Bankruptcy proceedings for Easterday Farms and Easterday Ranches turned tumultuous during a hearing on March 16.
Lawyers for Cody Easterday’s wife, Debby Easterday, and Karen Easterday, wife of the late Gale Easterday, asked Judge Whitman L. Holt of the U.S. Bankruptcy Court in the Eastern District of Washington to appoint an independent fee examiner and remove the two creditor committees overseeing the liquidation along with the lawyers.
Additionally, lawyers for the Easterday family have filed objections to the settlements with CHS Inc. and Washington Trust Bank (WTB).
The lawyers argue that Easterday Farms and Easterday Ranches are two separate entities with separate creditors. The debtors’ lawyers and the committees allow Easterday Ranches to use money from Easterday Farms to settle with Tyson Fresh Meats and other creditors.
Lawyers for the Easterday family stated in court documents that it appears Easterday Farms is solvent. At the conclusion of its bankruptcy proceeding, it will have between $20-45 million in assets available for distribution to its general partners, court documents show. According to the Washington secretary of state, Debby Easterday is a partner in Easterday Farms, and Karen Easterday is a governor.
Before the court hearing, attorneys for Debby Easterday filed a motion for the appointment of a fee examiner. The court documents state a fee examiner must review the debtors’ lawyers’ fees because there are “inherent problems in every interim fee application to date, including ambiguous time entries, redundant and duplicative time entries.”
The documents show examples of “ambiguous time entries” and time sheets that do not distinguish between Easterday Ranches and Easterday Farms or explain how the fees were calculated. The attorneys asked to appoint Nancy B. Rapoport, professor of law at the William S. Boyd School of Law at the University of Nevada, who worked as a fee examiner for bankruptcies such as Toys “R” Us and Caesars Entertainment.
The Easterdays also asked the committees for Easterday Farms and Easterday Ranches to resign and be replaced by new directors. Cody Easterday previously asked for the resignation of three board members, which Tyson argued in court documents was Easterday trying to “materially increase administrative expense in the bankruptcy.”
The Easterday Farms and Easterday Ranches committees filed court documents before the hearing, stating they had engaged in good-faith negotiations with the debtors and the Easterday family.
Court documents for the Easterday Ranches committee said that negotiations with Tyson Fresh Meats proceeded where they believed a “settlement was attainable and, indeed, could have been achieved within a matter of days if the Easterday family had continued to work toward a compromise solution.”
The committee stated the Easterday family rejected the latest counterproposal on March 11. The committees oppose a change in management and assert that a change in legal counsel for the debtors would result in unnecessary delays and expenses.
On March 11, lawyers for the Easterday family also filed objections to the proposed settlements with CHS Inc. and WTB.
The attorneys contend that the “patronage equity” with CHS of $6.6 million for Easterday Ranches and roughly $1 million for Easterday Farms belongs to the family, contrary to the settlement agreement. As part of the settlement, CHS Inc. agreed to pay the debtors the $7.4 million the firm received due to fraudulent hedging activities from Cody Easterday.
Lawyers for the debtors said the Easterday family is no longer involved in farming due to the liquidation in bankruptcy and are no longer “producer members” eligible to redeem the patronage equity.
The redemption of the “patronage equity” is under the sole discretion of the CHS board of directors, and there is a risk the equity will not be paid out to the debtors if the settlement does not proceed, lawyers for the debtors stated in court documents.
Lawyers for the Easterday family also objected to the proposed settlement with WTB, stating it did not contain a release from any deficiency claim that may result from the settlement agreement. Lawyers for the Easterday family assert the debtors, both of the committees and counsel for the debtors have breached their fiduciary duties to the solvent Easterday Farms estate.
Lawyers for the debtors replied, “This continual refrain from the perpetrator of an admitted $200+ million fraud and the family members that served as partners and board members who failed to protect the creditors from such fraudulent activity and likely benefited from such fraud is both disingenuous and hypocritical.”
Moreover, lawyers for the debtors stated the objections expend costly resources for both sides as they work to settle the bankruptcy in a timely manner.
Lawyers for the Easterday family stated in court documents and at the hearing that the assertions by the debtors and their counsel are far from the truth. Court documents show the family’s efforts to keep the farm operation running, including driving all night to pick up parts for a broken combine and Cody Easterday’s role in selling the Easterday Farms properties to Farmland Reserve Inc. for $209 million.
“Nobody has worked harder than the Easterdays to turn assets into cash,” said Jeffrey Misley, Cody and Debby Easterday’s lawyer.
In the sentencing of Cody Easterday for wire fraud charges, the judge has twice delayed his sentence hearing to allow Easterday time to settle bankruptcy proceedings. Easterday is due to be sentenced on June 13.
Holt did not rule at the hearing on March 16 whether there was a conflict of interest between the Easterday Farms and Ranches Easterday committees or Easterday’s attorneys’ assertions. Another hearing is scheduled for April 15. — Charles Wallace, WLJ editor
