1020-00005 · Greenfield Agricultural Partners · Receivership

client-memo-recommendation-voluntary-dismissal.docx DOCUMENT Litigation

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

MEMORANDUM

FROM: Francesca Morano, Partner Calderwood & Harkness LLP 225 West Wacker Drive, Suite 4000 Chicago, Illinois 60606

TO: Thomas R. Greenfield, Chairman and Chief Executive Officer Margaret A. Greenfield-Wu, President and Chief Operating Officer Greenfield Agricultural Partners LLC 1400 Grand Prairie Boulevard, Suite 800 Des Moines, Iowa 50309

CC: Caleb Jennings, Director of Grain Operations, GAP Grain Trading Division Samuel Eklund, Partner, Calderwood & Harkness LLP Hannah Brinkley, Associate, Calderwood & Harkness LLP

DATE: January 25, 2023

RE: Recommendation to Voluntarily Dismiss Cook County Collection Action — Greenfield Agricultural Partners LLC v. Prairie Basin Grain Co. et al., Case No. 2022-L-004831, Circuit Court of Cook County, Illinois

C&H MATTER NO.: 1020-00005

I. Purpose of Memorandum

The purpose of this memorandum is to recommend that Greenfield Agricultural Partners LLC ("GAP") voluntarily dismiss the collection action currently pending in the Circuit Court of Cook County, Illinois, Case No. 2022-L-004831 (the "Cook County Action"), without prejudice, pursuant to Section 2-1009 of the Illinois Code of Civil Procedure, 735 ILCS 5/2-1009.

This recommendation is prompted by the fact that Prairie Basin Grain Co. ("PBGC"), the principal defendant in the Cook County Action, has been placed into receivership by order of the Circuit Court of Sangamon County, Illinois, Case No. 2022-CH-001247, entered on December 12, 2022 (the "Receivership Order"). The Receivership Order imposed an automatic stay on all pending litigation against PBGC, effectively precluding GAP from further prosecuting the Cook County Action against PBGC for the duration of the receivership.

This memorandum addresses: (1) the relevant background and procedural history of the Cook County Action; (2) the preservation of GAP's claims within the Sangamon County receivership proceeding; (3) the legal basis for voluntary dismissal without prejudice and the effect of such a dismissal on GAP's rights; and (4) the strategic rationale for this recommendation. We also provide a summary of the financial status of the engagement and outline the next steps that Calderwood & Harkness LLP ("C&H") would take upon receiving GAP's authorization.

II. Background and Procedural History

A. The Collection Action

On May 9, 2022, C&H filed a four-count Verified Complaint on behalf of GAP in the Circuit Court of Cook County, Illinois, County Department, Law Division, initiating the action styled Greenfield Agricultural Partners LLC v. Prairie Basin Grain Co. et al., Case No. 2022-L-004831. The Complaint named two defendants:

(1) Prairie Basin Grain Co. ("PBGC"), an Illinois corporation with its principal office located at 4520 Harvest Road, Champaign, Illinois 61820. PBGC is a grain merchandising and elevator operations company that was party to the Master Grain Purchase and Off-Take Agreement with GAP dated March 15, 2019 (the "Off-Take Agreement").

(2) Darren K. Musgrave, individually. Mr. Musgrave is the President, sole director, and 72% shareholder of PBGC. Mr. Musgrave executed a Personal Guaranty of Payment, attached as Exhibit D to the Off-Take Agreement (the "Musgrave Guaranty"), pursuant to which he personally guaranteed PBGC's payment obligations under the Off-Take Agreement up to a maximum aggregate amount of $2,000,000.

The Complaint set forth the following four counts:

Count I — Breach of Contract (Off-Take Agreement) against PBGC. This count alleged that PBGC breached the Off-Take Agreement by failing to remit payment for five separate grain deliveries made by GAP between the fourth quarter of 2021 and the first quarter of 2022. The unpaid principal amount totaled $4,870,050.00.

Count II — Breach of Personal Guaranty against Darren K. Musgrave. This count alleged that Mr. Musgrave breached the Musgrave Guaranty by failing to honor his obligation to pay amounts owed by PBGC under the Off-Take Agreement, up to the $2,000,000 cap specified in the Guaranty. GAP demanded from Mr. Musgrave the full $2,000,000 guaranty amount.

Count III — Account Stated against PBGC. This count alleged that the parties had an established course of dealing under the Off-Take Agreement, that periodic account statements reflecting the outstanding balances were transmitted by GAP to PBGC, and that PBGC's failure to object to those account statements within a reasonable time resulted in an account stated in the amount of $4,870,050.00 in principal.

Count IV — Unjust Enrichment (in the alternative) against PBGC. Pleaded in the alternative to the contract claims, this count alleged that PBGC was unjustly enriched by its receipt and subsequent resale or use of grain delivered by GAP for which PBGC failed to render payment.

At the time of filing, the total amount claimed was approximately $5,216,042, which comprised the principal balance of $4,870,050.00 plus approximately $345,992 in accrued interest through the date of filing. Interest was calculated at the contractual rate of 1.5% per month (18% per annum), as specified in Section 7.3 of the Off-Take Agreement, which provides that any amounts past due shall bear interest at the rate of one and one-half percent (1.5%) per calendar month, compounding monthly, from the date such amount became due until paid in full.

B. Key Litigation Developments

The following is a chronological summary of the significant events in the Cook County Action since the Complaint was filed:

Service of Process. Service of the Complaint and Summons was completed on both defendants on May 24, 2022. PBGC was served through its registered agent, Ridgeline Corporate Services LLC, in accordance with 735 ILCS 5/2-204. Mr. Musgrave was personally served at his residence at 1188 Windermere Lane, Champaign, Illinois 61822, in accordance with 735 ILCS 5/2-203.

Answer and Affirmative Defenses. On June 27, 2022, PBGC and Mr. Musgrave, appearing jointly through the law firm of Bartlett, Reyes Linley CPAs LLP & Harkin LLP (lead counsel Douglas M. Harkin), filed their Answer and Affirmative Defenses to GAP's Verified Complaint. The Answer admitted certain foundational allegations regarding the existence of the Off-Take Agreement and the Musgrave Guaranty, but denied the material breach allegations and raised three affirmative defenses: (1) force majeure, predicated on the Macon County grain elevator fire of October 17, 2021, which Defendants contended excused PBGC's nonperformance under the Off-Take Agreement; (2) commercial impracticability under Section 2-615 of the Uniform Commercial Code as adopted in Illinois, again relying on the elevator fire and related supply disruptions; and (3) failure to mitigate damages, contending that GAP failed to take reasonable steps to resell or otherwise dispose of grain inventories to mitigate its losses following PBGC's nonpayment.

Motion to Strike Affirmative Defenses. On July 15, 2022, C&H filed a Motion to Strike Defendants' First and Second Affirmative Defenses on behalf of GAP, arguing that the force majeure clause in Section 9.1 of the Off-Take Agreement did not encompass PBGC's failure to pay for grain already delivered and accepted, and that commercial impracticability was inapplicable because the breach at issue was a payment obligation rather than a delivery or supply obligation. The memorandum in support of the motion cited controlling Illinois authority, including Hess Corp. v. EPA, and analogous federal decisions applying Illinois law. The motion was fully briefed, with Defendants filing their response on August 5, 2022, and GAP filing its reply on August 15, 2022.

Ruling on Motion to Strike. On August 22, 2022, the Honorable Patricia Delacroix granted GAP's Motion to Strike as to the first affirmative defense (force majeure) and the second affirmative defense (commercial impracticability). Judge Delacroix's oral ruling, confirmed by written order entered the same date, held that the force majeure clause in Section 9.1 of the Off-Take Agreement was limited by its terms to excuse failures of delivery and could not be invoked to excuse nonpayment for commodities already delivered and accepted. The court further held that commercial impracticability did not apply to payment obligations under governing Illinois case law. The third affirmative defense — failure to mitigate — survived and remained at issue.

Case Management Conference. A Case Management Conference was held before Judge Delacroix on September 12, 2022, at which the court entered a Case Management Order establishing a discovery schedule. The order set a fact discovery cutoff of March 31, 2023, with expert discovery, if any, to close on June 30, 2023.

Written discovery by GAP. On September 30, 2022, C&H served GAP's First Set of Interrogatories (20 interrogatories) and First Request for Production of Documents (32 requests) on both PBGC and Mr. Musgrave. On October 14, 2022, C&H served GAP's First Request for Admission (15 requests) directed to PBGC. The interrogatories and document requests sought, among other things, details regarding PBGC's financial condition, its disposition of grain purchased from GAP, the Macon County elevator fire, the insurance claim with Triton Mutual Insurance Co., and the basis for the remaining failure-to-mitigate defense.

