%1

In 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), according to a Reuters analysis. 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.

The U.S. Supreme Court on Friday granted the U.S. Solicitor General’s petition for a writ of certiorari in Office of the U.S. Trustee v. John Q. Hammons Fall 2006 LLC, 22-1238 (Sup. Ct.), to decide whether chapter 11 debtors are entitled to refunds for overpayment of fees for the U.S. Trustee System, according to a special analysis from ABI Editor-at-Large Bill Rochelle. In Siegel v. Fitzgerald, 142 S. Ct. 1770 (Sup. Ct. June 6, 2022), the Court unanimously held that the 2018 increase in fees paid by chapter 11 debtors to the U.S. Trustee System was unconstitutional because it was not immediately applicable in the two states with Bankruptcy Administrators rather than U.S. Trustees. The Court in Siegel explicitly left open the question of remedy. The government had been contending that prospective relief was sufficient. In other words, the government believes it is enough for the Court to have ruled that fees must be uniform throughout the country in the future. Alternatively, the government wants courts to rule that someone should retroactively collect underpayments from debtors in Bankruptcy Administrator districts.