Setoff Agreement Reached Between USDA and Borden Dairy

February 11, 2021

The U.S. Department of Agriculture (USDA) and Borden Dairy Company (Borden) have reached an agreement in the Borden bankruptcy proceeding that should lead to recovery of 100 percent of monies owed to USDA. Per the agreement, USDA will use these funds to remit monies owed to Federal Milk Marketing Order-regulated handlers and the Fluid Milk Promotion Board, and handlers will be required to promptly remit payment to the affected producers.

Borden filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code on January 5, 2020, and failed to make payments to five Federal Milk Marketing Orders (FMMOs) and the National Fluid Milk Promotion and Research Board for milk marketed in April 2020.  Borden has outstanding USDA obligations totaling $921,334.59.

On February 3, 2021, the Honorable Christopher S. Sontchi, Chief Judge of the United States Bankruptcy Court for the District of Delaware entered an Order approving an agreement between USDA, the IRS, and Borden.  Under the terms of the agreement, Borden acknowledged the right of the federal government to set off claims and that a portion of its 2019 Internal Revenue Service (IRS) tax overpayment can be used as a setoff to pay the USDA claims.  

Without this agreement, USDA would have been treated as an unsecured creditor in the bankruptcy proceeding and received substantially less, by some estimates around 10 percent of the obligations owed to USDA under FMMO and the National Fluid Milk Promotion and Research Programs.