Withdrawal of Defense Counsel. On November 4, 2022, Bartlett, Reyes Linley CPAs LLP & Harkin LLP filed a Motion to Withdraw as Counsel for both PBGC and Mr. Musgrave, citing nonpayment of legal fees as the basis for withdrawal. The motion was presented to Judge Delacroix and, after a hearing on November 18, 2022, was granted. Since November 18, 2022, PBGC has been without legal representation. Under well-established Illinois law, a corporation cannot appear or proceed pro se in litigation and must be represented by a licensed attorney. See Eychaner v. Gross, 202 Ill. 2d 228, 253 (2002). As a result, PBGC's ability to participate in the Cook County Action has been effectively suspended.

Outstanding discovery. As of the date of this memorandum, no discovery responses have been received from either PBGC or Mr. Musgrave. The receivership intervened before any motion to compel discovery was filed by GAP.

C. PBGC's Financial Distress and Receivership

PBGC experienced severe financial deterioration beginning in the fourth quarter of 2021, driven by a confluence of factors that rendered the company unable to meet its obligations to trade creditors, including GAP. The principal causes of PBGC's distress are as follows:

Macon County Elevator Fire. On October 17, 2021, a fire destroyed PBGC's primary grain storage facility located in Macon County, Illinois. The estimated loss from the fire was approximately $3.2 million, encompassing structural damage to the facility, destruction of stored grain inventory, and related business interruption losses. PBGC carried property and casualty insurance through Triton Mutual Insurance Co. ("Triton Mutual"). However, Triton Mutual has disputed coverage for the fire loss, alleging that PBGC's insurance premiums had lapsed prior to the date of the fire. PBGC has initiated separate coverage litigation against Triton Mutual, which remains pending.

Failed Hedging Strategy. In the period following the elevator fire, PBGC's management, under the direction of Mr. Musgrave, pursued an aggressive short position in corn futures in an apparent attempt to offset the company's losses from the fire. This hedging strategy was unsuccessful. As corn futures prices rose sharply in late 2021 and early 2022 — driven in part by global supply concerns — PBGC sustained approximately $6.8 million in mark-to-market losses on its short corn futures positions. These losses further eroded PBGC's liquidity and capital position.

Cessation of Trade Payments. By January 2022, PBGC had ceased paying its trade creditors, including GAP. GAP's five unpaid invoices, spanning deliveries from October 2021 through January 2022, represent a portion of the broader trade creditor shortfall.

In light of PBGC's mounting financial difficulties, its senior secured lender, Heartland Prairie Bank, N.A. ("Heartland Prairie"), with principal offices at 300 East Main Street, Decatur, Illinois 62521 (relationship manager Kenneth W. Aldrich, Senior Vice President, Agribusiness Lending), declared PBGC in default under its Revolving Credit and Term Loan Agreement dated June 1, 2018 (the "HPB Credit Agreement"). The HPB Credit Agreement provided for an aggregate lending commitment of $45 million. As of the date of default in April 2022, PBGC's outstanding balance under the HPB Credit Agreement was approximately $31.4 million, consisting of both revolving credit advances and term loan principal. Heartland Prairie holds a senior perfected security interest in substantially all of PBGC's assets under Article 9 of the Uniform Commercial Code, as evidenced by a Security Agreement dated June 1, 2018, and UCC-1 Financing Statements filed with the Illinois Secretary of State.

On November 28, 2022, Heartland Prairie Bank filed a Verified Petition for Appointment of Receiver over PBGC and all of its assets and operations in the Circuit Court of Sangamon County, Illinois, Case No. 2022-CH-001247 (the "Receivership Proceeding"). The Petition alleged that PBGC was insolvent, that its assets were at risk of dissipation, and that the appointment of a receiver was necessary to preserve value for the benefit of all creditors.

On December 12, 2022, after a hearing at which PBGC appeared without counsel and did not contest the petition, the Sangamon County Court entered an Order Appointing Receiver (the "Receivership Order"). The Receivership Order designated Gareth J. Whitmore, CPA, CIRA, of Whitmore Strauss Advisory LLC, 500 East Monroe Street, Suite 300, Springfield, Illinois 62701, as receiver for all assets and operations of PBGC (the "Receiver"). The Receivership Order vested the Receiver with broad authority to manage, preserve, and liquidate PBGC's assets, to investigate the company's financial condition and transactions, and to pursue claims on behalf of the receivership estate.

Critically, the Receivership Order included a provision imposing an automatic stay of all pending litigation against PBGC. The stay provision broadly enjoins all persons and entities from commencing or continuing any action, suit, arbitration, or other proceeding against PBGC or its assets during the pendency of the receivership, absent prior leave of the Sangamon County Court.

GAP received formal notice of the entry of the Receivership Order and the imposition of the automatic stay on December 19, 2022.

Based on publicly available information and disclosures made in the Receivership Proceeding, PBGC's estimated total liabilities are in the range of $58–62 million. PBGC's estimated total assets, at current fair market value, are in the range of $35–40 million. This represents a significant asset-to-liability shortfall of approximately $18–27 million. Given that Heartland Prairie Bank's senior perfected security interest secures approximately $31.4 million in outstanding obligations, the prospect of meaningful recovery for unsecured creditors — including GAP — from the general receivership estate is, candidly, uncertain and potentially limited. We address the implications of this analysis further in Section III below.

III. Preservation of GAP's Claims in the Receivership

Notwithstanding the recommendation to dismiss the Cook County Action, GAP's claims against PBGC have been independently preserved through the Sangamon County receivership proceeding. C&H has taken the following steps to ensure that GAP's interests are protected.

A. Letter to Receiver's Counsel

On January 10, 2023, C&H transmitted a formal letter to Joanna M. Lockridge, lead attorney at Lockridge Payne LLP, 120 South Sixth Street, Suite 1800, Springfield, Illinois 62701, who serves as counsel to Receiver Gareth J. Whitmore in the Receivership Proceeding. The letter formally asserted GAP's claim against PBGC arising out of the Off-Take Agreement and provided the Receiver with a detailed breakdown of the amounts owed.

The letter set forth GAP's total claim of approximately $5,664,428.85, comprised of the following components:

Principal — $4,870,050.00. This amount represents the aggregate unpaid invoices for grain delivered by GAP to PBGC under the Off-Take Agreement, consisting of five invoices:

Accrued Interest through December 31, 2022 — approximately $492,341.00. Interest was calculated at the contractual rate of 1.5% per month (18% per annum), compounding monthly, as specified in Section 7.3 of the Off-Take Agreement, running from the respective due date of each invoice through December 31, 2022.

Attorneys' Fees and Costs — $302,037.85. This amount consists of $287,415.50 in professional fees and $14,622.35 in costs and disbursements incurred in connection with the Cook County Action. GAP's claim for attorneys' fees is asserted pursuant to Section 12.4 of the Off-Take Agreement, which provides that the prevailing party in any action to enforce the Agreement shall be entitled to recover its reasonable attorneys' fees and costs from the non-prevailing party.

The letter requested that the Receiver acknowledge receipt of GAP's claim and provide information regarding the claims process established for the receivership, including any bar date for the filing of creditor claims.

B. Proof of Claim

On January 30, 2023, C&H prepared and filed a formal Proof of Claim on behalf of GAP in the Receivership Proceeding, Sangamon County Case No. 2022-CH-001247. The Proof of Claim was submitted to the Receiver and filed with the Clerk of the Circuit Court of Sangamon County in accordance with the procedures set forth in the Receivership Order and subsequent directives of the Receiver.

The Proof of Claim asserts a total unsecured claim of approximately $5,664,428.85, calculated as described above. The Proof of Claim was accompanied by the following supporting exhibits:

• A complete executed copy of the Master Grain Purchase and Off-Take Agreement dated March 15, 2019, including all schedules and exhibits thereto;

• A copy of the Musgrave Guaranty (Exhibit D to the Off-Take Agreement);

• Copies of the five unpaid invoices (GAP-2021-3187, GAP-2021-3244, GAP-2021-3301, GAP-2021-3358, and GAP-2022-0042);

• A copy of the pre-suit demand letter dated April 11, 2022, transmitted to PBGC and Mr. Musgrave by certified mail, return receipt requested;

• Copies of forbearance correspondence exchanged between GAP and PBGC between January and April 2022;

• A detailed interest calculation spreadsheet prepared by C&H, setting forth the accrual of contractual interest on each invoice from its respective due date through December 31, 2022.

