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Bankruptcy Court Refuses to Dismiss Marijuana Industry Debtor Chapter 11 Case

In re The Hacienda Company, LLC, No. 2:22-bk-15163, the U.S. Bankruptcy Court for the Central District of California (Judge Neil W. Bason) denied a motion to dismiss the Chapter 11 bankruptcy case despite finding that the marijuana-industry debtor was engaged in an ongoing, post-petition violation of the federal Controlled Substances Act (CSA).

The Hacienda court's refusal to dismiss this marijuana industry case — on two separate occasions — and instead to confirm the Chapter 11 plan, represents a departure from the vast majority of bankruptcy court decisions, which reached the opposite result: dismissing bankruptcy cases based on perceived violations of federal drug laws alone. See, e.g., In re: Way to Grow, Inc., 610 B.R. 338 (D. Colo. 2019); Burton v. Maney (In re Burton), 610 B.R. 633 (9th Cir. BAP 2020).

In this Reuter’s article authored by Loeb & Loeb Restructuring and Bankruptcy partners Schuyler Carroll and Bethany Simmons and associate Noah Weingarten, the writers analyze the U.S. Bankruptcy Court's refusal to dismiss a Chapter 11 bankruptcy case, emphasizing that a violation of the Controlled Substances Act (CSA) does not automatically warrant dismissal, and considering the interests of innocent creditors and potential post-petition efforts to address violations.

To read the full article, please visit Reuter’s website.