Tuesday, August 16, 2022, 7:42 pm
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Today, the bankruptcy court in the Express Grain collapse held a hearing to determine how many farmers wish to move forward to a 557 Determination Hearing.
The 557 Determination Hearing is the legal method by which the contested ownership of grain held by a bankrupt warehouse is sorted out. EG went broke owing almost 260 farmers $48 million for grain they delivered to EG but were never paid for.
It turned out that EG had sold and resold grain to multiple parties, and was $218 million in debt when it collapsed. There was not enough grain or money to pay off all of EG's creditors.
A settlement was hammered out by UMB Bank, StoneX, Macquarie, the crop lender banks, and various farmers, that resolved almost all of the claims made by the farmers. Sadly, the settlement meant that some farmers would be paid a pittance of what they are owed, while others would receive nothing, with UMB Bank, StoneX, and Macquarie getting most of the money collected by liquidating the grain holdings.
After some farmers accepted the settlement, and a large number of farmers "renounced" their interests in the grain, there were in the end only five farmers who had live claims for grain but who had not filed an "election form" indicating how they wished their claims to be treated.
Those farmers were:
Belmont Farms, LLC
Kyle Mills d/b/a Kyle Mills Farms
Kyle Knight Farms, LLC
James H. Alderman
For more details about how the bankruptcy case reached this point, read our previous, exhaustive reporting on these matters: Express Grain bankruptcy: now it's down to just five farmers contesting their grain interests
Today was the day that a preliminary hearing was scheduled by the court to determine which, if any, of these five remaining farmers wished to pursue their claims at a full-blown evidentiary hearing.
The hearing, which began at 10 am, was fraught with technical glitches. For the first 40 minutes, the parties who participated by telephone could not hear anything that was said in the court room.
After Judge Selene Maddox called the names of all five farmers three times in open court, three of the five (Hunter Alderman, James H. Alderman, and Kyle Mills) did not respond, and were not present. The court therefore ruled that their claims would be treated as general unsecured claims, which means most probably they will never be paid anything.
One farmer, Samuel Pigott with Belmont Farms, LLC, was present and did answer when his name was called. Mr. Pigott told the court that he no longer wished to pursue his grain claim in court, and wanted it to be treated as a general unsecured claim. The court entered an order doing so.
The final farmer, William Kyle Knight representing Kyle Knight Farms LLC, was also present and answered. He told the court that he wished to proceed to a 557 Determination Hearing to litigate his grain claim. According to various court filings, Mr. Knight's claim is valued at around $56,000.
Mr. Knight's claim apparently is that Express Grain was holding his grain, and did not actually own it, so he is entitled to recover it on a "bailment" theory, or perhaps under a constructive trust argument. It is not clear whether the law will uphold such a claim or not.
The judge reminded Mr. Knight that since his claim was made by an LLC, he would have to be represented by an attorney, as only sole proprietorships can represent themselves in federal court. Mr. Knight assented to that requirement.
The court set the hearing for September 8th at 1 pm at the Aberdeen bankruptcy courthouse. The court stressed that all parties who would participate in that hearing must be physically present in the court room.
Meanwhile, the farmers who settled their claims are awaiting distribution of the settlement money. It is not known publicly how many farmers there are, or what their claims total, but the settlement allotted $9.2 million to pay claims and various farmers' attorney costs.
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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