Did you get a ‘Dean estate’ demand letter from ASK LLP? Respond with this simple, approved ‘Declaration’

By Sherry Bunting, Farmshine, December 18, 2020

HARRISBURG, Pa. — U.S. Dairy producers and haulers who received letters from ASK LLP — the Dean Foods estate trustee seeking money back from producers and haulers paid prior to Dean’s bankruptcy filing Nov. 12, 2019 — should not pay, but will need to act on those letters. Many of the letters were received right before or after Thanksgiving and had deadlines of December 19 or 24.

Dairy producers and milk haulers have an air-tight defense, and now there is a simple one-page Declaration Letter any producer or hauler from any state can use as their response to ASK LLP. Explanation and form are downloadable at the Pa. Milk Marketing Board (PMMB) website at www.mmb.pa.gov or call the PMMB at 717-836-3115. (See below also.)

The Declaration Letters — one for producers (here at this link and pictured below) and one for haulers (here at this link) — were designed by PMMB chief counsel Doug Eberly — working with the state Attorney General’s office and verbally approved by ASK LLP for use by producers and haulers in all states.

“Please, please, please complete this Declaration Letter because it gets you off the hook. You will complicate matters if you don’t send them back,” said PMMB chairman Rob Barley in a Center for Dairy Excellence industry conference call December 10. “It will release you from this if you fill it out. We know it is an inconvenience, but if you don’t fill out the Declaration, you could risk losing that money.”

With hundreds of farmers on the Dec. 10 call, Eberly and others gave updates and answered questions. Here’s what you need to know:

1. Dairy farmers and milk haulers have an air-tight defense.

2. The Declaration Letters developed by PMMB for use in all states demonstrate this defense. Just fill in the blanks about how often milk was picked up and how long you shipped milk to Dean Foods, sign it and email or fax it back to ASK LLP.

3. The Declaration describes how payments for milk and transport are “ordinary course” of business.

4. The legal letters sent by ASK LLP to dairy farmers and haulers are ‘avoidance claims.’ These arise when a business nears the end of a bankruptcy proceeding. All payments made to creditors — including vendors and suppliers — in the 90 days prior to filing are liable for recovery, unless the recipient can show the payments they received were not preferential.

Eberly explained the theory is that some creditors of Dean Foods could have had bargaining power to get money pre-bankruptcy that was not available then to other creditors. This is known in bankruptcy law as “trustee avoidance.”

Bottomline: “ASK needs some kind of documentation from you because they have an obligation to the bankruptcy court to show — pursuant to the bankruptcy code — the things they are charged with doing as the trustee have been done,” said Eberly.

“Farmers kept shipping milk in good faith and kept getting paid for the milk in order for Dean to stay in business,” said Eberly. “If you are a producer or hauler, you received payments in ordinary course of business with Dean. They picked up your milk every day or every other day or you shipped it to them … and they paid you twice a month as the Federal and State Milk Marketing Orders specify. We wrote this in the Declaration that you can fill out, sign and send back to ASK LLP. Doing this, you will demonstrate to the trustee that you do not owe this money back because you were not paid in any preferential way when you got paid.”

In addition to the state Attorney General’s office, PMMB worked with the Pa. Secretary of Agriculture, Center for Dairy Excellence, American Farm Bureau and organizations and individuals from other states.

“ASK LLP has taken a lot of heat on this, and they want to get this behind them because farm groups came together to back the farmers,” said Barley. “We’ve worked with anyone who is able to help as we reached out to other states and they reached out to us and this helps them as well. We are unique to have PMMB in Pennsylvania, and this is a time it has shown brightly to have this in Pennsylvania.”

Eberly noted the insurance bond held by Dean, as is law in Pennsylvania, has already been exercised during the bankruptcy to pay producers, so it would not have been available to help farmers in this situation.

Pa. State Representative Frank Ryan of Lebanon County was also on the call. He specialized in bankruptcy as a certified public accountant before being voted into the state legislature. “These types of ‘demand letters’ are common in bankruptcies,” said Ryan. “They are trying to determine a ‘preference period’. I can’t imagine that any dairy producer got any preference payment or was treated better than someone else (ahead of the bankruptcy).”

