The court-appointed receiver in the Salyer American Fresh Foods case continues to pore over the troubled company's financial books, while creditors wait to see if the company can be salvaged.
The receiver, Steve Franson, who declined to comment for this article, arrived at the Monterey-Calif.-based company in early May, shortly after its line of credit dried, forcing Salyer American officials to tell growers to stop planting. His role is to oversee the daily operations while compiling a report for a judge presiding over a $35-million lawsuit against the company that could include Perishables Agricultural Commodities Act claims.
Meanwhile, a bankruptcy case proceeds against Salyer American parent company SK Foods LP, Monterey, and a tomato processor it owns, RHM Industrial Specialty Foods, Williams, Calif. Bank of Montreal and other lenders claim they are owed $130 million, according to federal court documents. Bank of America and Wells Fargo are part of the lenders' group. A hearing in that case is scheduled for June 4 in Sacramento.
Gerard Rose, a Monterey attorney representing SK Foods, the two companies' problems stem from a precipitous decline in business since the federal government began investigating SK Foods and some of its contractors on bribery allegations last year.
They "started getting nervous when they heard bad things," Rose said.
Patricia Rynn, a Newport Beach, Calif.-based attorney representing growers who sold produce to both SK Foods and Salyer American, said PACA trustee rights are the same whether in a bankruptcy proceedings or under receivership, such as in the Salyer American case.
PACA payments can take longer under a receivership because in bankruptcy PACA trustees can petition the judge to grant their payments before a bankruptcy plan is approved, Rynn said.
"The idea is the trust beneficiaries are not suppose to wait in either setting," Rynn said.
There aren't many differences in how PACA cases are handled between state and federal laws, Rynn said, because PACA trustees are given top priority in both jurisdictions.
Payment in any PACA case, however, depends on how quickly the company in bankruptcy works with its creditors, reorganizes its finances and gets money set up in a trust for claims, attorneys said.
Under PACA, most sellers use standard legal language on their invoices advising buyers of the sellers' legal protections. This isn't required, said Paul Moncrief a Salinas, Calif.-based attorney advising growers on the matter, but it saves sellers the need to send notice to their buyers about their trustee rights.
"If you've got a valid claim you're going to be right at the front of the line before the banks for anyone else," Moncrief said. "The legal ramification is the money doesn't belong to the entity but belongs to the seller."
Growers look at options
Glenn Dupree, vice president and chief financial officer of Merrill Farms, Salinas, a grower for Salyer American, said the company isn't a PACA licensee, but the company has been paid and plans to harvest under contract through July.
About 20% of Merrill Farms' business is growing for Salyer American.
"We believed that they're trying to do right by their growers," Dupree said.
Another Salinas-area grower for Salyer American speaking on background said his company and attorney are looking into filing a PACA claim but are waiting to speak with Franson. Based on previous payouts under PACA, the grower said it's unlikely that companies owed money by Salyer American will receive all they are entitled to, but can expect something closer to 70%.
Having a receiver in place is a good development, the source said, because growers considering PACA claims know Salyer American's money isn't being misused.
"You're going to get your share," the grower said.
Dupree and the grower both said they haven't dumped any Salyer American crops and have sold off what the company couldn't take to other shippers and wholesalers.