UPDATE: Investors Claim They Were Misled But Jury Disagrees

by Mark Friedman  on Monday, Sep. 20, 2004 12:00 am  

UPDATE: In October 2008, the catfish investors who claimed they were misled about the financial status of a catfish processing plant lost their lawsuit, which was originally reported below, in Pulaski County Circuit Court. Later, the defendants, Catfish Producers LLC, won a counterclaim against the plaintiffs for breach of contract. You can read more about the outcome of the case reported below in this December 2008 article.

Original story:

The defunct Arkansas Catfish Growers LLC of Eudora, which operated as Seacat, revealed earlier this month that it has $15.7 million in debt and only $3.5 million in assets.

The Arkansas Development Finance Authority helped push the catfish cooperative into involuntary bankruptcy in June in an attempt to collect on $7.5 million worth of loans, which were secured by Seacat's processing plants, mortgages on the real estate and guarantees by the 16 fish farmers who owned a slice of Seacat.

Meanwhile, several owners of Seacat want their names removed as guarantors. They claim they were misled about the true financial picture of the catfish processing plants before they invested $2.5 million into them in 2001 in exchange for delivery rights.

The eight catfish farmers have sued some of the other owners of Seacat, which operated the processing plant called Farm Fresh Catfish Co.

The plaintiffs said it wasn't until they opened a file cabinet which had been sealed with duct tape that they discovered board minutes indicating that Farm Fresh had been gasping for air for years.

"It now appears that, from its inception, the catfish processing operations of Farm Fresh Catfish Co. were always economically disastrous," the plaintiffs said in their lawsuit filed in Pulaski County Circuit Court on Aug. 13.

The plaintiffs have named Catfish Producers LLC and its owners Baxter Land Co. of Watson and its owner, Jeff Baxter; Frank Pugh of Portland, Ore.; Tom Pugh of Little Rock; and David Yocum IV of Dermott. The plaintiffs are suing for an unspecified amount of damages for intentional misrepresentation, intentional interference with contract, breach of contract and negligence.

Frank Pugh declined to comment and the others didn't return calls.

The lawsuit also names Little Rock law firm Friday Eldredge & Clark and ADFA as defendants.

Friday attorney Price Gardner, who wrote the stock memorandum for Catfish Producers, said he didn't do anything wrong.



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