(Editor’s note: A previous version of this story incorrectly used the Easterday Farms Produce Co.’s logo. This logo is unrelated to either of the debtors or the bankruptcy; there is no evidence that Easterday Farms Produce Co. has engaged in anything but commercially ethical conduct. WLJ apologizes for any suggestion that Easterday Farms Produce Co. was involved in any of the conduct or activities referenced in this article.)
The federal judge overseeing the bankruptcy proceedings of Easterday Farms and Easterday Ranches granted the sale of the Easterday equipment to a newly formed corporation and blocked Tyson Fresh Meats from acquiring the feedlot under AB Livestock LLC (Agri Beef).
Judge Whitman Holt, in his decision, denied the motion for derivative standing and request for abandonment by Tyson Fresh Meats without prejudice. A motion of derivative standing is filed when a bankruptcy debtor or trustee is unwilling to generate value for the estate. Tyson Fresh Meats asserted the bid by Agri Beef was “woefully inadequate,” and Tyson offered $25 million for the feedlot—a 56 percent premium over the $16 million paid by Agri Beef.
Tyson also stated the sale of the North Lot feedlot in Pasco, WA, was “with actual intent to hinder, delay and defraud creditors.” Cody Easterday of Easterday Ranches sold the feedlot on Jan. 22 to Agri Beef, which operates a meatpacking plant in Toppenish, WA. Shortly after the sale, Tyson claimed a large portion of the proceeds was transferred to companies owned by the Easterday family. Funds were also transferred to bankruptcy restructuring advisers Paladin Management Group and Easterday’s lawyer, Richard Pachulski of Pachulski, Stang, Ziehl and Jones. According to court documents, of the proceeds, $2.1 million was paid to creditors, some of which went unpaid.
In court documents, Tyson stated Easterday was “desperate for cash” after admitting to defrauding Tyson Fresh Meats and other creditors for over $250 million, and Agri Beef had knowledge of the insolvency. Tyson also stated Easterday expressed a “willingness to transfer ownership of the property to Tyson in partial satisfaction of the debtor’s obligations to Tyson.”
Alan Kornfeld, attorney for Easterday, said at a hearing on Aug. 8 that Tyson offered to buy the feedlot while negotiating with Easterday in January for $10 million.
Tyson claimed they were not given the opportunity to bid for the feedlot and claimed the price paid by Agri Beef was below appraisal value. In court documents filed on Aug. 24 by Easterday lawyers, there were three appraisals for the North Lot between 2016 to 2021 for between $8.75 million and $10 million, “all of which are consistent with Tyson’s own just-disclosed ‘soft’ offer.”
Tyson stated the $25 million bid for the North Lot on a cost-benefit analysis would benefit the creditors. At the hearing on Sept. 22, Kornfeld said Tyson was trying to use the bankruptcy court to fix a business mistake, and “Now they want a mulligan.”
Agri Beef Attorney Chris Harris said the company bought the North Lot in good faith, and the damage of undoing the sale would be “in the millions,” for which they would hold the Easterday estate liable.
Holt stated that while reselling the feedlot might bring more money to the Easterday estate, the costs of litigation and other expenses are too risky.
“I cannot conclude that the preponderance of the evidence concludes a clear cost benefit,” Holt said.
Tyson Fresh Meats operates a processing plant in Wallula, WA, distributing its products to the West Coast and exporting to Asian countries.
Equipment sale
At the hearing on Sept. 22, Holt approved the sale of equipment to Blue Tag Farms LLC for $14.02 million. The equipment consisted of tractors, a fleet of Dodge pickup trucks, 18-wheelers, four-wheelers and equipment associated with Easterday Farms, including a horse trailer with living quarters for riders, totaling 678 different lots.
The purchase also included the Easterday Farms’ and Easterday Ranches’ lease of the Truck Shop at the Port of Pasco/Tri-Cities Airport.
At a previous court hearing, Easterday lawyers felt selling the equipment as one lot would bring the most money for the Easterday estate. With the amount of equipment, it did not make sense to move it to an auction house or sell it individually, they said.
Blue Tag Farms LLC submitted a stalking-horse bid for the equipment of $14 million and placed a deposit of $1.4 million. No other bidders placed a higher bid than Blue Tag Farms.
Blue Tag Farms is a newly incorporated company in the state of Washington. Blue Tag Farms LLC was incorporated in Washington state on April 9 and lists the headquarters address, employee names and email addresses for Agri Beef on court documents.
Blue Tag Farms has until Oct. 31 to move the equipment but can request a two-week extension if needed.
According to Anna King of Northwest News Network, Blue Tag’s bid for equipment “raises eyebrows” among some ag players in the community, as Agri Beef is in the livestock business, not crop production. The company did not respond to King for a request for comment.
Sentencing delayed
Easterday’s sentencing was postponed to Jan. 24, 2022, to give Easterday time to participate in the bankruptcy proceedings and the liquidation of Easterday Farms and Easterday Ranches.
Carl J. Oreskovich, attorney for Easterday, asked the court to move the sentencing to January 2022, stating, “Mr. Easterday’s continued participation is essential to creating the best possible outcomes for creditors in the bankruptcy cases.”
Oreskovich stated Easterday participates daily with Paladin Management “to assist with the liquidation of agricultural products, farmland, real property and equipment,” and the cooperation agreement is set to expire Dec. 31, 2021. Oreskovich indicated there are several outstanding issues with the cooperation agreement, including the personal property of Easterday’s wife, Debby, and his mother, Karen, which Cody has “the knowledge and expertise to assist in the negotiation of the remaining issues on behalf of his family.”
This is the second time sentencing has been delayed for Easterday, who pleaded guilty to one count of wire fraud and agreed to repay $244.03 million in restitution. Easterday faces a maximum penalty of 20 years before Stanley A. Bastian, chief U.S. district judge for the Eastern District of Washington. Easterday was originally scheduled to be sentenced on Aug. 4. — Charles Wallace, WLJ editor
