FAYETTEVILLE -- Veg Liquidation, formerly known as Allens Inc., disputed on Friday unpaid claims made by one of its vegetable providers in the largest -- and likely final -- claim the bankrupt vegetable canner faces under the Perishable Agriculture Commodities Act.
Jason Klinowski of Freeborn & Peters of Chicago, Veg Liquidation's special Commodities Act counsel, said that agribusiness Hartung Brothers Inc., which made claims of more than $8.2 million, failed to protect its rights under the Commodities Act. Part of Veg Liquidation's argument contends Hartung Brothers improperly charged for freight and acted as Allens' agent, not as an independent contractor.
Attorney Greg Brown of Washington, D.C.-based McCarron & Diess, representing Wisconsin-based Hartung Brothers, said Veg Liquidation's argument was futile, contending the company modified its objections after court deadlines and was doing anything it could to reduce Hartung Brothers' claims.
Bankruptcy Judge Ben Barry is hearing the case.
The Commodities Act regulates the sale of fresh and frozen produce to avoid unfair trade practices and ensures that sellers are paid in a timely manner. Valid claims are paid dollar for dollar in bankruptcy cases and are moved to the head of the line for payment, even ahead of secured debt.
A filing by Veg Liquidation shows there is a total of $19.36 million available to pay for claims allowed under the act.
Early Friday, Dan Hartung, president of Hartung Brothers, testified the company has sold beans, peas and carrots to Allens since 1984 and had done business with the company annually since 2004. Delivery of peas and carrots are part of the company's claim under the Commodities Act. Hartung said his company had become Allens' sole source of peas.
On Friday afternoon, former Allens CEO Josh Allen testified in detail about Allens' contracts with Hartung.
Last month, Barry heard and took under advisement Veg Liquidation's objection to $1.16 million in claims by H.C. Schmieding Produce Co. Inc. of Springdale; D&E Farms Inc. of Pennsylvania's $1.95 million in claims; and Michigan-based Central Produce Sales Inc.'s claims for $128,000.
In late October, the canned-vegetable company filed for Chapter 11 protection in U.S. Bankruptcy Court for the Western District of Arkansas. Veg Liquidation owed its primary lenders $114.36 million and its secondary lenders $65.6 million. Sager Creek Acquisition Corp. bought Allens at auction in February with a winning bid of $123.8 million. The total value of the deal is just less than $160 million.
Barry recently approved a move by Veg Liquidation to shift its Chapter 11 bankruptcy status to Chapter 7 to help liquidate its remaining debt. Chapter 11 bankruptcy allows for the reorganization of debt while a company continues to operate, whereas Chapter 7 focuses primarily on the liquidation of debt.
Allens, now owned by Sager Creek, employs nearly 1,200 people across its U.S. operations. In addition to its Siloam Springs plant and other Arkansas holdings, the company has operations in Georgia, North Carolina and Wisconsin.
Business on 06/10/2014