Ryan gave an example: “Say I am owed money by Dean for services (as a CPA) on a 90-day invoice. And say you as a farmer did a contemporaneous exchange of something of value (milk) for payment and you are paid every 14 days. You get preference over me. That’s ordinary business. But, if Dean paid me ahead as a CPA for a 90-day invoice instead of you for that contemporaneous exchange of milk for payment, then the trustee would come back to me for payment.

“The Declaration Letters are intended to help producers demonstrate that they do not have to pay that money back,” he said.

If someone went ahead and paid the settlement offer in the ASK LLP letter, Ryan said it may be difficult to get that money back. Using the Declaration and hiring an attorney might be successful to get a settlement payment back. American Farm Bureau and others are looking into this to determine if any producers paid the settlement offer in the letter.

Specific questions and answers handled in the group call Dec. 10 include:

Q.  Do the documents on the PMMB website at www.mmb.pa.gov only apply to Pennsylvania, or can other farms from other states send them in?

A. “It is very important that everyone know about these forms because farmers and haulers from other states can use them,” Barley answered.

“We did not make these forms PA-specific,” said Eberly, noting that he has talked with folks from the Kentucky Dairy Development Council, Vermont Attorney General’s office, Michigan Department of Agriculture, and AgriVoice on behalf of several entities in Tennessee.

Q. If I filed a critical vendor contract with the bankruptcy court to be paid during the bankruptcy, is that enough to prove I did not get preferential payments before the bankruptcy?

A. Short answer: No. Eberly stated he is not giving legal advice; however, the critical vendor agreements signed by dairy producers and haulers were standard forms that do not address the points ASK is asking for. On the other hand, the Declarations PMMB got approved are specific to the way milk plants do business with farmers and haulers.

“If you are a dairy producer, the way you prove you did not get preferential payments is you either send all the records that ASK LLP has asked you for, or you send in the Declaration Letter we put together to take care of it. This Declaration Letter is the most efficient way to do that,” said Eberly.

Q.   Do the Declaration Letters PMMB provided need to be submitted by an attorney?

A.  The Declaration Letter is designed in a way that a dairy producer or hauler can simply fill it out and send it back by email, fax or postal mail — on their own.

Eberly explained that while a person or corporation can’t really represent itself in bankruptcy court, only through an attorney, these Declaration Letters are not going directly to the bankruptcy court. They are going to the law firm (ASK LLP) and will be part of what they show as fulfilling their obligation with the court as trustee.

Q. Who, specifically should the Declaration be sent to?

A. At the top of every demand letter received from ASK LLP is the name, phone number and email address for the paralegal to which your file number has been assigned. Different letters have different names their ‘matter’ has been assigned to. Email your signed Declaration to that person, said Eberly.

There is also a fax number on your packet. That number is 651.406.9676. “Be sure to put the fax to the attention of the paralegal that has been assigned to your particular file,” said Eberly. (If using postal mail, get delivery confirmation or certify the letter.)

Q. Who should sign the Declaration?

A. Whomever has authority to sign on behalf of the farm or hauling business — whether as a single-family sole proprietor, multi-owner LLC or incorporated business — should sign the Declaration.

In general, said Eberly, if three members of an LLC sign other documents for the farm, then they would sign this. If one person for an incorporated farm signs other types of documents, then that’s the person who would sign this. If a farm received separate letters for separate farm locations, return a Declaration Letter in response to each letter received from ASK LLP.

If more than one person legally signs documents for the farm, just cross out ‘I’ and write in ‘we’ with a pen. Do not retype the Declaration, according to Eberly.

Q. Do I need to send anything with the Declaration?

A. The PMMB’s understanding is that filling out the one page Declaration Letter, alone, is sufficient.

Q. What happens if we do not respond to the letter from ASK LLP? Is it possible the entire claim will be dropped on its own?

A. Everyone on the call stated that ignoring the letter is unwise and risky.

“I would caution you not to ignore the letter,” said Rep. Ryan. “Absent the response with this Declaration, it will be in the hands of the court. If you ignore it, and they determine you owe the money, you will get an immediate judgment against you and they (the bankruptcy court) have incredibly powerful ways to get those funds.”

