The county judge received a letter dated April 3rd from J.A. Riggs Tractor Company of Little Rock’s legal representatives demanding payment for a Caterpillar road grader whose engine was destroyed by a fire that the operator said started in the grader itself. The letter threatens “legal proceedings” by J.A. Riggs against the county for not paying off a balance of $237,621 for the grader.
A road grader is a wheeled vehicle that uses a blade on its undercarriage to help smooth out rough surfaces on land or roads so that a form of pavement can be applied to the graded area that will not tend to crack or sustain potholes.
The Justices of the Peace who make up the Quorum Court, minus JPs Willie Wilson, Eric Jackson and Brenda Grimes, sat down at a table in the courtroom with County Judge Mike Otwell, County Treasurer Ricky Reyenga and County Clerk Tammie Rose. Judge Otwell brought the meeting to order after Ben Hale, District Prosecutor and the county’s attorney, arrived just after 5:00 p.m. He briefed the Quorum Court about the overall situation, provided it with its options and made recommendations.
The letter, signed by Lauren A. Spencer of Barber Law Firm PLLC in Little Rock, establishes the firm as the representative of J.A. Riggs Tractor Company “with respect to enforcement of its rights concerning the above-referenced equipment,” a Caterpillar Grader.
In Spencer’s version of events, in December of 2019 then Nevada County Judge Mark Glass “executed documents for the rental of the grader from Riggs.” Spencer then writes that “in August 2022, while in Nevada County’s possession, the grader was heavily damaged by fire.” Meanwhile, Spencer continues, the firm has “confirmed that although Nevada County initially purchased the required insurance coverage for the grader on or about December 23, 2019, by the time of the fire loss in August 2022, coverage had expired.”
As the letter continues, in December of 2022, “Judge Glass made an arrangement with Riggs to pay $242,621.02 for repairs to the damaged grader.” Spencer writes that one payment of $5,000 was made to Riggs “with the assurance that the balance would be paid with grant funds expected in January 2024.”
Spencer asks that current Nevada County Judge Mike Otwell “deliver to Riggs a cashier’s check or other certified funds in the amount of $237,621.02 or make other arrangements satisfactory to my client, by the close of business on April 19, 2024.” If this does not occur, “my client will be forced to collect this balance through legal proceedings, and if forced to do so, will seek a judgment for the total balance plus interest and attorney’s fees.”
A copy of the letter was provided to the JPs and several audience members at the meeting prior to Hale’s speaking about the matter to the JPs, the other county officials present and an audience of about 15 people that included attorneys from the firm of Rowe and James.
Hale started his presentation to the court with a recounting of the events leading to J.A. Riggs’ attorney sending County Judge Otwell the letter demanding payment. In December of 2019, previous County Judge Mark Glass went to Riggs Caterpillar in Texarkana to purchase a road grader. He filled in a credit application for the county. “Somehow, some way, Riggs steers him to Arvest,” Hale said. Arvest is a Bentonville-based financial services company owned by the Walton Family. Glass signed a three-year lease agreement with Arvest for the grader with an option to buy. The agreement was dated December 13, 2019.
Two weeks later, Riggs and Arvest signed a repurchase agreement, under which Riggs bought the lease agreement. As Hale explained, “The county didn’t get any financing. We just rented this motor grader. Some of these repurchasing agreements have been under a lot of scrutiny across the nation. Lehman Brothers did it basically to manipulate financial records. I’m not accusing them of doing anything like that at this point. I do want you to understand there are certainly discrepancies between the way Arvest treated the agreement in this transaction and the way that Riggs is referring to this transaction.”
A financing form from Arvest, Hale said, shows Nevada County as the borrower and the principle borrowed was the entire purchase price of the grader at about $192,000. The lease agreement, he said, “comes to approximately $52,000.” The form, which was filed as required with the Arkansas Secretary of State, includes the option to be considered a lessee-lessor agreement, “which is what we believe we have with Arvest.” But the form does not show Arvest designating the agreement County Judge Glass signed in that way. Instead, Hale said, Arvest “marked Nevada County as a debtor and Arvest as a secure party.”
Hale said that repurchasing agreements, like the one Riggs and Arvest signed, are known as “disguised financing.” Arvest, when it sold the transaction to Riggs, was treating the agreement with Glass as a loan of the price of the grader plus the amount paid to lease rather than as the lease agreement Glass believed he was entering. “Arvest treated this as a loan and not as a sale and resale. The reason that's important is, again, we did not contract with Riggs, we contracted with Arvest. And if Arvest never actually acquired this equipment, they could not lease it to Nevada County, which means that contract is void.”
The lack of evidence Arvest paid taxes on the grader is also consistent with Arvest never having possessed the grader and therefore not being able to sell its agreement struck with Nevada County to J.A. Riggs. In addition, Hale said, Arvest is not an authorized Caterpillar equipment dealer, as Riggs is. Riggs is, in fact, the only authorized Caterpillar dealer in the state. “So that would create a problem for Riggs, but also create a problem for Caterpillar, if that is what [Arvest and Riggs] did,” Hale said.
(Later in the meeting, Hale said Arvest had stopped doing equipment repurchase agreements about a year ago. “I do think it was kind of a newer business for Arvest, and they got in over their heads and got exposed,” he said.)
Hale assessed the situation as “just us being bullied by Riggs.” His analysis is that Riggs cannot sue the county based on the contract the county signed with Arvest and expect to win. The proper party for Riggs to sue would be Arvest to induce Arvest to enforce the agreement it signed with Riggs.
