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CA Bankruptcy Court Throws Regulatory Concerns Aside and Sides With Cannabis Business' Chapter 11 Plan
In contrast with a majority of bankruptcy courts that routinely dismiss cannabis-related cases for perceived violations of the Controlled Substances Act (CSA), the U.S. Bankruptcy Court for the Central District of California in the recent opinion In re Hacienda, No. 2:22-BK-15163-NB, (Bankr. C.D. Cal. July 11, 2023), refused to conform to the same historical standard. Instead, the Bankruptcy Court struck down the U.S. trustee's motion to dismiss not once but twice in favor of confirming a marijuana business' Chapter 11 plan of reorganization.
|Background
In this case, the debtor, Hacienda Co. LLC, was in the business of wholesale manufacturing, packaging, and distribution of cannabis products to dispensaries within the state of California under the name "Lowell Herb Co." aka "Lowell Farms."
In 2021, the debtor transferred its assets, including intellectual property and drug-related goods, to a publicly traded Canadian company that changed its name to Lowell Farms Inc. (LFI). At the time of this transfer, the cannabis industry was legal under Canadian law and California state law. In exchange for its assets, the debtor received a 9.4% share in LFI.
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Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
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The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.