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Bankruptcy judge bars Express Grain lawyer from pursuing claims against former owners

Monday, September 4, 2023, 6:28 pm News Flash Archive

Last Thursday, the bankruptcy court in the Express Grain collapse barred Express Grain's bankruptcy attorney from pursuing any claims against John Coleman and Dr. Michael Coleman, due to a conflict of interest.

Express Grain and John Coleman have both been represented by Craig Geno's law firm in their respective bankruptcy proceedings.

But since June 7, 2023, Express Grain no longer exists. Its meager cash assets, and its potential legal causes of action, have been transferred to the Express Grain Liquidating Trust, which is managed by trustee Ms. Heather Williams.

Ms. Williams had petitioned the court to allow her to hire Mr. Geno's firm to continue to represent the successor Liquidating Trust, just as he has represented EG since late September 2021 when it filed for bankruptcy.

The liquidating trust is responsible to pay off any court-approved administrative claims, and any other creditors if any money is left.

The liquidating trustee is also allowed to "claw back" certain payments to creditors under Section 5 of the bankruptcy code, and to pursue other legal claims against former officers and managers of Express Grain.

Indeed, on July 24, the liquidating trustee filed a notice that she intends to sue Dr. Michael Coleman for what she claims was his mismanagement and poor oversight of Express Grain, which she suggests helped lead to its collapse, leaving $210 million in unpaid debts.

The entire company liquidated for around $85 million, leaving over a hundred farmers unpaid for at least $40 million in grain they delivered to EG. In all, creditors were left unpaid for over $120 million that was owed them.

To read our previous reporting on the trustee's litigation threat to sue Dr. Coleman, see here: Express Grain Liquidating Trustee threatens to sue Dr. Michael Coleman

But the trustee's threat of litigation against Dr. Coleman triggered both Dr. Coleman and his son John Coleman to file an Objection to Mr. Geno's legal representation of the trustee against them in any matter.

The Colemans argued that, because Geno represents John Coleman already in his bankruptcy, Geno is privy to confidential information that could be used against both Colemans if the court allows Geno to represent the liquidating trustee in claims against either of them:

. . . the Geno Law Firm currently represents John Coleman in his personal bankruptcy . . . and, through that representation, would necessarily have obtained privileged and confidential information in the course and scope of that representation that Objectors [the Colemans] have not waived nor consented to its use or release. Such privileged and confidential information in the Geno Law Firm inherently taints any potential representation of the Liquidating Trustee, in any matter adverse to the Objectors.

To see our previous coverage of the Colemans' objection to the request for approval to hire Geno to represent the liquidating trustee, and to read more details about the ways in which the Colemans describe why Geno's law firm is conflicted, please view here: Colemans claim attorney Craig Geno has a conflict of interest, want him off the Express Grain case

Dr. Michael Coleman owned 99% of Express Grain, but it was operated by his son, John Coleman. Dr. Coleman has not been accused of any illegal activities, but his son John Coleman is awaiting trial on multiple counts of fraud by both the federal and state authorities. Mr. Coleman has entered pleas of not guilty on all counts. See our previous reporting here: John Coleman's federal criminal trial put off until November 27, 2023

What appears to have triggered the liquidating trustee's ire most is Dr. Michael Coleman's claim, filed in late May 2023, that the liquidating trust owes him $2.8 million in money he claims he loaned to EG after it filed for bankruptcy. See our previous reporting on Dr. Coleman's claim here: Dr. Michael Coleman files $2.8 million expense claim against bankrupt Express Grain

The trustee vigorously disputes Coleman's claim, and wants to use Mr. Geno to fight that claim, and to pursue claims against Dr. Coleman as well.

But the court has now barred Geno from representing the trustee in any claims against the Colemans. Otherwise, the court ruled, the trustee can employ Geno and his firm to represent her in matters unrelated to claims against the Colemans:

The Geno Law Firm's application for retention by the Liquidating Trustee is granted; provided that, such retention expressly excludes any legal services related, in any respect, to the Insider-Related Claims [i.e., claims involving the Colemans], which exclusion of the Geno Law Firm encompasses, but is not limited to:

a. Any investigation or assessment of claims, causes of action or other actions against John Coleman and/or Dr. Michael Coleman, (the "Insiders"), individually or collectively, directly or indirectly, regardless of their capacity as employees, officers, directors, managers, or members;

b. Pursuing or defending, directly or indirectly, any action or matter adverse to the Insiders (including any claim objection), individually or collectively, whether in their individual capacity or as employees, officers, directors or members; and/or

c. Using, or providing to another for use, any privileged materials of the Insiders, which includes materials, notes, documents, communications or other materials protected from disclosure under the attorney-client communications, attorney work-product or other applicable privilege.

The court's orders may be seen here:

Order Approving Counsel to Liquidating Trustee

Order Approving Special Counsel to Liquidating Trustee

The court essentially agreed with the Colemans, that it would be improper for Geno to represent the liquidating trustee in any way adverse to the Colemans, and prohibited Geno from doing so.

It is not clear what the liquidating trustee will do about this turn of events. Time is short, and some deadlines are fast approaching.

As of this Labor Day afternoon, Ms. Williams has not filed any requests to appoint another law firm to pursue the Colemans or to object to Dr. Coleman's $2.8 million claim against the liquidating trust.


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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