A federal judge has approved a settlement term sheet that resolves issues in the Chapter 11 bankruptcy case of Easterday Farms and Easterday Ranches, including objections raised by the Easterday family.
At a hearing on April 19, Judge Whitman L. Holt of the U.S. Bankruptcy Court in the Eastern District of Washington approved the agreement, which “paves the way for a 100 percent recovery to general unsecured creditors of (Easterday) Farms and a material recovery to general unsecured creditors of (Easterday) Ranches, while avoiding costly and protracted litigation.”
The settlement agreement filed in court on April 14 between the creditors and the Easterday family resulted from a monthslong “extensive, arm’s length and exceptionally hard-fought negotiation and litigation process.”
The term sheet provides a framework to be incorporated into the bankruptcy plan, which will resolve all material disputes and issues among the parties as of the plan’s effective date. According to the settlement, the plan’s effective date shall be no later than July 31, 2022.
Under the settlement, Karen Easterday, wife of the late Gale Easterday, would receive $6 million, but the amount will be reduced by purchasing the Basin City properties and maintaining ownership of a property in Idaho.
Cody and Debby Easterday will sell their interests in the Basin City properties, located in Franklin County, to Karen Easterday’s newly formed entity, BC 140 LLC, for the amount of $4.2 million in cash, plus the assumption of the loan (approximately $1.2 million) with AXA Equitable Life Insurance Company.
BC 140 LLC will also guarantee a loan for $2.1 million owed by Easterday Dairy LLC to Easterday Farms. The loan will be against the Basin City properties parcels and be subject to consent by AXA.
Karen Easterday will deliver a secured promissory note on her Franklin County house for $5 million to the creditors.
3E Properties and Easterday Farms Produce Co., companies owned by other Easterday family members, will buy back Cody and Debby Easterday’s equity interests in the companies for roughly $2.2 million. That money would go to pay creditors.
Karen Easterday will also receive ownership of the Easterday Farms steer head logo.
The settlement releases any claims by the Easterday family or their affiliates against the creditors, the attorneys for the creditors, the bankruptcy restructuring company and the committees for Easterday Farms and Easterday Ranches.
It also releases any claims against the Easterday family, all related family members, and entities owned by the Easterday family from the estates of Easterday Farms and Easterday Ranches.
As part of the settlement, the Easterdays will rescind their objections to the proposed settlement agreements with Washington Trust Bank and CHS Inc., filed on March 11. Holt approved the motion to settle with Washington Trust Bank and CHS Inc. at the hearing.
They will also withdraw their motion for a temporary restraining order against members of the restructuring committees. Karen Easterday will also rescind her motion to appoint a fee examiner without prejudice, and no party, including the Easterday family, shall oppose the expenses of the estates’ professionals.
The settlement has garnered the support of two of Easterday Ranches’ largest debtors, Tyson Fresh Meats and Segale Properties LLC. Tyson Fresh Meats will receive $261 million, and Segale Properties LLC will receive $7.8 million.
Timothy Conway, Karen Easterday’s lawyer, said at the hearing the Easterday family is pleased to reach an agreement, as “The family has worked hard from day one and wanted the creditors to get paid as much and quickly as possible.”
Attached to the term sheet settlement agreement was a statement by the Easterday family chronicling their contributions to the bankruptcy proceedings. The eight-page memo details how Cody Easterday “self-reported to Tyson management,” and he and his wife, Debby, cooperated “to create the best outcome possible for all creditors.”
It also details how the family worked on marketing the Benton County properties, kept the 124 employees at Easterday Farms and 76 at Easterday Ranches employed as long as they could, marketed crops and equipment, and surrendered collateral, including the patron equities stake in CHS Inc.
Holt questioned Conway about who the document’s intended audience was during the hearing and commended the Easterday Family for making concessions. Conway stated the memo was for creditors and interested parties and “doesn’t even touch half of what the family did,” all “without fanfare or compensation.”
Jeffrey C. Misley, Cody and Debby Easterday’s lawyer, said at the hearing the main reason for the memo is to let all parties know—some of whom are “creditors, friends, neighbors and longtime employees,”—of the efforts made by the Easterday family to maximize the value of the assets.
Misley said the settlement does not resolve the criminal proceeding, and they are working with Brian Donovan, attorney for the Department of Justice (DOJ).
Donovan told the court that the DOJ is reviewing the issue, and the fact that Tyson Fresh Meats and Segale Properties agree with the settlement is “very persuasive.” The DOJ is talking with the U.S. Probation Office and should have something in writing for the courts soon.
The creditors, Tyson and Segale, will cooperate with Cody and Debby Easterday to get the DOJ to consent to the settlements and releases of properties and interests included in the term sheet and plan. The DOJ’s consent is a condition of the settlement and a condition precedent to the effective date of the bankruptcy plan.
The settlement also stipulates that the debtors agree not to appear at, file or otherwise make any statements about Cody Easterday’s sentencing.
Cody Easterday is scheduled to be sentenced on June 13 in U.S. District Court for wire fraud. He faces up to 20 years in prison. — Charles Wallace, WLJ editor
