Clawback and Bankruptcy Resources for Organic Farmers
The Organic Farmers Association is interested in working to help find a solution to better protect farmers from buyer bankruptcy and clawbacks to ensure stable organic markets.
On October 24, 2022, organic and non-GMO grain buyer Global Processing, Inc filed for Chapter 11 bankruptcy with the United States Bankruptcy Court for the Northern District of Iowa. On November 1, 2023, the bankruptcy court granted the United States Trustee’s application to appoint Terry Gibson as the Chapter 11 trustee and his firm Wandro & Associates as counsel.
Because of the 2022 Global Processing, Inc. (GP) bankruptcy, many farmers who had delivered grain to GP but had not yet been paid were unable to receive payment for grain delivered. Some farmers were successful in submitting a claim to either the Iowa or Minnesota indemnity funds to receive payment for this grain; however, the Iowa Grain Indemnity Fund ran out of funds for the first time in decades after paying out many claims in 2021 for the Pipeline Foods bankruptcy.
Unfortunately, for some organic farmers who sold to GP, this situation is still not behind them. Beginning on Friday, September 13, 2024, over 90 “clawback” letters have been sent to farmers in Iowa, Minnesota, and other states from the law firm Wandro & Associates based in Des Moines, Iowa, serving as the trustee for Global Processing, Inc.’s liquidation.
If you have received one of these letters, do not ignore it. Unfortunately, this is a legitimate part of the bankruptcy process.
The letters claim that farms that were paid by Global Processing, Inc. during the 90 days leading up to the bankruptcy filing (on October 24, 2022) 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:
- Do not automatically pay the amount requested. You should be able to negotiate this request down and hopefully avoid paying it if you respond with adequate evidence that this letter should not apply to you (read below).
- 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. You may also request this extension without an attorney if you prefer. This example extension letter can be used to help you outline this request.
- Gather information about your history with Global Processing, Inc. (How many times did you sell grain to the company, on what dates, when did they make payment, etc.) This will be important in establishing that the payment you got during the 90 day period before bankruptcy was similar to your previous transactions with the company and within the requirements of the Iowa Code, establishing that you were not given preferential treatment. (Iowa Code section 203.8(1)(a) requiring that a licensed grain dealer “shall pay the purchase price to the seller for the grain upon delivery or demand by the seller, but not later than thirty days after delivery by the seller.”
- Contact an attorney. If you already have an attorney you use for farm business, start with them. and ask if they have experience with bankruptcy proceedings. If not, ask them to refer you to someone who does have experience with bankruptcy law. If you need an attorney, OFA has identified an attorney proficient in agriculture and bankruptcy law, his contact information is below.
- 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 the 90 days before the bankruptcy date.) These exemptions are spelled out under 11 USC 547(c).
- You could send the Global Processing, Inc. attorney a form letter outlining that you were operating in the ordinary course of business and should be excluded from the clawback. Note, OFA is not and cannot be your legal representation, nor should you accept this letter as legal advice.
Call OFA's Farmer HelpLine
OFA’s Farmer Services Team wants to hear from you if you’ve received a clawback letter from Global Processing. Please call our team at: 883-714-3834 or email helpline@organicfarmersassociation.org and we can help you decide what to do next and connect you to other resources, experts, and farmers in the same situation.
Tell Us About Your Clawback Experience
Have you received a clawback letter? You can help us help other organic farmers by completing this short survey about your Global Processing clawback experience. We’re using this information for our education purposes only. Documenting the number of farmers affected is extremely important for us finding a policy solution to protect farmers against this in the future.
In Need of an Attorney?
If you are in need of an attorney versed in Bankruptcy and Agricultural Law, Eldon McAfee at Brick Gentry, P.C. in West Des Moines, IA is taking farmer clients who have received clawback letters to collectively respond. You can contact him via email or mobile: 515-249-1706.
Need to Talk to Someone?
Access Free Immediate Counseling & Personal Assistance Services:
Toll-Free Phone: (833) 999-FARM, 24 hours a day
Text to Chat: (314) 451-5727, 9AM-5PM Central
988 Lifeline: Dial or Text 988
Note: OFA does not endorse any particular attorney or legal service and makes no representation, guarantee or warranty (express or implied) as to the legal ability, competence, quality, or reliability of any legal services provided by any of these Lawyer Services.
Research and Resources from OFA
Resources to Dig Deeper
Pipeline Foods Grain Clawback Virtual Meeting with Farmers Hosted by Organic Farmers Association
Grain Marketing Issues & Solutions Presentation Slide Deck from Farm Commons & OFA
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