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And then there were none: last farmer withdraws 557 grain claim in Express Grain bankruptcy

Thursday, September 8, 2022, 4:09 pm News Flash Archive

This afternoon, the last farmer's claim to grain ownership in the Express Grain bankruptcy was withdrawn by him in court, ending the long spun out 557 Grain Determination Hearing process.

As we previously reported, the 557 Determination Hearing process 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 a few farmers would be paid a pittance of what they are owed, while most 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.

At a previous court hearing held on August 16, 2022, the five farmers were winnowed down to just one farmer left, Kyle Knight of Kyle Knight Farms, LLC. Mr. Knight stated at that hearing that he wished to proceed with the 557 Hearing, which the court then scheduled to be held today. Mr. Knight was told by the judge that his LLC would have to be represented in court by an attorney, according to federal court rules.

To read our coverage of that hearing, see here: Express Grain bankruptcy saga inches forward - now there's only one farmer left

But over the weekend, with still no sign of an attorney to represent Mr. Knight's farm, the court scheduled a telephone status conference for Tuesday afternoon to discuss how to proceed.

At Tuesday's conference, neither Mr. Knight nor his attorney was present. EG bankruptcy attorney Craig Geno conveyed to the court that he had been approached by an attorney who might represent Mr. Knight's farm, and Mr. Geno brought him up to speed on the 557 Determination Hearing status. Later, Geno reported, the attorney let him know that he would not be representing Mr. Knight's farm after all, as Mr. Knight had decided to "go with Don Barrett."

The court decided to convert today's hearing into a telephonic hearing, since it appeared that it might be a waste of everyone's time to travel to court in Aberdeen for a hearing that might be quite short. The court suggested that Mr. Knight's claim might be dismissed if his farm wasn't represented, or if his farm was represented by a new attorney, a continuance might be necessary.

But at today's telephonic hearing, Mr. Knight appeared, and withdrew his 557 Grain claim. He indicated that he would no longer be pursuing his claim in the bankruptcy court.

At today's hearing, UMB Bank, StoneX, and Macquarie were each represented by two or more attorneys by telephone, with the bankruptcy trustee representative Abby Marbury, and EG's attorney Craig Geno also in attendance.

Due to Mr. Knight's withdrawal of his claim, the court upheld the objection to Kyle Knight Farms, LLC's claim, converting it into an unsecured claim. Unsecured claims are very unlikely to be paid anything at all.

The entire hearing, which could have dragged on for days, ended in just 15 minutes.

Mr. Knight's claim for around $56,000 was not as strong, legally speaking, as many of the claims originally filed by other farmers. He did not file a "reclamation" claim nor a "bailment" (storage) claim, but rather claimed to have sold the grain to EG. Other farmers had claimed that EG was "storing" their grain, and did not actually own it. Under the current state of the law, claims made by farmers like Mr. Knight who sold grain to EG are treated as unsecured debts with the lowest priority for payment. EG has liquidated for around $85 million, with $115 million in secured debts, and over $100 million in unsecured debts.

Mr. Knight is joining over a hundred other farmers, who have thrown in their lot with attorney Don Barrett's lawsuit against UMB Bank. In that suit, Mr. Barrett accuses the bank of conspiring with EG to shanghai the farmers' grain to pay off the $71 million that EG owes the bank. To read our previous coverage of Mr. Barrett's litigation against UMB Bank, see the links in this recent article: Farmers' Attorney Don Barrett continues to pursue UMB Bank in Express Grain debacle


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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