Is Bankruptcy an Option for Ancillary Marijuana Businesses?
To date, bankruptcy courts have denied relief under the United States Bankruptcy Code to marijuana cultivators and dispensaries, as well as their landlords, on the ground that those businesses violated the Controlled Substances Act — the federal law that regulates controlled substances such as marijuana.[2] In each case, bankruptcy courts found that the cultivators and dispensaries violated a particular CSA provision because they either manufactured, distributed or dispensed marijuana,[3] or because the landlords owned property being leased and used for the manufacture or distribution of marijuana.[4] In at least one case, however, involving an entity that licensed its brand name to a dispensary, the violation in question hinged on an accomplice theory of liability for violating the CSA.[5] This more attenuated violation may be consistent with the UST Program's broadly written position.
Nevertheless, as discussed below, the application of the UST Program's position and the limitation of bankruptcy relief has not been addressed at this stage, let alone settled, with respect to businesses that are ancillary to the core business of growing, processing and dispensing marijuana, such as lighting, security, software and growing-equipment entities (ancillary businesses). Moreover, there are options that may still be available for both marijuana businesses and ancillary businesses to manage their debt.
