New Opinion Confirms Growing Trend Away from “Zero Tolerance” Cannabis Bankruptcy Relief Policy

As those in the cannabis industry are fully aware, the option of bankruptcy has not been available to cannabis or many cannabis-adjacent businesses to date. The courts have consistently indicated debtors who work in the cannabis industry or derive meaningful income from cannabis activity (directly or indirectly) cannot use bankruptcy, a federal mechanism, so long as marijuana remains illegal under federal law. The seminal Arenas decision from 2014 observed that things get especially awkward when “granting [relief to the debtor] directly involves a federal court … administering the fruits and instrumentalities of federal criminal activity.”

This rationale has prevailed without exception for a decade now. Here and there, a bankruptcy court will break away in very limited and specific scenarios, like when the Ninth Circuit confirmed a plan of reorganization for a group of cannabis-adjacent real estate companies in 2019 (see that post here). A recent case highlights perhaps another specific scenario in which a distressed cannabis business was given the chance to pursue bankruptcy under federal law.

Facts of In re: The Hacienda Company, LLC

The Hacienda Company, LLC (“HC”) was in the business of wholesale manufacturing and packaging cannabis products under the “Lowel Herb Co.” brand, also known

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As those in the cannabis industry are fully aware, the option of bankruptcy has not been available to cannabis or… Continue reading
The post New Opinion Confirms Growing Trend Away from “Zero Tolerance” Cannabis Bankruptcy Relief Policy appeared first on GrowCola.com. 

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