Cannabis Bankruptcy 101

In a prior post, we discussed some of the emerging trends for cannabis-related companies that seek bankruptcy protection (click here to view the prior post). But, in the first instance, the question is whether a cannabis-related company can file for bankruptcy relief? This post will examine the first decision from Arizona in the case of In re Medpoint Management, LLC, Case No. 2:14-bk-15234-DPC., which was issued on April 6, 2015. The Medpoint decision was rendered by the Honorable Daniel P. Collins, who was the Chief Judge for the District of Arizona at the time of this decision.

The Medpoint case commenced with an involuntary petition filed by three petitioning creditors of Medpoint. Once an involuntary petition is filed, the purported debtor has a chance to answer the petition and seek to dismiss the case. That is exactly what happened in the Medpoint case.

Background Facts

Medpoint is a limited liability company formed under the laws of Arizona. Medpoint was a dispensary-management company that operated under Arizona Nature Wellness’ (“ANW”) dispensary certificate. Medpoint formerly managed ANW’s marijuana business, business relationships, and cultivation operations. ANW had no employees, but Medpoint employed approximately 70 people. Medpoint purchased an interest in another entity that

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