GAP's claims are now formally on record before the Receiver and the Sangamon County Court. The filing of the Proof of Claim ensures that GAP will be treated as a claimant in any distribution of the receivership estate's assets and will receive notice of all material proceedings, including any proposed plan of liquidation or reorganization.

C. Claim Classification and Priority

GAP's claim in the Receivership Proceeding is classified as an unsecured trade creditor claim. GAP does not hold a security interest in any of PBGC's assets and does not have any statutory lien or priority that would elevate its claim above those of other general unsecured creditors.

As noted in Section II.C above, PBGC's assets are encumbered by Heartland Prairie Bank's senior perfected security interest, which secures approximately $31.4 million in outstanding obligations under the HPB Credit Agreement. Heartland Prairie's security interest attaches to substantially all of PBGC's tangible and intangible assets, including accounts receivable, inventory, equipment, general intangibles, and proceeds thereof. As such, the Receiver will be required to satisfy Heartland Prairie's secured claim — and the costs of administration of the receivership — from the estate's assets before any distributions are made to unsecured creditors.

Given PBGC's estimated total liabilities of $58–62 million against estimated total assets of $35–40 million, the arithmetic is sobering for unsecured creditors. After satisfaction of Heartland Prairie's approximately $31.4 million secured claim and administrative expenses (receiver's fees, professional fees of counsel to the Receiver, operational wind-down costs, etc.), the residual assets available for distribution to unsecured creditors may be minimal. Depending on the ultimate realization on PBGC's assets and the total pool of unsecured claims, GAP could potentially receive pennies on the dollar for its unsecured claim.

However, there is one potential additional source of recovery that bears monitoring. If PBGC's separate coverage litigation against Triton Mutual Insurance Co. is resolved favorably — either through litigation or settlement — the proceeds of any insurance recovery related to the Macon County elevator fire could augment the receivership estate and increase distributions to creditors. The outcome of that coverage dispute remains uncertain at this time, but C&H will monitor developments closely.

Regardless of the ultimate recovery in the receivership, the filing of GAP's Proof of Claim independently preserves all of GAP's claims against PBGC. The dismissal of the Cook County Action does not in any way diminish or impair GAP's position in the Receivership Proceeding.

IV. Legal Analysis — Voluntary Dismissal Without Prejudice

A. Effect of the Automatic Stay

The Receivership Order entered by the Circuit Court of Sangamon County on December 12, 2022, includes a broad automatic stay provision that enjoins all persons and entities from commencing or continuing any action, suit, arbitration, or other legal proceeding against PBGC or its assets during the pendency of the receivership, absent prior leave of the Sangamon County Court.

The stay prevents GAP from further prosecuting the Cook County Action against PBGC with respect to Counts I (Breach of Contract), III (Account Stated), and IV (Unjust Enrichment), all of which are directed against PBGC. Any further litigation activity — including motions to compel discovery, motions for summary judgment, or trial — is prohibited as to PBGC unless and until the Sangamon County Court lifts the stay or grants GAP leave to proceed.

It is important to note that an Illinois state court receivership stay is distinct from the automatic stay imposed in federal bankruptcy proceedings under 11 U.S.C. § 362. In the federal bankruptcy context, the scope and exceptions to the automatic stay are defined by statute. In the state court receivership context, however, the stay is governed by the specific terms of the appointing court's order. Here, the Sangamon County Court's order is drafted broadly and does not include exceptions that would permit GAP to continue prosecuting the Cook County Action.

Maintaining the Cook County Action on the active docket while the stay is in effect serves no practical purpose. GAP cannot advance its claims against PBGC through the Cook County litigation, and the case will remain dormant indefinitely. In the meantime, GAP may incur unnecessary administrative costs, including the obligation to appear at periodic status hearings before Judge Delacroix. The Cook County Court may also, on its own motion, dismiss the case for want of prosecution if no activity occurs for an extended period, which could create procedural complications. A voluntary dismissal without prejudice is the cleaner and more strategically sound course of action.

B. Voluntary Dismissal Under 735 ILCS 5/2-1009

Section 2-1009 of the Illinois Code of Civil Procedure, 735 ILCS 5/2-1009, provides in relevant part:

"The plaintiff may, at any time before trial or hearing begins, upon notice to each party who has appeared or such party's attorney, and upon payment of costs, dismiss his or her action or any part thereof as to any defendant, without prejudice . . . ."

Under this provision, a plaintiff's right to voluntary dismissal without prejudice is a matter of right so long as three conditions are satisfied: (1) the dismissal is sought before trial or hearing begins; (2) notice is given to each party who has appeared or to such party's attorney; and (3) costs are paid. See Kahle v. John Deere Co., 104 Ill. 2d 302, 307 (1984) ("Section 2-1009(a) grants to a plaintiff an absolute right to a voluntary dismissal before trial or hearing begins.").

Each of these conditions is readily satisfied here:

No Trial or Hearing Has Commenced. The Cook County Action remains in the discovery phase. No trial date has been set, and no dispositive motions have been filed. Accordingly, the statutory prerequisite that no trial or hearing has begun is clearly met.

Notice. C&H will serve the Notice of Voluntary Dismissal on all parties who have appeared in the action. Although Bartlett, Reyes Linley CPAs LLP & Harkin LLP has withdrawn as counsel for PBGC and Musgrave, C&H will serve the notice on PBGC at its principal office address and on Mr. Musgrave at his last known address, as well as on the Receiver and his counsel, to ensure proper notice.

Payment of Costs. GAP will tender payment of any taxable court costs as required by the statute.

A dismissal without prejudice under Section 2-1009 is not an adjudication on the merits and does not operate as a bar to refiling the same claims in the future. See Hudson v. City of Chicago, 228 Ill. 2d 462, 472 (2008). GAP may refile the Cook County Action or commence a new action asserting the same claims at any time within the applicable statute of limitations.

With respect to the statute of limitations, the applicable period for breach of a written contract under Illinois law is ten (10) years from the date the cause of action accrued. 735 ILCS 5/13-206. GAP's earliest invoice at issue (GAP-2021-3187) became due in approximately November 2021, which means the statute of limitations on that claim will not expire until approximately November 2031. The most recent invoice (GAP-2022-0042) became due in approximately February 2022, with a limitations period extending to approximately February 2032. Accordingly, GAP has ample time to refile the collection action if circumstances warrant.

C. The Musgrave Guaranty Claim

Count II of the Complaint asserts a claim against Darren K. Musgrave individually for breach of the Musgrave Guaranty, which caps Mr. Musgrave's personal liability at $2,000,000. This claim raises a distinct analytical issue because the receivership stay, by its terms, applies to claims against PBGC and its assets. Whether the stay extends to bar prosecution of personal claims against Mr. Musgrave as guarantor depends on the specific language of the Receivership Order.

Upon review of the Receivership Order, we note that the stay provision is directed to actions against "Prairie Basin Grain Co. and its assets" and does not expressly reference claims against third-party guarantors. There is a reasonable argument that GAP could continue to prosecute Count II against Mr. Musgrave notwithstanding the receivership stay. However, after careful consideration, we recommend that GAP dismiss the Musgrave Guaranty claim without prejudice as well, for the following reasons:

(a) Uncertainty Regarding Musgrave's Personal Financial Condition. Mr. Musgrave is the 72% shareholder of PBGC and, as its President and sole director, has been at the center of the company's financial collapse. It is likely that Mr. Musgrave's personal financial condition has been adversely affected by the events at PBGC, including the failed hedging strategy. Pursuing a judgment against Mr. Musgrave that may prove uncollectible would be an imprudent expenditure of litigation resources.

(b) Avoidance of Duplicative Litigation Expense. Prosecuting Count II against Mr. Musgrave individually while the receivership is pending would require GAP to bear the expense of continued litigation in Cook County — including discovery, depositions, and potentially trial — solely with respect to the guaranty claim. This would generate costs disproportionate to the $2,000,000 cap on the Musgrave Guaranty, particularly if Mr. Musgrave lacks the personal assets to satisfy a judgment.

(c) Preservation of the Guaranty Claim. A dismissal without prejudice fully preserves GAP's right to pursue the Musgrave Guaranty claim independently at a later date. Once the receivership concludes and the extent of GAP's recovery (or lack thereof) from the receivership estate becomes clear, GAP will be in a far better position to evaluate whether pursuing Mr. Musgrave personally is warranted and cost-effective. The ten-year statute of limitations on the written guaranty provides ample time for this evaluation.

In sum, while GAP is not legally required to dismiss the Musgrave claim, the practical and economic considerations strongly favor doing so at this time, with the understanding that the claim is fully preserved by the without-prejudice dismissal.

