Attorneys representing dozens of produce companies reached a settlement agreement in the Adams Produce LLC bankruptcy case, paying the PACA claimants approxiamtely 80 cents on the dollar. The agreement was approved Oct. 23 by the U.S. Bankrutpcy Court.

Adams Produce, which was headquartered in Birmingham, AL, filed Chapter 11 bankruptcy proceedings this past spring. At the time, there was close to an estimated $12 million in produce debt. The original settlement negotiations conducted by some of the larger creditors led to challenges and this revised settlement.

When the dust settled, some of the claims were disallowed, mostly because the claimants failed to file with the court for one reason or another. In addition, the largest claimants, Pro*Act, agreed to a reduced payment of a little less than $5 million of the $6.6 million it had claimed.

In total, about $8 million in payments will be made to settle about $10 million in approved claims. Checks are expected to be issued in early to mid-November

Jason Read, a partner in the law firm of Rynn & Janowsky in Newport Beach, CA, which represented a number of mostly West Coast-based produce firms, called it "a good settlement." While he wouldn't characterize the agreement as the "normal" disposition of PACA Trust cases, he said that "it is not unusual either, especially when there are less funds available than the total of the PACA Trust claims."

Several claims were apparently headed for either a separate settlement or mediation Oct. 24-25, including one of the larger PACA claimants, Alex Kontos Fruit Co. Inc. in Birmingham, which filed a claim of more than $750,000.

John Kontos, president of the firm, was the only one authorized to discuss the matter and he was not available to comment at press time.

Mr. Read said that besides being paid for their claims, most of the produce companies also will receive an extra amount for interest accrued and attorney fees, although some will not.

"If they had the correct language on their invoice, they will receive a pro rata share of those costs as well," he said.

Tom Oliveri, director of commodity services and trade practices for Western Growers Association, said, "We always recommend that our members put the proper language on their invoices, but some just do not do it. I do not know why."

He said the language that needs to be included is fairly simple and can result in an extra payment in the event of a bankruptcy. He recommended that the following wording be included on all invoices:

"The perishable agricultural commodities listed on this invoice are sold subject to statutory trust authorized by section 5(c) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499e(c)). The seller of these commodities retains a Trust claim over these commodities, all inventories of food or other products derived from these commodities, and any receivables or proceeds from the sale of these commodities until full payment is received. A finance charge calculated at the rate of 1.5 percent per month (18 percent annually), or at the highest rate permitted by law, will be applied to all past due accounts. In addition, should any action be commenced between the parties to this contract concerning the sums due or the rights and duties of any party to this contract or the interpretation of this contract, the prevailing party in such action shall be entitled to, in addition to such other relief as may be granted, an award for the actual attorney's fees and costs in bringing the action and/or enforcing any judgment granted in the action."