South Mountain Creamery Lawsuit: IRS Refund and FDA Skim Milk Ruling

The South Mountain Creamery lawsuits were two separate federal fights won by the same Maryland dairy: a 2012–2016 battle to recover $29,500 the IRS seized from its bank account under cash “structuring” laws, and a 2018–2020 First Amendment case that pushed the FDA to stop requiring the creamery to label its additive-free skim milk as “imitation.” The family-owned farm in Middletown, Maryland, prevailed in both.

The IRS Seizure and How the Money Came Back

In February 2012, the IRS emptied $62,936.04 from South Mountain Creamery’s bank account under federal structuring laws, which make it a crime to break up cash deposits to stay under the $10,000 bank reporting threshold. A federal court had authorized the government to seize up to $243,455.¹

Randy Sowers later told Congress that his wife Karen had started keeping deposits under $10,000 after a bank teller mentioned the paperwork that larger deposits triggered. She was trying to avoid a hassle, not a law. Neither of them was ever charged with a crime.²

The 2012 Settlement

In May 2012, faced with the threat of criminal prosecution and the risk of losing the full $243,455, Sowers agreed to forfeit $29,500, roughly half of what had been taken. In return, the government agreed not to bring charges. The rest of the seized money was returned.¹

Sowers’ attorneys later alleged the U.S. Attorney’s Office for Maryland had filed the civil forfeiture suit in retaliation for Sowers speaking to Baltimore’s City Paper. Attorney David Watt said Assistant U.S. Attorney Stefan Cassella told him by phone that the case had been filed because Sowers went public, and that Cassella did not want future targets thinking they could use the press for leverage. Watt also said Cassella insisted on a “reasonable cause” clause in the Sowers settlement that had been left out of a similar deal with Taylors Produce Stand, allegedly explaining: “Mr. Taylor did not give an interview to the press.” Then-U.S. Attorney Rod Rosenstein denied the retaliation claim, and Cassella called the settlement “routine.”³

Getting the $29,500 Back

Sowers joined with the Institute for Justice and, in July 2015, filed a petition seeking return of the forfeited $29,500. He testified before the House Ways and Means Oversight Subcommittee in May 2016, telling members: “We were scared to death to think they could throw my wife in jail for depositing money into the bank.” Emails from a DOJ attorney criticizing Sowers for talking to the press were entered into the congressional record.⁴

In June 2016, the Department of Justice agreed to return the full $29,500.²

Ripple Effects

The case reshaped how the IRS handled similar seizures. The agency began notifying more than 700 property owners who had faced comparable structuring seizures that they could petition for their money back, and it returned funds in at least 17 other cases. A 2015 Institute for Justice report had found the IRS had seized over $43 million from more than 600 property owners in cases where the only suspected offense was depositing or withdrawing cash in amounts under $10,000.²

The case also fed momentum for the Fifth Amendment Integrity Restoration (FAIR) Act, which would raise the government’s burden of proof in civil forfeiture, require prompt probable cause hearings, and end “equitable sharing” of forfeited assets between agencies.⁵ The House Judiciary Committee reported the bill favorably by a 26-0 vote in June 2023, and Senators Cory Booker and Rand Paul reintroduced it in December 2024. It had not become law as of early 2026.⁶

The FDA Skim Milk Lawsuit

Two years after recovering his seized money, Sowers sued again. This time the fight was about a label.

South Mountain Creamery makes pasteurized skim milk with nothing added. FDA regulations, however, required “skim milk” to contain added vitamins A and D. Because the creamery’s product skipped the synthetic vitamins, the FDA said it had to be labeled “imitation skim milk” or “imitation milk product.”⁷ Sowers said he had first raised the issue with the FDA about 15 years before the lawsuit but at the time lacked the resources to fight and simply added the vitamins.⁸

First Amendment Claims

On April 5, 2018, the creamery, represented by Institute for Justice attorneys Justin Pearson and Anya Bidwell, filed suit against the FDA in the U.S. District Court for the Middle District of Pennsylvania (No. 1:18-cv-00738).⁹