D. Preservation of Rights

To summarize the effect of a voluntary dismissal without prejudice on GAP's rights, we note the following:

1. A dismissal without prejudice under 735 ILCS 5/2-1009 expressly does not constitute an adjudication on the merits. It carries no preclusive effect under the doctrines of res judicata or collateral estoppel.

2. GAP may refile the Cook County Action or commence a new action asserting the same claims at any time within the applicable limitations period. Given the ten-year limitations period for written contract claims under 735 ILCS 5/13-206, GAP's ability to refile is preserved through at least 2031–2032.

3. GAP may elect to refile if any of the following circumstances arise: (i) the receivership concludes without full satisfaction of GAP's claim; (ii) the automatic stay is lifted by the Sangamon County Court; or (iii) GAP determines that it is strategically advantageous to pursue separate litigation against either PBGC or Mr. Musgrave.

4. GAP's Proof of Claim filed January 30, 2023, in the Sangamon County Receivership Proceeding independently preserves all of GAP's claims against PBGC. The receivership claim is separate from and unaffected by the disposition of the Cook County Action.

5. GAP should continue to actively monitor the receivership proceedings and participate as a creditor, including by attending creditor meetings, reviewing any proposed distribution plan, and objecting to any proposed actions by the Receiver that may adversely affect GAP's interests.

V. Recommendation

Based on the foregoing analysis, Calderwood & Harkness LLP recommends that GAP authorize the filing of a Notice of Voluntary Dismissal Without Prejudice as to all counts (Counts I through IV) and all defendants (Prairie Basin Grain Co. and Darren K. Musgrave) in Case No. 2022-L-004831, Circuit Court of Cook County, Illinois, pursuant to 735 ILCS 5/2-1009.

The rationale for this recommendation is summarized as follows:

1. The automatic stay prevents further prosecution. The automatic stay arising from the Receivership Order entered December 12, 2022, in the Sangamon County Receivership Proceeding (Case No. 2022-CH-001247) prevents GAP from further prosecuting the Cook County Action against PBGC. The action cannot move forward as to PBGC for the duration of the receivership.

2. GAP's claims are preserved in the receivership. GAP's claims against PBGC have been fully preserved through the Proof of Claim filed on January 30, 2023, in the Sangamon County Receivership Proceeding. The total asserted claim of approximately $5,664,428.85 is on record before the Receiver and the Sangamon County Court.

3. Dismissal without prejudice preserves the right to refile. A voluntary dismissal without prejudice under 735 ILCS 5/2-1009 does not constitute an adjudication on the merits and does not bar GAP from refiling the same claims in the future. GAP retains the option to refile if the receivership concludes without full satisfaction of its claim or if the stay is lifted.

4. Eliminating unnecessary costs. Maintaining the Cook County Action on the docket during the pendency of the stay generates unnecessary administrative costs — including periodic status hearing appearances, docket monitoring, and potential motions — with no corresponding benefit to GAP.

5. The Musgrave Guaranty claim is preserved. The without-prejudice dismissal of Count II preserves GAP's right to pursue the Musgrave Guaranty claim (up to $2,000,000) independently against Mr. Musgrave at a later date, if warranted by his personal financial circumstances and GAP's recovery (or lack thereof) in the receivership.

6. Ample time remains under the statute of limitations. The ten-year statute of limitations for breach of written contract claims under Illinois law (735 ILCS 5/13-206) provides GAP with a substantial window to refile if necessary, with the earliest limitations period not expiring until approximately 2031.

VI. Next Steps

Upon receipt of GAP's authorization, C&H proposes to take the following actions:

1. File Notice of Voluntary Dismissal. C&H will prepare and file a Notice of Voluntary Dismissal Without Prejudice, together with a proposed Order of Dismissal, for entry by the Honorable Patricia Delacroix in Case No. 2022-L-004831. Service of the Notice will be made on PBGC (at its registered office), on Mr. Musgrave (at his last known address), on the Receiver (Gareth J. Whitmore, Whitmore Strauss Advisory LLC), and on the Receiver's counsel (Joanna M. Lockridge, Lockridge Payne LLP).

2. Monitor the Receivership Proceeding. C&H will continue to monitor the Sangamon County Receivership Proceeding (Case No. 2022-CH-001247) on behalf of GAP. This includes reviewing all filings, attending creditor meetings and hearings as appropriate, and ensuring that GAP's Proof of Claim is properly processed by the Receiver.

3. Advise on Distributions and Developments. C&H will advise GAP regarding any distributions to creditors, any proposed plan of liquidation or reorganization submitted by the Receiver, and any developments in the separate coverage litigation between PBGC and Triton Mutual Insurance Co. that may affect recovery prospects for the receivership estate and its creditors.

4. Evaluate the Musgrave Guaranty Claim. As additional information becomes available through the receivership process — including any asset disclosures, examinations, or other investigative actions undertaken by the Receiver — C&H will evaluate whether it is appropriate and cost-effective for GAP to pursue the Musgrave Guaranty claim independently against Mr. Musgrave. C&H will provide a separate recommendation on this issue at the appropriate time.

5. Matter Closure. Upon entry of the dismissal order by Judge Delacroix, C&H Matter No. 1020-00005 will be administratively closed. Any future work relating to the receivership claim, any refiled collection action, or any independent pursuit of the Musgrave Guaranty claim would be opened as a new C&H matter, with a new matter number and engagement letter as appropriate.

VII. Financial Summary

The following is a summary of professional fees and costs incurred in connection with C&H Matter No. 1020-00005 through January 31, 2023:

Costs and disbursements consist of filing fees, service of process fees, court reporter fees for the August 22, 2022 hearing, and legal research charges (Westmark Data Systems).

These amounts have been included in GAP's total receivership claim of $5,664,428.85 and are asserted against the PBGC receivership estate pursuant to the prevailing-party attorneys' fees provision set forth in Section 12.4 of the Off-Take Agreement.

For reference, the hourly rates for the members of the C&H engagement team on this matter are as follows:

VIII. Closing and Request for Authorization

We respectfully request that GAP confirm its authorization to proceed with the voluntary dismissal of Case No. 2022-L-004831 at its earliest convenience. To avoid the need to appear at any further status hearings before Judge Delacroix in the Cook County Action, we recommend that the Notice of Voluntary Dismissal be filed no later than mid-February 2023. A status hearing is currently set for February 28, 2023, and filing the dismissal in advance of that date would eliminate the need for C&H to appear and would avoid any associated hearing-preparation costs.

We are available to schedule a call with Mr. Greenfield and Ms. Greenfield-Wu at your convenience to discuss this recommendation in greater detail and to address any questions or concerns you may have. We can also arrange a meeting at your Des Moines office or at our Chicago office if you prefer an in-person discussion.

Please direct any questions or your authorization to proceed to the undersigned at the contact information below.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Francesca Morano Partner 225 West Wacker Drive, Suite 4000 Chicago, Illinois 60606 Telephone: (312) 555-8200 Direct: (312) 555-8217 Facsimile: (312) 555-8201

Email: fmorano@calderwoodharkness.com

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

This memorandum is a privileged and confidential attorney-client communication prepared by Calderwood & Harkness LLP for the exclusive use of Greenfield Agricultural Partners LLC, its officers, and its authorized representatives. This memorandum contains legal advice and attorney work product. It is not intended for distribution to, or use by, any third party. Any dissemination, distribution, copying, or other use of this memorandum or any information contained herein by any person other than the intended recipients is strictly prohibited. If you have received this memorandum in error, please notify the sender immediately and destroy all copies.

