October-December 2020: Planting to Processing (Formerly West Coast Industrial Solutions Magazine)

October - December 2020

Planting to Processing

In this issue:

Pivoting in

a Pandemic

Formerly

Cultivate Knowledge. Feed the World.

October - December 2020

CONTENTS

PAGE 1

Letter from the Editor

PAGE 3

Innovation: Forage Kitchen - Local Food Economy Evolving in a

Global Epidemic

PAGE 8

Company Profile: African American Farmers of California

(AAFC)

PAGE 12

Ethics: The Complexities of Enforcing Cannabis Contracts in

Federal Court

PAGE 16

Finance: Alternatives To Bankruptcy: What Should Business

Owners Know?

PAGE 19

Explore: Volt Institute

PAGE 9

Safety: Why Safety Should be Proactive Instead of Reactive

Advertise with Us!

Contact Information

Tara Sweeney, Marketing Director

tara@wcismag.com

559.999.6637

PO Box 7864, Fresno CA 93747

Staff

Sheri McClure, Content and Sales

Tara Sweeney, Sales and Marketing

Trevor Merrow, Layout and Design

Visit us at wcismag.com

LETTER FROM THE EDITOR

Thank you for reading the October to December, 2020 fourth quarter edition

of Planting to Processing magazine—formerly West Coast Industrial Solutions

magazine. You voted on our social media, and we listened; the final votes were

42.1% for “Planting to Processing.”

Now that you have helped us choose a new name, we need your help choosing

a new logo! Please vote through our website or our social media channels to let

us know what you think our logo should be. The deadline has been extended to

December 7th to help us break the tie:

A

B

The content in the fourth quarter is focused on pivoting in the pandemic. Innovations in food and beverage

through a commissary and incubator, Forage Kitchen. Introducing African American Farmers of California,

a non-profit providing support to current growers through agro-tourism, farmers markets, and educational

awareness, while training future farmers in operating equipment and basic farming skills. Along with why

safety procedures need to be proactive rather than reactive. How businesses hard hit by the pandemic

have alternative options to bankruptcy. And how Volt Institute in Modesto is providing training to and for

manufacturers in the Central Valley.

We only have to be socially distant with in-person interaction! Feel free to connect with us on social media,

where we give updates on industry events—we attend over 20 trade shows and local events a year! Or browse

our website, where we host these articles as blog posts with more behind the scenes photos and video.

Food & Facilities is our new online show through Central Valley Talk, where we will revisit and expand on

subjects we have covered, watch us the first and third Saturday of each month at 11am PST for the live showing

or follow us on social media to stay up to date.

If you missed our past event in October 2019, we will be hosting our second annual trade show: our trade

show has been postponed till May 11, 2021 for the health and safety of our attendees. Speaking slots are

open if you would like to provide training to industry professionals in agriculture, food and beverage, food

processing, and manufacturing.

Join us as an exhibitor. Contact us today (tara@wcismag.com, (559) 999-6637) if you are interested or browse

our advertising options on our website. wcismag.com/welcome/advertise/

-Tara Sweeney

Please visit wcismag.com to subscribe and

get exclusive free content.

West Coast Industrial Solutions Magazine

West Coast Industrial Solutions Magazine

@wcismag

@wcismag

Planting to Processing | October 2020 1

Join us online

for the combined

Northern and Southern California Facilities Expo Event

VIRTUAL CALIFORNIA FACILITIES EXPO

2 Planting to Processing | October 2020

innovation

Forage Kitchen - Local Food Economy Evolving

in a Global Epidemic

Written by Callie Waldman

Forage Kitchen

Intro

Forage Kitchen is a commissary and shared incubator

kitchen in the heart of Uptown Oakland. Nestled

amongst retail locations and maker warehouses, we

exist to support the local food economy by supporting

its producers. Our community members find this

support through our physical shared kitchen space,

business support & promotional help, and through

our network of like-minded food business owners.

We’re a lot of other things as well. Beyond just our

commissary, we’re also a small batch copacking

facility as well as an event space for both private

bookings and community gatherings. Attached to

our kitchen we have a small cafe that houses rotating

up-and-coming restaurants, offering low rent to

minimize risk as they transition towards moving into

their own permanent space.

History

Though we officially opened

our doors in 2016, leading

up to that moment took years

of thoughtful decisions and

physical build-out. In 2012,

cousins and co-founders Iso

Rabins and Matt Johansen

began their journey in

building Forage inspired by their own experience

as food entrepreneurs. Their driving motivation was

to create an experience and a kitchen for others that

they wished they’d had themselves while navigating

the industry.

Iso, having worked in shared kitchens for years while

hosting his Wild Kitchen underground dinners, had


seen all the ways shared spaces fell short, and the

destructive impact that had on the community. This

experience was motivation enough to want to create

something better. Iso’s focus had always been food

and food makers; launching Forage Kitchen just felt

like the right next step.

If you ask the cousins, Iso will tell you that getting

Matt onboard took some courting. Matt’s expertise

in business management, his previous partnership

in opening SF’s still-thriving Hayes Valley Biergarten,

and his effortless knack for connecting with just

about anyone, balanced Iso’s vision and made him

the perfect co-founder. Iso knew he needed Matt

onboard and over a handful of beers and long talks

at family reunions, the motivation and the dream was

mutual.

Once established and open, Iso and Matt needed

someone to flesh out programming and act as a

direct line of support for the growing community, and

so they introduced a third partner, Callie Waldman, to

run daily operations. Callie also came from extensive

food industry experience but also brought with her

the relationship building component, having

overseen employee engagement and company

culture during the early stages of Imperfect Foods.

Focused on honesty, communication and trust, this

small but mighty trio oversees all aspects of the

business.

Structure

When operating at full capacity, Forage congruently

runs four arms of business: membership, small

batch co-packing, events, and a cafe. Each functions

as an integral piece of the puzzle, harmoniously

interwoven to support our community at a multitude

of crossroads.

Membership

Our primary focus and the reason Forage exists, is

to support our members. Each of our members own

and operate their own small food business and have

24/7 access to our kitchen through reserving tables

using our online booking system. Pricing is tiered and

ranges from $21-28 per hour depending on frequency.

