Produce suppliers owed a total of $3.4 million by two defunct San Antonio companies could receive checks in a few weeks, but those payments will not include reimbursement for about $175,000 in attorney fees the suppliers collectively spent on the case.
The 38 produce suppliers are expected to receive a total of about $2.36 million of the money the two companies owe, said Craig Stokes, a San Antonio attorney appointed special counsel in the case.
In a move some attorneys say is unprecedented, Federal Bankruptcy Judge John Akard ruled out the reimbursement of all but about $25,000 of the produce companies’ $200,000 in attorney fees.
“…the language of the (Perishible Agricultural Commodities Act) statute does, in fact, include attorneys’ fees, and I would agree with that, up to the dates of the filing of the (bankruptcy) petition,” the judge said in a Nov. 2 hearing.
However, the judge said because the case is being handled in bankruptcy court, unsecured creditors are not entitled to attorney fees incurred after the debtor files for bankruptcy protection.
“What we’re seeing here, I think, is a bunch of vultures coming in and asking for fees and wasting time,” the judge said.
Stokes has been involved with PACA law since the 1990s. He said he has never seen the bankruptcy code applied in this manner in a PACA case.
The good news for PACA creditors in the case is that those owed money by Delta Produce will likely receive 90 cents on the dollar, Stokes said. Superior’s PACA creditors will probably get about 50 cents on the dollar, Stokes said. Payments to all PACA creditors in the combined case could begin soon after a Dec. 12 hearing, provided the judge OKs the distribution plan.
Stokes said PACA claims against Delta total about $1.64 million and PACA claims against Superior total about $1.78 million.
Chicago attorney Jason Klinowski, representing Muller Trading Co., Libertyville, Ill., said Akard’s ruling on PACA creditors’ attorney fees could have “chilling effects” on the produce industry.
“One reason we can keep costs down on produce for consumers is because attorney fees in PACA cases are part of the sums due and owing in connection with the sale of fresh produce,” Klinowski said.
“This ruling is dangerous. It’s anti-industry. The PACA (claimants) did everything they were supposed to do to recover these funds.”
Klinowski’s client, Muller Trading, sought about $24,600 for produce, plus $3,200 in interest and attorney fees of more than $28,900. Under Akard’s ruling, Muller Trading will receive reimbursement for $9,888 of its attorney fees in the case.
The ruling on the attorney fees is subject to motions for reconsideration and appeals.
The complex case started Dec. 27, 2011, when three suppliers filed PACA claims against San Antonio companies Delta Produce LP and Superior Tomato & Avocado in federal court. Delta and Superior — who bought and sold produce from each other — filed for bankruptcy on Jan. 3 this year.