Dean Foods Chapter 11: Quickly Evolving Events weeks of Nov. 23rd through December 4th, 2020 – a Year after filing

“WHAT SHOULD A PRODUCER DO ABOUT THE REQUESTS FROM ASK SUGGESTING FARMERS SHOULD PAYBACK MONEY?” is the question first and foremost on farmers’ minds.   Most are electing to wait until more information is gathered before sending any money to this law firm, realizing some of the deadlines are pending. This situation has been and continues to be QUICKLY EVOLVING, with information changing by the minute.

NOTICE: This post contains and refers to information and reports about legal events, with some attorneys quoted and official legal notices included, but should not be considered legal advice.  I am not an attorney, so any information should be considered as public information, and not taken as advice on a course of action for any individual.

LEGAL REFERENCE:  Case #19-36313, US Bankruptcy Court, Southern District of Texas-Houston; Presiding Judge:  David R. Jones

SUMMARY – some good news:  

The good news is that producers do have recourse and options per many industry reports, although the exact course of action has yet to be determined, and it may differ for individual producers.  

ADDITIONAL COURT ACTIVITY this week:  On Nov. 30, Southern Foods Group, LLC / Dean Foods et.al. filed several documents outlining a “Plan of Liquidation” in the above-referenced Bankruptcy Action.  (See graphic below).  Some producers have received emails, or may receive letters in the mail, regarding a hearing related to this process, scheduled for Jan 11 at 2:30 pm. (Doc. 3234 at the Epiq Southern Foods Court Docket)  Producers can participate in this January proceeding via audio/video if they wish.  

SUMMARY REPORT:

Past Week:  As many already know, there has been a lot of activity since the last week of November, 2020, concerning an attempt from ASK, LLP to reclaim a portion of funds paid to producers, and other entities doing business with Dean Foods, in the 90 days prior to the Dean Foods/Southern Foods Group Chapter 11 Bankruptcy filing on Nov. 12 of 2019.

Who all got the notices?  It has been confirmed through several sources that farmers were not the only parties who got such notices: a few co-ops and other business entities, such as milk check assignees, consultants, and milk haulers, also received similar letters, and have challenged the requests in a variety of ways.  The resolution of these challenges is not yet known.

Since producers began receiving letters on or about Wednesday, Nov. 25, there has been a flurry of phone calls, text messages, communication to and among agricultural advocacy organizations and dairy producer groups, and others trying to gather and assemble all pertinent information.

The main goal was to establish a producer’s rights and potential courses of action in regards to these solicitation letters from ASK, LLP, and to determine if a producer would eventually be required to pay the requested amounts at all.  Just because ASK asked, does not necessarily mean they will receive.

In communications with many, most farmers have elected to wait until more information was forthcoming before they paid anything to this third party, some have engaged individual attorneys, and some have elected to wait to see if their is a ‘blanket’ recourse on a collective group of farmers.  

The Beginning: How ASK, LLP got involved:

ASK, LLP is working based on contingency fees ranging from 15-27.5%, stated in a ‘letter of engagement’ on the Bankruptcy Court’s Docket. This ‘letter of engagement’ is dated July 18, 2020, and was sent to Gary Rahlfs, Chief Financial Officer, Southern Foods Group/Dean Foods.  That engagement was approved by via a Court Order of Sept. 1, 2020.  That Order, Document #2898, was publicly posted at the Bankruptcy website on Sept. 1, 2020, and it can be downloaded.    

On Social Media?  Be careful!!!  By this time, social media is full of posts of dismay, indignation, and asking what to do.  While these posts generally may be interesting to read, they should not be considered as valid sources of legal information or advice.  

SUMMARY ARTICLES   (the most complete, most accurate, and most in-context with the entire situation – all contain pertinent information):

Dec 3, 2020: Update on Dean Trustee Letters demanding payment from farmers. Don’t pay. Gather records. Fight back, by Sherry Bunting, based on a cover article which has been printed in this week’s edition of Farmshine, and is now in the mail to subscribers.