Additionally, we offer an $18 per hour rate between

10pm-6am to accommodate those chefs who prefer

off-peak schedules. Once in the kitchen, members

have equal access to our industrial equipment as

well as the option to rent storage depending on their

needs. Folks are surprised to hear that we typically

fluctuate between 40-50 memberships at a time,

however the variety of scheduling needs means that

we hardly see conflicts in booking or overcrowding.

Our members range from pastry chefs to soul food

caterers, bagel producers to homemade pickle

and boutique sauce companies. A vast majority are

women-owned. The kitchen is equipped with a gamut

of industrial equipment in order to accommodate

many types of businesses. We have grills and deep

fryers, 4 convection ovens, a total of 12 burners, a

30qt standup mixer, and an entire rack of smallware

equipment available.

Small Batch Copacking

Through our small batch copacking program, we lay

out a pathway for businesses to grow with us. Once

companies are a little further along, this program

enables food producers to scale even bigger, while

we take care of everything operationally from sourcing

ingredients to label compliance to packaging. For

small scale food producers, outsourcing production

allows for their time and energy to focus on sales

and marketing so that they can get one step closer

towards their dream of large scale distribution. We’ve

worked with a wide variety of clients but our areas

of expertise mainly focus on bone broth, cookies,

sauces and spice blends.


Photo Courtesy of: Paul Jackman

Events

One of the joys of running Forage is to foster our

growing community. We find significance in this not

just among our members, but within the greater

community of Oakland. Our central location and

spacious outdoor area makes Forage ideal for

bringing people together. We’re a short walking

distance from bars, cafes, and venues in every

direction, and BART is just a 10 minute walk down

the street, making us accessible to the rest of the

Bay. Outside of the current covid circumstances, our

summer calendar is typically stacked with all kinds

of events. We host weddings and rehearsal dinners,

holiday parties and cooking classes, birthdays and

anniversaries. In the warmer seasons we offer monthly

outdoor movie nights and we partner with Sofar

Sounds, hosting regular live music nights. Every First

Friday of the month, we open our doors once again

and participate in the city of Oakland’s monthly First

Friday event where our members are encouraged to

set up vendor tents and sell their food; an excellent

opportunity for their own exposure and testing out

the market.

Cafe

Connected to the kitchen and facing the street, our

cafe serves as a rotating space for new restaurants

to launch their temporary home and gain traction

as they test menu concepts, hire staff, and work out

operational kinks before moving into their permanent

retail location. Some of these restaurants include:

Smokin Woods BBQ, World Famous Hotboys, and

Shawarmaji. Regardless of who’s serving food,

patrons can enjoy patio seating and a cold, local beer

on tap.

How We Foster Innovation And Entrepreneurship

Under most circumstances, the production and sales

of food in California requires the use of a certified

commissary kitchen. At the most basic level, this is

what we provide. In addition to that, there’s a lengthy

list of permits and licences that producers need to

apply for, some which come from the county, others

which come from the city or state. There’s a lot of red

tape and often, even knowing where to begin with the

administrative side of this industry can be daunting

enough to cause roadblocks. This is again where we


come in. As part of our onboarding service and at no

extra charge, we offer additional support with new

members by identifying and helping complete all the

applications they need.

Undeniably, our biggest avenue of support exists

through our active community. It’s inspiring to see

members helping one another as some have been

in the industry for decades, while others are stepping

foot into a commercial kitchen for their very first time.

We’ve seen collaborations emerge, like Gourmet

Puff (a Nigerian doughnut company) popping up

with Shawarmaji (a Jordanian Shawarma restaurant).

Internally, we use slack as a way to make sure all

members can easily connect with one another and

we have a couple channels specifically intended for

companies to post things like kickstarter campaigns,

new product launches, or simply to spread the word

that they’re hiring. In the last few months we also set

up a little shelf in our cafe where patrons can purchase

shelf staple items, all made at Forage. We sell

products like The Final Sauce, Goldi’s Spice Blends,

and Claudine Hot Sauce. In this sense, we find ways

to interweave the various components of Forage such

that our members’ businesses are amplified.

Currently

Since the pandemic began affecting California in mid

March, It’s no secret that small food businesses have

suffered. As event cancellations soared and remote

work within the bay area tech scene became status

quo, most of the catering companies that worked out

of Forage suddenly had nothing to cook for. In an

effort to get creative, we worked with members to

develop a ghost kitchen model, offering our space

as a pickup site for any catering companies willing

or able to shift into strictly pickup & delivery. We’ve

seen several companies successfully make the

switch, however with the exorbitant percentage that

corporate delivery platforms take from each ticket

item, relying strictly on the apps is hardly feasible.

In this vein, we’re huge proponents of encouraging

customers to pick up food directly from the restaurant

whenever possible.

Future

Though business has been undeniably slow for the

first several months, our kitchen remains open, 24/7

as it’s always been. And, as it’s become increasingly

clear that we’re in this for the indeterminable long

haul, we’re starting to see some shifts. We’ve started

hearing from folks who’ve completely changed

direction to make ends meet; A previously touring

musician who decided to bottle and sell chili oil; A

furloughed Pastry Chef who shifted her focus to

participate in a national bake sale, benefiting the

Black Lives Matter movement. When outdoor dining

opened in Oakland, that enabled us to once again

capitalize on our outdoor space after months of it

laying dormant. We replaced our large picnic tables

with wine barrel seating designed to fit 2-4 people

instead of 8-10. Our cafe extended its hours, and we

folded in a Happy Hour to encourage customers to

stay and have a drink rather than just taking their food

to go.

In all honesty it’s hard to say exactly when we’ll be

operating at full capacity again, or what that will

even look like as it’s a constant moving target. That

said, we’re optimistic. We’re seeing the beginnings

of private event inquiries for 2021, and we’re also

starting to talk about hosting small, distanced

gatherings. Additionally, we’re working on launching

our own cafe concept in the fall of 2020, focused on

maximizing our outdoor space. While uncertainty is

always the case, covid has been an abrupt and potent

awakening to this truth and so we move forward with

flexibility, creativity and patience; committed now

more than ever, to offer a space and a community that

supports our local food economy.

Watch what you read

on CentralValleyTalk.com

First and Third Saturday Each Month

11am-12pm PST


The California League of Food Producers

(CLFP) is the only statewide organization

that works to protect and promote the

interests of food processors. CLFP and

its members have been working together

through one united voice to address the

diverse array of issues facing the industry

since 1905.

For more information:

Visit clfp.com or call (916) 640-8150.

