A dispute over more than $500,000 between the bankruptcy trustee for Turner Grain Merchandising and a grain dealer in Benton has been settled for $35,000, subject to the approval of U.S. Bankruptcy Judge Phyllis Jones.
A trial scheduled for today in U.S. Bankruptcy Court in Little Rock was rendered moot by the proposed settlement. Jones has until Feb. 22 to approve the deal, and any objections must be sent to the court by that date.
The dispute is an offshoot of Turner Grain's bankruptcy filing in October 2014, when it listed liabilities of $24.8 million against assets of $13.8 million. The collapse of the Brinkley firm left dozens of farmers, grain dealers and other entities being owed millions of dollars for grain that Turner sold but never paid them for.
In the months after the bankruptcy filing, trustees for the Turner estate and lawyers for KBX Inc. of Benton attempted to settle the dispute. Turner's trustee sued KBX in March 2016, ultimately seeking payment of $887,806.
Last fall, KBX paid $354,882 for grain the company purchased from Turner but never paid for. KBX lawyers agreed that their client owed that amount but said it would continue to dispute the balance of $532,923. KBX said that amount was actually a debt owed by Turner for corn it bought from KBX and paid for with a hot check.
KBX also contended throughout last year that Turner Grain Merchandising Inc. shouldn't be allowed to enforce any of its contracts because KBX's dealings were with Turner Grain Inc., an entity not registered at the time with the secretary of state's office. That name, like several other names used by Turner officials, wasn't registered until last August.
The payment of $354,882 went into a Turner account from which proceeds eventually will be parceled out to creditors.
In November, after a court hearing between the two sides that went nowhere, Jones had set the trial date.
Turner's bankruptcy trustee, Randy Rice, of Little Rock, said Tuesday that the $35,000 settlement was "fair and reasonable" because of the "uncertain outcome of litigation." He also said continuing the case in court would only deplete the Turner account to the detriment of creditors.
Rice said he and his attorney, Thomas Streetman of Crossett, "analyzed all the issues really closely" and determined that KBX likely had the right to the $532,923 offset and probably would have won in court. The $35,000 settlement to the Turner estate will help both sides avoid further litigation costs, he said.
"It stinks, but what can you do?" Jim Mead of Jonesboro, owner of Delta Grain Marketing and one of Turner's many creditors, said Tuesday. "It is a kick in the shin to the victims. It's degrading to all the victims. They've lost everything. They [KBX] are not victims."
Mead and dozens of farmers have been sued by the Turner trustee for the return of any payments they received from Turner Grain in the 90 days before its bankruptcy filing. Such payments are considered "preferential" under federal bankruptcy law and are subject to lawsuits.
"That's the problem with the 'clawback' lawsuits," Mead said. "Probably 70 percent of those being sued were already victims."
Josh Silverstein, a law professor at the University of Arkansas at Little Rock's W.H. Bowen School of Law and expert in bankruptcy law, said "a lot of factors" will go into a trustee's attempts to settle. They include the strength of one's case and the expense of litigating it.
"Settling for pennies on the dollar" happens, Silverstein said, "but whether it makes sense depends on the specifics of the case."
Silverstein also said bankruptcy judges "will give some deference to the trustee," who develops proposed settlements in bankruptcy cases like Turner's, "but will still put in very careful review so as to help creditors as much as possible."
Business on 02/08/2017