Turning to the matter of why the grader was not insured at the time of the fire, Hale said at that time, in December of 2022, the county was transitioning its insurance from Arkansas Public Entities Risk Management Association (APERMA) to the Arkansas Association of Counties Risk Management Fund. APERMA, said Hale, “stopped insuring municipalities including Nevada County.” The grader was bought after a list was submitted to the new insurer of what equipment the county needed covered.
Hale said a contention by Riggs hat Nevada County had to have the grader insured before signing the agreement with Arvest was not the case. The agreement said the county could self-insure. So that was not a basis for Riggs to conclude the lease agreement with Arvest was breached. But the expectation of Riggs was that in the event of damage, insurance would pay for it. “That’s what this is all about,” said Hale.
The purchase order for the grader, Hale said, includes 42 months of what Riggs calls a “premier warranty.” Hale said no copy of the warranty documents was ever given to Nevada County with the grader despite a legal requirement that the terms for an expressed, or written, warranty be provided to a piece of equipment’s possessor.
The warranty does have an exclusion clause for damage to the vehicle due to “acts of war, vandalism, riot, theft, explosion, collision, fire and any other acts of nature, person or environment.” Hale said that in refusing to repair the grader at no charge to the county, Riggs was not correctly interpreting its warranty. His read of the warranty is that its exclusion list “means anything that didn’t have to do with the equipment itself, that would cause damage to it, like an act of God.”
Hale said the fire that damaged the grader in December of 2022, which there is video footage of, did not start externally from the grader but in the grader itself after it had been used on roads in the northern part of the county. “We were using this motor grader the way it was warranted to be used,” Hale said. “I say this with passion. I care about Nevada County and I believe we’re being taken advantage of.”
Following the fire, representatives from Riggs came to inspect the grader, then sent a letter offering to sell the grader to the county for $265,000 or repair it for $239,775.50. The county would later pay $5,000 to Riggs to continue the lease.
In a Quorum Court meeting in October 2023, there was discussion of negotiating with Riggs but no evidence the court assumed the liability for the grader’s being damaged. “We never assumed the amount. We just were trying to make a good faith—show them something we were negotiating. “After this, I told Ricky [Reyenga] and Judge Otwell that I was digging into this and to not pay another dime. I did that because of everything I’m telling you.”
Hale said he had sent a letter with all the concerns he was mentioning in the current meeting to Riggs’ attorneys six months ago, but had not heard anything from them. Only when County Judge Otwell received the letter from Spencer had the county received a response. Hale also said he thought it was no coincidence that the letter was received after Riggs got word that a second grader purchased from them in late 2022 had a failing hydraulics system and was being repaired at Riggs’ shop.
Hale said that should the county wish to fight Riggs, the county’s officials should be advised about the nature of courts and the firm, Barber Law Firm, that Lauren Spencer is a part of. “They're a big firm, and that's what they do. I hope everybody understands this. There is a difference between what the truth is and what the truth is decided by a court, because by the time you go through the discovery process and you have to respond to all the stuff they sent you You are going to see the bully versus small and everybody knows Nevada County is small.” Hale added that because of his duties as a district prosecutor and his office only having three deputies, he would need help in any litigation strategy.
JP Herbert Coleman asked why the county was not working with Arvest instead of Riggs to resolve the issue. “Because Arvest doesn’t care,” Hale said. “Arvest got their money.” He explained that Riggs signed an agreement to pay Arvest at the end of the repurchase. “But [Riggs] still could sue Arvest to sue us to make us fix this motor grader pursuant to the lease. But what we would have to fight is, Arvest never really owned this equipment in the first place to lease it to Nevada County one and two, we would also say that Riggs is in breach of their warranty to us.”
JP Dennis Pruitt said in his view the county had fulfilled a lease agreement when it continued its lease payments up to the point the grader burned. “So the warranty should take it up from where it burned and that should be between Riggs and Arvest,” he said.
Hale said this was what he believed but that he also believed litigation would be a waste of time, and the chances of winning equal to that of a crapshoot but “better than nothing.” In case the county wished to take that path and because he could not fight the lawsuit alone, he had invited attorneys Rowe Stayton and John Stayton to the meeting. Hale said that for Riggs the matter was quite small in terms of cost, that the engine fire had been confined, not damaging the rest of the grader.
Pruitt pointed out that the county, lacking an expert who could assess the damages, was in the position of taking Riggs’ word for what the value of the damage was.
Prescott attorney Rowe Stayton told the court that if his firm was needed to help fight Riggs, it would do so for a discounted rate. He characterized the whole matter as a mess and said the way Nevada County was being treated had angered him. “They’re attacking my home is how I look at it.” James Stayton, who runs the firm, said he would charge about $100 an hour. Rowe Stayton said they would come to the court if the fees necessary exceed a certain level.
On Spencer’s mention in her letter of Glass saying grant funds were coming, Hale said that was likely due to a misunderstanding, but it was not something that could be relied on legally. In any case, grant funds could not be diverted to matters not included in the terms of grants.
The Quorum Court accepted Hale’s advice to ask Judge Otwell to select members of a small committee for Hale and other attorneys to answer to, set up a fund of $5,000 for legal fees, appoint a committee of JPs to oversee the negotiations with Riggs and possible lawsuit and authorize him to negotiate with Riggs (although Hale said there was no guarantee Riggs would meet). Treasurer Ricky Reyenga said the funds could be provided from the county’s general funds. Pruitt made the motion. Bailey seconded and the motion passed unanimously. After Otwell asked the audience if anyone had any comment and no one did, the meeting adjourned.