FAYETTEVILLE -- A bankruptcy judge Tuesday took under advisement objections by Veg Liquidation, formerly known as Allens Inc., to claims made under the Perishable Agricultural Commodities Act by one of its top vegetable suppliers.
Wisconsin-based Hartung Brothers Inc. has made $8.2 million in claims for unpaid bills for peas and carrots sold to Allens under the act. Hartung Brothers and Allens have done business since 1984, and Hartung had become Allens' sole source of peas.
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.
Bankruptcy Judge Ben Barry is hearing the case. Last month, he 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.
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 has recently been shifted to Chapter 7.
Sager Creek Acquisition Corp. bought Allens Inc. at auction in February with a winning bid of $123.8 million. The total value of the deal is just less than $160 million.
Veg Liquidation's special commodities act counsel, Jason Klinowski of Freeborn & Peters of Chicago, said Tuesday that the language of the act does not require Allens to consider fuel and freight charges as part of Hartung Brothers' claim for several reasons, including contract language that in this case limits the act's protection. He said Allens and Hartung were both operating in good faith but had different interpretations of the act's scope and requirements.
"They both can't be right," Klinowski said.
Attorney Greg Brown of Washington, D.C.-based McCarron & Diess, representing Hartung Brothers, said Allens contracted for a delivered price for Hartung Brothers' vegetables, so freight and other charges counted toward the total cost of the produce. He said Klinowski misunderstands the logical reading of the commodities act and said he was trying to get around deadlines set by the court to raise new objections at trial.
"It's the same old dog-and-pony show," Brown said.
Barry directed the attorneys to submit post-trial briefs in the next 20 days and said he'd consider the validity of new objections Klinowski raised during the trial and a request for a directed verdict by Brown. A directed verdict is usually made when a judge determines there has not been enough evidence submitted to prove a case.
Before he adjourned, Barry praised attorneys on both sides for their professionalism, saying that in bankruptcy cases it comes down to the difficult decision of how best to distributed limited resources. Brown and Klinowski and their respective legal teams argued three of the commodities act cases Barry heard.
"There are no bad guys here, including Mr. Allen," Barry said, referring to Josh Allen, former CEO of Allens Inc., who testified in each of the commodities act cases.
Allens Inc., 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 06/11/2014