In re Express Grain Terminals, LLC
| Decision Date | 02 May 2022 |
| Docket Number | 21-11832-SDM |
| Parties | IN RE: EXPRESS GRAIN TERMINALS, LLC[1] DEBTOR |
| Court | U.S. Bankruptcy Court — Northern District of Mississippi |
This cause came before the Court on the Joint Application to Compromise Controversy (the "Settlement Application")(Dkt. #2718) filed by the Business Debtors StoneX Commodity Solutions LLC ("StoneX"), UMB Bank, N.A. ("UMB"), Macquarie Commodities (USA) Inc. ("Macquarie"), Agrifund, LLC ("Agrifund"), Ag Resource Holdings, LLC, Ag Resource Management, BankPlus, Guaranty Bank and Trust Company ("Guaranty Bank"), Southern AgCredit, ACA ("Southern AgCredit"), Bank of Commerce, First South Farm Credit, ACA ("First South Farm Credit") Planters Bank & Trust Company ("Planters Bank"), and Staple Cotton Discount Corporation ("Staple Cotton") (collectively, the "Movants"); the Comment and Reservation of Rights Regarding Joint Motion for Approval of Settlement and Compromise (the "Reservation of Rights") (Dkt. #2755) filed by Travelers Casualty and Surety Company of America ("Travelers"); the Disclaiming Farmers' Limited Objection to Joint Motion for Approval of Settlement and Compromise (the "Objection") (Dkt. #2760) filed by approximately 99 farmers or farming entities (the "Disclaiming Farmers")[2]; Farm Group's Response to Joint Motion for Approval of Settlement and Compromise (the "Response") (Dkt. #2761) filed by Farm Group and the various Joinders filed by Farm Group I (Dkt. #2762), Farm Groups II and III (Dkt. #2763), and the State of Mississippi Department of Agriculture and Commerce (the "State of Mississippi") (Dkt. #2765).
This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a) and the Standing Order of Reference signed by Chief District Judge L.T. Senter and dated August 6, 1984. This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(A) ().
The procedural history leading up to the filing of the Settlement Application is extensive. As such, the Court will limit its overview to the § 557 proceedings. On January 31, 2022, the Court entered the Amended Section 557 Procedures - Phase 2 Scheduling Order (the "Scheduling Order") (Dkt. #1800), establishing parameters for an expedited discovery process and final determination hearing (the "§ 557 Final Determination Hearing") necessary for the resolution of certain legal issues (the "Common Legal Issues") under 11 U.S.C. § 557.[3] The Scheduling Order provided for discovery to begin on February 1, 2022, and continue through the month of February. The § 557 Final Determination Hearing was set to begin on March 4, 2022, but on March 2, 2022, following a status hearing with the parties, the Court entered its Order Extending the Period for Final Disposition of Grain or the Proceeds of Grain Under § 557(f), Rescheduling the Final Determination Hearing on Common Legal Issues, and Outlining Procedures (the "§ 557 Extension Order") (Dkt. #2206). The § 557 Extension Order rescheduled the commencement of the § 557 Final Determination Hearing to March 31, 2022, continuing through April 7, 2022[4]. All other discovery deadlines remained unaltered.
Later, on March 15, 2022, the parties informed the Court that they reached an agreement to mediate all issues related to the disposition of grain and grain assets under § 557. Following this announcement, the Court entered its Order Referring 11 U.S.C. § 557 Procedures to Mediation, Appointing Mediator, and Establishing Mediation Procedures. (Dkt. #2543). The mediation was set to begin on March 17, 2022, before former U.S. Bankruptcy Judge William H. Brown[5] as mediator (the "Mediator"). Additionally, in consideration of the mediation request, the Court entered its Order (Dkt. #2545) resetting the § 557 Final Determination Hearing from March 31, 2022, to April 1, 2022.
On March 24, 2022, the Court held a hearing on several matters outside of (but related to) the § 557 proceedings.[6] Following the other substantive matters, the Court held a brief status conference regarding the ongoing settlement negotiations, during which several parties expressed to the Court the need for additional time to continue settlement discussions. To encourage all parties to continue working toward a settlement (and, in the case one was not reached, to give all parties the ability to prepare for the § 557 Final Determination Hearing), the Court entered its Order Rescheduling § 557 Final Determination Hearing on Common Legal Issues and Outlining Pretrial Procedures (Dkt. #2624). The Court rescheduled the § 557 Final Determination Hearing to April 18, 2022, at 9:30 a.m. CST.
