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).
Pre-petition, the Debtor was in the business of wholesale manufacturing, packaging, and distribution of cannabis products to dispensaries in California under the brand name Lowell Herb Co.
The Debtor ceased its operations and transferred its assets to Lowell Farms, Inc. (Lowell Farms), a Canadian entity whose sole business was cannabis growth and sales. In return, the Debtor received approximately 9.4% of Lowell Farms' shares, valued at approximately $35 million at the time of sale.
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