With more than $10 million in claims against it under the Perishable Agricultural Commodities Act, plus millions more in other debt, Adams Produce proposed a bankruptcy compromise that lawyers for some PACA creditors say could restrict companies’ rights to recover money.

Chicago attorney Jason Klinowski, Freeborn & Peters LLP, represents produce wholesalers Grover Bailey Tomato, Pensacola, Fla., and Lee’s Produce, Thomasville, Ga. He said the compromise restricts PACA creditors’ rights before they have even been notified of the full details of the case.

Produce suppliers still have time to file PACA claims against Adams, which has proposed a cutoff date of June 15.

“Almost all bankruptcy cases have some kind of settlement proposal, but this is unusual because it looks to limit third-parties’ rights — PACA creditors in this case,” Klinowski said May 15.

Joining Adams in the compromise proposal are its bank (PNC Bank), Pro*Act LLC, eight other produce companies with PACA claims totaling almost $1.5 million, and an “ad hoc committee of non-insider employees.” Pro*Act’s PACA claim is almost $5 million.

Grover Bailey Tomato’s PACA claim is more than $176,300 and Lee’s Produce is more than $67,000.

Lawyers for Alex Kontos Fruit Co. Inc., Birmingham, Ala., are working with Klinowski to oppose the compromise. Kontos has a PACA claim of more than $835,300 against Adams, also based in Birmingham. Part of the wholesalers’ opposition is in the form of an adversary complaint that alleges a variety of infractions by Adams and other entities affiliated with the case.

That complaint states that Adams Produce, PNC Bank and several other financial holding companies have:

  • improperly handled PACA trust assets;
  • breached fiduciary duty by illegally holding PACA assets; and
  • converted and illegally retained PACA assets, with PNC Bank allegedly taking $3.6 million.

Grover Bailey Tomato, Lee’s Produce and Kontos Fruit contend PACA claims should be paid before debts to PNC Bank and back wages to Adams Produce employees, among other things.

The three wholesalers, who expect Tom Lange Co. Inc. to join them in opposition to the compromise, according to Klinowski, want the bankruptcy judge to preserve the PACA assets and put the bankruptcy on hold until a federal court can resolve the adversary complaint.

Calls to Tom Lange’s attorneys were not immediately returned May 17. The Marietta, Ga., company has more than $766,600 in PACA claims against Adams Produce.

Bankruptcy Judge Tamara Mitchell scheduled May 21 hearings on the compromise motion and several other motions.

PACA claimants in the list of 20 creditors with largest unsecured claims in the bankruptcy case against Adams Produce include:

  • T&T Produce, Fort Oglethorpe, Ga., $$474,389;
  • Tropicana Chilled DSD, Pittsburgh, $262,234;
  • Cooseman’s Tampa Inc., Tampa, Fla., $242,177;
  • Angelo M. Formosa Foods Inc., Nashville, Tenn., $222,178;
  • Harvest Sensations LLC, Los Angeles, $199,990;
  • Capitol City Produce, Baton rouge, La., $142,374;
  • First Cut Produce, Evanston, Ill., $113,587;
  • Pleasant Valley Potato, Aberdeen, Idaho, $109,556; and
  • Kingsburg Orchards, Kingsburg, Calif., $108.380.