MJBizMag February 2021 - 44

Limiting Your Liability
The 10th Circuit Court of Appeals ruled that marijuana cultivation, processing, distribution and sales meet the definition of racketeering activity because
the plant remains federally illegal. Courtesy Photo
Readying for RICO
Civil racketeering lawsuits remain a liability risk for marijuana businesses,
but companies can take steps to head off risks
By Jeff Smith
F
ederal racketeering lawsuits
against state-legal marijuana
businesses might be in something
of a lull right now, but they remain a
risk to be factored in with other business
costs, experts agree.
" We still see it as a significant risk for
marijuana growers-although maybe one
that is slowing a bit, " said Gerald Arth,
a partner in the Philadelphia law office
of Fox Rothschild and an expert in civil
racketeering cases.
In recent years, anti-cannabis property
owners and businesses have used
the federal Racketeer Influenced and
Corrupt Organizations (RICO) Act in
efforts to win monetary awards and shut
down marijuana cultivation operations
that allegedly diminish property values
in their neighborhoods.
Plaintiffs bringing RICO
cases generally argue that
marijuana operations
diminish the value of their
property or business because
of odors and/or security
concerns.
AN ONGOING RISK
" If you're looking to invest
Gerald Arth
in a grow facility or acquire
land, it's one of those risk
factors you have to account for, " Arth
said. " You have to factor it in along with
the cost of employees, environmental
risks and other business costs. "
RICO was enacted in 1970 to target
organized crime, but it now includes
drug trafficking and other federally
illegal activities. Under RICO, a
44 Marijuana Business Magazine | February 2021
successful plaintiff can win
triple financial damages.
" These cases come
and go, " Arth said, " but
the cost of defending
them, the harm to one's
reputation, the potential
treble damages " all can
mount. Not to mention
the stress and anxiety that
they can cause.
A VICTORY OF SORTS
Marijuana companies cheered in late
2018, when a federal court jury in
Denver rejected RICO claims against a
southern Colorado marijuana grower.
But as attorneys at Birmingham,
Alabama-based Bradley law firm
pointed out in a column after the

MJBizMag February 2021

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