With the Declaration available, there’s no reason to ignore this. Dairy producers and haulers have an efficient, simple way to take a big step to put this behind them.

Q. What is the deadline to submit the Declaration Letter?

A. Submit it by the date on your letter from ASK LLP. Some say Dec. 19, others Dec. 24. Whatever your date is, submit your Declaration by that date. As Dean estate trustee, ASK LLP, will begin filing these claims with the bankruptcy court in January.

Q. Do I need to submit a Declaration Letter if I provided a paralegal with their requested information already?

A. “I would call the paralegal and ask if they had a chance to look at it and make a determination, and I would also submit the Declaration Letter just to be on the safe side,” said Eberly.

Q. What should lenders and others do who received assignments from milk checks direct from Dean Foods if they received these letters?

A. Since everyone is operating under the belief that producers won’t owe money back, then their assignees should not owe money back either because the assign would not have been paid except for the farmer getting paid.

Eberly noted that lenders have access to legal people and accountants to answer questions for them, but producers who had money paid directly to someone out of their milk check should contact them to see if they got a letter and tell them what is being done. Contact the paralegal listed on the ASK letter and let that person know your assignee got a letter and to piggyback your Declaration to cover them as an assignment from your milk check.

A longer version of this article appears here.


Ghost of milk payments past invoked as intimidating letters seek money from farmers for big bottler’s bankrupt estate: Don’t pay. Don’t panic. Don’t sign anything. Sit tight. Gather records.

BREAKING NEWS UPDATES 4:00 – 9:00 p.m. Dec 2: Updates after the essential background article below, appear in separate articles here and here.

USDA is forwarding inquiries about ‘preference action’ letters to DOJ. In PA, the Attorney General’s office is involved.

By Sherry Bunting for Farmshine

Disclaimer: I am not a lawyer, and this is not legal advice, but researched information based on many people working on the issue. This is a ‘what we know now’ pre-press preview of a rapidly evolving story, check Friday’s Farmshine and this link for updates, including information about a conference call for dairy farmers in Pennsylvania and open to affecte producers outside of PA (call details here); other states also mobilizing!

BROWNSTOWN, Pa. —  Notices of Intended Litigation and Settlement Offers have been received by dairy farmers last week from ASK LLP, a law firm in St. Paul, Minn., seeking payment to the Dean Foods Company Estate under what is known as preference action recovery or trustee avoidance claims covering payments to dairy farmers for raw milk (and co-ops for ingredients) from August 14 to November 12, 2019 — the 90 days prior to Dean’s Nov. 12, 2019 filing for Chapter 11 bankruptcy protection and sale.

We have confirmed these predatory letters have been received by Dean Dairy Direct producers in numerous states – including Pennsylvania, Ohio, New York, Kentucky, Tennessee and assuredly others — on the day before and after Thanksgiving. These letters contain a record of payment transactions (on the Federal Order specified dates), list a total claim amount the farmer will be sued for, and a settlement offer at about 15 to 20% of that amount due December 19 or 24, 2020 (depending on the date of the letter).

Under Southern Foods Group LLC, case number 19-36313 in the bankruptcy court of Houston, Texas, with Judge David R. Jones presiding, the Dean Chapter 11 reorganization is headed to an omnibus hearing scheduled for Dec. 11, 2020 and disclosure hearing Jan. 11, 2021. Debtor filed its Plan of Reorganization as file number 3230 today, Nov. 30, on the docket at https://dm.epiq11.com/case/dnf/info

If you are a dairy farmer who received a ‘demand package’ from ASK LLP representing the Dean Foods Company Estate, don’t ignore the letter, but don’t panic, don’t pay anything, don’t sign anything, sit tight for a bit, get prepared, and know many trustworthy, well-situated people are working on this.

The letters and legal packets are an intimidating threat to see what ‘other people’s money’ the law firm can shake loose for the Dean Foods Estate after the fire sale in which the bulk of assets were sold to Dairy Farmers of America (DFA). For its part, DFA as the new owner of the bulk of Dean’s plants issued a statement that it does not control Dean’s decisions on their bankruptcy and did not participate in this decision.

