Archer-Daniels-Midland Co. v. Country Visions Coop.
| Decision Date | 19 February 2021 |
| Docket Number | Case No. 17-cv-0313-bhl |
| Court | U.S. District Court — Eastern District of Wisconsin |
| Parties | ARCHER-DANIELS-MIDLAND COMPANY, Appellant, v. COUNTRY VISIONS COOPERATIVE, United States Trustee, Appellees. |
Andrew R. Running, Michael B. Slade, Ryan B. Bennett, William Guerrieri, Kirkland & Ellis LLP, Chicago, IL, John C. O'Quinn, Kirkland & Ellis LLP, Washington, DC, for Appellant.
Bridget M. Hubing, John B. Nielsen, David G. Peterson, Reinhart Boerner Van Deuren SC, Waukesha, WI, Charles W. Averbeck, Averbeck Hammer & Slavin SC, Fond du Lac, WI, Amy J. Ginsberg, United States Department of Justice Office of the US Trustee, Milwaukee, WI, for Appellees.
DECISION AND ORDER
In this long-pending bankruptcy appeal, Archer-Daniels-Midland Company (ADM) seeks the reversal of a bankruptcy court order that denied ADM's "motion to enforce" an earlier plan confirmation order issued by the same bankruptcy judge. Through its motion, ADM asked the bankruptcy court to enforce a 2011 confirmation order against Country Visions Cooperative (CVC), even though CVC was not a party to the bankruptcy case at confirmation. ADM also requested an injunction that would have prevented CVC from continuing state court litigation related to a right of first refusal (ROFR) on real property that ADM purchased pursuant to the confirmation order. The bankruptcy court denied the motion, concluding that because CVC had not received proper notice of the bankruptcy proceedings, its rights could not be affected by the confirmation order consistent with due process. The court also rejected ADM's alternate theory that it was a "good faith" or "bona fide" purchaser of the property. On March 3, 2017, ADM filed this appeal.
For the reasons that follow, the bankruptcy court's ruling is affirmed. As an initial matter, the 2011 confirmation order is not binding on CVC because the bankruptcy court did not obtain personal jurisdiction over CVC before confirmation. Moreover, in CVC's absence, the parties to the confirmation proceedings failed repeatedly to comply with bankruptcy rules and procedures protecting CVC's rights, depriving CVC of the process to which it was Constitutionally and statutorily due. The informal notice CVC actually received was insufficient to overcome these procedural failures. Finally, the record shows ADM was not an innocent, bona fide purchaser.
In 2007, CVC's predecessors, Golden Grain LLC and Agri-Land Co-op, acquired a right of first refusal on a parcel of real estate in Ripon, Wisconsin (the Ripon Property) from Olsen Brothers Enterprises LLP, a limited partnership owned by Paul and David Olsen. The ROFR provided that for a period of ten years, Olsen Brothers Enterprises would give the holder of the ROFR notice and an opportunity to match any third party's written offer to purchase the Ripon Property. In July 2010, Olsen Brothers Enterprises sold the Ripon Property to Paul and David Olsen individually. The parties agreed that this was a permitted transfer that did not trigger the ROFR.1
On December 16, 2010, the Olsens and their spouses filed petitions for bankruptcy. They requested, and the bankruptcy court ordered, the joint administration of their cases. Like many chapter 11 bankruptcies, the Olsens' cases began with contentious motion practice and, ultimately, competing reorganization plans. These disputes were resolved through mediation, after which, the Olsens' major creditors filed a consensual, amended plan of reorganization. The agreed-upon plan, and a later Second Amended Plan, provided for the sale of the Ripon Property, along with other real estate, pursuant to a bidding process in which ADM was to serve as the "stalking horse" bidder.
The parties presented the agreed-upon plan to the bankruptcy court in late July 2011 and asked for expedited consideration. Pointing to the impending close of the farming season, they insisted that farmers, and creditors who purchased the farmers' crops, needed the certainty that only an approved sale could provide. Accordingly, with the apparent consent of all interested parties, the bankruptcy court approved a disclosure statement on July 29, 2011 and scheduled a confirmation hearing for August 26, 2011, with objections due two days before the hearing. The bankruptcy court later delayed the hearing to August 30, 2011 and scheduled an auction for the same date.
