532 B.R. 53
Bankr. W.D. Mich.2015Background
- Jerry L. Johnson, a 66-year-old Michigan resident, filed Chapter 13 to prevent foreclosure and utility shutoff.
- He operates a marijuana business as a registered MMMA caregiver; income purportedly from cultivating and selling to patients and a dispensary.
- Federal law (CSA) criminalizes marijuana activities, creating a clash with his state-law MMMA-compliant conduct.
- The estate includes the Residence, the truck, horticultural equipment, and related supplies; post-petition earnings from his marijuana business and Social Security are part of the estate.
- The United States Trustee moved to dismiss, arguing Johnson’s ongoing marijuana business renders him ineligible for relief.
- The court ordered an injunction: he must cease marijuana activities and destroy/abandon plants, with an evidentiary follow-up hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Debtor's post-petition marijuana business bar Chapter 13 relief? | Johnson's MMMA-compliant activity is lawful under state law and should not preclude relief. | CSA violations render him ineligible for bankruptcy relief. | Not dismissed; relief denied if he continues marijuana activity; injunction issued. |
| May the Debtor use estate property to conduct a marijuana business? | Debtor may use estate assets under §1304 to run the business if lawful under state law. | Use of estate to facilitate illegal activity is impermissible under federal law. | Use permitted only if he ceases marijuana activity; otherwise prohibited. |
| Should the marijuana plants and related products be abandoned or destroyed from the estate? | Not a separate issue; plan should progress with allowed assets. | Plants constitute contraband assets under federal law. | Plants and products abandoned and destroyed as a condition of continuing case. |
| What remedy should the court impose pending further proceedings? | Dismissal or relief consistent with federal law should be considered. | Continue protection under bankruptcy while addressing CSA concerns. | Injunction maintained; evidentiary hearing scheduled; UST motion denied without prejudice. |
Key Cases Cited
- Kras v. United States, 409 U.S. 434 (1973) (no constitutional right to discharge absent compliance with law)
- United States v. Hicks, 722 F. Supp. 2d 829 (E.D. Mich. 2010) (federal law criminalizes marijuana activities notwithstanding state law)
- In re Rent-Rite Super Kegs West, Ltd., 484 B.R. 799 (Bankr. D. Colo. 2012) (trustee must comply with federal law; multiple bankruptcy players not above law)