A judge in bankruptcy court in Boston has ruled a manager at a Massachusetts marijuana dispensary can't take advantage of federal bankruptcy laws because marijuana remains illegal under federal court.
In a ruling handed down earlier this month, US Bankruptcy Judge Elizabeth Katz ruled that by continuing to work at a marijuana company, the man's violation of federal law was so egregious she could not even approve a Chapter 13 bankruptcy repayment plan that relied on the earnings of the man's wife, who does not work in a federally forbidden business.
Katz noted that bankruptcy law requires debtors to show a "good faith" reason why they need to have some of their debts forgiven and others adjusted, and that nobody who is paid from the sales of an illegal substance can meet that requirement - and that in this case, that extended to the wife because the couple had commingled their finances.
The Debtor "has no constitutional or 'fundamental' right to a discharge in bankruptcy." Grogan v. Garner, 498 U.S. 279, 286 (1991). Here, the Debtor has not indicated any intention to forego his federal criminal activities while this case is pending, even if he proposed a plan to be funded solely by his spouse's income. The Court ... holds that it would be an abuse of process to permit the Debtor to obtain the protections and benefits of the federal bankruptcy laws while continuing to commit federal crimes. Accordingly, dismissal of this case is warranted pursuant to [federal bankruptcy law].
The judge added:
As reflected in the Debtor's Schedule I and the parties' stipulated facts, at the time the Debtor filed this case he worked in "sales" as a "budtender" for a retail dispensary of cannabis. According to Merriam-Webster.com, https://www.merriam-webster.com/dictionary/budtender (last visited January 17, 2023), a "budtender" is "a person who serves customers at an establishment where cannabis products are sold (such as a medical or recreational marijuana dispensary)." It is reasonable for the Court to infer that this means, at the time the case was filed, as part of his employment, the Debtor provided information about and sold cannabis products to customers. The Court finds, by a preponderance of the evidence, that the Debtor's actions during his employment selling cannabis as a budtender included distributing cannabis and possessing cannabis with intent to distribute cannabis (a controlled substance) in violation of 21 U.S.C. § 841, and possession of a controlled substance without a prescription in violation of 21 U.S.C. § 844(a). The Court also finds that as a budtender, the Debtor aided and abetted his employer, Green Star Herbal, in the unlawful distribution and possession of cannabis with intent to distribute, without a prescription, in violation of 18 U.S.C. § 2. Further, at the time the case was filed, the Court finds that the Debtor conspired with his employer to commit the crimes of distributing cannabis and possessing cannabis with intent to distribute in violation of 21 U.S.C.A. § 846.
The request to deny him bankruptcy came from the trustee appointed by the court to oversee his case. The man argued that the trustee would not be overseeing an illegal activity, just the man's use of wages to pay his debts and that in any case, the federal appeals court in Boston had ruled last year, in a case involving a Maine law on ownership of marijuana businesses, that even marijuana producers could seek relief in federal court:
[T]he Debtor says that, given the marijuana industry's contribution to a wide spectrum of the Massachusetts economy, the Trustee's position would result in a large swath of the community - including the janitorial agency that cleans a dispensary, a pizza shop where dispensary employees get their lunch, Federal Express that delivers packages for a dispensary, the electric utility company, public schools, and perhaps even 2.3 million Walmart employees – being ineligible for bankruptcy relief because they derive an economic benefit from marijuana-related businesses. Instead, the Debtor contends that, based on the recent case of Ne. Patients Grp. v. United Cannabis Patients & Caregivers of Me., 45 F.4th 542 (1st Cir. 2022), where the First Circuit Court of Appeals held that Maine's restriction on cannabis business ownership to Maine residents was unconstitutional under the dormant Commerce Clause, engagement in cannabis-related activity is not a bar to obtaining relief in federal courts.
Katz wrote she didn't buy it:
The Court is unpersuaded by this "slippery slope" argument and does not need to and will not reach the question as to whether other employees, like a warehouse attendant or web designer for a marijuana dispensary, would be eligible for bankruptcy relief.
Via Massachusetts Lawyers Weekly.