Cannabis Employee’s Case Presents Novel Issue
Updated: Jul 15, 2022
A bankruptcy judge has been asked to decide whether an employee of a cannabis business is ineligible for Chapter 13 relief because his income comes from an industry still illegal under federal law.
The debtors have generally been proprietors of cannabis businesses, not employees, to the extent that precedent exists.
The U.S. Trustee is arguing that there is no meaningful distinction between the debtor and a cannabis business owner because the continuance of his case requires the administration of assets resulting from criminal activity. The trustee has moved for dismissal of the case for cause and says the debtor cannot show that his Chapter 13 plan has been proposed in good faith and not by any means forbidden by law.
The debtor argues that dismissal is a draconian remedy under the circumstances. If taken at face value, it potentially extends to employees of a wide range of businesses and industries that provide all levels of services to marijuana-related enterprises.
Why This Is Important… The whole marijuana industry is illegal under federal law. The federal courts are not available to resolve disputes arising from that industry, and no federal right or statute can be used to protect a marijuana business. This case highlights that problem. It will determine, at least in Massachusetts, whether the employees of marijuana businesses are also going to be swept into this issue.