Altman Plants purchases EuroAmerican inventory, in escrow on property

Altman Plants, a wholesale nursery based in Vista, Calif., operating several locations in five states, has purchased plant inventory from the property of EuroAmerican Propagators, which filed for Chapter 7 bankruptcy protection at the end of January. The $200,000 cash sale, which also includes pots, trays and boxes, was approved under an emergency motion by the U.S. Bankruptcy Court Southern District of California on Feb. 10, 2017, because the inventory includes live goods that are perishable, according to court documents.

The sale does not include tags and plant labels, and there are restrictions and instructions for plants deemed “Third Party Plants” or “Royalty Plants.” In one inventory list EuroAmerican gave to the trustee overseeing the case, it noted more than 1,700 varieties of plants, totaling 2.5 million individual plants, according to court documents. It is unclear exactly how many are included in the sale or when that inventory was conducted.

Ken Altman, president of Altman Plants, said he is in escrow on a land purchase as well from owner Jerry Church, co-founder of EuroAmerican. Altman said he bought Plug Connection in October, and plans to use the 55 acres of EuroAmerican space primarily for Plug Connection's young plant production. Altman has already reached out and hired "quite a few" former EuroAmerican employees, and plans to continue adding to staff as production expands.

"Sometimes when these things happen, facilities don’t look as good, but John [Rader, EuroAmerican COO and co-founder] and Jerry Church really kept everything up, and it’s in great shape," Altman said. "This is a facility that’s very well set up for young plants and allows us to expand Plug Connection very easily.

"We don’t have full plans yet on what we are going to do, although there was a succulent liner program there, and we’re probably going to continue that," Altman added. "Altman Plants is a large finished succulent producer, and we’ve been trying to figure out how we can help other growers. We have lots of stock, we know the plants, and we have new introductions from our own breeding. We’ll have a robust offering."

The trustee appointed to EuroAmerican’s case reached out to Altman Plants, hoping the company could serve as an independent contractor and care for the plants after EuroAmerican shut down its operations Jan. 24. Altman Plants agreed and was paid a flat fee of $5,000 per week starting Jan. 26, which ended after the inventory sale closed, according to court documents.

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EuroAmerican Propagators, which was a young plant and retail-ready producer for more than 20 brands, was struggling long before filing for bankruptcy at the end of January. The company stopped paying wages to at least 238 employees starting with the payroll scheduled for Nov. 28, 2016, according to court documents. Former employees who wished to remain anonymous confirmed this, though their dates differ from court records.

Because it is unlawful to sell goods that are produced by employees who are not paid at least the federal minimum wage under the Fair Labor Standards Act, the Department of Labor filed an action on Jan. 24. The action designated the inventory “hot goods,” meaning that plants on EuroAmerican property could not be shipped or re-sold, and customers of EuroAmerican who purchased plants were prohibited from shipping or re-selling these plants until "restitution of the wages owed to [EuroAmerican] workers has been made," according to court documents.

However, the sale of the plants to Altman was approved, and that permits Altman to sell those plants free and clear of interests of creditors. Proceeds Altman receives from selling the plants will not need to be redirected to the Department of Labor, either, according to court documents.

The Department of Labor has not responded to multiple requests for comment about the status of their action regarding the unpaid wages. Lawyers working on the case and John Rader also did not respond immediately to our follow-up requests for comments.

Some plants on the EuroAmerican property from about 26 companies were not actually owned by EuroAmerican, but were designated in contracts as “testing agreements” or “propagation agreements” and are considered intellectual property, according to court documents. Companies who fall into this category have three options: Altman can destroy the plants; the companies can pick up their plants; or Altman can continue to have possession of plants until pending negotiation of a license with Altman. Companies with plants in trial gardens can either ask Altman to destroy them or pick them up, Altman says. There are also a handful of companies with plants designated as “Royalty Plants” that have different stipulations, but like the third party plants, Altman does not have permission to sell them under the agreement unless they first obtain permission.

"We’re working on those agreements," Altman says. "Many people are giving us the agreement so that we can sell the plants and pay them their royalties."

They've also been working with companies that had previously ordered plants from EuroAmerican, Altman says.

"To the extent to that the inventory is in shape, we’re trying to supply them with that inventory. But there was a pretty long period between the bankruptcy filing and when the inventory was purchased by us," Altman says. "For young plants, that two to three weeks is pretty critical. To the extent that we can, we’ll help them out."

This is all part of the process of Chapter 7 bankruptcy, which traditionally ends in liquidation, with a trustee overseeing the distribution of non-exempt property to creditors. Dean T. Kirby Jr., a lawyer representing the trustee on the case, said in early February that they were trying to determine the value of the plants and that the business was being liquidated. The court documents indicate EuroAmerican has more than 350 listed creditors, and its liabilities range from $1 million to $10 million.

Although Altman is excited about the opportunity to expand on EuroAmerican's former property, he is not happy about the circumstances.

"It’s just a shame because EuroAmerican has been such a great nursery, and produced so many good plants and introduced so many programs. I hate to see that part of this happening. I know John and Jerry really well, and it’s an unfortunate thing," Altman says.

He's working on reaching out to breeders to see if he can work out agreements.

"With this increased young plant facility, we can expand the resources of Plug Connection. We’re talking to various breeders to make agreements to propagate their plants," he says. "There are breeders' plants we’d like to see in the industry, and we're happy to work with them. We like plants, and when we see good plants, we want to grow them."

This is a developing story. Keep checking back for updates.