✔ labor laws

✔ water regulations

✔ Proposition 65

✔ labeling requirements

✔ regulating chemicals

✔ drinking water

✔ transportation

✔ greenhouse gas

✔ cap-and-trade

labor laws

water regulations

Proposition 65

labeling requirements

drinking water issues

transportation issues

greenhouse gas emissions

cap-and-trade program

We Help Bring California’s Goodness to the World

CLFP_WCISad920_fin.indd 1

9/21/20 11:39 AM


Company profile

African American Farmers of California (AAFC)

- William Scott Jr., AAFC President

“We need to make sure

African-American farmers

are visible because, for

a long time, we’ve been

invisible. We, as a people,

have played a tremendous

part in agriculture

throughout the U.S.”

According to the 2018-2019 California Agricultural

Statistics Review through the California Department

of Food and Agriculture (CDFA), California is home

to over sixty nine thousand farms. The United States

Department of Agriculture (USDA) 2017 Agriculture

Census noted that, of those farms, only 429 were

run by African American producers—operating over

seventy five thousand acres. That is barely over a

half percent of farms in the state—and less than two

percent nationally, due to historically discriminatory

practices within the USDA causing black farmers to

lose 80 percent of their farmland from 1910 to 2007,

from lack of access to loans or insurance needed to

sustain their businesses.

A non-profit in California’s Central Valley hopes to

combat that historical discrimination by empowering

African-American growers to provide their

communities with fresh, wholesome food.

“We take care of the land, the land will take care

of us. Then we’ll take care of the community.”


Tucked behind Kearney Park on the outskirts of Fresno,

California, at the intersection of California and Fair, a

sixteen acre farming demonstration site serves as the

homebase for African American Farmers of California

(AAFC.) Established in 1997, founders William Scott

Jr. and Ken Grimes started by doing door-to-door

outreach for members in the nearby west Fresno

neighborhoods. In the past twenty years, they’ve built

a community of over twenty farmers to support current

growers through agro-tourism, farmers markets, and

educational awareness, while training future farmers

in operating equipment and basic farming skills. To

further this cause, they have begun the process of

becoming a healthy soils demonstration project in

collaboration with the Fresno State UC Extension,

which will qualify them for additional equipment to

manage the land, train their members, and more

efficiently grow their crops under the program’s grant

funding.

“If we can get the message across about

supporting a variety of farmers, and get more

people interested and taking quality food to

where it should be, then I’ve done my job.

This is what I was born to do.”


Scott and Grimes have been pivotal in reintroducing

Southern specialty crops, which have long been a

part of the traditional African-American diet, into

the central valley. These crops grow seasonally, with

summers bringing black-eyed, crowder, and purple

hull peas, okra, turnips, and tomatoes, while winters

serve up mustard, turnip, and collard greens, spinach,

broccoli and carrots. The AAFC hopes to provide

their growers with an outlet to distribute these crops

via the USDA Farmers to Families Food Box program,

next year.

If you are interested in attending their monthly

meetings starting at 5:30pm every second Tuesday

you can reach out to their Vice President, LaKeishia

Martin, at africanamericanfarmersofca@gmail.com.

Follow them on Facebook to stay tuned for their field

day showcase next year.


Safety

Why Safety Should be Proactive Instead of

Reactive

Written by James Boretti, CSP

President / CEO of Boretti, Inc.

In today’s COVID-19 environment, people may think

this isn’t a great statement to make: having safety

makes sense. In the safety profession, the following

question has always been a challenge: “Why safety?”

There are many reasons why organizations embrace

safety, such as complying with OSHA regulations,

minimizing the impact of insurance rates, reducing

injuries, or minimizing risk exposures. And on the

surface, it appears that most companies pay attention

to safety to avoid something: recurrence of a recent

serious injury; OSHA penalties; high insurance rates.

While all of these are good reasons, these actions

are reactions: in each case safety isn’t planned, it’s

a reaction to something that happens. In the past,

the assumed answer is “because it’s required;”

however, today we see safety is all about creating

confidence: confidence that our food supply is safe,

confidence that our workplaces are safe to work in,

and confidence that it’s safe for customers to return.

And that confidence comes with success. A safe

environment allows customers to feel confident to

visit and buy from you, talent to seek employment

at your organization and remain, and stability for the

organization. Over 30 years of experience has shown

that to build this confidence, businesses must follow

five steps to embrace safety.

Investigate

1. Assess –

5 Basic Steps to Embrace Safety

Implement

Assess

Educate

Process

Ask yourself “What is of risk to the organization, and

how can I possibly control it?” You’d be amazed at all

the wasted effort you’ll find if you spend a little time

asking these questions. Knowing these risks helps you


know how to address them. OSHA lists absenteeism,

change in commerce patterns, and interrupted

supply chain are potential risks to businesses from

the COVID-19 pandemic. And, if we are to assess for

risk, OSHA’s assessment for risk fall into three major

categories:

• Job duties involving close (within 6 feet), frequent

contact with the public, customers or workers,

especially contact with infected people or other

sources of the virus.

• Social conditions in the population area have

ongoing transmission.

• Traveling to areas that are highly affected by

COVID-19.

Considerations would be given to proximity

(closeness to others); frequently touched surfaces

that may be found in a common area such as a lobby,

customer waiting room, breakrooms, restrooms, and

time clocks; and layouts such as open spaced work

areas and airflow.

2. Process –

Once you know risks you need to address, you can

know how you’re going to control them, and you’ll

want to put them into a written process. OSHA

has outlined a process to reduce exposure risk for

employees by addressing both workplace specific

and non-occupational risk factors to determine the

best prevention measures for your operation. As

always, ensure you are following federal, state, local,

tribal and/or territorial recommendations.

Applying this to the COVID-19 situation, capturing the

efforts you make into a plan ensures your efforts are

on track and documented, and that they are working

well. The key is to ensure everyone knows who is

going to do what by when. Elements of a process

would include the following:

(See Table on Opposite Page)

3. Educate –

Educating and including your people in the process,

including the risks being controlled and why, will help

them engage and contribute to the success, making

it more valuable.

Applying this to the COVID-19 situation, education

would cover the following elements at a minimum:

• What COVID is and How it Transmits: this provides

the “why” we are doing what we’re doing.

