
Rudy J. Cerone

Heidi Urness

David Waxman

Perry Salzhauer
New Cannabis MRB Receivership in Oregon
Recently, Chalice Brands, Ltd. (Chalice), the Canadian parent company to several Oregon subsidiaries (the Greenpoint Parties), engaged in the production, distribution, and sale of cannabis and cannabis products via a network of sixteen retail stores in Oregon, filed suit against the Greenpoint Parties in Oregon state court seeking appointment of a receiver to prevent a “race to the courthouse” by creditors, thereby avoiding piecemeal dismemberment and liquidation of the Greenpoint Parties and their assets (Chalice is also a secured lender to the Greenpoint Parties). In its suit, Chalice requested that the court-appointed receiver take over management and operation of the Greenpoint Parties and their assets so those assets would be preserved and liquidated in an orderly fashion to maximize value for the benefit of all creditors and parties in interest. When the receivership suit was filed, many creditors of the Greenpoint Parties understandably worried that they would be left empty-handed. They also were confused about their rights to repayment with respect to still-outstanding debts. The filings also sent a shockwave through the greater cannabis industry, leaving creditors (and potential creditors) of MRBs throughout the country wondering: Is there any chance of recouping any of the funds owed by a cannabis company that has filed a receivership? Or, in other words, is all lost for creditors of marijuana and ancillary businesses when a state receivership is filed?What are the Powers and Duties of a Receiver in Oregon?
Receivership and bankruptcy are both legal processes that businesses and individuals may use to address their financial problems. In both cases, the goal is to protect a company or individual from creditors, as well as to maximize the value of the assets and distribute the proceeds to creditors in an orderly fashion according to priorities set forth in the statutes. Generally, in receivership and a liquidating bankruptcy, a third party (a receiver or trustee) is appointed to take control of the company’s assets and/or manage its operations. Unlike federal bankruptcy laws, which are uniform throughout the country, receivership statutes differ by state. Oregon has one of the most robust and detailed receivership statutes. In Oregon, where Chalice recently received an order appointing a receiver over the Greenpoint Parties, a receiver of a licensed marijuana business is assigned the duties and responsibilities set forth in the state court order appointing that person as the receiver. Oregon receivership law also confers on the receiver a broad range of powers, which may be further expanded by court order, including but not limited to:- Control over property of the estate
- Operate a business owned by the estate in the ordinary course
- Incur debt to preserve estate property and to pay expenses of administration
- Use, sell, transfer and/or abandon property of the estate
- Sue and be sued
- Engage estate professionals
- Assume executory contracts
- Allow or disallow creditors’ claims
- Distribute estate property
- Must be eligible to be a licensee (see, OAR 845-025-1260(2))
- May obtain a temporary authority to operate a licensee “to allow orderly disposition of the business” (see, OAR 845-025-1260(1))
- May be granted an extension of the temporary 60-day authority to allow for the disposition of the business (see, OAR 845-025-1260(3), and (4))
What Happens in an Oregon Receivership?
Generally, in a receivership, once a receiver is appointed, several timelines begin to run. For example, within 60 days of appointment, the receiver will file with the court a “schedule” listing all of the company’s creditors, the amounts and nature of each creditor’s claim, and whether the same is disputed (see, ORS § 37.190). Should any dispute arise, the receiver and any interested party may object to a claim. That claim may be mediated or litigated before the court (see, ORS § 37.360; Or.R.Civ.P. 80). In this same 60-day period, the receiver must also file an inventory of all estate property. Further, each month following the appointment, the receiver is required to file reports detailing the ongoing business operations and finances. In Oregon, the receiver has flexibility to set the form and procedure of the claims allowance and payment process and may issue a claims “bar date” (the date by which claims must be filed with the receiver) (see, ORS § 37.340(1)) and ORS § 37.210). With respect to specific claims of creditors in Oregon, all unsecured claims that arose before the receiver was appointed must be submitted to the receiver to participate in the proceeds of the estate (see ORS § 37.350(6)). It is essential that creditors take notice of relevant claims bar date(s) and comply with all requirements prior to the stated deadline(s). Once all claim disputes are resolved, and the company’s assets have been assessed, the receiver will sell and distribute the proceeds of the sale of the assets to the creditors based on a state-specific priority of payment of claims. In Oregon, after taking into account the expenses associated with the administration of the receivership estate, available proceeds are distributed to creditors and equity holders in the order listed below:- Secured and perfected claims (from the proceeds of the collateral)
- Administrative claims
- Secured but unperfected claims
- Wages and salaries
- Small unsecured claims by individuals for certain types of deposits
- Spousal and child support
- Unsecured tax claims
- Other unsecured claims
- Equity interests