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VeroBlue Farms USA, once the promising start-up that brought aquaculture to Webster City and Hamilton County, filed for Chapter 11 bankruptcy in late 2018, revealing more than $100 million in debt, including the most were unsecured.

WEBSTER CITY — Long after the aquariums were drained and the resulting disappointment settled in this hopeful Iowa town, the minutia of the bankruptcy that brought VeroBlue Farms USA Inc. to its knees has snaked through the courts, leaving behind continuous streaks of disappointments and a ruling that could change the way some future bankruptcy cases play out.

The catch in this case is “fair theoretical character”.

freely described, “equitable disappearance” is a doctrine that allows for judicial discretion when deciding the outcome of a bankruptcy.

He may have met his match in FishDish LLC.

VeroBlue Farms USA, once the promising start-up that brought aquaculture to Webster City and Hamilton County, filed for Chapter 11 bankruptcy in late 2018, revealing more than $100 million in debt, including the most were unsecured. VeroBlue, according to its bankruptcy petition, owed $98,943,246.22 in unsecured debt to its top 20 creditors.

Another secured debt of $6 million was assigned to Broadmoor Financial LP, of Wichita, Kansas, VeroBlue’s main creditor. VeroBlue owed more than $53 million to this company alone.

So when the bankruptcy court in April 2019 accepted an amended Chapter 11 reorganization plan submitted by major shareholder Alder Aqua Ltd. and Broadmoor, it appeared the case was closed.

But not for FishDish, which is another creditor.

According to his appellant’s brief filed on January 7, 2022, “(I)n the summer of 2016, to fund their growth, (VeroBlue) raised $63 million in debt and equity financing. Specifically, (it) raised $34 million in equity by selling Preferred shares of VBF USA to Alder Aqua, Ltd. ($28 million) and FishDish ($6 million) Some of the debtors became borrowers under an original credit facility of $29 million. dollars from Amstar Group, LLC. … Amstar and Alder have common ownership and control – Dr. Otto Happel and his immediate family members. Happel then leveraged his ownership of Amstar and Alder to assert control over the VeroBlue by installing his daughter on its board of directors and directing his other board appointees to dominate board decision-making, even in the face of contrary board direction.

The original 2016 business plan, the brief states, “involved relying on local Iowa farmers as “designated producers” to assist with aquaculture production at various stages of the fish life cycle. …these local farmers and others with ties to the local business community (had) the opportunity to invest by purchasing common shares of parent company “VBF Canada” – an originally incorporated Canadian company as the sole shareholder of VBF USA. … Approximately 74 individuals or entities have invested in this parent company of (VeroBlue), many of whom are Iowans…”

In 2016 VeroBlue refinanced its debt with Alder and Amstar and ultimately VBF Canada became a minority shareholder of VeroBlue.

FishDish, with $6 million in in-game skins, immediately appealed the Chapter 11 reorganization plan proposed by Alder and Broadmoor. In October, his appeal was denied by the United States District Court for the Northern District of Iowa.

Then FishDish appealed to the United States Court of Appeals for the Eighth Circuit. This court overturned an essential part of the previous dismissal:“We rescind and remand for reconsideration the District Court’s dismissal of FishDish’s appeal of the Plan Confirmation Order on the grounds of moot fairness.”

The appellant’s factum puts it this way: “The bankruptcy court deprived FishDish of its legitimate opportunity to participate meaningfully in the bankruptcy cases, thereby preventing it from taking the necessary steps to achieve any recovery of its $6 million investment.”

The decision caught the attention of Wall Street Journal writer Andrew Scurria, who wrote. “Federal judges shouldn’t be too quick to dispense with appeals challenging the approval of a Chapter 11 plan,” a U.S. appeals court has said.

“The United States Court of Appeals for the Eighth Circuit issued a decision on Thursday (August 5, 2021) criticizing the application of ‘mootness fairness,’ a legal doctrine developed over the years that protects many court decisions bankruptcy from appellate review.

“Although the standard varies from one federal appeals court to another, the equity mootness generally states that certain aspects of Chapter 11 proceedings are effectively not reviewable on appeal, because to overturn them it is would have to unwind transactions that have already taken place.”

In December 2020, NaturalShrimp, Inc., another aquaculture company, purchased the former assets of VeroBlue Farms from Alder Aqua.

Despite this sale, calls from FishDish kept the business alive.

”[T]The Eighth Circuit has articulated an olfactory standard for clearly erroneous as “a high to uphold”;says the appellant’s factum. “ “To be clearly wrong, a decision must seem more than maybe or probably wrong to us; it must…seem false to us with the force of a five-week-old unchilled dead fish.

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