Jason H. Rosell

Jason H. Rosell

Jason H. Rosell joined the insolvency boutique at Pachulski Stang Ziehl & Jones a decade ago with a summa cum laude business degree from Arizona State University and a magna cum laude J.D. from the Sandra Day O’Connor College of Law. He represents debtors and creditors in Chapter 11 cases—especially in the cannabis industry.

When California voters legalized the recreational use of marijuana in 2016, Rosell looked at the cannabis industries in Colorado and Washington state and foresaw what might happen. “Oversupply and the resulting downside price pressure made it look like there would be a big industry here with a lot of distress restructuring,” he said.

So Rosell put together a business plan. “To my great delight, the firm approved the formation of a cannabis restructuring practice,” he said. He set about attending cannabis conferences, networking with cannabis attorneys and developing a client base. In April 2022, Pachulski Stang formally established its cannabis restructuring group, promoted Rosell to partner and put him in charge.

“My prediction, unfortunately, came to fruition,” Rosell said. “The cannabis industry remains in a state of distress due to high taxes and other pressures.” The regulated market got a little more competitive with illicit growers and sellers when Gov. Gavin Newsom signed a state budget that eliminated the weight-based cannabis cultivation tax, effective July 1.

“Now we’re in wait and see mode, wondering whether that will have a meaningful impact and bolster the business,” Rosell said. “But there are a lot of other issues.” On the negative side, as inflation and interest rates rise, “It’s only going to get worse in the immediate future because investment money in the cannabis business costs two to three times what it does elsewhere.”

Another problem in Rosell’s arena is that distress restructurings must be done in an out-of-court fashion because federal bankruptcy judges will not hear cannabis cases while the product remains illegal at the federal level. “Congress could modify the Bankruptcy Code to allow a debtor in a business authorized under state law to file, but that has gotten no traction yet.”

In a recent typical deal, Rosell completed an out-of-court restructuring of Greenfield-based cultivator Loudpack. He and colleagues served as counsel to an ad hoc group of unsecured noteholders in the deal, and then recently aided the company in its three-party merger with Urban Leaf and Harborside Inc. to create what he said is the second-largest cannabis company in California. “Economies of scale made this deal make sense,” he said.

Rosell said the work suits him. “I thoroughly enjoy this unique and complex job.”

– John Roemer