Joe Peiffer on The Big Show re: Dean Foods

Posted on: December 8th, 2020 by Mike Peiffer

Joe Peiffer had the opportunity to chat with Andy Petersen of WHO’s The Big Show regarding the Dean Foods preference recovery efforts. The host aired the interview in two parts, on December 7, 2020 and December 8, 2020. The audio is embedded below and also transcribed:

December 7, 2020 Dean Foods Interview

Andy Petersen and Joe Peiffer talk about Dean Foods preference recovery.

Andy Petersen: Well, some concerning letters showing up to people who sold milk to Dean Foods before they declared bankruptcy, which was maybe about a year ago or so. You’ll get more into that here, and what your options are. There are options, it sounds like, but not responding is not one of them, if I can throw some more negatives in there for you.

Joe Peiffer is here. He’s the founder of Ag and Business Legal Strategies in Cedar Rapids, and a good buddy of The Big Show and one of our legal experts that we turn to in times like this. And, Joe, what’s going on?

Joe Peiffer: Well, what’s going on is what happens in a lot of bankruptcies: literally, that at some point in the case, somebody will make a demand to recover what are known as preferences. A preference is a payment that’s been made to a creditor within 90 days of filing a bankruptcy.

The idea here, and when Congress set the Bankruptcy Code back in 1978, was to say, well, gee, if people got paid within 90 days, they might have gotten more than their fair share. So, they give the bankruptcy the power to chase those preferences, and pull the money back into the bankruptcy estate and to share it with everybody. It sort of reminds me of Robin Hood, if you will.

Nonetheless, preferences have been very frustrating for many, many years. People do not like them. They say, “I got paid fair and square. Why do I have to give the money back?” Part of the idea here is to equalize distribution among different groups of creditors. But there are defenses, and the Dean Foods letters remind me of what happened in the VeraSun ethanol bankruptcy in Delaware back in 2010.

In that case, lawyers from Delaware and in New York sent letters out to thousands of farmers all across the Midwest, demanding that any payments that cleared their bank within 90 days of filing bankruptcy be returned. That’s what appears to be happening in the Dean Foods bankruptcies. Dean Foods and 43 affiliates filed a bankruptcy in Houston, Texas, on November 12th, 2019. Now demands are being put out by a law firm out of Saint Paul, Minnesota, demanding money, all the payments within 90 days. Not just the dairy farmers, but other creditors, too.

We’re going to focus on the defenses the dairy farmers have, and they’ll be similar to some others. But dairy farmers typically have what I think is going to be a very strong defense, called “ordinary course of business”, or course of dealing. Provided that Dean Foods was paying them a couple of times a month, and either by check or by EFT … If that was happening, deliver milk, get paid; deliver milk, get paid; deliver milk, get paid, that’s an ordinary course of business defense. It should be golden.

But what these letters say is, you’ve got a given period of time to pay us a certain amount of money, and I think it’s approximately 25% of the amount, or they’re going to sue the farmer. They’re going to sue the farmer in bankruptcy court in Houston, Texas. Now, I don’t know, but I think most of the Midwestern farmers don’t have bankruptcy lawyers on tap in Houston, Texas. For the most part, they’d just as soon never touch a bankruptcy lawyer’s office, but this is one of those times where you might need to talk with a bankruptcy expert to help you migrate and respond to these letters.

If you do not respond, you’re going to be sued. If you do respond, and you provide the documentation to prove a defense, chances are they won’t do anything. But most of my farm clients aren’t used to assembling documentation in a fashion that a bankruptcy lawyer is used to looking at. So, in order to help people, next week on December 9th I’m going to hold a free Zoom meeting. Anybody that wants to jump in can jump in, and we’ll talk about it. And if people can’t make it on the 9th, we’ll have a follow-up meeting on the 14th. They’ll both be at one o’clock.

The key thing you want to do: get your information, showing the payments you got and the deliveries of milk when they happened. If they happened like when my father was dairying back in the ’70’s, deliver milk, get paid; deliver milk, get paid, I see no way that the Dean Foods people can possibly win. If they were not paying on time, and they were delinquent in paying you, that’s a different story. Then we have to see if there are other defenses that can be used.

AP: This is something that, when you and I talked earlier, you compared it, I believe, to extortion.

JP: Correct. It reminds me of extortion, because they’re threatening to sue you in a court, a long ways away, and saying, “If you’ll pay me something, we won’t sue you.” In my mind, if you have no right to something, to threaten to do something which you shouldn’t do in the first place because you haven’t done your homework, is extortion. Or, blackmail is another term that comes to mind. This may be a situation where paying a few bucks to somebody to help you organize your answer beats the heck out of paying them the price they want to say for freedom.

