Simply Essentials files bankruptcy petition in California

By Bob Steenson, bsteenson@charlescitypress.com

Simply Essentials LLC, the company that owns the chicken processing facility in Charles City that closed a year ago, has filed for voluntary Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Eastern District of California.

But the parties that filed an involuntary Chapter 7 bankruptcy petition against Simply Essentials in Iowa earlier this year will fight to keep the proceeding in this state, their attorney said Monday.

Joseph Peiffer, an attorney with Ag & Business Legal Strategies in Cedar Rapids, told the Press that he would be filing a motion Monday in U.S. Bankruptcy Court for the Northern District of Iowa to stay the proceedings in California and transfer the venue of the case back to this state.

He said he expects that the bankruptcy judge in Iowa will schedule a hearing on the motion once it is filed.

“The major property of the company is here. Many of the creditors are from Iowa or surrounding states, and litigation is pending here, so why should we go there?” Peiffer asked. “We don’t see a good reason to have to do any of this in California.”

Peiffer said there is litigation currently pending with Simply Essentials in Minnesota in both state and federal court and there is an arbitration pending in Chicago with a creditor from Michigan.

“For the convenience of the parties, in case we have to have testimony, it’s a lot easier for farmers from Iowa, Wisconsin and Minnesota to come to Cedar Rapids than to go to Fresno, California,” he said.

“In addition, the bankruptcy judge here already has familiarity with this plant, as it was in a Chapter 11 bankruptcy with Custom Poultry back in 2011,” Peiffer said.

Peiffer had filed the involuntary bankruptcy petition against Simply Essentials in March in the U.S. Bankruptcy Court for the Northern District of Iowa in Cedar Rapids, on behalf of eight business or individuals in Iowa and Wisconsin that raised chickens for Simply Essentials and that said the company owed them a total of almost $806,000.

Under Chapter 7 bankruptcy, often called liquidation bankruptcy, a trustee is assigned to sell the assets of the business to raise as much money as possible to pay back the creditors who are owed money.

In Chapter 11 bankruptcy, often called reorganization bankruptcy, the goal is to restructure debts so that the business can continue to operate while paying off remaining debts under new terms.

The California bankruptcy petition was filed on behalf of authorized representative David Pitman, listed as secretary of Pitman Farms Inc., of Sangor, California. It lists the Charles City plant as the place the business operates.

Pitman Family Farms purchased Simply Essentials in November 2017 from Tillridge Global Agribusiness Partners, a private equity firm.

Simply Essentials closed the Charles City business last summer on Aug. 5, 2019, putting more than 500 people out of work.

The required court forms listing assets and liabilities, property, equity security owners, secured and unsecured creditors and additional information have not yet been filed by Simply Essentials in California bankruptcy court, and are due by Aug. 24 unless the company is granted an extension or the California action is stayed.

The general information filed with the bankruptcy petition in California shows the estimated number of creditors between 50 and 99, estimated assets between $10 million and $50 million, and estimated liabilities between $100 million and $500 million.

The list of the largest unsecured creditors leads off with NMTC, with a claim amount of $34 million.

NMTC is the New Markets Tax Credit program, a program of the U.S. Treasury Department that provides a federal tax credit for private investors to help finance businesses in low-income areas.

Simply Essentials purchased the former Cedar River Poultry facility in 2016 and invested millions of dollars in converting the facility to a state-of-the-art chicken processing facility, using air-chilling to produce what it said was better tasting, healthier chicken products.

It contracted with farmers around the Midwest to raise company-owned chickens, using feed and medicine supplied by Simply Essentials.

As part of the proceedings in California, Simply Essentials has asked the judge there to authorize the rejection of those contracts between Simply Essentials and the farmers, since the plant is closed and Simply Essentials has stopped placing chickens with the growers.

Other unsecured creditors are listed as Prairie’s Best Farms Inc. of Fairfax, Minnesota,, for $2.11 million, and Ryder Truck Rental Inc. for a little over $10,000.

Twenty-two other creditors are listed without dollar amounts, including all those that had filed the involuntary bankruptcy petition in Iowa.

The filing says that Richard Pitman, president of Pitman Farms, and David Pitman, secretary/treasurer of Pitman Farms, met last week and decided it was in the best interest of Simply Essentials to file a petition for Chapter 11.

Tim Fox, the executive director of the Charles City Area Development Corp. has said frequently in past months that there is serious interest by other companies in purchasing the Simply Essentials facility, and his latest prediction – made at the July CCADC board meeting – was that something could be announced by the end of this month.