Aurora Organic Dairy has agreed to a US$7.5m settlement of a US lawsuit over “fraudulent” marketing claims on organic milk.

The issue was first raised in 2005 when farm policy research group The Cornucopia Institute filed a formal legal complaint with the USDA alleging Aurora was producing its milk on giant feedlots, confining as many as 4,400 milk cows, instead of grazing their cattle, as federal organic standards require.

Cornucopia’s first complaint was summarily dismissed. However, Cornucopia said a second complaint was adjudicated by federal regulators, which in April 2007 said Aurora “willfully” violated regulations requiring pasture for their animals and also used non-organic subcontractors and illegally brought conventional cows into their organic operations.

“Even after the USDA found that Aurora had ‘willfully’ violated 14 tenets of the organic standards, this company, with over $100 million in revenue, was allowed to continue in operation, without a cent of fines,” said Mark Kastel, senior farm policy analyst at Cornucopia.

An official suit was filed on behalf of two St. Louis-area mothers on 4 October 2007 in the US District Court for the Eastern District of Missouri, claimed Aurora used “unfair and deceptive” practices to sell non-organic milk at organic prices.

However, while the courts confirmed Aurora’s organic certifications have always been valid and the company said it is confident it would prevail in trial on the remaining marketing claims, Aurora said it reached the settlement to “avoid the cost and distraction of protracted litigation”.

“Since our inception in 2004, Aurora Organic Dairy‘s mission has been to provide American families with high-quality organic milk,” said Marc Peperzak, founder and CEO of Aurora Organic Dairy. “Without exception, we have always produced organic dairy products without chemical fertilizers, synthetic pesticides, antibiotics and artificial growth hormones according to USDA organic standards. Aurora’s products have been continuously certified as organic since 2004 with the USDA Organic Seal, the marketplace standard that American families rely on and trust.”

Moreover, a spokesperson said Aurora signed a “consent agreement” with the USDA following the regulator’s 2007 notice. She said the agreement stated the dairy did not meaningfully break the regulations. The agreement allowed Aurora to tweak some of the ways it farmed.

“The USDA found that there were no violations – willful or otherwise – by Aurora Organic. The consent agreement clearly states that these were allegations or alleged violations, not willful violations,” the spokesperson told just-food.

She added the consent agreement “superseded” the USDA’s April 2007 notice.

Kastel said the agreement did not change what the USDA found in its original investigation.

“This debate is a matter of semantics. Their subsequent agreement with the USDA does not change how their operation was being managed nor does it change the letter that the USDA made public regarding the violations they found.”

However, the Aurora spokesperson replied: ”USDA did not find willful violations and confirmed that Aurora Organic Dairy carried valid organic certifications, as cited in the consent agreement.”

She said the USDA did not find Aurora guilty of what it was originally accused and added a district court and an appellate court dismissed the original claims in the 2007 lawsuit that challenged the company’s organic practices.

If a federal court in St. Louis approves the $7.5m settlement, consumers can get $10 rebates without a receipt and up to $30 with receipts. A planned website will explain how to file for rebates.