By AMANDA LOVIZA
Glasgow Daily Times
Farmers across southcentral Kentucky and middle Tennessee have filed two civil suits against Fifth Third Bank in an effort to be paid compensatory and punitive damages for the bad checks they received for their livestock when Fifth Third Bank discontinued Eastern Livestock’s line of credit last fall.
The 74 complainants in the two suits sold livestock to Eastern Livestock, LLC, between Aug. 10 and Nov. 2, 2010, and received bad checks as payment. Eastern Livestock’s checks were not honored because Fifth Third Bank discontinued the livestock company’s line of credit when the bank discovered an alleged check kiting scheme in which Eastern Livestock has been accused of artificially inflating its accounts to make the company appear to be financially strong. When Fifth Third stopped honoring Eastern’s checks, farmers across Kentucky and Tennessee lost hundreds of thousands of dollars. While Eastern Livestock and its owner are in the throes of bankruptcy court, in which Fifth Third Bank is the most likely entity to receive money, local farmers have chosen to seek compensation from the bank that they believe could have honored their checks despite Eastern Livestock’s solvency or lack thereof.
The civil cases have been brought before Metcalfe Circuit Court within the bounds of subject matter jurisdiction, according to court documents. The amount in controversy within the two cases exceeds the court’s jurisdictional threshold, but the two suits argue that the Metcalfe court can maintain jurisdiction because of Cincinnati-based Fifth Third Bank’s decision to have offices located in Kentucky, contract credit with Eastern Livestock and engage in regular business within in Kentucky.
“Fifth Third Bank, Inc. intentionally engaged in the wrongful acts set forth herein, the said acts being calculated to cause serious harm to the Plaintiffs who reside in Kentucky and Tennessee and to all of the Plaintiffs that sold livestock at the Edmonton Buying Station in Metcalfe County, Kentucky (between August and November),” the court documents state.
Fifth Third Bank established a credit agreement and security agreement with Eastern Livestock in 2004, which granted Fifth Third a first lien on Eastern Livestock’s assets. A revolving line of credit and revolving loans were established in order for Eastern Livestock to purchase livestock. Each week from 2004 through November of 2010 when Eastern purchased livestock, in particular when it purchased livestock each Tuesday from the Edmonton buying station, the livestock company would provide purchasing records to the bank, and the bank would transfer enough funds to cover Eastern Livestock’s purchases.
The alleged check kiting scheme was initially discovered and investigated in 2007, then again in 2009 and finally in 2010. On Nov. 1, 2010, Fifth Third bank froze Eastern Livestock’s checking accounts without notice to the company or the farmers who brought livestock to the Edmonton market on Tuesday, Nov. 2. Failure to give notice of those actions to Eastern Livestock went against the credit agreement between the livestock company and the bank, the court documents allege.
The court documents further accuse Fifth Third Bank of not only failing to give timely notice, but purposely choosing not to give notice with the understanding that its failure to give notice would result in farmers receiving bad checks. Fifth Third’s purpose was to “minimize and reduce” its deficiency loss and acquire a first lien on the livestock misappropriated from their owners at the Edmonton Buying Station. Fifth Third bank’s first lien is a key entanglement in the bankruptcy of Eastern Livestock and its owner, Thomas P. Gibson, and it affects farmers’ abilities to make any claims on money within the bankruptcy case. That “interference” has been “pervasive and continuous” since the checks were not honored, the court documents said.
The actions set forth in both suits against Fifth Third Bank are conversion, unjust enrichment, theft by failure to make required disposition. They are seeking compensatory damages and punitive damages. The plaintiffs believe that Fifth Third Bank acted reprehensibly and showed indifference or a reckless disregard to the health, safety and legal interests of the plaintiffs. Each farmer is looking to be repaid for the money he or she lost as well as punitive damages to compensate for the year that has followed without the farmers receiving money for their livestock and becoming involved in legal cases.
Thomas W. Davis is representing all 74 plaintiffs, some who are listed in both suits for multiple bad checks. Davis declined to comment on an ongoing case.
The Eastern Livestock scandal rocked farmers, banks and other livestock contractors across the nation when Eastern Livestock Company, LLC, was exposed last November for writing millions of dollars worth of bad checks. Local farmers were hit especially hard on Nov. 2, 2010, when they sold approximately $900,000 worth of cattle at the Edmonton livestock market and received worthless checks from Eastern Livestock in return. Investigations began within days of the Edmonton market sale, and in September 2011, Eastern Livestock owner, Thomas P. Gibson, and operator, Steve McDonald, were indicted by the U.S. Attorney on one charge of mail fraud for their part in the check kiting scheme. Gibson and McDonald allegedly deposited billions of dollars worth of checks issued from various bank accounts in amounts that exceeded available balances in those accounts, in order to artificially inflate the balances in Eastern Livestock’s cash collateral account and lead Fifth Third Bank to believe that Eastern Livestock could sustain its line of credit. On the same day Thomas Gibson and McDonald were indicted on the federal level, they were also indicted in Metcalfe Circuit Court, along with Grant Gibson and Darren Brangers on charges of engaging in organized crime and multiple counts of theft by deception.