• What to do:

– Cover coughs and sneezes

– Wash hands

– Wear face coverings

– Frequent cleaning

– Stay home if sick / exposure

– What’s changed in the workplace

– Your program / what’s expected

4. Implement –

Implement the process and watch it take off. For the

current COVID-19 pandemic, the Centers for Disease

Control (CDC) and OSHA suggest implementing

frequent handwashing and shifting policies or

practices to include more flexible worksites and

work hours. Workplace changes such as workstation

distancing or use of barriers, and one single point

for entry and a separate single point for exit are also

some ideas to consider COVID prevention.

5. Investigate –

Not everything will be perfect the first time: if

something goes wrong, investigate to find out why,

then make a change to improve the process.

OSHA uses the following investigation technique for

a COVID situation to determine if it is possibly work

related or not.

• COVID-19 case is likely work-related if:

– Several cases develop among workers who work

closely together

– Contracted shortly after lengthy, close exposure to

customer or coworker who has a confirmed case of

COVID-19


Elements

• Responsibilities / Roles

• Access

• Cleaning

• Precautions

• Travel

• Carpooling / Vanpooling /

Ridesharing

• Resources

• Communication

Expectations, Better Practices,

Application

Lists who is responsible for what by when

Who can access the facility / job site / when

(i.e., employees, contractors, visitors)

working from home, screenings, PPE and

distancing expectations, etc.

How is this done, frequency, what surfaces

(hard vs. porous), post-COVID suspected or

confirmed, etc.

Social distancing, PPE, washing / sanitizing

staggered shifts and breaks, etc.

If necessary / approved, precautions to take,

etc.

If necessary, cleaning and disinfecting after

each ride, self-screening, barriers / PPE,

ventilation

Items the company will provide to

employees, customers (within its ability)

For confidence on cleaning, following

suspected / confirmed COVID cases, etc.

– Job duties include frequent, close exposure to the

general public in a locality with ongoing community

transmission

• COVID-19 case is likely NOT work-related if:

– The person is the only worker to contract COVID-19

in vicinity and job duties do not include having

frequent contact with the general public, regardless

of the rate of community spread.

– Outside the workplace, the worker closely and

frequently associates with someone who (1) has

COVID-19; (2) is not a coworker, and (3) exposes the

employee during period in which the individual is

likely infectious

The answers to the investigation would trigger

immediate actions to do with regard to

communication, quarantining and cleaning, and how

the process can be improved, if needed.

For additional resources regarding COVID, visit the

following links:

OSHA Risk & Hazard Recognition: https://www.osha.

gov/SLTC/covid-19/hazardrecognition.html#low_risk

OSHA Return to Work Document: https://www.osha.

gov/Publications/OSHA4045.pdf

Centers for Disease Control (CDC): https://www.cdc.

gov/coronavirus/2019-nCoV/index.html

American Society of Safety Professionals: https://

www.assp.org/resources/covid-19/latestresources

These five simple steps will create the confidence

needed for success. Contact a safety professional to

provide you guidance and support.

About the Author: James Boretti is the President and founder of Boretti, Inc. James has over thirty

years of environmental, health and safety management and consultation experience. He is a Certified

Safety Professional, a prestigious designation he has held for over 25 years. You can contact him at

(559) 372-7545 or james@borettiinc.com.


ethics

The Complexities of Enforcing Cannabis

Contracts in Federal Court

Written by Robert Selna

Selna Partners LLP

Since California legalized commercial cannabis in

2018, the expected “green rush” has fallen short of

expectations. Forecasts of enormous profits have

given way to the reality that the state’s cannabis

industry is confronted by unique challenges, which

have curtailed revenue and caused many businesses

to close. A well-documented short list of industry

hurdles includes disproportionately high taxes, a

shortage of local business permits, competition from

a thriving black market, and commercial banking

limitations.

A lesser known, but equally important hurdle is the

difficulty of enforcing cannabis industry contracts

in federal court. As an alternative to state court,

federal court is attractive for many reasons, including

generally faster case resolutions, judges who never

face election, and more exacting expert evidence

standards. The federal court option took on new

relevance in March when state courts began to close

due to COVID-19. Superior courts recently began

to hear cases remotely, but the courts’ backlog is

enormous and is expected to stay that way for some

time.

For the cannabis industry, enforcing a cannabis

industry contract in federal court – even when

a defendant contractor has clearly violated an

agreement – is not simple. Instead, it is nuanced, and

depending on the specifics of the subject matter in

dispute, may not succeed, even though the party

seeking to enforce the contract may be in the right.

The well-established California cannabis industry

hurdles noted above, and challenges associated

with enforcing cannabis contracts in federal court,

have collided in a single case that our law firm, Selna

Partners LLP, filed in the San Francisco-based federal

Northern District court.

California Cannabis Industry Hurdles

We represent a large, vertically-integrated California

cannabis company that cultivates and distributes

cannabis, and sells products at retail outlets in several

cities. The company, which started its operations in

2010 under non-profit medical regulations in the

existence at the time, is now fully-licensed and

compliant under California law. As such, it has been

hit hard by regulations and taxes. The company pays

a city gross receipts tax, and state excise, sale and

cultivation taxes, making the company’s effective

tax rate approximately 40 percent. In addition, the

company’s ability to expand has been limited by

the fact that only one-third of California’s 540 cities

and counties permit commercial cannabis (state law

dictates that personal use is legal everywhere). An

added dilemma is competition from the black market,

which is estimated to sell eighty-percent (80%) of the

cannabis cultivated in California.


Adding to the companies’ woes is the absence of

standardized commercial banking for the California

cannabis industry. Despite our client’s compliance

with all state and local laws, and a business model that

has had more success than many, through 2019, the

company had not been able to maintain a banking

relationship with a traditional bank or credit union.

This forced our client to hold revenues in a steel

vault and deliver cash tax payments to government

agencies in armored cars, among other workarounds.

The company also often paid vendors and employees

in cash.

Cannabis Industry Banking is in Short Supply

The reason for the traditional banking shortage is

straightforward: marijuana (the federal government’s

term for cannabis) is listed as a controlled substance,

and is therefore, illegal to grow, import, possess, use,

or distribute in the U.S., despite the fact that 43 states

have legalized medical and/or adult-use cannabis.

Meanwhile, the vast majority of banks and credit

unions are regulated by the federal government.

