January 22, 2022, Northern District of Iowa – Plaintiff ARKK Food Company, a creditor of Debtor Simple Essentials, LLC, brings a complaint against Pitman Farms to disallow the latter’s proof of claim number 3 for $98,722,336.53 pursuant to section 502 of the Bankruptcy Code and in the alternative, subordinate the claim pursuant to Bankruptcy Code section 510 in the bankruptcy case of Simple Essentials, LLC.
Specifically, ARKK argues that Pitman Farms’ claim should be disallowed because Pitman Farm allegedly provided no consideration in exchange for the Debtor’s incurrence of loan obligations. ARKK claims that Pitman Farms allegedly used its status as sole member and manager of the Debtor to execute a memorandum of understanding less than a month before the Debtor shut down its Iowa Plant and halted all operations. The complaint further contends that the MOU retroactively approved and ratified $92,350,000 in interest-bearing loans allegedly in favor of Pitman Farms at a high-interest rate. Adding further, ARKK argues that Pitman Farms allegedly wielded its total control over the Debtor to run it for its own benefit, strip it of all value, and when it became hopelessly insolvent, buried it in claims to Pitman Farms to soak up any residual value that remained.
The complaint also contends that the Debtor allegedly received no, or inadequate, consideration for undertaking the loan obligation and that Pitman Farms allegedly caused the Debtor to incur over $98 million in obligations with the actual intent to hinder, delay, and defraud the creditors. As a result, the Debtor’s estate was allegedly damaged. Accordingly, ARKK requests the Court to avoid the loans underlying the alleged claim as actual and constructive fraudulent transfers and recover any transfers already made to Pitman Farms as repayment of the alleged claim, pursuant to 11 USC §§ 548, 550.
In re: Simply Essentials, LLC, Adversary Proceeding No. – 22-09004