A second lawsuit stemming from the collapse of Turner Grain Merchandising Inc. has gotten a federal bankruptcy judge's OK to be returned to circuit court.
U.S. Bankruptcy Judge Phyllis Jones this week approved a request by Southern Rice and Cotton of Harrisburg to pursue its claims against multiple defendants in Poinsett County Circuit Court. Those defendants will not include Turner Grain Merchandising, which remains under the protection of the bankruptcy court.
However, Jones ruled that Southern Rice will be allowed to continue pursuing its financial claims against Turner Grain Merchandising in bankruptcy court. Turner and the trustee in the bankruptcy case, Richard Cox, retain the right to object to Southern Rice's claims in the federal bankruptcy case, according to the order Jones signed Tuesday.
Turner Grain Merchandising, a grain dealer that was based in Brinkley, filed for bankruptcy in October 2014, listing its officers as Jason Coleman, president, and Dale Bartlett, vice president, although it noted that Bartlett's ownership share was in dispute. Bartlett has filed for personal bankruptcy.
In its initial bankruptcy filing, Turner Grain Merchandising listed assets of $13.8 million and liabilities of $24.8 million, a number that was expected to grow as the bankruptcy case progressed. Meanwhile, numerous lawsuits were filed against Turner Grain Merchandising in state and federal court seeking payment for grain that was delivered to the company. Most of those lawsuits were made part of the Turner Grain Merchandising bankruptcy case that is being heard by Jones.
As part of the bankruptcy proceeding, Cox, the trustee, is working to identify cash and other assets that can be used to pay at least some of the claims against Turner.
Now, Jones has agreed to let two of the state lawsuits that arose from Turner's collapse return to circuit court, though without the entity known as Turner Grain Merchandising Inc. In general, both lawsuits allege that a web of companies, some controlled by Coleman and Bartlett, engaged in a conspiracy to defraud farmers by promising inflated prices for their rice, taking possession of the rice, and failing to pay the farmers.
In the first lawsuit, Southern Rice said it purchased rice from farmers and began selling it to multiple defendants through Turner Grain Merchandising in the fall of 2013. When it filed its original suit in Poinsett County Circuit Court in September 2014, Southern Rice asserted that KBX Inc., a Benton grain broker, was "intricately involved" with Turner Grain Merchandising and its officers. KBX was the "ultimate purchaser" of rice for which Southern Rice never received payment, according to the lawsuit.
KBX was later dismissed from a lawsuit filed in Poinsett County Circuit Court, but Lyndsey Dilks, Southern's attorney, said in a Dec. 11 filing that she intends to add it again to the list of defendants.
The other defendants are an entity called Turner Grain Inc., which the lawsuit says wasn't licensed to do business in Arkansas and was operated as an "implied partnership" by Coleman, Bartlett, Christopher Taylor and "John Does 1-10"; Brinkley Truck Brokerage LLC., which the lawsuit says listed Bartlett as its agent and hauled grain for Turner Grain Inc.; Coleman Transportation LLC which the lawsuit says listed Coleman as its agent; Ivory Rice LLC, which the lawsuit says listed Neauman Coleman as its agent, Jason Coleman, Taylor and "John Does 1-10."
In the second lawsuit, Jones agreed in September to let Zero Grade Farms, Bigfoot Ag Inc. and other farmers return their case to Lonoke County Circuit Court. In November, she ruled that they could not include Turner Grain Merchandising in the Lonoke County Circuit Court lawsuit because to do so would give them an advantage over the other creditors in Turner's bankruptcy case, among other reasons.
Separately, Judge Richard Taylor, who is presiding in Bartlett's personal bankruptcy case, ruled that Zero Grade and its fellow plaintiffs could include Bartlett in the Lonoke County Circuit Court case.
Attorneys for Zero Grade and the other plaintiffs argued in a Dec. 7 hearing before Judge Taylor that Bartlett was a key figure in a purported conspiracy and that it was essential to include him in the Lonoke County case. Under questioning from Bartlett's attorney, however, three of the farmers acknowledged that the contracts for their rice were signed by Jason Coleman, rather than by Bartlett. Bartlett later testified that he was fired before the contracts were signed.
Judge Taylor ruled that the plaintiffs' allegations of fraud, conspiracy and theft by deception, among others, were issues for a state-level court to decide. If the Lonoke County Circuit Court finds that Bartlett's estate owes money to the plaintiffs, Judge Taylor said the plaintiffs would have to return to his court for a decision on how much, if anything, they could collect.
Defendants KBX, Gerald Loyd, Neauman Coleman and Rice America Inc. have filed responses over the past nine days denying wrongdoing in the Lonoke County Circuit Court case.
KBX said Turner Grain Merchandising was an "indispensable party" in the Lonoke County Circuit Court case, and its absence from the case meant that the lawsuit should be dismissed. Turner, not KBX, was the entity that entered into contracts with the farmers and then failed to pay them, KBX said.
KBX said it paid Turner Grain Merchandising more than $104 million between October 2013 and August 2014, "representing payment for virtually all" of the rice it bought from Turner. KBX also noted that it has reached an agreement with Cox that it owes Turner Grain Merchandising $308,914 and has joined Cox in asking Jones to approve payment.
"Despite these facts, Plaintiffs seek to have KBX pay twice for the same rice, a truly unjust result," KBX said in a motion to dismiss Zero Grade's state court lawsuit.
KBX also said Zero Grade Farms had failed to offer any facts supporting the existence of a conspiracy or that Turner Grain Merchandising acted as its agent. KBX said it was included in the lawsuit only as part of "an entirely transparent attempt to find the proverbial 'deep pocket' in this case."
In his response, Loyd acknowledged that he was general manager of Turner Commodities Inc., another of the defendants, but asserted that he was not a partner in any entity called Turner Grain Inc. or Turner Grain. Zero Grade and its fellow plaintiffs contend that Loyd, Jason Coleman, Neauman Coleman, and Christopher Taylor did business under the names "Turner Grain Inc." and "Turner Grain."
Loyd said he discovered in late September or early October 2014 that "some individual believed to be Jason Coleman" had been making unauthorized withdrawals from bank accounts belonging to Turner Commodities. Statements for those accounts went to Jason Coleman and/or Bartlett in Brinkley, Loyd said, making Turner Commodities a victim of "unauthorized, fraudulent and improper conduct, rather than a participant."
Business on 01/01/2016