Currently there are no clear laws specifically addressing the means for addressing insolvency issues for debtors and creditors involved in the Cannabis industry. Like the industry itself, the laws are evolving. Using a Cannabis grower business as an example, at this time the Federal Court system is not available to address such entities insolvency issues.

In In re KB Toys,¹ a recent decision by the Third Circuit Court of Appeals, the Court held that a claim that is disallowable under § 502(d)² if held by the original claimant is also disallowable in the hands of a purchaser or subsequent transferee. In other words, if a creditor sells or assigns its claim to a claims trader and the creditor later becomes liable on a preference or fraudulent transfer,³ the claim may be disallowed in the hands of the claims trader if the creditor fails to pay the amount it owes to the estate.

Bankruptcy Code § 1129(a)(10) provides that in order for a plan proponent to “cram down” - i.e., force acceptance of - a plan of reorganization on a dissenting class of creditors, at least one impaired class of creditors must vote in favor of the plan. Because a plan is often not accepted by all classes entitled to vote, the ability to procure at least one impaired, accepting class in order to cram down a dissenting class is essential in achieving plan confirmation.

In what it described as “an easy decision,” the U.S. Supreme Court issued its eagerly anticipated decision in RadLAX Gateway Hotel, LLC et al. v. Amalgamated Bank¹ on May 29, 2012.

Technological innovation has changed the landscape of domestic natural gas production from shortage to surplus. The result: a glut of natural gas and historically low prices. While many producers have successfully hedged against this risk to date, as older hedges roll off, many companies are unable to obtain replacement hedges at attractive prices. Some have even resorted to monetizing their in-the-money hedges to raise capital today (and borrowing against the future).

Rejection of a contract in bankruptcy may not always accomplish a debtor’s goal to shed ongoing contractual obligations and liabilities, especially when dealing with employee benefit plans. On October 13, 2011, the Fifth Circuit Court of Appeals highlighted this issue in its opinion in Evans v. Sterling Chemicals, Inc.¹ regarding the treatment of a pre-bankruptcy asset purchase agreement which contained a provision addressing the debtor-acquiror’s post-closing ERISA retiree benefit plan obligations to its new employees resulting from the transaction.

Bankruptcy Judge Michael Lynn of the Northern District of Texas recently issued a noteworthy opinion in In re Village at Camp Bowie I, L.P. that addresses two important Chapter 11 confirmation issues. Judge Lynn determined that a plan that artificially impaired a class of claims in order to meet the requirements of section 1129(a)(10) had not been proposed in bad faith and did not violate the requirements of section 1129(a). In his ruling, Judge Lynn also applied the Supreme Court’s cram-down “interest”1 rate teachings in Till v.

Introduction

The Eleventh Circuit Court of Appeals has just issued an opinion that should concern anyone doing business with a debtor in bankruptcy. In short, the court ruled that a company that supplied $1.9 million worth of goods to a debtor after the petition date had to return the debtor's payment. The reason? The debtor did not have permission from the court or its secured creditor to use the money. The payments were for value given post-petition and were apparently made in accordance with the pre-petition practice between the parties.

Under Section 1031 of the Internal Revenue Code, a taxpayer does not recognize gain or loss on the exchange of like-kind property. Before 1984, the Code did not specifically address so-called deferred exchanges - exchanges in which the taxpayer relinquished property and some time later received the replacement property - although at least one leading case did. The 1984 rules require that the taxpayer identify the replacement property within 45 days after the disposition and close on the replacement property and close within 180 days after the disposition.