The complaint made two First Amendment arguments. First, the FDA was censoring truthful commercial speech by forbidding the creamery from using the accurate word “skim milk.” Second, the agency was compelling misleading speech by forcing a pure, additive-free product to be called an “imitation.” As Pearson put it: “The government does not have the power to change the dictionary.”¹⁰

The suit built on a 2017 win the Institute for Justice had secured for Ocheesee Creamery, in which the 11th U.S. Circuit Court of Appeals held that Florida could not bar a dairy from labeling its additive-free product as “skim milk.”¹¹

Judge Kane’s Ruling

U.S. District Judge Yvette Kane denied the FDA’s motion to dismiss on March 31, 2019. Treating the motion as a facial attack on the complaint, she set aside the FDA’s supporting materials because they were filed after the plaintiff’s opposition brief. Working from the complaint alone, she found the creamery faced a “substantial threat of real harm,” noting it had halted business plans to avoid criminal penalties of up to one year in prison and $1,000 in fines per violation.¹²

The FDA’s Concession

Rather than continue litigating, the FDA backed down. In an April 22, 2020, letter to Randy and Karen Sowers, signed by Susan T. Mayne, Director of the Center for Food Safety and Applied Nutrition, the agency confirmed that it would not require non-fortified skim milk to be labeled “imitation,” would not expect state authorities to enforce that federal labeling requirement against the creamery or other farmers, and would not hold the creamery retroactively liable for past labels. Approved options included the straightforward “Skim milk, 0% DV vitamins A&D.”¹³

Judge Kane dismissed the lawsuit without prejudice after the letter arrived.¹⁰ One boundary is worth noting: the underlying FDA regulations technically remain in place. The agency changed how it enforces the rule, not the rule itself, and the Institute for Justice said it would return to court if the FDA reversed course.¹⁴ As of 2026, the milk standards of identity in 21 CFR Part 131 do not appear to have been formally amended.¹⁵

Who South Mountain Creamery Is

Randy and Karen Sowers began farming in 1981 and opened South Mountain Creamery in 2001 as Maryland’s first on-the-farm dairy processing plant.¹⁶ The farm sits in Frederick County, covers about 3,000 acres, and milks around 600 dairy cows.¹⁷ Randy and Karen have retired; since 2017 the business has been run by the second generation, Tony and Abby Brusco and Ben and Kate Sowers, with Tony Brusco as CEO.

1
U.S. House Ways and Means Committee. Randy Sowers Testimony Before the House Ways and Means Oversight Subcommittee
2
Forbes. Maryland Dairy Farmer Beats the IRS, Will Recover Nearly $30,000 Seized Through Civil Forfeiture
3
Van Smith. Milked: Feds Nail South Mountain Creamery for Talking to City Paper
4
U.S. House Ways and Means Committee. Bipartisan Agreement: IRS Treated Americans Unfairly
5
U.S. Senate – Senator Booker. Booker, Paul Introduce Bipartisan FAIR Act to Reform Civil Forfeiture Laws
6
GovTrack. S. 263: FAIR Act of 2025
7
Institute for Justice. Family-Run Farm Sues FDA for Right to Say Skim Milk Is Skim Milk
8
PennLive. Skim Milk FDA Lawsuit
9
Institute for Justice. FDA Skim Milk Case
10
Reason. FDA Backs Away From Absurd Skim Milk Legal Fight
11
WUSF. Court Rules Against State on Skim Milk Labeling
12
Institute for Justice. Memorandum Opinion Denying Federal Defendants’ Motion to Dismiss
13
U.S. Food and Drug Administration. FDA Letter to South Mountain Creamery
14
Institute for Justice. Dairy Farmer Will Continue to Fight FDA for Right to Say Skim Milk Is Skim Milk
15
eCFR. 21 CFR Part 131 – Milk and Cream
16
South Mountain Creamery. History
17
PR Newswire. South Mountain Creamery Announces Strategic Growth Plans