A motion to withdraw a proposed settlement put a sudden end to a hearing Thursday in federal bankruptcy court involving business dealings between grain broker KBX Inc. and the now-bankrupt Turner Grain Merchandising Inc.
KBX and Richard Cox, the trustee for Turner, said last November they had reached a compromise in the settlement of a dispute involving more than $800,000. Two separate plaintiffs who sued Turner Grain Merchandising in Lonoke County objected to the proposed settlement, resulting in the hearing Thursday morning before U.S. Bankruptcy Judge Phyllis Jones. It lasted 45 minutes before the settlement offer was pulled down.
In the proposed settlement, KBX, which is based in Benton, said that it owed Turner $841,837 for grain it purchased from the dealer. At the same time, KBX said it was owed $532,923 from Turner for corn. The difference -- $308,914 -- would go to the Turner bankruptcy estate. Turner filed for bankruptcy in October 2014, listing liabilities of $24.8 million and assets of $13.8 million. The collapse of the grain dealer cost farmers millions of dollars in the sale of grain for which Turner never paid. Lawsuits are pending in both state and federal courts. The case is now in Chapter 7 liquidation.
"No one disputes -- at least on our side" the $308,914 debt, Randy Grice, a lawyer representing Cox and KBX, said at the hearing. Grice said settling now will reduce the chances that KBX will be "subjected to double payments" as the tangled case winds it way through state and federal courts.
Kendel W. Grooms, a Little Rock lawyer representing a group of Lonoke County farmers who have sued Turner Grain Merchandising, argued that KBX and Turner were using a possible settlement in federal court as a way of establishing any "findings of fact" that could then negatively affect the farmers' lawsuits in Lonoke County. Grooms said he doesn't object to any payments that can be made into the Turner estate but, rather, "the reason why it's owed."
Grooms also said his clients "were never approached about this settlement, not one time. They read about it in the newspaper."
Lyndsey D. Dilks, a Little Rock lawyer representing Southern Rice and Cotton LLC in the Lonoke County lawsuits, echoed many of Grooms' complaints. "There are a lot of facts still in dispute and any settlement puts a cloud" over the Lonoke County farmers' case. "A settlement agreement implies there is evidence that certain facts have been settled," she told the court.
But Grooms and Dilks were only just starting their objections; they intensified when Grice put on as a witness Shay Sebree, a KBX employee of 12 years, who said, "I buy and sell" grain for KBX. Grooms and Dilks objected, saying whatever business relationship KBX and Turner had was irrelevant in this hearing.
Sebree said KBX, depending on the market, "bought rice every day, or once a week," from Turner, prompting more objections from Grooms and Dilks.
The objections continued for several more minutes, prompting the judge to order a recess.
After a 15-minute break, Grice announced he was withdrawing the proposed settlement agreement and that his side would prepare for trial. Grice said Cox, the trustee, had drawn up the offer in good faith.
Jones eventually got both sides to agree to meet, before trial, in an effort to salvage a compromise.
Grice later declined comment, as did Grooms.
Dilks said she believed Grice withdrew the proposed settlement because he was going to lose.
Business on 03/04/2016