When your legal medical marijuana business fails, you’re screwed


As support for Florida’s Amendment 2, which would legalize medical cannabis in the state, picks up across the state, Floridians are eager to get their hands in the medical weed industry game. But it’s become clear recently that the Republican-controlled Legislature might cap the number of dispensaries and limit the number of people who can cash in.
Consider California. When medical pot was first legalized there, dispensaries popped up everywhere. Voters decided to limit them, and many closed down, leaving would-be entrepreneurs in the dust.

But what happens when a medical marijuana business fails? Four court rulings from Colorado, California, and Oregon suggest it’s not pretty. Because medical marijuana still isn’t legal on a federal level and bankruptcy cases are handled in federal court, the government won’t let anyone involved with pot restructure his debt. To the feds, dealing with weed is still “illegal activity,” even if it’s perfectly above board to be a warehouse landlord, dispensary owner, or caregiver in your state.
Here’s how courts have ruled in the past:
– Oregon, June 9, 2011: A debtor tried to file Chapter 13 bankruptcy. He made his money from Oregon Medical Growers LLC, which leased a warehouse to people who grow pot as well as a tattoo parlor. Because part of the debtor’s income was derived from doing business with pot growers, a debt repayment plan was denied by the courts.
– California, November 29, 2011: Plaintiff Northbay Wellness Group was set up to sell medical weed. Its attorney told the owners not to pay state income taxes, a piece of bad advice that cost them hundreds of thousands of dollars later on. When the company tried to sue, the courts invoked the “clean hands doctrine” that “closes the doors of a court to one who is tainted relative to the matter in which he seeks relief, no matter how improper may have been the behavior of the defendant.”
– California, October 4, 2012: Mother Earth’s Alternative Healing Cooperative Inc. tried to file Chapter 11 bankruptcy. The court said no, because it was in violation of the Controlled Substances Act.
– Colorado, December 19, 2012: A landlord tried to file Chapter 11 without knowing that 25 percent of his income came from a tenant who grew pot. This violated a so-called “crack house” statute, which caused the courts to dismiss the case.
Read the rest over at the Broward-Palm Beach New Times.