Recognizing the expansion of state-legal cannabis,

the U.S. Treasury Department, has issued guidance for

banks that want to serve cannabis companies while

avoiding prosecution. The guidance directs banks to

provide on-going “suspicious activity” reports to the

Treasury Department regarding the practices of their

cannabis clients and whether they appear to comply

with state laws, or instead, are illegal operators. The

number of banks and credit unions willing to take on

these responsibilities is incrementally increasing, but

the conventional wisdom is that there still are only

300-400 such institutions in the U.S.

In 2019, our client sought a solution and was

introduced to a payment processor in Seattle,

Washington, where, similar to California, commercial

cannabis is regulated. A contract was signed for

executing payments to vendors, employees and the

State of California taxing authority and our client

deposited approximately $8 million with the Seattlebased

payment processor.

Things went as planned for several months, but then

the payment processor began delaying payments

or failing to make them altogether. Lacking a viable

alternative, the cannabis company stuck with the

payment processor despite its poor service. The

company hit a tipping point when the processor

Helping you navigate the Paycheck Protection

Program.

We have successfully helped 40+ businesses secure

$19 million in approved PPP loans! From funding to

forgiveness, we are ready to help you!

Visit cpaplus.com/ppploan.php to get started!

559.431.5500

cpaplus.com

8080 N. Palm Ave. STE 201, Fresno, CA 93711


claimed to have made a $1.2 million tax payment to the

California Department of Tax and Fee Administration

(CDTFA), which the CDTFA documented that it never

received.

Confronted with proof from the CDTFA that the $1.2

million never arrived, the processor vowed to clear

up the problem, but failed to do so. Our client finally

demanded its remaining $3 million (including the

$1.2 million returned). The processor stopped making

payments and returning phone calls altogether.

The processor’s refusal to return the $3 million left our

clients with few options for getting their money back

or paying the state and vendors. State court justice

has been slow in most jurisdictions for decades.

COVID-19 has only made that situation worse. Also,

filing a lawsuit in state court against an out-of-state

operator made the case vulnerable to the Seattlebased

defendant’s motion to remove the case to

Washington.

Reporting the issue to law enforcement was an

alternative, but when recouping funds is the top

goal, a California company asking the Seattle police

department to investigate what could be described

as a contract dispute, did not appear to be the most

efficient solution.

Cannabis-Related Contract Claims and the “Illegality

Defense”

In the end, our firm and our client believed that the

best bet for getting the $3 million back efficiently was

to file a breach of contract and fraud case in federal

court. But while federal court was the top choice

available, we knew it would not be easy.

It is hard to argue that the processor did not breach

the payment processing contract. It had our client’s

money and failed to make payments that it agreed to

make. But the analysis does not end there, because

the processor, like defendants to cannabis contract

disputes before it, is relying on the so-called “illegality

defense.” In short, the defense is that, because

cannabis is illegal under federal law, a federal court

cannot enforce a contract that involves a cannabis

company. In essence, the argument is as follows: “the

merits of the case do not matter because the parties

contracted to do something illegal and a federal court

cannot review a case involving an illegal contract.”

If the illegality defense were iron clad, our client’s case

would have been dead on arrival. Fortunately, the

reality is far more subtle. While there are older federal

cases standing for the principal that federal courts

cannot enforce “illegal contracts,” judges interpreting

those cases have inserted a key exception to that

baseline rule. The now well-established exception is

that a federal court may enforce an illegal contract (or

parts of an illegal contract) if, in doing so, the court

fashion a legal remedy that does not compel future

unlawful conduct.

At first blush, it may seem hard to imagine how it

would be possible to enforce a contract that involves

an “illegal” company and not compel future illegal

conduct. But, as it turns out, such circumstances are

common in the cannabis industry, in which cannabis

companies are paying vendors and individuals to

perform services that are not inherently unlawful.

Our case provides examples of potential orders that

would not compel unlawful conduct: a requirement

to pay the CDTFA taxes that are required under the

state’s cannabis laws and payments vendors such as

PG&E. Returning a company’s so that it can make

such payments also would seem to pass the test.

So, what are the key issues that courts consider when

deciding whether to enforce an illegal contract?

Based on California federal cases, it appears that

the court’s top consideration is whether the court’s

order would further a specific violation of federal

law. In the case of cannabis, the law in central law at

issue is the Controlled Substances Act (CSA) and its

prohibition on manufacture, importation, possession,

use, and distribution of marijuana. Other relevant

laws include money-laundering statutes, which

prohibit transactions in which the funds involved in

the transactions are derived from illegal activity. The

definition of “transaction” is key to this crime and

would require a much longer explanation than is

appropriate for this article.

Given the context, in cannabis breach of contract

cases, where defendants have raised the illegality

defense, courts have mulled whether they can

order a remedy that makes the plaintiff whole, such

as restitution, for example, but is neither derived

from – nor results in – the manufacture, importation,

possession, use or distribution of marijuana.

A few examples where the court found that it could

not enforce a contract involving cannabis are as


follows: Tracy v. USAA, where the court ruled it

could not require an insurance company to pay for

the replacement of the plaintiff’s marijuana plants;

J. Lilly v. Clearspan, in which the court determined

that awarding lost profits from a marijuana cultivation

operation would further violate the law; and Hemphill

v. Liberty Mutual, in which the court ruled it could

not require Liberty Mutual to pay for the future use

of medical marijuana expenses, because doing so

would violate the Controlled Substances Act.

In contrast, federal courts have enforced cannabisrelated

contracts (or parts of them) where the result

would not violate the CSA or other federal statutes.

In Bart Street III, a case that involved financial

transactions, the court said it could enforce parts

of two promissory notes between a lender and a

cannabis cultivation company because each note

included provisions that directed defendants to use

the loaned funds for solely legal acts (paying off prior

lenders and purchasing property).

A court used a similar analysis in Ginsburg v. ICC

Holdings There the court stated, “[E]ven if a contract

is illegal, it is not automatically unenforceable. Under

federal law, the illegality of contract defense involves

a balancing of the ‘pros and cons of enforcement,’

taking into account the benefits of enforcement

‘that lie in creating stability in contract relations and

preserving reasonable expectations’ and the ‘costs

in foregoing the additional deterrence of behavior

forbidden by the statute.’”

Ginsburg appeared to be influenced by a line of

cases starting with Bassidji v. Goe. Bassidji, did not

involve marijuana, but its analysis was followed by

a Northern District case, Mann v. Gullickson, which

involved a contract between two companies that

served the cannabis industry. Both courts opined that

“[A] court only needs to dismiss a claim for breach

of contract when the contract is “illegal” if the lone

remedy available would, itself be illegal.