Invoice No.	Amount	Commodity	Volume
GAP-2021-3187	$892,500.00	Corn	150,000 bushels
GAP-2021-3244	$936,750.00	Soybeans	75,000 bushels
GAP-2021-3301	$1,224,000.00	Corn	200,000 bushels
GAP-2021-3358	$741,600.00	Corn	120,000 bushels
GAP-2022-0042	$1,075,200.00	Soybeans	80,000 bushels
Total	$4,870,050.00
Category	Amount
Total Professional Fees Billed	$287,415.50
Total Costs and Disbursements	$14,622.35
Total Billed to GAP (Matter No. 1020-00005)	$302,037.85
Timekeeper	Role	Hourly Rate
Francesca Morano	Partner	$785.00
Samuel Eklund	Partner	$750.00
Hannah Brinkley	Associate	$495.00
Patrick Gallagher	Associate	$395.00
Diane K. Velasquez	Paralegal	$225.00
Ryan T. Marbury	Paralegal	$195.00

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
MEMORANDUM
FROM: Francesca Morano, Partner Calderwood & Harkness LLP 225 West Wacker Drive, Suite 4000 Chicago, Illinois 60606
TO: Thomas R. Greenfield, Chairman and Chief Executive Officer Margaret A. Greenfield-Wu, President and Chief Operating Officer Greenfield Agricultural Partners LLC 1400 Grand Prairie Boulevard, Suite 800 Des Moines, Iowa 50309
CC: Caleb Jennings, Director of Grain Operations, GAP Grain Trading Division Samuel Eklund, Partner, Calderwood & Harkness LLP Hannah Brinkley, Associate, Calderwood & Harkness LLP
DATE: January 25, 2023
RE: Recommendation to Voluntarily Dismiss Cook County Collection Action — Greenfield Agricultural Partners LLC v. Prairie Basin Grain Co. et al., Case No. 2022-L-004831, Circuit Court of Cook County, Illinois
C&H MATTER NO.: 1020-00005
I. Purpose of Memorandum
The purpose of this memorandum is to recommend that Greenfield Agricultural Partners LLC ("GAP") voluntarily dismiss the collection action currently pending in the Circuit Court of Cook County, Illinois, Case No. 2022-L-004831 (the "Cook County Action"), without prejudice, pursuant to Section 2-1009 of the Illinois Code of Civil Procedure, 735 ILCS 5/2-1009.
This recommendation is prompted by the fact that Prairie Basin Grain Co. ("PBGC"), the principal defendant in the Cook County Action, has been placed into receivership by order of the Circuit Court of Sangamon County, Illinois, Case No. 2022-CH-001247, entered on December 12, 2022 (the "Receivership Order"). The Receivership Order imposed an automatic stay on all pending litigation against PBGC, effectively precluding GAP from further prosecuting the Cook County Action against PBGC for the duration of the receivership.
This memorandum addresses: (1) the relevant background and procedural history of the Cook County Action; (2) the preservation of GAP's claims within the Sangamon County receivership proceeding; (3) the legal basis for voluntary dismissal without prejudice and the effect of such a dismissal on GAP's rights; and (4) the strategic rationale for this recommendation. We also provide a summary of the financial status of the engagement and outline the next steps that Calderwood & Harkness LLP ("C&H") would take upon receiving GAP's authorization.
II. Background and Procedural History
A. The Collection Action
On May 9, 2022, C&H filed a four-count Verified Complaint on behalf of GAP in the Circuit Court of Cook County, Illinois, County Department, Law Division, initiating the action styled Greenfield Agricultural Partners LLC v. Prairie Basin Grain Co. et al., Case No. 2022-L-004831. The Complaint named two defendants:
(1) Prairie Basin Grain Co. ("PBGC"), an Illinois corporation with its principal office located at 4520 Harvest Road, Champaign, Illinois 61820. PBGC is a grain merchandising and elevator operations company that was party to the Master Grain Purchase and Off-Take Agreement with GAP dated March 15, 2019 (the "Off-Take Agreement").
(2) Darren K. Musgrave, individually. Mr. Musgrave is the President, sole director, and 72% shareholder of PBGC. Mr. Musgrave executed a Personal Guaranty of Payment, attached as Exhibit D to the Off-Take Agreement (the "Musgrave Guaranty"), pursuant to which he personally guaranteed PBGC's payment obligations under the Off-Take Agreement up to a maximum aggregate amount of $2,000,000.
The Complaint set forth the following four counts:
Count I — Breach of Contract (Off-Take Agreement) against PBGC. This count alleged that PBGC breached the Off-Take Agreement by failing to remit payment for five separate grain deliveries made by GAP between the fourth quarter of 2021 and the first quarter of 2022. The unpaid principal amount totaled $4,870,050.00.
Count II — Breach of Personal Guaranty against Darren K. Musgrave. This count alleged that Mr. Musgrave breached the Musgrave Guaranty by failing to honor his obligation to pay amounts owed by PBGC under the Off-Take Agreement, up to the $2,000,000 cap specified in the Guaranty. GAP demanded from Mr. Musgrave the full $2,000,000 guaranty amount.
Count III — Account Stated against PBGC. This count alleged that the parties had an established course of dealing under the Off-Take Agreement, that periodic account statements reflecting the outstanding balances were transmitted by GAP to PBGC, and that PBGC's failure to object to those account statements within a reasonable time resulted in an account stated in the amount of $4,870,050.00 in principal.
Count IV — Unjust Enrichment (in the alternative) against PBGC. Pleaded in the alternative to the contract claims, this count alleged that PBGC was unjustly enriched by its receipt and subsequent resale or use of grain delivered by GAP for which PBGC failed to render payment.
At the time of filing, the total amount claimed was approximately $5,216,042, which comprised the principal balance of $4,870,050.00 plus approximately $345,992 in accrued interest through the date of filing. Interest was calculated at the contractual rate of 1.5% per month (18% per annum), as specified in Section 7.3 of the Off-Take Agreement, which provides that any amounts past due shall bear interest at the rate of one and one-half percent (1.5%) per calendar month, compounding monthly, from the date such amount became due until paid in full.
B. Key Litigation Developments
The following is a chronological summary of the significant events in the Cook County Action since the Complaint was filed:
Service of Process. Service of the Complaint and Summons was completed on both defendants on May 24, 2022. PBGC was served through its registered agent, Ridgeline Corporate Services LLC, in accordance with 735 ILCS 5/2-204. Mr. Musgrave was personally served at his residence at 1188 Windermere Lane, Champaign, Illinois 61822, in accordance with 735 ILCS 5/2-203.
Answer and Affirmative Defenses. On June 27, 2022, PBGC and Mr. Musgrave, appearing jointly through the law firm of Bartlett, Reyes Linley CPAs LLP & Harkin LLP (lead counsel Douglas M. Harkin), filed their Answer and Affirmative Defenses to GAP's Verified Complaint. The Answer admitted certain foundational allegations regarding the existence of the Off-Take Agreement and the Musgrave Guaranty, but denied the material breach allegations and raised three affirmative defenses: (1) force majeure, predicated on the Macon County grain elevator fire of October 17, 2021, which Defendants contended excused PBGC's nonperformance under the Off-Take Agreement; (2) commercial impracticability under Section 2-615 of the Uniform Commercial Code as adopted in Illinois, again relying on the elevator fire and related supply disruptions; and (3) failure to mitigate damages, contending that GAP failed to take reasonable steps to resell or otherwise dispose of grain inventories to mitigate its losses following PBGC's nonpayment.
Motion to Strike Affirmative Defenses. On July 15, 2022, C&H filed a Motion to Strike Defendants' First and Second Affirmative Defenses on behalf of GAP, arguing that the force majeure clause in Section 9.1 of the Off-Take Agreement did not encompass PBGC's failure to pay for grain already delivered and accepted, and that commercial impracticability was inapplicable because the breach at issue was a payment obligation rather than a delivery or supply obligation. The memorandum in support of the motion cited controlling Illinois authority, including Hess Corp. v. EPA, and analogous federal decisions applying Illinois law. The motion was fully briefed, with Defendants filing their response on August 5, 2022, and GAP filing its reply on August 15, 2022.
Ruling on Motion to Strike. On August 22, 2022, the Honorable Patricia Delacroix granted GAP's Motion to Strike as to the first affirmative defense (force majeure) and the second affirmative defense (commercial impracticability). Judge Delacroix's oral ruling, confirmed by written order entered the same date, held that the force majeure clause in Section 9.1 of the Off-Take Agreement was limited by its terms to excuse failures of delivery and could not be invoked to excuse nonpayment for commodities already delivered and accepted. The court further held that commercial impracticability did not apply to payment obligations under governing Illinois case law. The third affirmative defense — failure to mitigate — survived and remained at issue.
Case Management Conference. A Case Management Conference was held before Judge Delacroix on September 12, 2022, at which the court entered a Case Management Order establishing a discovery schedule. The order set a fact discovery cutoff of March 31, 2023, with expert discovery, if any, to close on June 30, 2023.
Written discovery by GAP. On September 30, 2022, C&H served GAP's First Set of Interrogatories (20 interrogatories) and First Request for Production of Documents (32 requests) on both PBGC and Mr. Musgrave. On October 14, 2022, C&H served GAP's First Request for Admission (15 requests) directed to PBGC. The interrogatories and document requests sought, among other things, details regarding PBGC's financial condition, its disposition of grain purchased from GAP, the Macon County elevator fire, the insurance claim with Triton Mutual Insurance Co., and the basis for the remaining failure-to-mitigate defense.
