NORPAC

Frozen peas head to the bagging machines at NORPAC Foods in Salem.

Agribusiness entrepreneur Frank Tiegs no longer faces a planned lawsuit for terminating his purchase of the former NORPAC cooperative’s assets out of bankruptcy.

The defunct food processor’s unsecured creditors have withdrawn a proposed complaint against the Oregon Potato Co., which is owned by Tiegs, for pulling out of the $155 million deal last year.

However, the unsecured creditors could again seek to pursue the case, since their motion seeking to file a complaint was withdrawn “without prejudice.”

Scrapping the complaint over the failed deal may be the first step in resolving broader legal disputes between Tiegs and the cooperative, which is now called North Pacific Canners & Packers, said Joe VanLeuven, the attorney representing Tiegs.

Allegations that Tiegs canceled the agreement baselessly and in bad faith are meritless, which the unsecured creditors may have realized, VanLeuven said.

“We take it as a positive sign they’ve recognized those claims are weak,” he said.

A mediation session between Tiegs and the cooperative is scheduled for July 16, which will hopefully result in a “global settlement” resolving all disagreements about their transactions, VanLeuven said.

“We want to make sure if we enter into a settlement, we settle everything and don’t have any loose ends,” he said. “You always go into a mediation hoping to settle.”

Several attorneys representing the committee of unsecured creditors did not respond to requests for comment.

Unsecured creditors, who lack collateral for loans to NORPAC, filed a motion earlier this year asking a bankruptcy judge for permission to file the lawsuit against Tiegs on the cooperative’s behalf.

The proposed complaint would have accused Tiegs of rescinding his agreement to buy NORPAC’s processing facilities, crop inventories and other assets minutes before a deadline for competing bids in October 2019.

Calling off the deal was a “thinly-veiled attempt” to obtain “more favorable terms” that would take advantage of NORPAC “in the absence of competing bids,” the unsecured creditors claimed.

At the time, the failed transaction threw the bankruptcy process into disarray, as the NORPAC facilities were originally supposed to operate without interruption for farmers, customers and employees.

However, Tiegs did ultimately buy the cooperative’s facility in Quincy, Wash., along with its inventory and intellectual property, including the NORPAC name.

That transaction is now the subject of a lawsuit in which Tiegs alleges NORPAC overcharged $7 million for bulk inventory, while the cooperative has countersued claiming he hasn’t paid $10 million for finished goods.

The Lineage Logistics cold storage company eventually bought NORPAC’s three facilities in Oregon, then sold the plants in Brooks and Stayton to Tiegs while retaining the one in Salem.

Unsecured creditors nonetheless claimed the last-minute breach was “improper conduct” that resulted in “significant additional costs and expenses, including professional fees” for which their committee should be allowed to seek compensation in court.

The committee did not explain why it has now withdrawn the motion seeking “derivative standing” to file a complaint, but told the judge that its decision was not opposed by the cooperative, a committee representing NORPAC’s farmer-members or the Oregon Potato Co.

I've been working at Capital Press since 2006 and I primarily cover legislative, regulatory and legal issues.

Recommended for you