A recent decision from the Bankruptcy Appellate Panel of the Ninth Circuit is another in a small, but growing line of cases finding that bankruptcy cases need not be mandatorily dismissed simply because they touch upon marijuana related businesses or their assets. In turn, that realization could, and should, lead to a much needed change in thought over the general availability of bankruptcy protection for operating marijuana related businesses themselves.
The decision, In re Olson, 2018 WL 989263 (B.A.P. 9th Cir. 2018), involved a 92 year old, legally blind, debtor living in an assisted living facility. The debtor, Ms. Olson, owned a commercial property which leased space to a marijuana dispensary, which was by all accounts operating legally under California law. After Ms. Olson filed for Chapter 13 bankruptcy protection, the marijuana dispensary continued to pay rent to Ms. Olson as its landlord. Ms. Olson’s proposed Chapter 13 plan called for a termination of the lease with the dispensary and a sale of the commercial property with all proceeds to be used to pay Ms. Olson’s creditors. However, before a hearing could be held on Ms. Olson’s Chapter 13 plan and the commercial property liquidated to pay creditors, the court, on its own, dismissed Ms. Olson’s bankruptcy case because it found that Ms. Olson had committed “a crime” by “accepting rents from an illegal operation.” The Bankruptcy Court also concluded that dismissal was appropriate because Ms. Olson was “leasing property for an unlawful purpose under federal law, although lawful under state law.”
On appeal, the Bankruptcy Appellate Panel, in a logical (but unfortunately novel) approach to the issue, refused to support the automatic dismissal of Ms. Olson’s bankruptcy case simply because of her tangential ties to a marijuana related business, and the limited income she had derived therefrom during the pendency of her bankruptcy case. Perhaps more importantly, the Bankruptcy Appellate Panel found that it was actually an abuse of the Bankruptcy Court’s discretion to dismiss Ms. Olson’s case without providing explicit legal justification for the dismissal. The Bankruptcy Appellate Panel noted that “[w]hen a court imposes the harsh penalty of dismissal in circumstances such as those presented here, it is imperative that it state with clarity and precision its factual and legal bases for doing so.” In a well-reasoned concurrence opinion, one judge recognized the legal significance of addressing the legal needs of litigants who are otherwise in compliance with state laws, when over twenty-five states currently allow the medical or recreational use of marijuana.
The decision In re Olson is nowhere near a panacea for all of the insolvency issues facing marijuana related business and those who interact with them, but it is another much needed step in the right direction. The Bankruptcy Appellate Panel took a realistic, logical approach to an issue confronting all parties involved in this space, and concluded that the mere presence of a marijuana related business, or a marijuana related asset, should not preclude bankruptcy protection in the right situation. Again, the Olson decision does not open the courthouse doors to the bankruptcy option for marijuana related businesses, but it does stand for the proposition that bankruptcy courts can use a common sense approach in deciding these issues, as opposed to automatically dismissing bankruptcy cases with any connection whatsoever to a marijuana related business or its assets.
Welcome to the Cannabis Business Legal News blog where attorneys from Amundsen Davis blog about all things cannabis business and legal news related.
- Historic Cannabis Rescheduling on the Horizon? It's Up to the DEA Now
- FDA Issues First Ever Guidance for Research of Psychedelics
- Movement on the SAFE Banking Act? The Senate is Talking the Talk, but Not Ready to Walk the Walk
- The Federal Government & CBD – What the FDA is Happening?
- Illinois Lawmaker Introduces Legislation to Legalize Psychedelic Therapy Programs
- Illinois Set to Roll out New Cannabis Retail License Applications and Lottery in Early 2023
- Could a Small Town in Pennsylvania Force Congress to Deschedule Cannabis?
- No April Fool’s Joke: The MORE Act was Just Passed by the House
- Significant Increase in Production of Cannabis and Psychedelics for Research Proposed by the DEA for 2022 – What You Need to Know Now
- Protecting Your Cannabis Business from the Trappings of the Telephone Consumer Protection Act
- August 2023
- May 2023
- January 2023
- November 2022
- April 2022
- October 2021
- August 2021
- July 2021
- May 2021
- December 2020
- April 2020
- December 2019
- November 2019
- August 2019
- June 2019
- May 2019
- April 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- June 2018
- May 2018
- July 2016