Withdrawal of Defense Counsel. On November 4, 2022, Bartlett, Reyes Linley CPAs LLP & Harkin LLP filed a Motion to Withdraw as Counsel for both PBGC and Mr. Musgrave, citing nonpayment of legal fees as the basis for withdrawal. The motion was presented to Judge Delacroix and, after a hearing on November 18, 2022, was granted. Since November 18, 2022, PBGC has been without legal representation. Under well-established Illinois law, a corporation cannot appear or proceed pro se in litigation and must be represented by a licensed attorney. See Eychaner v. Gross, 202 Ill. 2d 228, 253 (2002). As a result, PBGC's ability to participate in the Cook County Action has been effectively suspended.
Outstanding discovery. As of the date of this memorandum, no discovery responses have been received from either PBGC or Mr. Musgrave. The receivership intervened before any motion to compel discovery was filed by GAP.
C. PBGC's Financial Distress and Receivership
PBGC experienced severe financial deterioration beginning in the fourth quarter of 2021, driven by a confluence of factors that rendered the company unable to meet its obligations to trade creditors, including GAP. The principal causes of PBGC's distress are as follows:
Macon County Elevator Fire. On October 17, 2021, a fire destroyed PBGC's primary grain storage facility located in Macon County, Illinois. The estimated loss from the fire was approximately $3.2 million, encompassing structural damage to the facility, destruction of stored grain inventory, and related business interruption losses. PBGC carried property and casualty insurance through Triton Mutual Insurance Co. ("Triton Mutual"). However, Triton Mutual has disputed coverage for the fire loss, alleging that PBGC's insurance premiums had lapsed prior to the date of the fire. PBGC has initiated separate coverage litigation against Triton Mutual, which remains pending.
Failed Hedging Strategy. In the period following the elevator fire, PBGC's management, under the direction of Mr. Musgrave, pursued an aggressive short position in corn futures in an apparent attempt to offset the company's losses from the fire. This hedging strategy was unsuccessful. As corn futures prices rose sharply in late 2021 and early 2022 — driven in part by global supply concerns — PBGC sustained approximately $6.8 million in mark-to-market losses on its short corn futures positions. These losses further eroded PBGC's liquidity and capital position.
Cessation of Trade Payments. By January 2022, PBGC had ceased paying its trade creditors, including GAP. GAP's five unpaid invoices, spanning deliveries from October 2021 through January 2022, represent a portion of the broader trade creditor shortfall.
In light of PBGC's mounting financial difficulties, its senior secured lender, Heartland Prairie Bank, N.A. ("Heartland Prairie"), with principal offices at 300 East Main Street, Decatur, Illinois 62521 (relationship manager Kenneth W. Aldrich, Senior Vice President, Agribusiness Lending), declared PBGC in default under its Revolving Credit and Term Loan Agreement dated June 1, 2018 (the "HPB Credit Agreement"). The HPB Credit Agreement provided for an aggregate lending commitment of $45 million. As of the date of default in April 2022, PBGC's outstanding balance under the HPB Credit Agreement was approximately $31.4 million, consisting of both revolving credit advances and term loan principal. Heartland Prairie holds a senior perfected security interest in substantially all of PBGC's assets under Article 9 of the Uniform Commercial Code, as evidenced by a Security Agreement dated June 1, 2018, and UCC-1 Financing Statements filed with the Illinois Secretary of State.
On November 28, 2022, Heartland Prairie Bank filed a Verified Petition for Appointment of Receiver over PBGC and all of its assets and operations in the Circuit Court of Sangamon County, Illinois, Case No. 2022-CH-001247 (the "Receivership Proceeding"). The Petition alleged that PBGC was insolvent, that its assets were at risk of dissipation, and that the appointment of a receiver was necessary to preserve value for the benefit of all creditors.
On December 12, 2022, after a hearing at which PBGC appeared without counsel and did not contest the petition, the Sangamon County Court entered an Order Appointing Receiver (the "Receivership Order"). The Receivership Order designated Gareth J. Whitmore, CPA, CIRA, of Whitmore Strauss Advisory LLC, 500 East Monroe Street, Suite 300, Springfield, Illinois 62701, as receiver for all assets and operations of PBGC (the "Receiver"). The Receivership Order vested the Receiver with broad authority to manage, preserve, and liquidate PBGC's assets, to investigate the company's financial condition and transactions, and to pursue claims on behalf of the receivership estate.
Critically, the Receivership Order included a provision imposing an automatic stay of all pending litigation against PBGC. The stay provision broadly enjoins all persons and entities from commencing or continuing any action, suit, arbitration, or other proceeding against PBGC or its assets during the pendency of the receivership, absent prior leave of the Sangamon County Court.
GAP received formal notice of the entry of the Receivership Order and the imposition of the automatic stay on December 19, 2022.
Based on publicly available information and disclosures made in the Receivership Proceeding, PBGC's estimated total liabilities are in the range of $58–62 million. PBGC's estimated total assets, at current fair market value, are in the range of $35–40 million. This represents a significant asset-to-liability shortfall of approximately $18–27 million. Given that Heartland Prairie Bank's senior perfected security interest secures approximately $31.4 million in outstanding obligations, the prospect of meaningful recovery for unsecured creditors — including GAP — from the general receivership estate is, candidly, uncertain and potentially limited. We address the implications of this analysis further in Section III below.
III. Preservation of GAP's Claims in the Receivership
Notwithstanding the recommendation to dismiss the Cook County Action, GAP's claims against PBGC have been independently preserved through the Sangamon County receivership proceeding. C&H has taken the following steps to ensure that GAP's interests are protected.
A. Letter to Receiver's Counsel
On January 10, 2023, C&H transmitted a formal letter to Joanna M. Lockridge, lead attorney at Lockridge Payne LLP, 120 South Sixth Street, Suite 1800, Springfield, Illinois 62701, who serves as counsel to Receiver Gareth J. Whitmore in the Receivership Proceeding. The letter formally asserted GAP's claim against PBGC arising out of the Off-Take Agreement and provided the Receiver with a detailed breakdown of the amounts owed.
The letter set forth GAP's total claim of approximately $5,664,428.85, comprised of the following components:
Principal — $4,870,050.00. This amount represents the aggregate unpaid invoices for grain delivered by GAP to PBGC under the Off-Take Agreement, consisting of five invoices:
Accrued Interest through December 31, 2022 — approximately $492,341.00. Interest was calculated at the contractual rate of 1.5% per month (18% per annum), compounding monthly, as specified in Section 7.3 of the Off-Take Agreement, running from the respective due date of each invoice through December 31, 2022.
Attorneys' Fees and Costs — $302,037.85. This amount consists of $287,415.50 in professional fees and $14,622.35 in costs and disbursements incurred in connection with the Cook County Action. GAP's claim for attorneys' fees is asserted pursuant to Section 12.4 of the Off-Take Agreement, which provides that the prevailing party in any action to enforce the Agreement shall be entitled to recover its reasonable attorneys' fees and costs from the non-prevailing party.
The letter requested that the Receiver acknowledge receipt of GAP's claim and provide information regarding the claims process established for the receivership, including any bar date for the filing of creditor claims.
B. Proof of Claim
On January 30, 2023, C&H prepared and filed a formal Proof of Claim on behalf of GAP in the Receivership Proceeding, Sangamon County Case No. 2022-CH-001247. The Proof of Claim was submitted to the Receiver and filed with the Clerk of the Circuit Court of Sangamon County in accordance with the procedures set forth in the Receivership Order and subsequent directives of the Receiver.
The Proof of Claim asserts a total unsecured claim of approximately $5,664,428.85, calculated as described above. The Proof of Claim was accompanied by the following supporting exhibits:
• A complete executed copy of the Master Grain Purchase and Off-Take Agreement dated March 15, 2019, including all schedules and exhibits thereto;
• A copy of the Musgrave Guaranty (Exhibit D to the Off-Take Agreement);
• Copies of the five unpaid invoices (GAP-2021-3187, GAP-2021-3244, GAP-2021-3301, GAP-2021-3358, and GAP-2022-0042);
• A copy of the pre-suit demand letter dated April 11, 2022, transmitted to PBGC and Mr. Musgrave by certified mail, return receipt requested;
• Copies of forbearance correspondence exchanged between GAP and PBGC between January and April 2022;
• A detailed interest calculation spreadsheet prepared by C&H, setting forth the accrual of contractual interest on each invoice from its respective due date through December 31, 2022.
GAP's claims are now formally on record before the Receiver and the Sangamon County Court. The filing of the Proof of Claim ensures that GAP will be treated as a claimant in any distribution of the receivership estate's assets and will receive notice of all material proceedings, including any proposed plan of liquidation or reorganization.
