Opinion ID: 2972927
Heading Depth: 4
Heading Rank: 2

Heading: Southern Belle

Text: Southern Belle is a limited liability company formed in February 2002. Southern Belle owns a milk processing plant in Somerset, Kentucky, that bids on school milk contracts. Under the initial ownership structure of the company, fifty percent of the voting interests in Southern Belle was owned by the Allen Family Limited Partnership (“AFLP”), which is managed by Robert Allen (“Allen”), and fifty percent was owned by DFA. Allen had previously been an advisor to DFA’s corporate board. In addition, Allen had earlier participated in another joint venture with DFA, in which he made a $21.7 million profit on a $1 million investment. According to Gary Hanman, the CEO of DFA, DFA partnered with Allen on Southern Belle because “we knew him, our experience has been great, our relationship has been perfect through the years.” J.A. 1061. No. 04-6318 United States, et al. v. Dairy Farmers of Am., et al. Page 3 The original agreement gave AFLP a “put option” that entitled it to sell its interests to DFA after three years at a price sufficient to recover its initial contribution. Although DFA asserts that AFLP has always had exclusive responsibility for the day-to-day operations of the plant and the sale and marketing of the products from the plant, including the sale of milk to schools, the initial agreement provided for the business and affairs of the company to be managed by the “Common Members,” i.e., by DFA and AFLP. On July 14, 2004, six days before DFA filed a motion for summary judgment in this case, DFA and AFLP agreed that DFA would exchange its common member interests in Southern Belle for non-voting preferred capital interests, thus eliminating DFA’s right to vote on any matter or to sit on the Southern Belle Representative Committee. Pursuant to this revised agreement, AFLP no longer has a “put option,” and can sell Southern Belle at its option at any time, and require DFA’s interests to be sold. Southern Belle, including its plant in Somerset, is managed by AFLP, which, as noted, is managed by Allen. DFA does not have any ownership interest in AFLP, and AFLP does not have any ownership interest in DFA. With respect to day-to-day responsibilities, Southern Belle’s school milk bidding and pricing decisions are made at levels below Allen.