The Fruit Growers News

One of Michigan’s largest apple and cherry processors has filed for bankruptcy. Mason County Fruit Packers Co-op filed for Chapter 11 reorganization bankruptcy on May 10 in the United States District Court in Grand Rapids, Mich. The company is the second Michigan fruit business to file for bankruptcy in the last year. The Belding, Mich. Kropf Orchard and Storage, Inc. filed for Chapter 11 bankruptcy July 23, 2001. Mason County owes apple growers over $3 million from the last three production years, according to the Michigan Agricultural Cooperative Marketing Association (MACMA). The Ludington, Mich.-based fruit processor, which also owns Indian Summer in Belding, Mich., continues to process and buy fruit while it is in reorganization, according to attorneys affiliated with the cooperative. Mason County, which had previously faced and met court orders to repay growers for not delivering on minimum negotiated prices in 1998, has begun negotiations with its creditors in hopes of emerging from bankruptcy intact, said the processor’s Ludington-area attorney and spokesman, Mark Pehrson. MACMA claims that the packer owes growers $500,000 from the 1999 season, $1.2 million from the 2000 season and an estimated $1.7 million from the current 2001 sales season, said Dave Vander Haagen, counsel for MACMA. Mason County disputes the amounts owed. Those debts and many others remain to be negotiated. According to MACMA the parties have different opinions of what is owed.
It remains to be seen how the apple and cherry industries in the state will be affected. The company is a major cherry processor for the state’s cherry growers, said Phil Korson, executive director of Cherry Marketing Institute.
“When you lose processing capacity within a state it is a scary thing,” said Korson. “It has been a long time since something like this has happened to a cherry processor.”
Bankruptcy negotiations will take a significant amount of time and the entire restructuring could take as long as two years, according to Tom Schouten, the company’s bankruptcy attorney in Traverse City, Mich. If the parties are able to arrive at an agreement as far as the dollar amount those claims will proceed through the bankruptcy process, said Vander Haagen. If an agreement cannot be reached a court will determine the amount owed and return its judgement to the bankruptcy proceedings. Included in the declaration of bankruptcy is the company’s juice line, Indian Summer. As the parent company of Indian Summer Products, when Mason County Fruit Packers applied for Chapter 11 Bankruptcy protection, Indian Summer is also protected under the filing, Schouten said. In the mean time, Indian Summer also continues to ship and supply its retailer customers.
Mason County had started meetings with creditors in May. “We did not come to a conclusion with MACMA during our first round of negotiations, but we did have constructive talks which are valuable as we move toward resolution of the filing,” said Pehrson. Last year, the Michigan Court of Appeals and Supreme Court issued rulings that enforce contracts negotiated on behalf of Michigan apple growers by MACMA that required the packer to pay growers money owed on the 1998 apple crop. The order was issued Oct. 25, 2001, by the Michigan Court of Appeals in response to a MACMA case against Mason County Fruit Packers Cooperative, Inc. This ruling was an enforcement of an arbitration case to force Mason County to pay the minimum price they agreed to, according to Tom Butler, manager of the MACMA’s Michigan Processing Apple Growers division. The company failed by 5%, and eventually paid MACMA members the full amount.
The appeals ruling stated that Mason County Fruit Packers’ refusal to pay was “indirect coercion” and ordered the co-op to pay growers a shortfall totaling $198,238.70. The order directed the co-op to pay MACMA within 10 days of the ruling and payment was then dispersed to member growers who sent processing apples to Mason County Fruit Packers in 1998. Debt owed to growers for that year has been resolved. Chapter 11 bankruptcy is the most common form of bankruptcy. It frees a company from the threat of creditor lawsuits while it reorganizes its finances. The debtor reorganization plan must be accepted by a majority of its creditors. Unless the court rules otherwise, the debtor remains in control of the business and its assets.