C. Claim Classification and Priority
GAP's claim in the Receivership Proceeding is classified as an unsecured trade creditor claim. GAP does not hold a security interest in any of PBGC's assets and does not have any statutory lien or priority that would elevate its claim above those of other general unsecured creditors.
As noted in Section II.C above, PBGC's assets are encumbered by Heartland Prairie Bank's senior perfected security interest, which secures approximately $31.4 million in outstanding obligations under the HPB Credit Agreement. Heartland Prairie's security interest attaches to substantially all of PBGC's tangible and intangible assets, including accounts receivable, inventory, equipment, general intangibles, and proceeds thereof. As such, the Receiver will be required to satisfy Heartland Prairie's secured claim — and the costs of administration of the receivership — from the estate's assets before any distributions are made to unsecured creditors.
Given PBGC's estimated total liabilities of $58–62 million against estimated total assets of $35–40 million, the arithmetic is sobering for unsecured creditors. After satisfaction of Heartland Prairie's approximately $31.4 million secured claim and administrative expenses (receiver's fees, professional fees of counsel to the Receiver, operational wind-down costs, etc.), the residual assets available for distribution to unsecured creditors may be minimal. Depending on the ultimate realization on PBGC's assets and the total pool of unsecured claims, GAP could potentially receive pennies on the dollar for its unsecured claim.
However, there is one potential additional source of recovery that bears monitoring. If PBGC's separate coverage litigation against Triton Mutual Insurance Co. is resolved favorably — either through litigation or settlement — the proceeds of any insurance recovery related to the Macon County elevator fire could augment the receivership estate and increase distributions to creditors. The outcome of that coverage dispute remains uncertain at this time, but C&H will monitor developments closely.
Regardless of the ultimate recovery in the receivership, the filing of GAP's Proof of Claim independently preserves all of GAP's claims against PBGC. The dismissal of the Cook County Action does not in any way diminish or impair GAP's position in the Receivership Proceeding.
IV. Legal Analysis — Voluntary Dismissal Without Prejudice
A. Effect of the Automatic Stay
The Receivership Order entered by the Circuit Court of Sangamon County on December 12, 2022, includes a broad automatic stay provision that enjoins all persons and entities from commencing or continuing any action, suit, arbitration, or other legal proceeding against PBGC or its assets during the pendency of the receivership, absent prior leave of the Sangamon County Court.
The stay prevents GAP from further prosecuting the Cook County Action against PBGC with respect to Counts I (Breach of Contract), III (Account Stated), and IV (Unjust Enrichment), all of which are directed against PBGC. Any further litigation activity — including motions to compel discovery, motions for summary judgment, or trial — is prohibited as to PBGC unless and until the Sangamon County Court lifts the stay or grants GAP leave to proceed.
It is important to note that an Illinois state court receivership stay is distinct from the automatic stay imposed in federal bankruptcy proceedings under 11 U.S.C. § 362. In the federal bankruptcy context, the scope and exceptions to the automatic stay are defined by statute. In the state court receivership context, however, the stay is governed by the specific terms of the appointing court's order. Here, the Sangamon County Court's order is drafted broadly and does not include exceptions that would permit GAP to continue prosecuting the Cook County Action.
Maintaining the Cook County Action on the active docket while the stay is in effect serves no practical purpose. GAP cannot advance its claims against PBGC through the Cook County litigation, and the case will remain dormant indefinitely. In the meantime, GAP may incur unnecessary administrative costs, including the obligation to appear at periodic status hearings before Judge Delacroix. The Cook County Court may also, on its own motion, dismiss the case for want of prosecution if no activity occurs for an extended period, which could create procedural complications. A voluntary dismissal without prejudice is the cleaner and more strategically sound course of action.
B. Voluntary Dismissal Under 735 ILCS 5/2-1009
Section 2-1009 of the Illinois Code of Civil Procedure, 735 ILCS 5/2-1009, provides in relevant part:
"The plaintiff may, at any time before trial or hearing begins, upon notice to each party who has appeared or such party's attorney, and upon payment of costs, dismiss his or her action or any part thereof as to any defendant, without prejudice . . . ."
Under this provision, a plaintiff's right to voluntary dismissal without prejudice is a matter of right so long as three conditions are satisfied: (1) the dismissal is sought before trial or hearing begins; (2) notice is given to each party who has appeared or to such party's attorney; and (3) costs are paid. See Kahle v. John Deere Co., 104 Ill. 2d 302, 307 (1984) ("Section 2-1009(a) grants to a plaintiff an absolute right to a voluntary dismissal before trial or hearing begins.").
Each of these conditions is readily satisfied here:
No Trial or Hearing Has Commenced. The Cook County Action remains in the discovery phase. No trial date has been set, and no dispositive motions have been filed. Accordingly, the statutory prerequisite that no trial or hearing has begun is clearly met.
Notice. C&H will serve the Notice of Voluntary Dismissal on all parties who have appeared in the action. Although Bartlett, Reyes Linley CPAs LLP & Harkin LLP has withdrawn as counsel for PBGC and Musgrave, C&H will serve the notice on PBGC at its principal office address and on Mr. Musgrave at his last known address, as well as on the Receiver and his counsel, to ensure proper notice.
Payment of Costs. GAP will tender payment of any taxable court costs as required by the statute.
A dismissal without prejudice under Section 2-1009 is not an adjudication on the merits and does not operate as a bar to refiling the same claims in the future. See Hudson v. City of Chicago, 228 Ill. 2d 462, 472 (2008). GAP may refile the Cook County Action or commence a new action asserting the same claims at any time within the applicable statute of limitations.
With respect to the statute of limitations, the applicable period for breach of a written contract under Illinois law is ten (10) years from the date the cause of action accrued. 735 ILCS 5/13-206. GAP's earliest invoice at issue (GAP-2021-3187) became due in approximately November 2021, which means the statute of limitations on that claim will not expire until approximately November 2031. The most recent invoice (GAP-2022-0042) became due in approximately February 2022, with a limitations period extending to approximately February 2032. Accordingly, GAP has ample time to refile the collection action if circumstances warrant.
C. The Musgrave Guaranty Claim
Count II of the Complaint asserts a claim against Darren K. Musgrave individually for breach of the Musgrave Guaranty, which caps Mr. Musgrave's personal liability at $2,000,000. This claim raises a distinct analytical issue because the receivership stay, by its terms, applies to claims against PBGC and its assets. Whether the stay extends to bar prosecution of personal claims against Mr. Musgrave as guarantor depends on the specific language of the Receivership Order.
Upon review of the Receivership Order, we note that the stay provision is directed to actions against "Prairie Basin Grain Co. and its assets" and does not expressly reference claims against third-party guarantors. There is a reasonable argument that GAP could continue to prosecute Count II against Mr. Musgrave notwithstanding the receivership stay. However, after careful consideration, we recommend that GAP dismiss the Musgrave Guaranty claim without prejudice as well, for the following reasons:
(a) Uncertainty Regarding Musgrave's Personal Financial Condition. Mr. Musgrave is the 72% shareholder of PBGC and, as its President and sole director, has been at the center of the company's financial collapse. It is likely that Mr. Musgrave's personal financial condition has been adversely affected by the events at PBGC, including the failed hedging strategy. Pursuing a judgment against Mr. Musgrave that may prove uncollectible would be an imprudent expenditure of litigation resources.
(b) Avoidance of Duplicative Litigation Expense. Prosecuting Count II against Mr. Musgrave individually while the receivership is pending would require GAP to bear the expense of continued litigation in Cook County — including discovery, depositions, and potentially trial — solely with respect to the guaranty claim. This would generate costs disproportionate to the $2,000,000 cap on the Musgrave Guaranty, particularly if Mr. Musgrave lacks the personal assets to satisfy a judgment.
(c) Preservation of the Guaranty Claim. A dismissal without prejudice fully preserves GAP's right to pursue the Musgrave Guaranty claim independently at a later date. Once the receivership concludes and the extent of GAP's recovery (or lack thereof) from the receivership estate becomes clear, GAP will be in a far better position to evaluate whether pursuing Mr. Musgrave personally is warranted and cost-effective. The ten-year statute of limitations on the written guaranty provides ample time for this evaluation.
