In Allens case, law firms bill $400,000

Sunday, July 27, 2014

Three law firms involved in the bankruptcy case of Siloam Springs-based Veg Liquidation, formerly know as Allen's Inc., have filed bills for more than $400,000 in fees and expenses with the court this month.

Bankruptcy Judge Ben Barry is hearing the case and will have to approve the bills before they are paid. Objections to the amounts may be raised through early September.

Including these most recent filings, the three firms so far have billed a total of $2.29 million for services and expenses. The firms ask that the most recently billed items be paid out of money set aside for the fees when Allens Inc. was sold.

Professor Tim Tarvin of the University of Arkansas School of Law in Fayetteville, who teaches bankruptcy and nonprofit law, and Joshua Silverstein, a professor at the W.H. Bowen School of Law at the University of Arkansas at Little Rock, who researches and writes about bankruptcy law, both looked over the bills and said they appeared reasonable.

"In cases of this sort, a large business is either destined for rehabilitation or liquidation, and the stakes are high, not only for the stakeholders and the creditors, but for employees, the community and the economy," Tarvin wrote in an email from the University of Cambridge in England, where he is teaching in UA's summer abroad program. "Having the best trained and most highly qualified professionals helps to insure that any potential workout has the best chance of success."

In late October, the canned-vegetable company filed for Chapter 11 protection in U.S. Bankruptcy Court for the Western District of Arkansas. The case was shifted to Chapter 7 in June.

Sager Creek Acquisition Corp., a group made up of former Allens Inc. creditors, bought the company at auction in February with a winning bid of $123.8 million. The total value of the deal is just less than $160 million.

In mid-July, Little Rock-based Mitchell, Williams, Selig, Gates & Woodward, attorneys for the debtor Veg Liquidation, filed its first and final application for legal fees of $274,648 and expenses of $5,549, a total of $280,197, for services provided between late October and June 6.

Greenberg Traurig LLP, a New York-based firm that also represented Veg Liquidation, filed a second and final application for legal fees of $86,299 and expenses of $4,919, a total of $91,218, for services from March 1 through June 30. Barry has already approved $1.3 million in expenses and fees billed by Greenberg Traurig that have already been paid, according to court filings.

New York-based Cooley LLP, which represents an official committee of unsecured creditors, billed for $32,400 for legal services and $724 for expenses for a total of $33,124 for the March 1 though June 6 period. According to the filing, Barry has already approved $582,660 in fees and $11,649 in expenses for the Nov. 13 thorough Feb. 28 period that have been paid.

UALR's Silverstein said bankruptcy cases are manpower intensive, with attorneys having to address nearly every aspect of a company from top to bottom. Cooley LLP, for example, overall billed for over 1,000 hours with a blended attorney rate of $566.04 an hour, according to court documents.

He said while the hourly fees for the attorneys in the case might seem high at first glance, bankruptcy lawyers are specialist who, at top firms, can command substantial fees.

Tarvin noted in his email that all the fees had been negotiated, and in the case of Cooley LLP, even discounted up to 20 percent, and that in the end the judge would determine if they were fair and reasonable.

"If you consider the amount of time required to review all of the detailed financial and legal documents, you begin to understand why so many attorneys, associates and paralegals are involved," Tarvin wrote. "The work must be shared not merely because of the volume, but to reduce the fees to the greatest extent possible."

Earlier in July, the company's new owners changed the name of Allens Inc. to Sager Creek Vegetable Co. The company's brands, including Veg-All, Allens Popeye Spinach and Freshlike, will not change.

Sager Creek Vegetable Co. employs more than 1,000 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.

Barry is still considering objections by Veg Liquidation to nearly $12 million in claims made by several of the company's suppliers under the Perishable Agricultural Commodities Act.

The Perishable Agricultural 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 all claims allowed under the act.

In June, Barry heard objections to $8.2 million in claims for unpaid bills for peas and carrots sold to Allens under the act by Wisconsin-based Hartung Brothers Inc. Allens and Hartung Brothers have done business since 1984, and Hartung had become Allens' sole source of peas.

In May, Barry heard and took under advisement Veg Liquidation's objection to Perishable Agricultural Commodities Act claims of $1.16 million by H.C. Schmieding Produce Co. Inc. of Springdale; $1.95 million by D&E Farms Inc. of Pennsylvania; and $128,000 by Michigan-based Central Produce Sales Inc.

SundayMonday Business on 07/27/2014