Cannabusiness Advisory

Don’t Bank(ruptcy) On It: In re Adair

May 3, 2019


The U.S. Justice Department (“DOJ”) has said that an Oregon woman who is employed by a marijuana staffing agency cannot use bankruptcy protection because of her firm’s ties to the cannabis industry. The U.S. Trustee—a DOJ bankruptcy administrator—objected to confirmation of the debtor’s Chapter 13 plan and moved to dismiss on the grounds that her income is earned in violation of the federal Controlled Substances Act (“CSA”).

The debtor, Ms. Adair, works for Greenforce Staffing, which advertises itself as a full-service staffing and temporary employment agency focused on labor solutions for the cannabis industry. Moreover, its website claims that the company specializes “in providing skilled harvesting, cultivation lifecycle, and trimming temporary labor services for licensed Oregon producers” as well as providing “a suite of permanent and temporary placement services for all aspects of the cannabis industry, including, but not limited to, bookkeeping, product packaging, garden management, and retail.”

Even though Greenforce is by no means a plant-touching operation, the Trustee argued that confirming Ms. Adair’s Chapter 13 plan would nonetheless improperly involve a federal court in administering the fruits and instrumentalities of federal criminal activity. The objection continued:

The Debtor receives her income from Greenforce, and Greenforce receives its revenue from the commercialized cannabis industry, which is regulated by the CSA. Greenforce is a business that relies on contractual payments it receives from entities and individuals who violate the CSA, and the Debtor thus ultimately receives her income from those same entities and individuals. Liability under the CSA 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.

Accordingly, the Trustee concluded that while the Ms. Adair is not directly producing or selling marijuana, her activities as an employee of Greenforce violate the CSA because she assists businesses that violate the CSA on an ongoing basis. Confirmation of the plan would amount to condonation of an activity that is illegal under federal law, according to the DOJ.

The DOJ’s position in In Re Adair is an alarming overreach which could have large scale implications. Last year alone, 259,000 people worked for plant touching operations in the US.  By including ancillary businesses like Greenforce, that number is likely to increase to more than 500,000 people.

We will be following this case as it progresses.

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