In sum, while GAP is not legally required to dismiss the Musgrave claim, the practical and economic considerations strongly favor doing so at this time, with the understanding that the claim is fully preserved by the without-prejudice dismissal.
D. Preservation of Rights
To summarize the effect of a voluntary dismissal without prejudice on GAP's rights, we note the following:
1. A dismissal without prejudice under 735 ILCS 5/2-1009 expressly does not constitute an adjudication on the merits. It carries no preclusive effect under the doctrines of res judicata or collateral estoppel.
2. GAP may refile the Cook County Action or commence a new action asserting the same claims at any time within the applicable limitations period. Given the ten-year limitations period for written contract claims under 735 ILCS 5/13-206, GAP's ability to refile is preserved through at least 2031–2032.
3. GAP may elect to refile if any of the following circumstances arise: (i) the receivership concludes without full satisfaction of GAP's claim; (ii) the automatic stay is lifted by the Sangamon County Court; or (iii) GAP determines that it is strategically advantageous to pursue separate litigation against either PBGC or Mr. Musgrave.
4. GAP's Proof of Claim filed January 30, 2023, in the Sangamon County Receivership Proceeding independently preserves all of GAP's claims against PBGC. The receivership claim is separate from and unaffected by the disposition of the Cook County Action.
5. GAP should continue to actively monitor the receivership proceedings and participate as a creditor, including by attending creditor meetings, reviewing any proposed distribution plan, and objecting to any proposed actions by the Receiver that may adversely affect GAP's interests.
V. Recommendation
Based on the foregoing analysis, Calderwood & Harkness LLP recommends that GAP authorize the filing of a Notice of Voluntary Dismissal Without Prejudice as to all counts (Counts I through IV) and all defendants (Prairie Basin Grain Co. and Darren K. Musgrave) in Case No. 2022-L-004831, Circuit Court of Cook County, Illinois, pursuant to 735 ILCS 5/2-1009.
The rationale for this recommendation is summarized as follows:
1. The automatic stay prevents further prosecution. The automatic stay arising from the Receivership Order entered December 12, 2022, in the Sangamon County Receivership Proceeding (Case No. 2022-CH-001247) prevents GAP from further prosecuting the Cook County Action against PBGC. The action cannot move forward as to PBGC for the duration of the receivership.
2. GAP's claims are preserved in the receivership. GAP's claims against PBGC have been fully preserved through the Proof of Claim filed on January 30, 2023, in the Sangamon County Receivership Proceeding. The total asserted claim of approximately $5,664,428.85 is on record before the Receiver and the Sangamon County Court.
3. Dismissal without prejudice preserves the right to refile. A voluntary dismissal without prejudice under 735 ILCS 5/2-1009 does not constitute an adjudication on the merits and does not bar GAP from refiling the same claims in the future. GAP retains the option to refile if the receivership concludes without full satisfaction of its claim or if the stay is lifted.
4. Eliminating unnecessary costs. Maintaining the Cook County Action on the docket during the pendency of the stay generates unnecessary administrative costs — including periodic status hearing appearances, docket monitoring, and potential motions — with no corresponding benefit to GAP.
5. The Musgrave Guaranty claim is preserved. The without-prejudice dismissal of Count II preserves GAP's right to pursue the Musgrave Guaranty claim (up to $2,000,000) independently against Mr. Musgrave at a later date, if warranted by his personal financial circumstances and GAP's recovery (or lack thereof) in the receivership.
6. Ample time remains under the statute of limitations. The ten-year statute of limitations for breach of written contract claims under Illinois law (735 ILCS 5/13-206) provides GAP with a substantial window to refile if necessary, with the earliest limitations period not expiring until approximately 2031.
VI. Next Steps
Upon receipt of GAP's authorization, C&H proposes to take the following actions:
1. File Notice of Voluntary Dismissal. C&H will prepare and file a Notice of Voluntary Dismissal Without Prejudice, together with a proposed Order of Dismissal, for entry by the Honorable Patricia Delacroix in Case No. 2022-L-004831. Service of the Notice will be made on PBGC (at its registered office), on Mr. Musgrave (at his last known address), on the Receiver (Gareth J. Whitmore, Whitmore Strauss Advisory LLC), and on the Receiver's counsel (Joanna M. Lockridge, Lockridge Payne LLP).
2. Monitor the Receivership Proceeding. C&H will continue to monitor the Sangamon County Receivership Proceeding (Case No. 2022-CH-001247) on behalf of GAP. This includes reviewing all filings, attending creditor meetings and hearings as appropriate, and ensuring that GAP's Proof of Claim is properly processed by the Receiver.
3. Advise on Distributions and Developments. C&H will advise GAP regarding any distributions to creditors, any proposed plan of liquidation or reorganization submitted by the Receiver, and any developments in the separate coverage litigation between PBGC and Triton Mutual Insurance Co. that may affect recovery prospects for the receivership estate and its creditors.
4. Evaluate the Musgrave Guaranty Claim. As additional information becomes available through the receivership process — including any asset disclosures, examinations, or other investigative actions undertaken by the Receiver — C&H will evaluate whether it is appropriate and cost-effective for GAP to pursue the Musgrave Guaranty claim independently against Mr. Musgrave. C&H will provide a separate recommendation on this issue at the appropriate time.
5. Matter Closure. Upon entry of the dismissal order by Judge Delacroix, C&H Matter No. 1020-00005 will be administratively closed. Any future work relating to the receivership claim, any refiled collection action, or any independent pursuit of the Musgrave Guaranty claim would be opened as a new C&H matter, with a new matter number and engagement letter as appropriate.
VII. Financial Summary
The following is a summary of professional fees and costs incurred in connection with C&H Matter No. 1020-00005 through January 31, 2023:
Costs and disbursements consist of filing fees, service of process fees, court reporter fees for the August 22, 2022 hearing, and legal research charges (Westmark Data Systems).
These amounts have been included in GAP's total receivership claim of $5,664,428.85 and are asserted against the PBGC receivership estate pursuant to the prevailing-party attorneys' fees provision set forth in Section 12.4 of the Off-Take Agreement.
For reference, the hourly rates for the members of the C&H engagement team on this matter are as follows:
VIII. Closing and Request for Authorization
We respectfully request that GAP confirm its authorization to proceed with the voluntary dismissal of Case No. 2022-L-004831 at its earliest convenience. To avoid the need to appear at any further status hearings before Judge Delacroix in the Cook County Action, we recommend that the Notice of Voluntary Dismissal be filed no later than mid-February 2023. A status hearing is currently set for February 28, 2023, and filing the dismissal in advance of that date would eliminate the need for C&H to appear and would avoid any associated hearing-preparation costs.
We are available to schedule a call with Mr. Greenfield and Ms. Greenfield-Wu at your convenience to discuss this recommendation in greater detail and to address any questions or concerns you may have. We can also arrange a meeting at your Des Moines office or at our Chicago office if you prefer an in-person discussion.
Please direct any questions or your authorization to proceed to the undersigned at the contact information below.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Francesca Morano Partner 225 West Wacker Drive, Suite 4000 Chicago, Illinois 60606 Telephone: (312) 555-8200 Direct: (312) 555-8217 Facsimile: (312) 555-8201
Email: fmorano@calderwoodharkness.com
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
This memorandum is a privileged and confidential attorney-client communication prepared by Calderwood & Harkness LLP for the exclusive use of Greenfield Agricultural Partners LLC, its officers, and its authorized representatives. This memorandum contains legal advice and attorney work product. It is not intended for distribution to, or use by, any third party. Any dissemination, distribution, copying, or other use of this memorandum or any information contained herein by any person other than the intended recipients is strictly prohibited. If you have received this memorandum in error, please notify the sender immediately and destroy all copies.
Invoice No. | Amount | Commodity | Volume
GAP-2021-3187 | $892,500.00 | Corn | 150,000 bushels
GAP-2021-3244 | $936,750.00 | Soybeans | 75,000 bushels
GAP-2021-3301 | $1,224,000.00 | Corn | 200,000 bushels
GAP-2021-3358 | $741,600.00 | Corn | 120,000 bushels
GAP-2022-0042 | $1,075,200.00 | Soybeans | 80,000 bushels
Total | $4,870,050.00
Category | Amount
Total Professional Fees Billed | $287,415.50
Total Costs and Disbursements | $14,622.35
Total Billed to GAP (Matter No. 1020-00005) | $302,037.85
Timekeeper | Role | Hourly Rate
Francesca Morano | Partner | $785.00
Samuel Eklund | Partner | $750.00
Hannah Brinkley | Associate | $495.00
Patrick Gallagher | Associate | $395.00
Diane K. Velasquez | Paralegal | $225.00
Ryan T. Marbury | Paralegal | $195.00

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

MEMORANDUM

C&H MATTER NO.: 1020-00005

CALDERWOOD & HARKNESS LLP

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