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.

-30-