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Marijuana business ends in acrimony and bankruptcy

The head of the Minnesota chapter of the National Organization for the Reform of Marijuana Laws (NORML) and a noted grower/activist couple are heading to court in Oregon. The couple and the man originally planned to start a legal marijuana growing operation after they separately ran afoul of authorities in other states.

The man initially loaned the couple $155,000 and put $700,000 into the partnership in 2015, but pulled the plug later in the year when he discovered that construction had not even begun on the operation and that the couple had used the money to pay off personal debts and expenses. The man alleged that the couple had defamed his name in the Portland marijuana business community. The man subsequently filed a lawsuit in early 2016, alleging several breaches of their contract, libel, slander and intentional misrepresentation. He also asked for thousands of dollars in payment of the money he had loaned them.

The couple countersued, contending that the partner approved expenditures that he later objected to. They also said the operation was on its way to completion. The couple also made accusations of addiction to prescription drugs and alcohol, which slowed the development of the business. They also allege that he backed out of the business as a way of undermining the success of the partnership. The couple is seeking $5 million in damages.

Man files bankruptcy

According to news reports, the trial was set to begin in January of 2019, but has now been delayed by the man filing Chapter 11 bankruptcy. While Chapter 7 is a more severe form of liquidation, Chapter 11 is a restructuring of debt, which can then be paid off over a three to five year period.

This move effectively protects some the man’s assets – he had previously sold a trucking business for $40 million before going into the marijuana business. It is hard to say what happened to the other $35 million the man had, but a bankruptcy will stop a lawsuit from moving forward and can also discharge money owed by the suit.

There are many options in business disputes

Bankruptcy is one viable solution, but there are others as well. Disputes in partnerships are commonplace, which is why written agreements are key to the success of a business. Knowledgeable attorneys can draft those agreements so they hold up in court or negotiate an equitable solution through arbitration, or pursue litigation in a court of law.

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