Seven Western New York dairy farmers are scheduled to appear Tuesday in State Supreme Court in Buffalo to attempt to show why they are entitled to $472,068 from the May 2006 merger of their milk cooperative, Niagara Milk, with Upstate Farms.
The seven were among 12 dissenters to the merger who said they weren't offered enough money for their shares of the co-op's assets. Niagara Milk settled with five of the farmers, as well as a 13th farmer who initially went to court over the legality of his belated notice of dissent.
Niagara Milk is bringing the seven farmers into court after trying unsuccessfully to settle their claims. More than two years have passed since the case was filed under a special provision of business law.
State Supreme Court Justice Christopher J. Burns has set aside four days next week to hear evidence on the value of Niagara Milk at the time of the merger. The hearing will be held in Room 19 of the Franklin Street courthouse. He then will decide how much of that should be given to the dissenters.
According to Anthony Eugeni, an attorney for Niagara Milk, the two sides are fighting over the value of the co-op. Its appraiser will testify next week that its value is between $7 million and $7.5 million, less than the roughly $12 million to $13 million assigned during the merger. The dissenters' share of that would total $121,800, he said in an interview Friday.
"We owe them something; we will end up paying them," Eugeni said, noting the rest of the co-op members were given dollar-for-dollar equity in their new accounts with Upstate as part of the non-cash transaction. The dissenters had a right to exit the co-op and receive a payment for their equity at that time, but he said they may have misunderstood a consultant's presentation before the merger vote was taken.
The presentation described how the new co-op would be structured after the merger and included several valuation possibilities, including Niagara Milk's $41 million "relative value" within the new merged co-op.
Eugeni said that the much lower appraisal of $7 million to $7.5 million is viewed from the perspective "of a third-party, arms-length buyer who may have problems with [Niagara Milk's] inefficiencies, such as . . . aging production facilities and that sort of thing."
But Deborah J. Chadsey of Kavinoky Cook, the dissenters' attorney, said that valuation "makes no sense" and won't even pay the farmers' the equity that has been withheld.
The argument that, without the merger, 70-year-old Niagara Milk would have lost the contract with Tops supermarkets and wouldn't have survived is only "supposition," since the co-op had no debt and millions in cash reserves, she said.
The seven dissenters -- Thomas J. Krenzer, Leon F. Perry, Leon G. Perry, Douglas Kelkenberg, Dwight and Renee Darling and George Dairy Farms -- have continued as dairy farmers and joined other cooperatives to sell the milk they produce in Monroe, Erie, Genesee and Wyoming counties.