Emory Bankruptcy Developments Journal

Volume 30Issue 1

Medical Marijuana Dispensaries in Chapter 11 Bankruptcy

Vivian Cheng | 30 Emory Bankr. Dev. J. 105 (2013)

Since California passed the Compassionate Use Act of 1996, the interaction between state and federal medical marijuana laws have been a subject of frequent legal debate. But few have considered whether state-compliant medical marijuana dispensaries may seek assistance from the bankruptcy system. Two dispensaries recently tested their ability to reorganize under chapter 11 of the Bankruptcy Code, but the cases were quickly dismissed. The U.S. Trustees argued that the debtors’ business activities constituted “cause” to dismiss, lack of good faith in filing, and a “means forbidden by law,” and left the debtor with little reasonable chance of success.

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Student-Loan Discharge—An Empirical Study of the Undue Hardship Provision of § 523(a)(8) Under Appellate Review

Ryan Freeman | 30 Emory Bankr. Dev. J. 147 (2013)

Prior to the enactment of the Bankruptcy Code, student-loan debtors could receive an automatic discharge of their debts in bankruptcy. Now, they cannot. Since the Code’s enactment, Congress has pursued progressively harsher standards, continually narrowing the scope of when a student-loan debtor could obtain discharge. Following the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005, student-loan debtors now encounter the toughest obstacles to discharge they have ever faced. By extending the protection of the discharge exception of 11 U.S.C. § 523(a)(8) to private lenders, Congress effectively placed all students who take out loans to pay for their education at the mercy of a harsh system whose narrow exceptions for discharge force debtors to prove that they face a “certainty of hopelessness” in their future.

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Considering Which Labor Terms a Debtor May Impose on its Union After Rejecting a Collective Bargaining Agreement Under § 1113

Jacob L. Kaplan | 30 Emory Bankr. Dev. J. 207 (2013)

Section 1113 of the Bankruptcy Code provides courts with a comprehensive set of criteria for determining when chapter 11 debtors can reject collective bargaining agreements during bankruptcy. When courts approve rejection, however, § 1113 and the rest of the Code are silent about which labor terms debtors may unilaterally impose on their unions. On the rare occasions when courts and the National Labor Relations Board have addressed this issue, they have followed one of two approaches. The first approach limits debtors to imposing only labor terms found in their “last, best offer” to unions before filing a § 1113 motion. The second approach, however, permits debtors to impose any labor terms found in any pre-§ 1113 proposals, subject to court approval.

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Avoiding the Inequities Created byIn re Delco Oil, Inc.—The Need for An Innocent Vendor Exception

Juan Mendoza | 30 Emory Bankr. Dev. J. 257 (2013)

In In re Delco Oil, Inc., the Eleventh Circuit addressed whether a chapter 7 trustee can avoid a debtor’s unauthorized transfer of cash collateral to a vendor that transacts in good faith and for equivalent value. The Eleventh Circuit strictly interpreted 11 U.S.C. §§ 549 and 550 by holding that the trustee has the power to avoid such a transfer. This decision is problematic for two reasons. First, the innocent vendor had to forfeit the goods that it transferred and any cash collateral received in exchange. Second, the decision created an absurd result by preventing the innocent vendor from obtaining an administrative expense claim even though it conferred a benefit on the estate. This decision effectively prevents an innocent vendor from receiving any compensation for the sale of its goods.

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