In re Spiech Farms, LLC

603 B.R. 395
CourtUnited States Bankruptcy Court, W.D. Michigan
DecidedJuly 3, 2019
DocketCase No. GK 17-05398-jtg
StatusPublished
Cited by8 cases

This text of 603 B.R. 395 (In re Spiech Farms, LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Spiech Farms, LLC, 603 B.R. 395 (Mich. 2019).

Opinion

From the beginning, nearly every aspect of the Debtor's case was disputed. At the forefront of these disputes was Produce Pay's contention that it was a beneficiary of a trust under the Perishable Agricultural Commodities Act, 7 U.S.C. § 499 et seq . ("PACA"). This court ultimately determined that because Produce Pay did not buy, sell and/or supply produce or otherwise succeed to the Debtor's rights in produce, it was not a PACA trust beneficiary. In re Spiech Farms, LLC , 592 B.R. 152 (Bankr. W.D. Mich. 2018).4 The Growers, too, claimed that they were beneficiaries of a PACA trust. When the Growers did not timely respond to the Debtor's objections, the court determined they were not PACA trust beneficiaries [Dkt. Nos. 220, 426, 428, 429, 431, 433, 434, 435, 436, 442, 443, 444, 445, 447].

Unsatisfied with their remaining claims against the Debtor's estate, the Plaintiffs filed a seventeen-count complaint, as amended (the "Complaint"), against the Spieches, Eva M. Stone ("Stone", and together with the Spieches, the "Principals"), and Spiech Georgia in the Southern District of Georgia on January 9, 2019. BW Orchards, LLC et al. v. Spiech Farms Georgia, LLC et al ., Case No. 2:19-cv-00007 (S.D. Ga.).5 The Complaint contains the following causes of action:

• Failure to Promptly Pay under PACA against the Principals;
• False or Misleading Statements under PACA against the Principals;
• Breach of Good Faith and Fair Dealing under PACA against the Principals;
• Breach of Express or Implied Duties under PACA against the Principals;
• Conspiracy to Defraud against Spiech Georgia and the Principals;
• Fraud against the Principals;
• Breach of Duty to Corporate Creditors against the Principals;
• Intentional Interference with Contract against the Principals;
• Conversion against Spiech Georgia and the Principals;
• Unjust Enrichment against Spiech Georgia and the Principals;
• Negligence against Spiech Georgia and the Principals;
• Common Enterprise Liability against Spiech Georgia;
• Piercing the Veil/Alter Ego against Tim Spiech;
• Piercing the Veil/Alter Ego against Robin Spiech;
• Piercing the Veil/Alter Ego against Steve Spiech;
*400• Piercing the Veil/Alter Ego against Bradley Spiech; and
• Piercing the Veil/Alter Ego against Eva. M. Stone.

For each cause of action, the Plaintiffs seek damages in the same amounts sought against the Debtor in this case. (See, e.g. , Hr'g Tr. at 36: 6-23).

After the Complaint was filed, Spiech Georgia filed a voluntary petition for relief under chapter 7 with this court on February 22, 2019. In re Spiech Farms Georgia, LLC , Case No. 19-00661 (Bankr. W.D. Mich.).6 To date, the Debtor's estate and the Spiech Georgia estate have not been substantively consolidated.

The Debtor filed its motion to enforce the automatic stay and for related relief [Dkt. No. 611] (the "Motion") on March 11, 2019. Shortly thereafter, the Debtor's case was converted to chapter 7 and the Trustee was appointed [Dkt. Nos. 623, 625].7 After briefing was completed [Dkt. Nos. 632, 636], the court held a hearing and took the matter under advisement.8

DISCUSSION

This dispute requires the court to consider the following issues: (i) whether the Plaintiffs violated section 362(a)(3) by asserting causes of action in the Southern District of Georgia that constitute property of the Debtor's estate; (ii) whether the Plaintiffs have collaterally attacked this court's decision denying Produce Pay the status of a PACA trust beneficiary; and (iii) whether the Plaintiffs should be held in contempt and sanctioned under section 105(a).9

A. Violation of the Automatic Stay Under 11 U.S.C. § 362(a)(3)

In the Motion, the Trustee contends the Plaintiffs have violated the automatic stay by asserting causes of action that are in reality nothing more than claims for fraudulent transfers and breach of fiduciary duties that should be liquidated for the benefit of all creditors of the estate. The Trustee further argues that even if some of the Plaintiffs' causes of action could be construed as personal, the Plaintiffs' recovery would directly interfere with the estate's recovery.

The Plaintiffs generally disagree. The Plaintiffs argue that because they did not name the Debtor as a defendant, they have not violated the automatic stay. Furthermore, the Plaintiffs summarily state that because they "are seeking money damages from non-debtors for harm done to them by the non-debtors in breach of the duties that the non-debtors owed to the [Plaintiffs]," they are not interfering with property of the Debtor's estate. (Resp. at ¶ 9). Finally, the Plaintiffs contend that the *401Trustee lacks standing to pursue piercing the veil/alter ego claims against the Principals.

As an initial matter, the Plaintiffs are mistaken when they argue that no violation of the automatic stay occurred because the Debtor was not named as a defendant. The Plaintiffs are correct in that the automatic stay does not extend to non-debtors absent the issuance of an injunction under section 105(a). See Parry v. Mohawk Motors of Mich., Inc. , 236 F.3d 299, 314-15 (6th Cir. 2000) ; Patton v. Bearden , 8 F.3d 343, 349 (6th Cir. 1993). However, unlike section 362(a)(1), which prohibits acts "against the debtor," section 362(a)(3) addresses acts "to exercise control over property of the estate," including causes of action. 11 U.S.C. § 362(a)(3) ; In re Nat'l Century Fin. Enter., Inc. , 423 F.3d at 577-78 (citation omitted).

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Cite This Page — Counsel Stack

Bluebook (online)
603 B.R. 395, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-spiech-farms-llc-miwb-2019.