Welcome back to Higher Law, our weekly briefing on all things cannabis. I'm Cheryl Miller, reporting for Law.com from Sacramento. No subpoenas necessary to read this edition, which is certified snit-free.

This week we look at new developments–breaking today–on the issue of bankruptcy and marijuana and why an arm's-distance length from a state-legal plant may not help a debtor. Plus, Washington, D.C., looks at plowing ahead with recreational sales rules. And scroll down to see Who Got the Work.

Thanks as always for reading. I'm happy to hear your feedback, tips and favorite William Barr testimony highlights. You can reach me at [email protected]. Or you can call 916-448-2935. Follow me on Twitter at @capitalaccounts.

 

 

Breaking News on Bankruptcy & Bud

Some big news out of the U.S. Court of Appeals for the Ninth Circuit today: A three-judge panel refused to reject a Washington real estate company's bankruptcy plan on the grounds that a portion of its rental income comes from a state-licensed marijuana-growing tenant.

The U.S. trustee, part of a Department of Justice program overseeing the administration of bankruptcy cases, had argued that Cook Investments' repayment plan should be rejected because the company's receipt of marijuana business money violates the Controlled Substances Act.

Writing for the court, U.S. Circuit Judge M. Margaret McKeown (at left) cited a 1990 bankruptcy case out of the Western District of Texas in finding that the trustee's interpretation of governing law would “convert the bankruptcy judge into an ombudsman without portfolio, gratuitously seeking out possible 'illegalities' in every plan.”

“The problem with the Trustee's theory is that it ignores the plain text of §1129(a)(3), which directs bankruptcy courts to police the means of a reorganization plan's proposal, not its substantive provisions,” McKeown wrote. “Resolution of this appeal rests on a straightforward question of statutory interpretation rather than on any conflict between federal and state drug laws.”

The ruling could have a big impact on the marijuana-related bankruptcy cases throughout the West Coast.

Just this week The Wall Street Journal told the story of Holly Adair, an Oregon woman who filed for Chapter 13 bankruptcy protection. An attorney for the region's acting U.S. trustee asked a federal judge last week to block Adair's debt repayment plan and to dismiss her case.

The reason? Adair has ties, albeit tangential ones, to the cannabis industry. She works for Greenforce Staffing, an employment agency that supplies workers to marijuana businesses.

“Liability under the [Controlled Substances Act] is broadly defined, and extends not only to the owners of controlled substances, but also to those who possess or dispense marijuana, as well as to persons who assist or conspire with violators of the CSA,” Acting Assistant U.S. Trustee Jonas Anderson wrote.

The Ninth Circuit panel noted that the District of Colorado has agreed with the U.S. trustee's arguments on marijuana-related bankruptcies. McKeown also wrote that there's still nothing stopping a bankruptcy court from rejecting a repayment plan because of a debtor's “gross management.” And a court confirmation of bankruptcy reorganization won't protect debtors from criminal prosecution for any illegal activity, McKeown wrote.

Still, the opinion would seem to offer clearer bankruptcy protections for those with direct and indirect ties to the marijuana industry.

 

 

Washington, D.C., Weed at Last?

Voters in the nation's capital approved recreational marijuana in 2014. But adult-use sales remain outlawed in D.C. because of federal budget language, inserted by congressional Republicans, that bars the district from enforcing legalization laws.

D.C. Mayor Muriel Bowser has apparently had enough of the ban. On Thursday she told The Washington Post she's unveiling legislation to create a regulated marijuana program. The plan is to have the groundwork for a recreational program in place if and when majority Democrats in the House remove the anti-sales language from the budget.

“We want to be able to regulate, we want to be able to make sure we are collecting our fair share in taxes, we want to invest those taxes in ways that affect communities that have been disproportionately affected, and we want to train and hire D.C. residents,” Bowser told the Post.

