Pipeline Foods "Clawback" Letters

Information for Organic Farmers Who Sold Grain to Pipeline Foods

On July 8, 2021, organic and non-GMO grain buyer Pipeline Foods filed for Chapter 11 bankruptcy. Earlier this year, the company’s bankruptcy proceeding was finalized by a court in Delaware.

Unfortunately, for some organic farmers who sold to Pipeline, this situation is still not behind them. This summer, some farmers have received “clawback” letters from a law firm in Minnesota serving as the trustee for Pipeline Foods’ liquidation.

IF YOU HAVE RECEIVED ONE OF THESE LETTERS, DO NOT IGNORE IT.  Unfortunately, this seems to be a legitimate part of the bankruptcy process.

The letters claim that farms that were paid by Pipeline Foods during the 90 days leading up to the bankruptcy filing (on July 8, 2021) now must return a portion of that payment to the bankruptcy proceeding.

Here are some things you can do if you have received one of these letters:

1. Gather information about your history with Pipeline Foods – how many times did you sell grain to the company, on what dates, when did they make payment, etc. This could be important in establishing that the payment you got during the 90-day period before the bankruptcy was similar to your previous transactions with the company.  If you have contracts with Pipeline, gather those as well.
2. Contact an attorney. If you already have an attorney you use for farm business, start with them. Ask if they have experience with bankruptcy proceedings. If not, ask them to refer you to someone who does.
3. When you show the letter from the bankruptcy trustee to your attorney, ask them to look into two possible arguments to make in response:

• Your payment should be exempt from a preference claim because it was made in the “ordinary course of business.”
• Your payment should be exempt from a preference claim because it was a contemporaneous transaction made for “new value.” (This would apply to payments made for grain delivered within 90 days before the bankruptcy date.)
            These exemptions are spelled out under 11 USC 547(c).

4. Ask for an extension. The letter from the trustee gives a very tight deadline to reply with a payment. The first step your attorney may want to take is to ask for more time to formulate your response explaining why your payment is not subject to clawback by the trustee.
5. Let OFA know if you have received one of these letters. We will try to keep people updated and share resources about ways to respond. You can email Kate Mendenhall, OFA Executive Director, kate@organicfarmersassociation.org or fill out a short survey about your situation.  Knowing how many farmers have been affected will help us strategize on the best way to help you as a whole.