Parties in Sager Creek’s sale sued
Pay up, grower tells seller, buyer
Del Monte Foods Inc., the seller of Sager Creek Vegetable Co., and McCall Farms Inc., the buyer, are both being sued by a Mississippi vegetable grower that said it’s owed nearly $1.2 million for its produce and neither party is paying up.
Del Monte said Sept. 20 that it was selling the business of Siloam Springsbased Sager Creek, including its key brands such as Allens and Popeye, to McCall Farms. In the transaction, California’s Del Monte retained several physical locations in Arkansas, including the Siloam Springs plant, which closed the day the deal was announced, leaving more than 230 people without jobs. The financial terms of the deal were not released.
Topashaw Farms Processing LLC of Vardaman, Miss., is suing both companies in the U.S. District Court Western District of Arkansas, saying that on the basis of a contract with Del Monte, it is owed $1.19 million, including interest and penalties, for 7,000 tons of produce Del Monte refused to pick up or accept from the grower.
Representatives of Del Monte had not seen the suit as of Wednesday, and executives of McCall Farms were not available for comment, according to the companies’ spokesmen.
According to the suit, Topashaw hasn’t received any notification regarding its contract with Del Monte, and during a meeting with Del Monte and McCall Farms on Sept. 21, Del Monte didn’t make adequate assurance of payment.
The suit alleges that neither Del Monte nor McCall Farms told Topashaw whether its contract was part of the sale of Sager Creek Vegetable. Topashaw also contends that during the meeting, McCall Farms tried to “unilaterally modify, renegotiate and otherwise
change the terms of the Del Monte contract with Topashaw by offering to purchase the vegetables at a severely reduced price.”
The actions of Del Monte and McCall Foods resulted in fraud, breach of good faith and fair dealing, and violations of the Perishable Agricultural Commodities Act, according to the filing.
The suit alleges that Del Monte was well aware it was going to sell its Sager Creek Vegetable business; kept Topashaw in the dark about the deal; and is required under the Perishable Agricultural Commodities Act to keep enough money on hand to pay its vegetable producers.
The Perishable Agricultural Commodities Act — frequently called PACA — regulates the sale of fresh and frozen produce to avoid unfair trade practices and make sure that sellers are paid in
a timely manner. Vegetable buyers working under the act are required to keep a fund known as the PACA Trust readily available to cover payment of valid sellers’ claims under the act.
Topashaw Farms is represented by Jason Klinowski of the Wallace, Jordan, Ratliff and Bradt law firm of Birmingham, Ala. Klinowski, while working for Freeborn & Peters of Chicago, served as special Perishable Agricultural Commodities Act counsel for Allens Inc., defending against claims under the act by some producers during parts of the company’s bankruptcy.
Sager Creek Vegetable is what remains of Siloam Springs vegetable company Allens Canning, also known as Allens Inc., which was founded in 1926. Allens filed for bankruptcy protection in late 2013. That bankruptcy case is still ongoing.
When Allens Inc. filed for
Chapter 11 bankruptcy protection in October 2013, it owed its primary lenders $114.36 million and its secondary lenders $65.6 million, according to documents. In February 2014, Allens was purchased by Sager Creek Acquisition Corp., owned by investment funds Sankaty Advisors LLC and GB Credit Partners LLC, two of Allens former creditors, for $123.8 million.
Allens Inc. was renamed Sager Creek Vegetable Co. in July 2014. In early 2015, Del Monte Foods Inc. bought all the assets of Sager Creek for $75 million in cash.
Privately held McCall Farms is a producer of canned fruits and vegetables. The company employs more than 1,000 and has corporate offices in Effingham, S.C. Del Monte Foods, based in Walnut Creek, Calif., is one of the nation’s largest branded food product companies.