Dec. 3, 2020:  Milk payment process officially described, relative to Dean trustee avoidance claims seeking partial payback from farmers, by Sherry Bunting, posted at AgMoos blog.  Includes information regarding ‘regular course of business procedures, regulated by Federal Milk Marketing Order rules, under the supervision of USDA.’  This post also appears as an article in the Dec. 4th edition of Farmshine.

• Both articles are full of various useful pieces of information
• The “Milk Payment Process” describes usual course of business transactions in the fluid milk industry
• Various scenarios described in both
• Bunting notes she is not an attorney

Dec. 3, 2020:  Bankruptcy and the Preferential Payment Rule, posted at the Agricultural Law and Taxation Blog, by Roger McEowen, a professor of Agricultural Law and Taxation for the Washburn University School of Law, Topeka, Kansas

• Includes insight from Joe Peiffer, described as one of the country’s leading farm bankruptcy attorneys, working with Ag and Legal Business Strategies of Cedar Rapids, Iowa
• Describes differing situations when avoidance claims will apply, and when they won’t

Dec. 3, 2020: Dairy Farmer Says She Won’t Be Bullied into Repaying $50,000 to Dean Foods, by Tyne Morgan, for AgWeb/ Farm Journal

• The perspective of Jessica Peters, Spruce Row Farm, at Meadville, PA
• Details her range of emotions when she got her letter of ‘legal jargon’

Dec. 3, 2020: DFA Calls Dean Foods Estate Claims “Farfetched,” by Anna-Lisa Laca for AgWeb/Farm Journal

• Quote from article: “We find it extremely disappointing that hardworking dairy farm families are now put in the position of having to incur costs, either in paying the amounts demanded, or obtaining legal counsel to defend themselves against these farfetched claims.”

Dec. 1, 2020:  Dairy Farmers Asked to Return Dean ‘Preference’ Payments, by Dave Natzke, for Progressive Dairyman.  Highlights:

• An attorney, Justin Mertz, with Michael Best, weighs in, via an interview, on three possible defenses, or reasons a party may not have to meet the demands in the letter
• DFA did not receive notices as part of their Asset Purchase Agreement with Dean Foods, which was approved by the court – they are ‘disappointed’ by this action.

CONCURRENTLY:  On this past Monday, Nov 30, Southern Foods Group, LLC, Dean Foods, and Debtor Affiliates filed on the Court Docket two significant documents:  

Document 3230: JOINT CHAPTER PLAN OF LIQUIDATION of SOUTHERN FOODS GROUP, LLC, DEAN FOODS COMPANY, and THEIR DEBTOR AFFILIATES  (75 pages) with the US Bankruptcy Court for the Southern District of Texas – Houston Division, and 

Document 3229 (143 pages), which is captioned:  
MOTION OF DEBTORS FOR ENTRY OF AN ORDER (I) APPROVING THEDISCLOSURE STATEMENT, (II) ESTABLISHING PROCEDURES FOR THESOLICITATION AND TABULATION OF VOTES TO ACCEPT OR REJECT THEPLAN, (III)APPROVING THE FORMS OF BALLOTS AND SOLICITATIONMATERIALS, (IV) ESTABLISHING THE VOTING RECORD DATE, (V) FIXINGTHE DATE, TIME, AND PLACE FOR THE CONFIRMATION HEARING ANDTHE DEADLINE FOR FILING OBJECTIONS THERETO, (VI) APPROVINGRELATED NOTICE PROCEDURES, AND (VII) GRANTING RELATED RELIEF

CONFERENCE CALL NEXT THURSDAY – via PA Center for Dairy Excellence

The PA Center for Dairy Excellence is graciously inviting those affected by this Dean Foods event to participate in a Conference Call on Thursday, Dec. 10, 2010.   The Dean situation is only one to be discussed – Rob Barley and Doug Eberly, Counsel for the PA Milk Marketing Board, will address the letters and how they affect farmers. 

QUICKLY MOVING, EVOLVING SITUATION – Stay Tuned

It is expected there are other significant actions and news to be shared in the next few days, since this is a quickly moving event with pending response deadlines as early as Dec. 19th.  Rest assured that many individuals, information networks, and advocacy organizations are trying to get answers and information to folks as quickly as they can.