Despite a company’s claim that it deals only in legal hemp products, a federal court this week denied the company’s access to relief under the Bankruptcy Code. U.S. Bankruptcy Court Judge Joseph Rosania Jr., of the District of Colorado, dismissed United Cannabis Corporation’s (UCANN) Chapter 11 bankruptcy filing, a move that could cause concerns for cannabis companies that may be seeking bankruptcy relief, particularly in the midst of a global pandemic.

Bankruptcy Courts Struggle with Drawing the Line for Cannabis Industry Protections

The combined effects of the coronavirus pandemic and falling oil prices have resulted in a surge of US bankruptcy petitions. Although the nation’s ports remain open for business, many retail and energy businesses have been unable to overcome the volatile economic climate and are seeking relief in US Bankruptcy Courts.

As the COVID-19 pandemic continues to cause harsh economic conditions throughout the United States, many companies face the difficult prospect of bankruptcy. Smaller businesses in particular have had to endure significant pain as a result of state-mandated closures and stay-at-home orders and public fear about the virus. Certain industries, such as leisure, dining, and travel, have been hit especially hard.

Since the bankruptcy of Hanjin Shipping Co. Ltd., so many articles have been written about how it happened, why it happened, and what can be learned from this tragedy. When Hanjin Shipping, once the 7th largest container carrier in the world and the 4th largest container carriers in the transpacific (Asia – US & Canada) trade, filed for bankruptcy, few believed that a “too big to fail” organization like Hanjin would not be given a government bail-out. So, naturally, no one really appreciated the kind of disruption and losses that would subsequently affect the global supply chain.

As COVID-19 wreaks havoc on people around the world, it is also severely disrupting numerous companies’ health, balance sheets, and ability to survive. The impact is already manifesting itself as businesses temporarily suspend operations and furlough their employees as revenue is lost and expenses mount. It is inevitable that many of these companies, especially those that were already distressed prior to the COVID-19 crisis, will need to restructure their debts.

Restructuring Leases, Other Contracts, and Loans

Edward L. Schnitzer spoke at Montgomery McCracken’s 2019 Higher Education Forum about parental bankruptcy making tuition payments subject to return as fraudulent transfers. On November 12th, the United States Court of Appeals for the First Circuit issued a noteworthy decision on the topic, and is the first circuit to do so.

Bankruptcy Claims Trading

Claims trading plays a huge role in bankruptcies. In 2018, it is reported that there were nearly 8,000 claims traded with value of $40 billion. More than half of those trades were on claims worth under $250,000, meaning the majority of claims being purchased were likely held by smaller companies who do not regularly sell claims or regularly appear in bankruptcies.

In Cal Dive Offshore Contractors, Inc. v. M/V SAMPSON, the U.S. District Court for the Southern District of New York considered a claim by vessel manager Cal Dive Offshore Contractors, Inc. (“Cal Dive”) for unpaid services against the vessel in rem, the owner CVI Global Lux Oil and Gas 4 S.a.r.l (“CVI”), and CarVal investors, LLC (“CarVal”) as owner’s agent. Following a trial, the district court held that Cal Dive’s maritime lien and in personam claims failed. Cal Dive has since filed an appeal, which remains to be decided.

The United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) recently ordered the appointment of a Chapter 11 Trustee to manage the business affairs of sixteen entities in the China Fishery Group (the “CFG Debtors”) in In re China Fishery Group Limited (Cayman).

The United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) recently recommended that the United States District Court for the Southern District of New York (the “District Court”) grant summary judgment in favor of shippers where the carrier discontinued the services for which the shippers had agreed to minimum quantity commitments (“MQC”) in exchange for reduced freight rates in a shipping service contract.