The letters do mention two potential defenses in a separate “additional instructions” piece, urging producers to “make a copy of this letter and all enclosures to send to your attorney should you choose to defend this matter rather than settle and return the payments.”

The instructions go on to state: “Under certain circumstances you may have a defense warranting settlement of this action at less than the settlement offer extended. We will be happy to consider your defense and ‘explore’ settlement.”

Even in that statement the ‘instructions’ intimidate the dairy farmer receiving it to feel they might have some financial obligation to the Dean Estate (absurd).

Please know that as dairy farmers, you have produced milk that was paid for according to federal and state milk marketing laws, that provided nourishment to families and that has enabled the Dean Foods Company to continue to operate until it was sold.

What’s happening and what dairy farmers should know:

First. Know that you are not alone and stay tuned. A range of emotions and reactions are no doubt happening on receipt of these letters.

Second. Don’t panic, don’t pay, don’t sign, and hold off in hiring an attorney. If you already have a trusted attorney advisor, talk to them, but these letters are concerning from a collective perspective. They name individual farms as defendants and demand a refund of a portion of what they were paid for milk they produced and shipped to Dean, that was bottled by Dean and sold by Dean in the 90 days BEFORE Dean filed for bankruptcy protection.

The situation may ultimately require farms to individually hire a bankruptcy attorney to assert a defense and prove qualification for exemption. But, well-situated sources indicate that it is also possible that collective group action could occur. More answers are needed by authorities and interested parties.

Yes, this preference recovery action is a loophole in bankruptcy law with farms caught in the shakedown net cast by the law firm working for the Dean Estate. There are concerning aspects based on how dairy farms are paid via federal and state laws that preclude the normal business activities of “invoicing.”

In Pennsylvania, the Pa. Milk Marketing Board is looking into this, and the State Attorney General’s office is aware of these letters. Dairy farmers selling milk to a dairy processor and being paid per federal/state regulations is ordinary course of business.

Third. Sit tight but use this time to be prepared by gathering milk statements for the past 15 to 18 months. Many trustworthy and reputable people are working on this issue affecting hundreds of independent dairy farms, and entities to which portions of their milk checks were assigned.

Sources indicate regional cooperatives may have received such letters for raw milk sales, though none have confirmed this. USDA has not confirmed nor denied whether market administrators received similar letters regarding producer settlement fund payments in the pre-bankruptcy period.

One regional cooperative executive has confirmed receiving a letter six weeks ago in relation to ingredient sales during the 90-day pre-bankruptcy time-period and indicates other regional co-ops have as well. They have not agreed to nor negotiated any settlement, but they provided their volumes and documentation of these sales to the soliciting law firm through their bankruptcy attorneys — and are monitoring the situation.

Dairy farmers can do the same.

  1. Absolutely don’t pay or sign anything right now.
  2. Start gathering deposit records for the 3-month period (Aug 14 – Nov 12, 2019) plus the 15 months before that as stated in the letter’s instructions about potential defense assertions.
  3. Don’t worry about putting any of this information into the requested spreadsheet or other formats mentioned in the letter, just get these items together for now.
  4. The Pennsylvania Attorney General’s office is aware of these letters. Producers in other states could look at involving the offices of their Secretaries of Agriculture and/or Attorneys General.
  5. The ordinary course of business affirmative defense means that the vast majority of farmers most likely will owe nothing, and people are working on how to get producers to that point in the most efficient way possible.

Fourth. Know that USDA AMS Dairy Programs has been contacted and is looking into the matter. Know that every one of the Federal Milk Marketing Order websites shows the strict dates and procedures concerning payment for milk. Dean Foods – or Southern Foods Group LLC as it is named covering all holdings in the bankruptcy case #19-36313 – could not have operated nor could it have been sold to yield any funds for the estate had the farmers not been paid for the milk sold.

Fifth. Know that in Pennsylvania, the Pa. Milk Marketing Board (PMMB) became involved immediately. The board and staff started their day Monday morning with a joint meeting on this issue that was brought to their attention over the weekend. Know that they have begun a conversation with Pennsylvania’s State Attorney General who is looking into this and is already familiar with some of the elements having been involved in getting final payments arranged using the mandatory bond insurance Pennsylvania requires all licensed milk dealers to carry. Know that in Pennsylvania, milk plants follow state payment and bonding regulations in addition to federal orders. Know that there are seven Dean Foods plants regulated by PMMB because they receive milk produced on Pennsylvania farms, and four of these plants are located in Pennsylvania.

