In Burton v. Maney (In re Burton), 610 B.R. 633 (B.A.P. 9th Cir. 2020), the Bankruptcy Appellate Panel of the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of a Chapter 13 case filed by two individual debtors who held ownership interests in a defunct medical marijuana company. Although the company was no longer operating, the Bankruptcy Appellate Panel agreed with the bankruptcy court that pending litigation stemming from the company’s marijuana business that could result in recoveries paid to the company and its members, including the debtors, was sufficient cause for dismissal.

Background

In April 2018, Brigham and Carly Rae Burton filed for bankruptcy protection under Chapter 13 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Arizona. The Burtons owned a majority membership interest in Agricann, LLC, a company engaged in cultivating and selling medical marijuana. Although medical marijuana is legal under Arizona state law, the growing and distribution of marijuana continues to be illegal under federal law.

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