For reasons that remain unclear, even though CVC had filed its ROFR with the local register of deeds, and its interest would have shown up on a simple title report, none of the parties (including ADM) took steps to ensure that CVC was included on the service list for the amended plan or any of the related motions and hearing notices. CVC learned of the potential sale of the Ripon Property only informally, and only after the bankruptcy court had already approved the disclosure statement and set the plan confirmation schedule.
CVC's counsel acknowledged telephoning counsel for one of the major creditors in August of 2011 to ask about the Ripon Property, but did not recall receiving a return call. He also sent a letter to the debtors and their attorney, referring to Olsen Brothers Enterprises' transfer of the Ripon Property to the Olsens and indicating that CVC had received information that the property might be transferred again. Despite CVC's inquiries, none of the parties, including ADM, took steps to ensure that CVC was served with the required bankruptcy notices.
CVC did not learn the actual confirmation hearing date until August 23, 2011, at the earliest. On that date, just one week before the confirmation hearing, one of the debtors' bankruptcy attorneys claims she had a telephone call with CVC's counsel during which she relayed the hearing date and told him that the Ripon Property might be sold. She suggested that if CVC wished to assert any rights, under the ROFR or otherwise, it should do so before or at the hearing. CVC's counsel confirmed the call but could not remember whether he was informed of the hearing date. Even after this call, neither debtors' counsel nor anyone else served notice of the proceedings on CVC.
Ultimately, no one appeared for CVC at the confirmation hearing. And, none of the parties or counsel in attendance spoke up to inform the bankruptcy court that CVC had an interest in the property and had been asking questions about a potential sale. Oblivious to these lurking issues, the bankruptcy court proceeded as scheduled, and, hearing no objections, confirmed the plan and approved the sale. ADM closed on its purchase of the Ripon Property shortly thereafter.
The failure to address the ROFR in the bankruptcy case caused problems four years later. In May of 2015, ADM began negotiations to sell its Wisconsin graining business assets, including the Ripon Property, to United Cooperative (United). By September of 2015, ADM and United had negotiated an asset purchase agreement that included a $25 million purchase price that covered land, improvements, and some personal property. For accounting purposes, the parties allocated the purchase price between the real estate and the other assets, with $14,579,000 assigned to intangible rights and hard assets, and $10,421,000 allocated to real property (Ripon and three other parcels).
Upon learning of the pending sale, CVC contacted ADM to discuss its ROFR on the Ripon Property. After this contact, ADM and United attempted to separate the transaction into two sales, one covering just the Ripon Property and the other covering the remaining assets, including the other three parcels and business assets. On October 13, 2015, ADM and United signed a "Commercial Offer to Purchase" for the Ripon Property. The price was now $20 million for just the Ripon Property. The parties' standard commercial real estate offer and acceptance form stated that United The agreement contained no other contingencies. The next day, on October 14, ADM forwarded the accepted offer to CVC in order to trigger the window for its exercise of the ROFR.
On October 15, 2015, ADM and United signed an Asset and Real Estate Purchase Agreement, transferring the other three properties and business assets (from all four properties) for $5 million. Of that $5 million purchase price, $2.8 million was allocated to real estate, with the remaining $2.2 million allocated to the personal property for all four locations. The end result of the two transactions was a collective sale of the same four properties and all related assets for the same $25 million purchase price previously agreed upon.
On October 16, 2015, the parties closed on the $5 million deal that had been signed the day before. The ROFR period on the Ripon Property deal expired with no matching offer from CVC, so the parties closed on that sale in early November. On November 11, 2015, CVC sued ADM and United in state court, seeking specific performance and damages under various theories, all of which revolved around allegations that the purported standalone nature of the Ripon Property transaction was a sham designed to impede the exercise of CVC's ROFR. Country Visions Cooperative v. Archer-Daniels-Midland Co., et al. , No. 2015CV546 (Wis. Cir. Ct., Fond du Lac Cnty.).
In response to CVC's state court litigation, ADM returned to the bankruptcy court, asking that the Olsens' bankruptcy cases be reopened. After the court agreed to reopen the cases, ADM filed its "Motion to Enforce the Confirmation Order Under Which It Purchased Property Free and Clear and Under Which It Is Not...
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Archer-Daniels-Midland Co. v. Country Visions Coop.
...(7th Cir. 1992). That is the basis of ADM's request.The bankruptcy court denied ADM's request, and the district court affirmed. 628 B.R. 315 (E.D. Wis. 2021). Both judges concluded that ADM had not acquired the parcel in good faith, because it knew of the Right yet failed to alert the bankr......