Know that producers outside of Pennsylvania can band together and through their state dairy organizations or Secretaries of Agriculture – ask their State Attorneys General to look at this.

Sixth. Know that other well-situated people are looking into a way for all affected producers to fight this together instead of each farm going it alone and having the expense of hiring legal counsel with bankruptcy experience to “assert” their defense in writing to the law firm ASK LLP (aka Ebenezer Scrooge).

Seventh. Know that answers to various questions and concerns are being sought. More will be learned in the coming days, and the situation is one that is rapidly evolving.

Eighth. Know that ASK LLP should know better. The Dean estate trustee should already know that these dairy farmer critical vendor payments are not “preferential” payments warranting trustee avoidance claims. Not only should they know the critical vendors of Dean Foods — since the bankruptcy judge issued orders that dairy farmers be paid as critical vendors during the proceedings so Dean could operate and be sold – they should know that Judge David R. Jones in hearings on several occasions stated his big concern that school children would continue to receive their milk and dairy farmers would continue to be paid during the bankruptcy proceedings.

ASK LLP should know that the very charts they included in their ‘demand packages’ — showing all transfers from Dean plants to individual ‘defendant’ dairy farmers — are made on the precise same dates twice a month as is the regulation for milk payments under Federal Orders.

Ninth. Know that Bankruptcy Judge David R. Jones’ office in Houston, Texas has been notified of the ‘demand packages’ sent to dairy farmers for the pre-petition period. Several high-profile members of the U.S. House and Senate Agriculture Committees have also been notified.

BACKGROUND: The letters descended on dairy farms the day before and after Thanksgiving with due dates of December 19 or December 24.  No, these were not Happy Thanksgiving and Merry Christmas John and Jane Q Dairy Farmer, these were thinly veiled attempts at blackmail – demands to pay Dean Foods Company Estate a portion of milk checks from August 14 through November 12, 2019 in order to avoid being sued for much larger sums of money.

Ebenezer Scrooge (ASK LLP) conjured up the ghost of Dean Bankruptcy Past to insinuate that monetary transfers from Dean to dairy farmers — or their assigns — in return for milk they received, processed and sold, were ‘preferential’ resulting in what are called Trustee Avoidance claims by the law firm purported to represent Southern Foods Group LLC the conglomerate name for the bankruptcy and sale of Dean and all of its holdings.

A Trustee Avoidance claim – the legal action that the letters state will occur after the due date for payment of the settlement offer – indicate that such payments to farms could have been ‘preferential’ to avoid the bankruptcy trustee making sure all creditors are treated fairly. In layman’s terms, the claim is that a defendant farmer’s payment for milk pre-bankruptcy could have been a ‘better deal’ than the ‘trustee’ would have divvied out.

Wrong. Federal and state law set forth dates and formulas for milk payments as a requirement for milk companies to operate. That money has already been spent by dairy farmers keeping cows fed and keeping lights on at farms already beleaguered by five years of marginal and below breakeven prices. No windfall there.

Sure, the intimidating packet shows ways a recipient can assert their defense – through hiring a bankruptcy attorney. They can show invoices for those three months – and the 15 months before that – to show “ordinary course of business.” They can assert their defense with milk check statements the scrooge law firm says must be supplied in Excel spreadsheets requiring certain types of entries and documentation. Or they can just pay the settlement offer at a reduced rate to avoid legal action commencing the week after the due date.

Did I mention the due dates are December 19 for some; December 24 for others?

Did I mention farmers have 21 days from the date of the letter to sign and pay the ‘settlement offers’ with checks payable to Dean Foods Company or risk – says the letter – paying amounts 5 to 6 times higher?

Yes. This is what intimidation looks like, a shakedown to see what they can get away with, what money can be extorted, to improve their cut on the deal by threatening hard-working, nose-to-the-grindstone dairy farmers with big numbers, big words, and big assumptions.

They know better, and if they don’t, they should.