A trial will be necessary to settle a financial dispute between bankrupt Turner Grain Merchandising and a Benton grain seller, a judge said Thursday.
U.S. Bankruptcy Judge Phyllis Jones will set a trial date after the first of the year.
Turner Grain Merchandising in Brinkley filed for bankruptcy protection in October 2014, about two months after it was closed down by federal grain inspectors who found no grain in bins that were certified as being full. The company listed liabilities of $24.8 million against assets of $13.8 million.
The dispute between Turner Grain Merchandising and KBX Inc. of Benton is an offshoot of a financial collapse that left farmers being owed millions of dollars for grain that Turner never paid for.
Turner and KBX this spring had attempted to reach a settlement in their dispute as part of the overall Turner Merchandising Chapter 7 bankruptcy proceedings. When that deal fell apart on March 3, Turner filed its own lawsuit a couple of weeks later.
During settlement attempts this summer, KBX said it owed Turner $887,806.04 for grain it purchased from Turner but also was due a setoff of $532,923.19 for corn that Turner bought from KBX but paid for with a hot check. That left a balance of $354,882.85.
Josh Silverstein, who specializes in bankruptcy law at the University of Arkansas at Little Rock's W.H. Bowen School of Law, said trials in such disputes are common. "The trial -- it's really more of a hearing -- is another way to make sure all creditors or shareholders are treated fairly," Silverstein said. "It's a way to ensure that one creditor isn't favored over any others."
The same reasoning is behind a flurry of "clawback" lawsuits filed this summer against farmers who received Turner payments within 90 days of its filing for bankruptcy.
As part of the lawsuit that brought the two sides into the Little Rock courtroom Thursday, KBX in various court filings said Turner Merchandising Inc. shouldn't be allowed to enforce any of its contracts because KBX's dealings were with Turner Grain Inc., an entity that was not registered with the secretary of state's office to do business in the state.
Turner Grain Merchandising argued that it never conducted business under fictitious entities.
Turner Grain Merchandising Inc. has been registered with the secretary of state for years; Turner Grain Inc. wasn't registered until Aug. 2.
In addition to the federal bankruptcy proceedings for Turner, the personal bankruptcy case of one of its top officials, Dale Bartlett of Marvell, continues to wind its way through court.
Two other lawsuits are pending in state courts. A group of farmers filed one suit in Lonoke County Circuit Court. In Poinsett County, Southern Rice and Cotton LLC filed in a similar suit in Harrisburg.
Both contend Turner Merchandising and its several business entities, including Turner Grain Inc., ran a Ponzi scheme of luring farmers with higher-than-market price offers for their grain, selling the grain to KBX and other dealers and then failing to pay many of the farmers and other businesses across Arkansas and into Mississippi and Missouri. Both lawsuits have trial dates set for next year.
Lawyers in those state cases -- Kendel Grooms for the Lonoke County farmers and Lyndsey Dilks for Southern -- have long challenged the Turner-KBX relationship, claiming KBX knew, or should have known, what Turner was doing and should have sounded an alarm. KBX is a defendant in those two lawsuits.
No criminal charges have been filed. The FBI has declined comment.
Business on 11/18/2016