Cannabis Company MedMen Tries to Avoid $1M in Rent By Using Schedule 1 Status as an Excuse12/8/2022
![]() Legal news site J.D. Supra has reported on a strange case of MedMen using the illegal federal status of cannabis as a defense for not paying rent. The case it extremely important for the cannabis industry to watch, as it could have a serious effect on other cannabis businesses. The suit is being brought by Thor Equities (“Thor”), who are a a New York-based private equity firm specializing in real estate development, leasing and management. The case is Thor 942 Fulton St., LLC v Future Transactions Holdings, LLC et. al.[1]. Thor Equities is suing the vertically integrated and multi state operating cannabis company, MedMen. Medmen is California based, and went public on the Canadian Securities Exchange in 2018 and grew rapidly in it’s early years. But their debts also grew. MedMen has faced many layoffs, selling of assets, cancelled aquisitions, and refinancing of debt. After years of struggling financially, they have sought to restructure the company over this past summer of 2022. Thor Equities case against MedMen is based on the 15 year rental lease for a Chicago property that MedMen signed with Thor Equities. Both parties agree that in August of 2021, MedMen stopped paying their rent. Thor Equities sued MedMen for unpaid rent totaling just under one million dollars, ($950,960.02 to be exact). MedMen doesn’t dispute the amount of unpaid rent. However, MedMen’s argument says, “It is unlawful under Federal law to lease any place for the purpose of distributing any controlled substance, including marijuana, as Plaintiff did here.” So MedMen is saying that because cannabis is illegal under federal law, the lease they signed with Thor Equities is legally un-enforceable, and therefore they cannot be forced to pay the back rent. For their part, Thor Equities says that the lease MedMen signed does have a specific clause that prohibits MedMen from using the federal illegality of its business as a valid defense to any claim arising from the lease, such as this one. The MedMen lawsuit is one that all in the industry should pay close attention to. Not only is this type of non-payment extremely bad publicity and paints a very negative view of cannabis companies, but also, if MedMen is successful in avoiding payment of all or part of the nearly $1 million owed in rent, this could significantly effect the willingness of commercial real estate landlords to rent to cannabis companies. Comments are closed.
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