MedMen Says Rent Contracts Illegal Under Federal Law

MedMen blames Thor Equities for renting to a federally illegal cannabis company.

Beleaguered cannabis company MedMen Enterprises (OTC: MMNFF) does not want the courts to move its unpaid rent dispute with Thor Equities to a state court from a Federal court. According to Law360, the company is hoping that a Federal court will blame Thor Equities for renting to a federally illegal cannabis operation and then won’t hold MedMen responsible for not paying rent. A state court could be more favorable to Thor Equities’ claims.

Thor had originally filed the case in New York Federal court because Thor Equities is mostly based in New York. Now the company has said it wants to move the case to California, where MedMen is mostly based.

Don’t Rent to Cannabis Co’s

MedMen continues to ask for the case to be dismissed even as it acknowledges signing the lease and not paying the rent. MedMen is arguing that cannabis is an illegal product and so Thor Equities shouldn’t have signed a lease with them. MedMen stated in its latest Memorandum:

It is unlawful under Federal law to lease any place for the purpose of distributing any controlled substance, including marijuana, as Plaintiff did here.

MedMen is arguing that the rent contract shouldn’t be enforced because the Federal government deems cannabis to be an illegal substance.

While the Lease and Guaranties that contemplate the operation of a cannabis dispensary my be legal under Illinois law, it is respectfully submitted that they are not legal under Federal law and cannot be enforced in this Court.

Unpaid Rent

The latest move is based on a complaint filed on July 15, 2022, in which Thor Equities claimed MedMen owed the company $950,960.02 in unpaid rent for 942-944 West Fulton Street, Chicago, Illinois 60611. The lease was signed on June 28, 2019, and Thor says MedMen hasn’t paid any rent since August 2021. Both parties agree that a contract was signed and the rent wasn’t paid.

The complaint stated, “For each month from August 2021 to the present, Tenant was required to pay Landlord base rent of $70,726.67, operating costs of $2,666.67, and insurance costs of $556.29. The monthly real estate charge of $4,429.26, in effect in August 2021 through March 2022, increased to $5,014.59 in April 2022.” The leaseholder is technically MM Enterprises USA LLC. In addition, MedMen’s guarantor is MedMen Enterprises Inc. which agreed to pay if MedMen didn’t have also ditched the landlords and not paid the rent. According to Thor, MedMen owes the principal amount for the past 11 months of $864,509.11.and late fees of 10% of that amount, or $86,450.91.


MedMen does have a dispensary in Chicago, but it’s not on Fulton St, instead, it’s at 1142 Lake St, located in Oak Park IL. The Chicago Tribune reported in 2020 that MedMen was considering a different location at  1001 W. North Ave.

Financial Woes

MedMen last reported earnings earlier in September when the company filed its 2022 annual report. While MedMen did deliver $140 million in revenue for the year, it also noted that its total liabilities hit an eye-popping $641 million. The company has sold its Florida assets, but the deal with Ascend Wellness to buy its New York assets fell through. Those properties are back on the market.

The annual report also stated, “The Company has suffered recurring losses from operations, is in violation of various debt covenants and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern.”

As of June 25, 2022, MedMen had cash and cash equivalents of $10.8 million and a working capital deficit of $164.9 million. The company said it has incurred losses from continuing operations of $165.5 million and $124.3 million in the fiscal year 2022 and 2021, respectively, used cash in continued operating activities of $18.9 million and anticipated that it would continue to incur losses until such time as revenues exceed operating costs and it is able to complete its restructuring plan. As of June 25, 2022, MedMen said it was in violation of the minimum liquidity covenant of its term loans. The term loans require the company to maintain a $15.0 million minimum cash balance.




Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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