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Sept 23 OV Web Stories

Pipeline Foods Bankruptcy - Organic Famers Association

Pipeline Foods Bankruptcy - Organic Famers Association

THE AFTERMATH OF THE PIPELINE FOODS BANKRUPTCY

By Harriet Behar

Farmers Weren't
Paid...

On July 8, 2021, Pipeline Foods, a grain buyer, processor, and marketer of organic and non-GMO grains declared bankruptcy.

Farmers Were Impacted

They delivered grain but weren't paid & wouldn’t be paid by Pipeline Foods

1

2

OR

They had outstanding delivery contracts with the bankrupt company who wouldn’t be able to pay

Approximately one year after the bankruptcy, some farmers who received payment for delivered grain started to receive “clawback” letters 

demanding they send back all payments within 21 days.

Unfortunately, a farmer can’t protect themselves from future clawbacks within their contracts, nor specify that if the grain buyer enters bankruptcy, the contract would be null and void.

Farmers argued the payments were made “in 
the ordinary course of 
their 
business relationship”
and also 
stated the payment 
received 
was not 
“preferential payment treatment.”

FARMERS RESPOND

These two phrases are important, and at least one farmer wrote a letter back to the Pipeline Foods using these phrases stating they would not be returning any money. Almost a year went by without a response.

Another farmer hired an attorney to cut the amount demanded in the clawback letters

SETTLEMENTS

IGNORED THE LETTER

One farmer represented himself in bankruptcy court after ignoring the letter, but his case was dismissed

ARGUED CASH PAYMENTS

Cash payments, including those wired to banks, may not be clawedback according to one farmer’s experience

While Pipeline Foods appeared to be a dynamic & growing business, their rapid growth was a warning sign.

White Scribbled Underline

To grow the business in their early years, they offered the highest price in the market to attract growers. This also caused them to incur debt that would ultimately be their undoing.

Protect yourself against buyer bankruptcy

Know the rules and protections of both the state where the grain was produced and delivered so you can protect yourself.

Some states have indemnity funds to protect farmers. Review your state’s limits and requirements before you enter into contracts.

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