The Chapter 7 trustee for bankrupt vegetable company Allens Inc. wants a judge to force Sager Creek Vegetable Co., Allens' initial buyer, to submit for court approval a nearly $12 million settlement deal it made with three of Allens' creditors.
In a hearing Wednesday, trustee Ray Fulmer said the deal should be examined by the court to determine whether it limits further liability for debts owed under the Perishable Agricultural Commodities Act.
He argued that the court had the right and duty to examine how the settlement works, since it could circumvent some of the trustee's rights in the case. Fulmer added that Sager Creek's attorneys initially refused to send him a copy of the settlement agreement.
The company that was once Siloam Springs-based Allens Inc. has changed hands twice since it filed for bankruptcy protection in late 2013. Sager Creek Vegetable Co. bought Allens at auction in February 2014 for $123.8 million. California-based Del Monte Foods now owns Sager Creek, purchasing the company in March for $75 million.
Michael Mervis, attorney for the former Sager Creek Vegetable Co., argued that the court is not required to approve a deal between third parties who are nondebtors. He added that the sale order made it clear that Sager Creek, and not the trustee, is responsible to settle the Perishable Agricultural Commodities Act claims at issue in the case. He noted that the settlement and its terms had been submitted to the court as supporting documents for the hearing in May and were not secret.
U.S. Bankruptcy Judge Ben Barry took the matter under advisement.
In early March, Greg Brown, an attorney representing three fresh-vegetable suppliers of the former Allens, said they settled claims with Sager Creek for the amount available under commitments from the sale order -- $11.8 million, according to court records. The copy of the settlement confirmed that Sager Creek paid that much to the three creditors.
Sager Creek dropped its appeals of rulings on the creditors' claims and proceeded with settling them.
Barry ruled last year that a $9.1 million claim by Hartung Brothers Inc. of Wisconsin, a $1.2 million claim by H.C. Schmieding of Springdale and a $1.9 million claim by D&E Farms of Pennsylvania were all valid under the Perishable Agricultural Commodities Act. Barry's rulings do not include attorneys' fees and interest, projected at the time to be worth about $1.6 million.
The commodities act regulates the sale of fresh and frozen produce to avoid unfair trade practices and make sure sellers are paid in a timely manner. Valid claims are given priority for payment in bankruptcy cases.
Business on 07/30/2015