The case between our client, the vertically integrated

California cannabis company, and the Seattle-based

payment processor is on-going. Central to our

argument is that a court order, in which our clients’

funds were returned, or which compelled payments

to the State of California and legal vendors, such as

PG&E would not violate the CSA or federal statutes.

The story of our case is to be continued, but any

California cannabis company which is considering

suing for breach of contract should give serious

consideration to the pros and cons of both state and

federal court. Filing a case in federal court, while likely

more complex, may still be the best choice.

Your Source for Print, Packing, and Promotion

500 free business cards with purchase for new customers

Graphic Design Print / Copies Custom Apparel Promotional Parcel Service Will Call & Deliveries

559.237.4747 graphics@fineprintplus.com www.fineprintplus.com


finance

Alternatives To Bankruptcy: What Should

Business Owners Know?

Written by Bennett G. Young

Jeffer Mangels Butler & Mitchell LLP

The coronavirus pandemic has upended many sectors

of the economy in unprecedented ways. Supply

chains are disrupted. Businesses that rely on face to

face interaction with their customers such as retailers

and restaurants, are subject to financial distress. In

turn, companies that supply products to businesses

impacted by COVID-19 may also experience pressure

as their customers delay or cancel purchases or are

unable to pay their bills.

These stresses are likely to cause some owners of

distressed businesses to explore their legal options.

Bankruptcy is only one alternative for a struggling

company Two other options are an assignment

for the benefit of creditors (ABC) and a voluntary

workout. These strategies are available to address a

failing company; which can be faster and equally or

more effective, at a lower cost, without the publicity

of a bankruptcy filing. Business owners should be

aware of these non-bankruptcy options and the

circumstances in which they can be useful.

Any discussion of bankruptcy alternatives must

start with bankruptcy. Bankruptcy is the most

widely known insolvency proceeding and, as the

usual course taken by a failing company, forms the

baseline. Any alternative should be compared to the

likely outcome of a bankruptcy case. The business

owner then can balance the bankruptcy and nonbankruptcy

alternatives available to him or her to

choose a strategy that is the best fit.

One useful alternative to bankruptcy is an assignment

for the benefit of creditors. This procedure, commonly

known as an ABC, is a recognized state law procedure

to sell the assets of a failing business while shielding

the purchaser from liability for the old company’s

debts. Usually, a distressed company is running out

of cash and has limited runway to sell itself; an ABC

provides a non-bankruptcy method to effectuate a

prompt sale of the business.

In an ABC, the company, called the assignor, transfers

its assets to a third party, called the assignee, that

typically is selected by the company. In legal terms

an ABC is a trust in which the assignor transfers title

to its assets to the assignee in trust for its creditors.

The assignee is a fiduciary tasked with selling the

assets and paying the proceeds pro rata to creditors.

The assignee must give notice to creditors of the

assignment and of the deadline to file claims and

creditors can file claims with the assignee.

In California, no court filing is required to commence

an ABC. This lowers the publicity dramatically. The

proceeding is not secret or confidential, but it is not

public in the way that filing a bankruptcy case is.

Instead, an ABC is a matter of contract between the

distressed company and the proposed assignee. The

company’s board and shareholders must approve

the ABC.


The process is fast and flexible. Because the company

picks the assignee, an ABC lends itself well to prepackaging.

A distressed company seeking a prompt

sale, a potential buyer of the business, and the

proposed assignee can negotiate a sale in advance

of the ABC occurring on the understanding that the

sale will be completed through the ABC. All parties

know what to expect and the process can proceed

on the parties’ schedule, with no delays imposed by

court processes or availability. This enables a sale of a

distressed business as a going concern to take place

quickly with little uncertainty and minimal disruption

to operations.

Used in this manner, an ABC is a viable alternative

to a sale of the business in a bankruptcy chapter 11

case. The speed and flexibility of the ABC process are

its chief virtues. Since there is no court the process is

usually less expensive than a chapter 11 bankruptcy

case and the sale can often be completed more

quickly than would occur in a chapter 11. The process

provides an efficient method to sell a small to medium

size failing company on a going concern basis.

The ABC process is not without its downsides. A

distressed business must weigh these downsides

against the speed, flexibility and lower transaction

costs of the ABC process. The most important is that

the purchaser will not get a court order validating

its purchase as it would in a bankruptcy. The

purchaser must rely on the integrity of the process

to shield it from the distressed company’s creditors.

Furthermore, there is no automatic stay to restrain

foreclosure as there would be in a bankruptcy case,

so the cooperation of the assignor’s secured lenders

is essential. Unlike in a bankruptcy case, there is no

power to assign leases or contracts without consent.

This can cause complications if the company’s

contractual relationships are a major asset. Finally, by

handing the company to the assignee, the business

owner will lose control. This is not necessarily a

negative, as it enables the business owner to move

on to new opportunities.

Another useful option is for the distressed company

to attempt a voluntary workout with its creditors. This

is not a formal process. Instead, a workout is a matter

of negotiation between the distressed company

and its creditors. The usual concept is to engage in

a process that is substantially similar to what would

occur in a chapter 11 bankruptcy case by agreement

of the parties, without filing a bankruptcy case and

without incurring the large legal fees or impact on the

business that will result if a bankruptcy case is actually

commenced. Chapter 11 thus forms the backdrop for

the negotiations.

Typically, in a voluntary workout the debtor will invite

its creditors to a meeting. At the meeting, the debtor

will make a presentation to the creditors in attendance

regarding its financial condition, how it got there,

and what the debtor intends to do to extricate itself

from its predicament. The debtor will request that

the creditors agree to a moratorium on collection

action, similar to the automatic stay in a bankruptcy

case, and that the creditors appoint a committee of

creditors to negotiate a workout plan with the debtor.

In return, the debtor will usually offer to be completely

transparent with its creditors, to provide information

regarding the business, and to refrain from engaging

in any out of the ordinary course transactions. This

creates a structure that mirrors what would occur in a

chapter 11 case.

The goal of the process is for the debtor and the

appointed committee to negotiate a repayment plan

on behalf of all creditors. The plan can take whatever

form the parties negotiate. Often the plan will consist

of the debtor’s agreement to pay a percentage or even

all of its profits or positive cash flow to its creditors

over a period of time in exchange for the creditors

agreeing to discount their debts in some amount.

