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Travelers and Disclaiming Farmers each respond to contrary claims regarding the effect of the settlement agreement

Wednesday, April 27, 2022, 7:53 pm News Flash Archive

The Express Grain bankruptcy court held a hearing April 25 regarding whether to approve the proposed grain interests settlement agreement and order, but kept it under advisement to allow responses to UMB Bank's filing, which was made early the same day. See our previous reporting on this matter here: Express Grain bankruptcy creditors await court ruling on the proposed settlement agreement

The deadline for the sur-replies is midnight tonight, and so far, Travelers Casualty and Surety Company of America, and the Disclaiming Farmers, have filed their responses.

The Travelers response stresses, once again, that if the Disclaiming Farmers give a release to EG, then their claims to any money from the surety bond that Travelers wrote for EG for licensing purposes will be forfeit. The Travelers response may be read here: Travelers Sur-reply on Settlement Agreement

Travelers points out that the court does not have the power to release or set aside its defenses against claims for the bond money, because Travelers isn't a party to the settlement:

Travelers's rights, claims, and defenses vis-a-vis claimants against the Bonds it issued to assure the Debtors' obligations under the Grain Dealer Law and the Grain Warehouse Law are not before this Court under the Settlement Agreement or the 9019 Motion. Indeed, Travelers is a party to neither the Settlement nor the 9019 Motion. Nonetheless, certain Disclaiming Farmers and the Farm Group, as well as other farmers and Agriculture Commissioner who joined in their requests (collectively, the "Objecting Parties"), seek to prejudice Travelers's rights, claims, and defenses by requesting certain language be added to the order resolving the 9019 Motion. Their proposals, if included in the order resolving the 9019 Motion, would grant a non-consensual third-party release, which Fifth Circuit precedent prohibits.

Travelers explains what it thinks is going on here:

A party's actions in one venue can and often do have legal implications in another venue. The other venue, which has jurisdiction over the parties and the dispute, will determine the legal implications. The Consenting Farmers and Disclaiming Farmers elected to agree to certain compromises and releases related to their claims to the Disputed Grain Asset Pool. The legal implications of their elections, if any, to their claims against the Bonds will be decided elsewhere. However, the Objecting Parties seek to have this Court make that determination, which would be a non-consensual third-party release or permanent injunction.

Travelers objects to attempts to add "clarifying language" to the settlement order that would seek to bar Travelers from raising defenses that grow out as a consequence of the farmers releasing EG from liability in the matter of the grain that was never paid for.

The Disclaiming Farmers reply, on the other hand, hammers away against UMB Bank's claim that if the disclaiming farmers release EG from all claims, and surrender, or waive, their rights to the grain they delivered to EG, then those same farmers cannot sue UMB Bank for allegedly helping to cheat them out of the same grain.

The Disclaiming Farmers are the majority of the unpaid farmers, who have elected to give up their interests in the grain they delivered to EG, and not continue the bankruptcy litigation any further. Instead, they have in mind to recover damages from UMB Bank in Don Barrett's lawsuit.

The Disclaiming Farmers state in summary:

In light of UMB's unyielding effort to gain approval of the Proposed Settlement without agreeing to include suitable limiting language in any final order approving it, the Court should either (i) include in its final order approving the Proposed Settlement Agreement the revised Protective Language suggested by Disclaiming Farmers below, or (ii) deny the Settlement Motion outright (albeit without prejudice), because it will compromise claims, causes of action, cross claims, or counterclaims sounding in tort, contract, or statute that are not directly related to the determination of interests in the grain and grain proceeds.

The Disclaiming Farmers accuse UMB Bank of falsely claiming that the farmers are going to try to "claw back" the settlement money that UMB Bank receives under the agreement. To the contrary, the Farmers assert, they are going after UMB Bank's assets for the misconduct they accuse the bank of committing:

Unquestionably, the fact that the Disclaiming Farmers may give up an interest in the Disputed Grain Asset Pool within this bankruptcy case should not provide UMB with an argument that any judgment against it in the District Court Action [Don Barrett's lawsuit against UMB] is unrecoverable, or that any aspect of the Proposed Settlement bars claims against UMB that relate in any way to the claims being settled through the Debtor releases, or somehow fixes the amount of damages that can be recovered from UMB on account of its own alleged bad acts. Those are completely legitimate concerns - particularly in light of UMB's recent intractability on the topic - not some attempt at an end-run. In the end, all the Disclaiming Farmers request is some language in the Proposed Order that protects against those legitimate concerns.

The Disclaiming Farmers suggest that UMB Bank has a hidden agenda:

By refusing to even negotiate possible versions of Protective Language to be included in the Proposed Order, UMB not only demonstrates a disdain for the very rights of the Disclaiming Farmers that this Court intended to preserve, but also suggests that there may be some hidden agenda.

The Disclaiming Farmers claim that UMB Bank is already planning to use the settlement agreement against them in Don Barrett's lawsuit against UMB Bank on their behalf:

... even as the Court conducted the hearing on the Proposed Settlement on April 25, 2022 other attorneys for UMB were in the District Court at the same time, telling the Magistrate in that action that UMB fully intends to use the Settlement Agreement and Farmer Elections as defenses in the District Court Action. UMB wants to have the best of both worlds and is unabashed when it comes to using the Proposed Settlement to its advantage. So, who is really involved in 'gamesmanship?'

The Disclaiming Farmers also assert that their elections can be changed up until the deadline, and that UMB Bank's argument to the contrary is incorrect.

Finally, the Disclaiming Farmers urge the court:

If the Protective Language, or something close to it, is included in the order that is entered, then the Disclaiming Farmers' Limited Objection is resolved. Otherwise, regrettably, the Court must deny the Settlement Motion without prejudice, for the reasons described above and in the Limited Objection.

The full response by the Disclaiming Farmers may be seen here: Disclaiming Farmers Sur-reply to UMB Bank

The court gave itself two days from tonight in which to enter its order regarding whether to approve the settlement agreement.

 


To read all our coverage of the Express Grain bankruptcy case, see here: Index of Express Grain articles

 

John Pittman Hey
The Taxpayers Channel

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