Unsecured creditors of the former NORPAC cooperative are seeking to pursue claims against an agribusiness company that backed out of buying the bankrupt processor’s assets last year.

A committee representing unsecured creditors — which lack collateral for their loans to NORPAC — has asked a bankruptcy judge for permission to file a complaint against the Oregon Potato Co.

Oregon Potato Co. is owned by agribusiness entrepreneur Frank Tiegs, who initially agreed to buy NORPAC’s four processing facilities and other assets for $155.5 million but withdrew from the deal over alleged regulatory and environmental issues.

The former NORPAC cooperative, now known as North Pacific Canners & Packers, has agreed to have the litigation pursued on its behalf by the unsecured creditors, who’d recover any additional funds if the complaint was successful.

Under the processor’s proposed bankruptcy plan, unsecured creditors currently stand to be repaid for 10 to 45% of the $75 million they’re owed — depending on the outcome of other lawsuits involving the cooperative.

The unsecured creditors want to file a lawsuit accusing Oregon Potato Co. of violating an asset purchase agreement with NORPAC in October 2019 and breaching its “duty of good faith and fair dealing.” The complaint would seek money damages in an amount to be proven at trial as well as attorney fees.

Capital Press was unable to reach Joe VanLeuven, attorney for OPC, for comment as of press time.

In terminating the deal, OPC wrote that it’s “not satisfied with the results of its due diligence investigation and is therefore electing not to proceed with the transaction.”

At the time of its bankruptcy filing in August 2019, NORPAC expected to sell substantially all of its assets to Tiegs, including a processing plant in Quincy, Wash., and three facilities in Oregon.

After realizing no other company planned to compete for NORPAC’s assets, however, Tiegs pulled out of the agreement minutes before the bid deadline, which was a “thinly veiled attempt to re-trade the deal in order to achieve more favorable terms,” according to the court motion filed by the unsecured creditors.

The last-minute maneuver caused “significant disruption” and added substantial costs to the bankruptcy proceedings, the motion said. “Rather than closing on a planned sale of substantially all of the Debtors’ assets within approximately two months of the Petition Date, the Debtors, estate professionals, and all creditors and parties in interest were faced with attempting to salvage value for all stakeholders with an uncertain outcome and under severe time constraints.”

After this first deal fell through, Tiegs ended up buying the facility in Quincy, Wash., and bulk goods for $109 million and finished goods for another $10 million. Meanwhile, the cold storage company Lineage Logistics bought the Oregon facilities in Brooks, Salem and Stayton for $49 million.

Lineage Logistics retained the plant in Salem but resold the property in Brooks for $13.5 million and in Stayton for $3.8 million to Tiegs.

According to the unsecured creditors’ motion, the “events that transpired subsequent to OPC’s improper termination” of the asset purchase agreement show that its actions were made “in bad faith and without basis.”

“Despite claiming that it was not satisfied with the results of its due diligence, less than a month later OPC was back at the negotiating table” and eventually bought most of the same assets as under the previous deal, the motion said.