On April 8, 2022, the parties informed the Court that a settlement had been reached in principle, and the Court held a status hearing on the same day for the parties to present the settlement terms to the Court. At the status hearing, and in addition to presenting settlement terms to the Court, the Movants made, and the Court granted, an ore tenus motion to stay the § 557 deadlines while the parties finalized the Settlement Application. The Court was also advised that the Movants would file the Settlement Application with the Court no later than April 11, 2022.
However, on April 11, 2022, the Court received correspondence from the Movants indicating that a "development" had arisen with respect to the proposed settlement and the Movants needed a status conference to receive direction from the Court. The Court held a status conference on April 12, 2022, at 4:00 p.m. CST at which the parties informed the Court that some of the Disclaiming Farmers were seeking to withdraw from the terms of the settlement. On April 12, 2022, the Movants filed the Settlement Application, and the Court set a hearing on the Settlement Application for April 25, 2022 at 9:30 a.m. CST. The Movants then filed their Joint Motion to Continue & Reset the Final Determination Hearing, to Set the Initial Claims Hearing For the Non-Participating Farmers, & Extend the 557 Deadline (Dkt. #2722), and the Court entered its Order Granting Motion to Continue & Reset the Final Determination Hearing & Extend the 557 Deadline (Dkt. #2725) on April 13, 2022. The § 557 Final Determination Hearing was continued to a date to be determined by the Court, and the § 557(f) deadline was to be extended by the Court after solidification of a new date for the § 557 Final Determination Hearing. Additionally, the Order Granting Motion to Continue & Reset the Final Determination Hearing & Extend the 557 Deadline set the Initial Claims Hearing[7] for May 3, 2022 at 10:00 a.m. CST. Movants' Arguments
In support of the Settlement Application, the Movants submitted their Supplemental Brief in Support of Joint Motion for Approval of Settlement and Compromise (the "Supplemental Brief") (Dkt. #2758) outlining several "options" for farmers both in the event of a settlement approval or failure. The Movants outlined four options for famers in the event of this Court's approval of the Settlement Application: (1) farmers may consent to the settlement agreement (the "Settlement Agreement") and become "Consenting Farmers", a status that would allow them to receive payment in the future in exchange for mutual releases with settling parties, recover attorneys' fees paid to date via the farmer settlement fund, and save money by opting out of pursuing litigation related to the grain assets under § 557; (2) farmers may elect to become "Disclaiming Farmers" by withdrawing from the § 557 proceedings and disclaim any interest in the grain assets at issue in the § 557 proceedings in exchange for the Disclaiming Farmers' receipt of attorneys' fees paid to date via the farmer settlement fund as well as releases of all claims by the bankruptcy estate; (3) farmers may elect to pursue their assertions of interest via the § 557 Final Determination Hearing, essentially becoming "Non-Consenting Farmers", and will not receive a release from the bankruptcy estate but may also pursue any civil litigation if desired; and (4) those farmers who have an assertion of interest in the grain assets but have not elected to be a Consenting, Disclaiming, or Non-Consenting Farmer ("Non-Participating Farmers") may appear at the Initial Claims Hearing, where they will either (a) appear to make an election into the Consenting or Non-Consenting Farmer elections or (b) fail to appear and be afforded only a general unsecured claim in the non-objected to amount. According to the Settlement Agreement, the Disclaiming, Non-Consenting, and Non-Participating Farmers have the option to change their election to a Consenting Farmer, but the option expires at 5:00 p.m. CST-10 days after entry of an order approving the settlement (the "Election Deadline").
The Supplemental Brief also outlined the events that transpired on or about April 7, 2022 through April 11, 2022. As a part of the Settlement Agreement, certain "thresholds" must be met by either Consenting Farmers or Disclaiming Farmers, and such thresholds were discussed by farmers' counsel on or about April 7, 2022. These "thresholds", as outlined in paragraph 14.1 of the Settlement Agreement, [8] were dependent upon farmers executing and signing a farmer election form (the “Farmer Election Form”), through which a farmer elects to become a Consenting Farmer, Disclaiming Farmer, or Non-Consenting Farmer. The Movants attached a blank copy of a Farmer Election Form as an exhibit to the Settlement Agreement:
FARMER ELECTION REGARDING THE SETTLEMENT AGREEMENT RELATED TO DISPUTED GRAIN ASSETS
The undersigned, a farmer creditor of Express Grain Terminals LLC, Express Processing, LLC, and ...
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