The legislation would allow the district's eight medical marijuana cultivation centers to grow cannabis for recreational sales. A 17 percent sales tax would be charged on marijuana products and home delivery would be allowed.

Opening D.C. to marijuana sales would have an immediate market of 700,000 residents and create a recreational hub for the roughly six million people who live in the metro region. It might also cause a feud with the federal government.

Who Got the Work

• Loeb & Loeb and Stikeman Elliott advised Massachusetts-based Curaleaf Holdings Inc. in its $949 million acquisition of Cura Partners Inc. of Portland, Oregon. Dentons US and Goodmans served as legal advisors to Curaleaf.

• Brian Feldman joined Canada-based TerrAscend Corp. as an officer and general counsel last month. He was previously chief administrative officer and general counsel at Serafima Investments in New York.

• Paul Hastings advised Canopy Growth in its acquisition of a 308,000 sq. ft. facility in Kirkwood, New York that will be part of a hemp industrial park. The Paul Hastings team was led by partner Gerd Alexander and also included partner Samuel Waxman and associates AJ Warner and Brooke Schachner.

• Richard Miadich of Sacramento, one of the author's of Proposition 64, the voter-approved initiative that approved sales of recreational marijuana in California, has been named chairman of the California Fair Political Practices Commission. Miadich has been managing partner at the Sacramento firm of Olson Hagel & Fishburn since 2016.

 

 

In the Weeds… With a 'Subtle Hint of Earth'

>> Who wants a CBD-infused burger at 6 a.m.? Dozens of connoisseurs, apparently. The district manager for the Denver Carl's Jr. offering the Rocky Mountain High: CheeseBurgerDelight on 4/20 reported 30 people in line and 10 cars waiting at the drive-thru for the one-day event. One diner declared the burger “awesome,” with a “very subtle hint of earth” from the CBD sauce. No word yet on whether Carl's Jr. will roll out the burger to a wider audience. [Leafly]

>> Oregon lawmakers want to freeze marijuana production levels. To address a marijuana glut, state senators this week advanced legislation to limit the supply of legal recreational product at existing levels for the next two years. Current growers will still be able to renew their licenses. [AP]

>> A judge described Michigan's marijuana regulation process as “freakish” and “whimsical.” Court of Claims Judge Stephen Borrello told the state not to set any new compliance deadlines for unlicensed medical marijuana shops. “The Court notes that [the Department of Licensing and Regulatory Affairs'] entire method of handling license applications has been 'apt to sudden change, freakish, or whimsical,'” Borrello wrote. [MLive.com]

>> The Trump administration opposes bills to give veterans easier access to medical marijuana. Officials from the Department of Veterans Affairs told a House subcommittee this week that they oppose allowing VA doctors recommend medical marijuana to vets because the drug remains illegal at the federal level. [The Washington Times]

>> In Massachusetts marijuana politics, it's still about who you know. In the last article in a four-piece series on the state's developing cannabis market, The Boston Globe found that “a cadre of politically connected lawyers, consultants, and lobbyists whose work to promote their well-capitalized clients is having an unintended side effect: undermining the state's promise to create an egalitarian marijuana industry in which small operators could thrive.” Among the biggest influencers: political kingmaker and now pot executive Frank Perullo. [The Boston Globe]

 

 

Calendar: All the Things

May 6 - MJBizDaily's European Cannabis Symposium takes place in Copenhagen, Denmark. Scheduled speakers include Eveline Van Keymeulen, counsel and head of life sciences regulatory practice at Allen & Overy, and João Taborda da Gama, founding partner at Gama Glória.

May 7 - Duane Morris presents the webinar “Cannabis 201: CBD and Hemp Regulatory Update.” Partner Seth Goldberg and associates Carolyn Alenci and Joseph Pangaro will lead the discussion.

May 9 - Best Best & Krieger partner Jeffrey Dunn leads a group discussion on “Cannabis Regulation” at the 2019 City Attorneys' Spring Conference in Monterey, California.