Another common structure is for the creditors to

agree to a discount in return for an immediate cash

payment funded by new capital contributed by a new

investor.

Once the debtor and committee have negotiated a

plan, the plan is circulated to creditors to accept or

reject it. Participation is voluntary. Only creditors that

accept the plan are bound, so the debtor generally

will insist that a high percentage of creditors accept

the plan in order for it to go into effect. If a sufficient

number of creditors accept the plan, it will go into

effect. If the required majority do not accept, the

debtor likely will end up in a chapter 11 case. The

plan thus needs to provide a result that is at least

as good, if not better, than the result would be in a

chapter 11 case.

The voluntary workout thus can be a viable alternative

to a chapter 11 case. The benefits of the process are

its flexibility and reduced legal fees which can mean

more funds available for creditors. A workout often


is faster than a chapter 11 case, there is no public

filing and therefore less publicity, and the business

owner remains in control. On the other hand, a

workout depends upon cooperation between the

debtor and its creditors. If that cooperation is absent

because creditors do not trust the debtor or for

other reasons, a voluntary workout might not be

possible. The process also depends upon creditors

cooperating with one another and accepting equal

treatment. There is no automatic stay, so creditors

are free to pursue collection actions and to attempt

to jump to the head of the line. If some creditors

pursue collection actions and seek to improve their

position relative to other creditors, the process can

break down. Finally, creditor participation in a plan is

voluntary. There is no way to bind creditors that reject

the plan. Holdouts thus can create major hurdles.

The selection of the non-bankruptcy alternative

depends upon the result the business owner desires

to achieve. If the goal is to sell the business as a

going concern, an ABC is a useful tool. Usually a

distressed company is running out of cash and has

limited runway to sell itself, and the ABC provides a

non-bankruptcy method to effectuate a prompt sale.

On the other hand, if the business owner’s objective

is to retain his or her stake in the enterprise and to

negotiate a payment plan with creditors globally, a

voluntary workout can be a less costly way to achieve

this goal.

Bankruptcy is not a one size fits all solution. There are

other routes available to a distressed business which

can be just as effective at a far lower cost. Owners

of troubled companies should be aware of these

options and should evaluate whether one of them

might provide a better fit.

Bennett G. Young is a partner at the law firm of

Jeffer Mangels Butler & Mitchell LLP. He represents

parties in insolvency matters and has extensive

experience in workouts, restructurings, bankruptcies,

and assignments for the benefit of creditors. Ben is

a member of the Bench-Bar Liaison Committee for

the United States Bankruptcy Court for the Northern

District of California and is a former Chair of the

California State Bar’s Insolvency Law Committee, a

past president of the Northern California Chapter

of the Turnaround Management Association, and

has been a member of the Board of Directors of the

Bay Area Bankruptcy Forum. He is recognized by

Best Lawyers in America® in the area of bankruptcy.

Contact Ben Young at BYoung@jmbm.com.

Over 32 Years of Sucessful Installations

Seamless Floor & Wall Systems

Non-Slip • Antimicrobial • Chemical Resistant

Extreme Durability • Decorative

Central CA: 559-323-8147

Central Coast: 805-455-3343

Northern CA: 707-540-4199

ProTecCoatings.com


explore

Volt Institute

Written by Tyler Richardson and Kevin Fox

It’s an exciting time at VOLT Institute. Two years of

planning for scaled-out manufacturing training is

finally coming to fruition. New equipment is arriving

and being assembled. Additional instructors are

coming onboard. Guided by an advisory board

comprised of local employers, the organization seeks

to adjust and move forward quickly. This includes

changes to allow for operations amidst a global

pandemic.

While the debates over masks, indoor dining, and

county-specific guidelines continue, VOLT Institute

never missed a beat. VOLT staff developed and

implemented a comprehensive plan to keep students

engaged and progressing toward in-demand careers

in manufacturing with higher wages and job security.

When school closures began in late March, VOLT had

remote learning in place and students transitioned

seamlessly. By April, other VOLT Institute training

opportunities also moved into the virtual realm.


The Supervisor Development Academy operated

in partnership with Ag Safe began meeting online

with workshops adjusted to two hour time blocks

instead of four. Admittedly, there were concerns

that this training for frontline supervisors to tackle

real world situations while managing teams would

not be as effective in a virtual space, but Ag Safe

trainer Angelina Ceja reported that feedback from

participants in this workshop remains positive. Volt’s

Supervisor Development Academy gives supervisors

a foundation to develop skills essential to furthering

their personal and organizational success. The

program addresses leadership, communication,

conflict resolution, planning, and team building with

an emphasis on building peer-to-peer relationships.

VOLT Institute’s popular efficiency training, Career

Accelerator Program (CAP), taught by Beaudette

Consulting INC. was made available remotely as well.

This valuable curriculum focuses on organizational

change management, continuous improvement,

employee engagement, process improvement, and

critical thinking problem solving are the “soft skill”

training industry demands. Student survey results

indicated that the length of time for each of the online

training sessions was appropriate and engaging and

either met or exceeded expectations.

VOLT Institute campus reopened June 15 it was

with strict COVID-19 protocols in place including

mandatory wearing of masks. To ensure social

distancing, students comfortable returning to the

downtown Modesto campus continued their training

on campus by appointment. One-on-one instruction

is being offered by VOLT instructors to help students

make up time lost during the mandatory shutdown.

Through it all, VOLT administration continues

developing new partnerships with regional

manufacturers such as the new internship program

with Flowers Baking Co. This partnership gives VOLT

students an opportunity to receive valuable work

experience. Recently, two VOLT graduates have been

accepted into E. & J. Gallo Winery’s maintenance

apprenticeship program. Other VOLT graduates have

started new careers in manufacturing at California’s

oldest family-owned dairy, Crystal Creamery and the

world’s largest plastic pipe manufacturer, JM Eagle.

Reports from VOLT alumni about promotions and

wage increases are too numerous to list but VOLT is

especially proud of its 96% job placement rate.

VOLT also partnered with Valley First Credit Union

to provide loans to students. This allows students

looking to improve their long-term wage outcomes to

apply for funding with most payments deferrable until

the program is complete. The application process is

online and very user-friendly. In addition, students

get to participate in financial wellness training. Before

the availability of the loan program, some potential

students were deterred by the cost, which is low

compared to similar programs of VOLT’s caliber but

still represented a modest financial investment.

