A trend has begun in the Michigan marijuana community of financially strapped dispensaries closing up shop quietly without paying off sizable debts, leaving vendors with little recourse but to try and sue.
According to MLive.com, “cut-and-run” situations where dispensary owners simply disappear without paying for inventory or other debts have become increasingly common, with upwards of 14% of the state’s cannabis retailers – or about 125 shops – having closed down or relocated since Dec. 2019, when the recreational market launched.
“It’s a problem that’s been going on at least a year (and) I think that it’s just hitting a more critical point now,” attorney Denise Policella of the Cannabis Attorneys of Michigan told MLive.com. “We get a whole bunch of clients calling us, saying we need to sue for this, we need to collect on that. We get a barrage of demand letters and collection letters.”
The issue has become pervasive enough that it’s caught the attention of state marijuana regulators, and now the Cannabis Regulatory Agency (CRA) is weighing new rules to handle businesses or individuals that have tried to welsh on industry debts and then re-enter the trade. And industry insiders have also taken it upon themselves to begin creating and circulating black lists of unreliable companies that others should avoid doing business with, MLive.com reported.
One industry insider said the systemic problem can be traced back to price compression that began about two years ago, and that some of the larger companies’ financial troubles have created a cascading effect that has had ripples throughout the Michigan supply chain.
“A lot of businesses are failing as a result of that,” attorney Jacob Kahn, who’s sued distressed dispensary Diamond Cannabis in Bay City over unpaid bills, told MLive.com.
Diamond Cannabis owes over $1 million to vendors and is one example of several financially strapped marijuana companies, MLive.com reported, and though Kahn has won two judgments against the defunct shop for his clients, he’s still had trouble collecting the actual payments, another common problem that’s been reported in other troubled marijuana markets.