AP: Joe Peiffer, there. He is the founder of Ag and Business Legal Strategies in Cedar Rapids, a good friend of the Big Show. You can read more on this subject. He has, along with our good Big Show buddy Roger [McCowan 00:05:35], written extensively a blog post offering some tips and some pointers, and more information that I have shared out on The Big Show website, and social media @BigShowFarm.

We’ll talk more about what happened with that VeraSun bankruptcy coming up tomorrow here on The Big Show. A scary situation, no doubt, and the last thing anybody wants to deal with on top of everything else that’s gone on in 2020. But we’ve got your back, and are helping you out here today on The Big Show.

December 8, 2020 Interview

Continuation of interview regarding Dean Foods and consequences of not responding to a preference recovery letter.

Andy Petersen: Well, we continue talking about these letters that Dean Foods has sent out to customers they bought milk for right before they filed for bankruptcy, and there are more voices now joining in on the comments, I guess, of these letters. The American Farm Bureau is standing up for hundreds of dairy farmers that they say are being targeted by predatory lawyers representing the estate of Dean Foods.

The organization says that they’ve sent letters to nearly 500 farmers who once sold milk threatening legal action unless they refund money earned before the bankruptcy filing. And the Farm Bureau president, Zippy Duvall says, “Shame on these predatory lawyers for bullying dairy farmers at a time when they’re struggling to keep their farms going.” They’ve sent a letter to the law firm managing the Dean Foods estate calling for an immediate reversal of their so-called “predatory shakedown” and threatening some legal action there.

Joe Peiffer is a good Big Show buddy, founder of Ag and Business Legal Strategies. We’ll continue a conversation with Joe here that we started yesterday about what you need to do if you get one of these letters, because not responding, sticking your head in the sand sounds like almost a guarantee to end up getting sued in court in Houston. Joe, as we talked yesterday, the defense if the payment was on time has to do with the ordinary course of business and organizing a response. It sounds like you’re fairly confident we’ll end this for producers?

Joe Peiffer: If they happen like happened when my father was dairying back in the ’70s, deliver milk, get paid, deliver milk, get paid, I see no way that Dean Foods people can possibly win. If they were not paying on time and they were delinquent in paying you, that’s a different story. Then we have to see if there are other defenses that can be used.

AP: This is something that when you and I talked earlier, you compared it, I believe, to extortion.

JP: It reminds me of extortion because they’re threatening to sue you in a court a long ways away and saying, “If you’ll pay me something, we won’t sue you.” In my mind, if you have no right to something to threaten to do something which you shouldn’t do in the first place because they haven’t done your homework, it is extortion or blackmail is another term that comes to mind. This may be a situation where paying a few bucks to somebody to help you organize your answer beats the heck out of paying them [Dean Foods] the price they want to say for freedom.

That’s what happened to the VeraSun bankruptcy is that we sent out letters like that and we put together a VeraSun Preference Defense Group coalition where we got a lot of lawyers together working collectively to put things together, got together strong letters, helped the farmers put together the defenses, sent them off to the folks in New York and Delaware, and to my knowledge, no farmer got sued at a preference action at VeraSun.

If the payments came under ordinary course of business, the same should happen here, but writing a check to them unless you don’t have a defense in my mind is a waste of money and you can do better by getting organized and sending the proper defensive letter, because if they do get sued, you’re got to get the privilege of hiring counsel in Houston. And when we did the VeraSun bankruptcy … I’ve been practicing 28 years. I hired a lawyer in Delaware to work with me and he’d been practicing seven years, had to look at everything I filed, had to introduce me to the judge, get permission for me to speak to the judge and had to be there every minute I was in court and he charged $700 an hour. That’d be a hell of a raise for you, wouldn’t it, Andy?

AP: Yeah. I’d take that tomorrow, first of all, but I doubt I’ll ever get that in my life. You mentioned the Zoom meetings coming up, Joe. We’ll get that stuff posted out on the Big Show website. And as always, good to visit with you, and we’ll chat again soon.

JP: Take care. Have a great day.

AP: Joe Peiffer, founder Ag and Business Legal Strategies. And by the way, there are two meetings. One of them is tomorrow [Wednesday, December 9, 2020] at 1:00 [PM CST] in the afternoon for Zoom meetings that Joe mentioned to go through more of this. The other one is Monday, December 14th [also at 1:00 PM CST]. I’ve got a link to his landing page on the website for more details, as well as details on these phone calls posted on the Big Show website and social media at @bigshowfarm. Scary situation, but we’re offering up to the minute advice here from the best legal minds on this that exists like we do for you each and every day right here on the Big Show.

Ag & Business Legal Strategies is a law firm that works strenuously to defend its clients’ interests. Operating often in the debtor-creditor sphere, ABLS has positioned its professionals uniquely to understand their clients’ needs and work to obtain the desired results.

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