In a recent legal development that underscores the intricate interplay between federal bankruptcy law and the cannabis industry, a court case has emerged involving a bankruptcy filing by an employee of a cannabis company. It’s well established that, because cannabis is generally considered a controlled substance under the federal Controlled Substances Act (CSA), certain cannabis related companies are precluded from obtaining debt relief through bankruptcy. Now individuals employed by cannabis companies might find themselves in the same boat. In Blumsack v. Harrington, 2024 Bankr.

Peter Bowden heads Gilbert + Tobin’s Restructuring + Insolvency group.

He specialises in front-end restructuring and insolvency and has significant experience advising hedge funds, banks, special situations groups, investment banks, insolvency practitioners, creditors and debtors on all elements of restructuring, insolvency, liability management, workouts, banking and distressed debt transactions in a range of industries including financial services, energy, mining, mining services, property, construction, agriculture and manufacturing.

On September 20, 2023, the U.S. Bankruptcy Court for the Central District of California (“Court”) confirmed a plan for a cannabis-related business (“Debtor”) to sell its equity interests in a Canadian cannabis company, Lowell Farms, and distribute the proceeds to its creditors.

As the cannabis industry matures, there will be winners and losers. Losers lack access to the U.S. Bankruptcy Code. Marijuana related assets cannot be sold free and clear of liens and encumbrances via the tried and true bankruptcy section 363 sale, which leaves the loser’s creditors without the best tool to maximize the value of the loser’s assets, and deprives acquirers of a federal court order conveying assets. What’s the state of play, and what’s the alternative for the losers, their creditors, and the companies that would acquire them?

STATE OF PLAY

Bank Asset Auction: Bids for Silicon Valley Bridge Bank, N.A. (“SVB”) and its subsidiary Silicon Valley Private Bank, together or separately, in whole or in part, are due by Wednesday, March 22, 2023 at 8 p.m. and Friday, March 24, 2023 at 8 p.m. We’ve previously reported that SVB is open for operations for a minimum of ninety days until it is sold or liquidated.

The FDIC has statutory obligations to maximize the net present value return from the sale or disposition of the assets entrusted to it as receiver, and to minimize the amount of any loss realized.[1] Today we examine the FDIC’s efforts to fulfill its mandate through the transfer of assets to bridge-banks, Silicon Valley Bank, N.A. (“SVB”) and Signature Bank, N.A. (“SB”).

This article analyses the decision of Ball J in Kennedy Civil Contracting Pty Ltd (Administrators Appointed) (KCC) v Richard Crookes Construction Pty Ltd (RCC); in the matter of Kennedy Civil Contracting Pty Ltd [2023] NSWSC 99 and considers the ramifications for the scope of section 32B of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act).

After reporting its lowest annual recovery from False Claim Act (“FCA”) cases in Fiscal Year (FY) 2020, the Department of Justice (“DOJ”) has reportedly bounced back. On February 1, 2021, DOJ released detailed statistics regarding FCA recoveries during FY 2021, during which DOJ reportedly obtained more than $5.6 billion in civil FCA settlements and judgments, of which $5 billion related to matters involving the health care industry.

On December 14, 2020, Judge Marvin Isgur of the United States Bankruptcy Court for the Southern District of Texas, issued an important decision in the CEC Entertainment, Inc. (Chuck E. Cheese) bankruptcy case, Case No. 20-33163, denying the Debtors’ motion to abate their obligations to pay post-petition rent due to government shutdown orders issued as a result of the COVID-19 pandemic. Memorandum Opinion [Dkt. No. 1492].

In a case litigated by the authors, the United States Court of Appeals for the Seventh Circuit held in In re Marzieh Bastanipour, Case No. 20-1373 (7th Cir. June 10, 2020) that Chapter 13 debtors are not permitted in forma pauperis fee waivers absent a showing of extraordinary circumstances.

In 2018, the Debtor, Marzieh Bastanipour, filed a Chapter 13 bankruptcy petition in the U.S. Bankruptcy Court for the Northern District of Illinois. This was the third Chapter 13 petition filed by the Debtor since 2013.