Easterday debtors blast attempts to replace independent directors

By Sarah Lizee

Olympia, Wash., March 15 – Easterday Ranches, Inc. and Easterday Farms filed a complaint for injunctive relief against Karen L. Easterday, Cody A. Easterday, Debby Easterday and the estate of Gale A. Easterday late Monday, according to a filing with the U.S. Bankruptcy Court for the Eastern District of Washington.

The debtors are seeking a court declaration that the attempts by the Easterdays – the general partners of Easterday Farms and shareholders of Easterday Ranches – to remove individual members of the board of directors violates the automatic stay in the case. The debtors also want an injunction from any further attempts to remove the independent directors.

On March 12, the Easterday family members executed a unanimous written consent of the shareholders of Easterday Ranches purporting to remove the current board, and an amendment to the Easterday Farms partnership agreement purporting to replace the current board with a manager.

The debtors said this came after a month-long series of settlement discussions, and on the eve of a hearing on approval of a disclosure statement and motions to approve settlements with third parties that the Easterdays do not believe are in their best interests.

As previously reported, the Easterdays assert that there is a conflict of interest between the two estates, because they believe Easterday Farms’ creditors can be paid in full with a return to equity, but the duties of Easterday Ranches are in direct conflict with those objectives.

However, the debtors said that a majority of the stakeholders agree that a consensual amended Chapter 11 plan is near, and that replacing the independent directors is “not simply a ploy for additional leverage but is a clear abuse of the process” by the Easterdays that “seriously jeopardizes” the plan.

“These Chapter 11 cases are the result of a fraud in excess of $200 million dollars concocted by Cody Easterday while the co-defendants – partners and/or board members of the debtors throughout the fraud – did nothing to stop it,” the debtors said in court documents.

Prior to the start of the Chapter 11 cases, Tyson Fresh Meats, Inc. and Washington Trust Bank each sought the appointment of a receiver over the debtors. Instead, the independent directors were appointed to start and manage the Chapter 11 cases.

“The independent directors have attempted to engage the defendants throughout these Chapter 11 cases,” the debtors said.

“Unfortunately, because of the defendants’ inherent conflict of wanting a maximum recovery at Farms to provide them with equity value, rather than achieving an equitable resolution, the defendants have been unyielding and have fought tooth and nail against the Ranches estate, doubling down on the harm to the Ranches estate and the direct victims of the fraud.”

The companies said replacement of the independent directors puts the anticipated consensual Chapter 11 plan at risk and may lead to the appointment of independent Chapter 11 trustees or the conversion of the cases to Chapter 7.

A disclosure statement hearing is scheduled for March 16.

Easterday Ranches is a Pasco, Wash.-based cattle operator. The company filed bankruptcy on Feb. 1, 2021 under Chapter 11 case number 21-00141.

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