Jackson Jambalaya

This post is reprinted with permission of The Taxpayers Channel (Greenwood). 

This afternoon, the bankruptcy court entered an order approving the Settlement Agreement in the Express Grain bankruptcy case. The Settlement Agreement settles most, but not all, of the disputes between Farmers, EG, and the warehouse receipt holders about who has an interest in the grainproceeds in the bankruptcy estate.

The court did so without adding any of the "protective language" urged by various Farmer Groups.

The court also ruled that the Disclaiming Farmers are indeed "parties" to the Settlement Agreement, and they cannot withdraw their "Farmer Election" forms that they previously filed.

The court ruled that it does not have jurisdiction to determine the issues being litigated by Mr. Don Barrett's lawsuit against UMB Bank on behalf of some farmers.

All of this leaves up in the air the question of whether the Disclaiming Farmers' claims against UMB Bank are undermined by their renouncing their interest in the grain they delivered to Express Grain but for which they were never paid.

The Settlement Agreement has turned into a bitter fight between the Disclaiming Farmers and UMB Bank, Macquarie, and StoneX over the meaning of the release that the Disclaiming Farmers granted regarding the disputed grain. See here for our previous reporting on this dispute: Travelers and Disclaiming Farmers each respond to contrary claims regarding the effect of the settlement agreement

The Settlement Agreement provides for farmers to join one of three groups by filing an Election Form. The three options are:

Consenting - these farmers will release all claims against the other parties, will be paid a sum of money from the $9.25 million farmers settlement pool, and will receive releases from the other parties, so that EG cannot try to "claw back" any of their proceeds, or sue them for any failure to deliver all the grain they had under contract when the bankruptcy was filed by EG.

Disclaiming - these farmers will disclaim, or renounce, their claims to the grain they delivered to EG, and no longer contest their interest in that grain. In exchange, they will be released by EG from any future claims, and will have their attorney fees paid out of the $9.25 million pool.

Non-consenting - these farmers will continue to litigate their claims to their interest in the grain at a future 557 hearing, and will neither receive nor grant any releases.

Both Disclaiming and Non-consenting farmers may change their elections to Consenting Farmers in the same 10 days. A Determination of Interest hearing will be held in mid-May at which farmers who have not yet filed an Election Form may appear to state their decision.

The matter that has caused the dispute is whether the farmers who "disclaimed" their interests in the grain they delivered, can nevertheless continue to pursue UMB Bank and perhaps others, based upon Don Barrett's claim that UMB Bank conspired with EG to effectively seize the farmers' grain for which they had never been paid. So far, Mr. Barrett has not produced publicly any proof of his claims against UMB Bank, but that separate lawsuit is still in its preliminary stages.

The disputed language on the farmers' Election Form reads:

The undersigned does hereby (1) withdraw any Assertion of Interest filed with the Court and (2) disclaim and waive any interest that the undersigned has or may claim to have to any and all grain delivered to the Debtors and the products and proceeds thereof which are the subject of the 557 Proceedings currently pending before the Bankruptcy Court (the "Disputed Grain Asset Pool") including, without limitation, all funds in any segregated accounts, accounts receivable, and remaining grain finished product inventory.

Does that language, "disclaim and waive any interest that the [farmer] has or may claim to have to any and all grain delivered to the Debtors," extinguish the farmers' right to sue UMB Bank in another court, arguing that UMB Bank conspired with EG to shanghai the farmers' grain?

The bankruptcy court ruled that it does not have jurisdiction to decide that question:

Any potential legal effect of this settlement on pending or future litigation in another forum, including any administrative proceedings, is not for this Court to determine as such litigation and administrative proceedings fall outside of this Court's limited jurisdiction. 

But the court does lay out the timeline of the development of the Settlement Agreement, and concludes that there was an agreement made, and a "meeting of the minds" as to the terms of the agreement, and that the farmers signed their Election Forms committing themselves to the agreement. Only later did questions pop up regarding the effect of the "disclaimer and waiver" to which the Disclaiming Farmers had already agreed.

In determining that the Settlement Agreement is reasonable and equitable, the court took note of testimony that was offered that a full-blown 557 trial, which would take place if the Settlement Agreement falls apart, would cost around $2.4 million in additional attorney fees for the various parties.

Further, the court notes that the legal issues at a 557 trial would be very complex, and involve state and federal statutes where there is very little legal precedent to proceed under. The parties are entitled to weigh the risks of their being able to prevail at such a 557 trial, and thus a settlement is a reasonable compromise of those issues and risks.

Finally, the court found that the Settlement Agreement is in the best interest of the creditors, and was not entered into by fraud or collusion.

A summary of the terms of the Settlement Agreement approved today may be seen here: Express Grain settlement terms finally disclosed: farmers would receive only $9.25 million. 

The Farmers portion is $9.25 million, while the warehouse receipt holders (UMB Bank, StoneX, and Macquarie) will divide $48.6 million.