk Moovement, Inc.—a start-up company breaking into the software market for milk cooperatives and processors.  With this decision, the Court has authorized Milk Moovement to move forward with its 10 claims against Dairy LLC, including claims under Sections 1 and 2 of the Sherman Act, Section 7 of the Clayton Act, and the Cartwright Act.

Milk Moovement’s claims seek to stop Dairy LLC’s alleged abuses of its monopoly power, which Milk Moovement says has caused substantial harm to the multibillion-dollar milk market.  The allegations against Dairy LLC include that it has worked hand-in-glove with dairy industry giant Dairy Farmers of America (“DFA”) to illegally tie up customers and unfairly limit their ability to choose their software service providers.  Milk Moovement’s claims also seek to unwind anticompetitive acquisitions made by Dairy LLC and its private-equity owner Banneker Partners in the past few years.  Milk Moovement alleges that those acquisitions unfairly stamped out would-be competitors in violation of federal antitrust laws.

Milk Moovement’s claims come after Dairy LLC itself sued Milk Moovement for supposedly misappropriating Dairy LLC’s purported “trade secrets,” after Milk Moovement convinced some of Dairy LLC’s customers to abandon Dairy LLC in favor of Milk Moovement.  Milk Moovement has long said that Dairy LLC’s lawsuit was not to remedy any actual injury, but was instead to harass Milk Movement and to unfairly prevent it from competing against Dairy LLC on a level playing field.  Milk Moovement will now have the opportunity to prove that Dairy LLC’s alleged abuse of its monopoly power has fundamentally and unfairly skewed the marketplace.

The Court credited Milk Moovement’s allegations in denying Dairy LLC’s motion to dismiss. Among other things, the Court ruled, “Milk Moovement has . . . alleged facts which plausibly show that Dairy charges supracompetitive prices, restricts customers from choosing their dairy data service provider, has a market share of over 80 percent, and has created multiple barriers to entry.”  The Court also rejected Dairy LLC’s efforts to downplay the substantial injury Milk Moovement and the rest of the industry have suffered because of Dairy LLC’s misconduct, finding that “Dairy’s arguments that Milk Moovement failed to plausibly allege antitrust injury are unpersuasive.”

The judge further ruled that Milk Moovement has adequately pleaded that “Dairy’s conduct, including acquisition of competitors and exclusive contracts, prevented Milk Moovement from growing in the market for dairy data processing services, limited consumer choice, and increased prices.”

And the Court also credited Milk Moovement’s allegations that DFA is an active participant in the antitrust conspiracy, ruling, “Milk Moovement’s allegations plausibly show that Dairy and DFA ‘conspired to endow’ Dairy with market power in the data processing market.”  Based on these and related conclusions, the Court denied Dairy LLC’s motion to dismiss in full.
Dairy LLC also filed a separate (and duplicative) motion to strike Milk Moovement’s claims, which the Court also rejected.  The judge wrote, “The court sees Dairy’s motion to strike as simply a second attempt to dismiss Milk Moovement’s new antitrust counterclaims in the event its concurrently filed motion to dismiss (Docket No. 266) is unsuccessful.”  The Court then ruled, “Dairy’s motion is to strike is nothing more than a disfavored delay tactic.  Such a motion is a waste of the court’s time and resources.”

With these claims, Milk Moovement seeks to put an end to Dairy LLC’s alleged unfair and abusive tactics for the benefit of the industry as a whole.  Milk Moovement also seeks compensatory and punitive damages against Dairy LLC for the injury it has caused to Milk Moovement’s business.

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