Market overview

Introduction & Key Takeaways

The year 2024 ended with some major legal fireworks, as two important courts issued contrasting New Year’s Eve decisions on the validity of “uptier” liability management transactions that have played a large role in corporate debt restructurings for the past several years.

On September 10, 2024, the U.S.

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.

Since the first Johnson & Johnson talc bankruptcy was filed in 2021, Judge Michael Kaplan has faced countless disagreements in the US Bankruptcy Court. These range from discovery fights, disputes over administration of tens of thousands of individual claims and all-out conflict over the total amount in controversy.

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

The U.S. Supreme Court recently issued its latest bankruptcy opinion in MOAC Mall Holdings LLC v. Transform Holdco LLC, holding that the Bankruptcy Code’s rule against invalidating 363 sales after appeal is not an iron-clad jurisdictional bar, but rather a mere statutory limitation.[1]

Just hours after the United States Bankruptcy Court for the District of New Jersey entered an order dismissing the Chapter 11 Case of Johnson & Johnson subsidiary, LTL Management, as a bad faith filing, LTL filed for Chapter 11 protection again in the same Bankruptcy Court.

Delaware Judge Brendan Shannon has joined calls for reforming Section 546(e) of the bankruptcy code, echoing concerns that the section’s safe harbor from fraudulent transfer liability has allowed investors to “loot privately held companies to the detriment of their non-insider creditors with effective impunity.”[1]