VOLT’s Senior Leadership Series in partnership with

Next Gear Consulting is back. The series is designed

to teach top level manufacturing and other executives

important skills in strategic planning, building a

positive company culture and leadership. Taught by

Kristi Marsella, CEO of Next Gear Consulting, and

former VP of Human Resources at G3 and E. & J. Gallo

Winery, this series is a great opportunity to improve

leadership skills.

One of the most in demand technical skills for plant

maintenance mechanics to have as the fourth industrial

revolution progresses is a solid understanding of the

internet of things. The implementation of complex

automation has become the standard throughout

industry. VOLT Institute’s partnership with Automation

Group to teach both introductory and intermediate

Programmable Logic Controls (PLC) courses as

part of the award-winning industrial maintenance

mechanics programs in a 20-hour boot camps are

efficient and helpful for participants. Three boot

camps are being offered for the summer session

through August and September with assistance from

California Manufacturing Technology Consulting

(CMTC). Reduced student capacity for the training

helps accommodate social distancing protocols.

As VOLT continues to receive deliveries from Amatrol,

unpack and install new mechatronic, process control,

and advanced electrical training equipment from

the shipping crates, the vision first conceived three

years ago starts to fall into place. Unskilled or semiskilled

workers have the opportunities to acquire

the aptitude and the attitude to be competitive in

a fast-paced manufacturing environment. They can

earn higher wages with job security while fueling

a vibrant, healthy economy in the Central Valley

Region by strengthening each company’s most

valuable asset: their people. All this happens while

simultaneously hearing the voices from the advisory


board and responding to the needs of investor

partners in a rapidly evolving manufacturing industry.

Training in electro-mechanical work with advanced

programmable logic controls experience and

access to nationally-recognized certifications such

as National Institute for Metalworking Skills (NIMS)

coupled with the new technology training are a

pathway for long term sustainability for California’s

Central Valley manufacturing industry.

In the midst of a global pandemic, one thing stands

out. Strategic planning is how to move forward.

The ability to be nimble is a key component to the

success of any strategic plan. If the plan doesn’t

work, change the plan, not the goal. VOLT Institute

is proud to be part of the solution for California’s

Central Valley manufacturing industry. Higher wages

and job security are very good ways to attract new

talent to the California manufacturing industry and

grow quality of life for those already living in the area.

Whether the talent is new to the area or locals with

deep roots one thing is certain: VOLT will continue to

thrive and provide the quality of training everyone in

the area deserves.

Pre-Manufacturer Safety Stair Tread Covers, Catwalks, & Mezzanines

Secondary Containment

Areas

Prefab Stair Treads

Food & Beverage

Custom Stair Treads

Industrial & Commercial

Floors - Walls - Linings - Stairs

5757 E. Fountain Way #101 • Fresno, CA 93727

559-292-4342 • Fax: 559-292-3521

www.reztechservices.com

We ship anywhere in the US


PO Box 7864

Fresno, CA 93747

Dynamic Coatings, Inc.


Los Angeles

Oakland

Los Angeles

Oakland

PRSRT STD

U.S. POSTAGE

PAID

CA Contractor’s License #763816

5629 E. Westover Ave.

Fresno, CA 93727

559.225-4605 • Fax: 559.225.4606

CA Contractor’s License #763816

CA Contractor’s www.dciflooring.com

License #763816



Fresno, CA 93727

Fresno, CA 93727

559.225-4605 • Fax: 559.225.4606

559.225-4605 • Fax: 559.225.4606

FRESNO, CA

PERMIT NO. 451

URETHANES • EPOXIES • DRAINS • POLISHED www.dciflooring.com

www.dciflooring.com

CONCRETE & STAIN

Dynamic Dynamic Coatings, Coatings, Inc. Inc.

INDUSTRIES

URETHANES

• URETHANES Food & Beverage

• EPOXIES

• EPOXIES

• DRAINS

• DRAINS

• POLISHED

• POLISHED

CONCRETE

CONCRETE

& STAIN

& STAIN

• Manufacturing

• Retail • Warehouses

INDUSTRIES

INDUSTRIES

• Institutional • Food & Beverage • Medical

• Food & Beverage

• Federal • Manufacturing & State Facilities

• Manufacturing

• Schools • Retail • Prisons Warehouses

• Retail • Warehouses

• Public • Institutional Works • Medical

• Institutional • Medical

• Federal & State Facilities

• Federal & State Facilities

• Schools • Prisons

PRODUCT FEATURES

• Schools • Prisons

• Public Works

• Public • Fast-Cure Works• Seamless • Low odor

Before

Safe &

Compliant

• Antimicrobial • Decorative

Safe &

• Cures in low temperatures

PRODUCT

PRODUCT

FEATURES

FEATURES Safe &

Compliant

Compliant

• USDA • Fast-Cure / FDA •/ Seamless OSHA Compliant • Low odor

• Fast-Cure • Seamless • Low odor

• Extremely • Antimicrobial Durable • Decorative • Non Skid

• Antimicrobial • Decorative

• Heat • Cures Resistant in low temperatures

• VOC Compliant

• Cures in low temperatures

• Freeze • USDA // Thaw FDA / Resistant OSHA Compliant

• USDA / FDA / OSHA Compliant

• 500% • Extremely Elongation, Durable Very • Non Flexible Skid Safe &

• Extremely Durable • Non Skid

• Over 85 flooring systems

Compliant

• Heat Resistant • VOC Compliant

• Heat Resistant • VOC Compliant Contractor

• Freeze / Thaw Resistant

• Freeze / Thaw Resistant

• 500%

Fresno

Elongation, Very Flexible

Sacramento

Safe &

• 500% 559.225.4605

Elongation, Very Flexible 916.485.6800 Safe &


Compliant


Compliant

Contractor

Los Angeles

Oakland Contractor

562.634.9887

Fresno

510.352.7000

Sacramento

Fresno

Sacramento

559.225.4605

559.225.4605

562.634.9887

562.634.9887

Before

Before

916.485.6800

916.485.6800

510.352.7000

510.352.7000

After

After

After

October-December 2020: Planting to Processing (Formerly West Coast Industrial Solutions Magazine)

Create successful ePaper yourself

Delete template?

Save as template?