MJBizMag February 2021 - 45

Colorado verdict, the 10th Circuit
Court of Appeals made a troubling
precedent when it weighed in on the
case before sending it back to the lower
court for what became a trial.
The appellate court made it clear in
its decision that marijuana cultivation,
processing, distribution and sales meet
the definition of racketeering activity
under RICO because the plant remains
illegal at the federal level.
" The cannabis industry obviously
celebrated the jury verdict, " the three
Bradley attorneys wrote. " On the other
hand, the Tenth Circuit's published
decision is not at all comforting to
the industry. "
Arth of Fox Rothschild said: " As a
cannabis operation, you've already loaded
the gun: It's already a violation of RICO. "
PLAINTIFFS FACE A HIGH BAR
The U.S. Supreme Court has yet to
rule on marijuana RICO cases, but it's
assumed the nation's highest court would
reach the same conclusion as the 10th
Circuit, which covers Colorado, Kansas,
New Mexico and Oklahoma.
Federal judges overseeing the cases
have issued various rulings on the
issue, but in general they have set the
bar high, requiring plaintiffs to prove
concrete damages.
That's hard to do unless the plaintiffs
are in the process of selling their
property or can prove other properties
in the area are selling at depressed
prices because of the presence of a
marijuana operation.
" It's difficult to prevail, but there's a
pathway there, " said Whitt Steineker,
co-chair of Bradley's cannabis industry
team. " And in all areas of the law, you
tend to see entrepreneurial attorneys
who find clever ways to bring lawsuits. "
Arth concurred: " Plaintiffs are going
to find ways to plead the concrete harm
they need to get to trial. "
And, once a case does get to trial,
" Certainly you can't guarantee the
outcome " seen in the Colorado case,
he said.
RICO Suits From Across the U.S.
While business owners from any market with state-legal marijuana could find
themselves named in a federal lawsuit filed under the Racketeer Influenced
and Corrupt Organizations (RICO) Act, many legal challenges have come
from states where recreational marijuana is legal.
Following are examples of RICO lawsuits filed against cannabis companies.
CALIFORNIA
A federal judge in October 2020 dismissed a $200 million RICO lawsuit filed
against a Southern California marijuana grower. What made the suit different
was that it was filed by another cannabis grower and involved a dispute
between former business partners.
MASSACHUSETTS
Cambridge business owners filed a RICO case in 2017 against HealthyPharms,
a medical cannabis operator, with potential damages set at $81 million.
HealthyPharms had a medical marijuana processing operation that was
30 miles away. But the plaintiffs in the case argued the neighborhood
dispensary caused their properties to lose $27 million in market value and
profits even before it opened its doors.
In late 2019, the plaintiff's attorney reported that the case was settled out of
court for a " substantial " amount. A local newspaper later reported that the
settlement exceeded $1 million.
OREGON
State marijuana operations in Oregon have seen several RICO lawsuits,
including three filed by one attorney.
One especially prolific RICO suit filed in July 2018 named 226 defendants.
The plaintiff lived adjacent to Oregon Candy Farm, a marijuana processor.
However, the suit also named East Fork Cultivars, which cultivated marijuana
for the processor but is located five hours south.
In addition, the plaintiff named as defendants just about every company
and individual who conducted business with Oregon Candy Farm, including
store operators.
The court eventually dismissed cannabis retailers from the suit, which cut
the number of defendants in half. Other defendants eventually settled,
with settlement amounts reportedly declining over time to about $1,000. A
number of defendants refused to settle, however, and the case was dismissed
in May 2020.
Lawsuits can drag out over years.
For example, in early 2019,
Momtazi Vineyards-located in the
state's famed Willamette Valley
winemaking region-filed a RICO
suit against a neighboring marijuana
operation called Yamhill Naturals.
Momtazi argued in its complaint
that it was unable to sell grapes
grown on the parts of its property
closest to the marijuana operation.
The plaintiff claimed that one of
its repeat customers canceled
a bulk order and complained of
wine grapes contaminated by a
" pungent stench. "
Owners of a vineyard in Oregon's Willamette
Valley sued a nearby marijuana company
alleging that cannabis odors tainted their
grapes. Courtesy Photo
A federal judge ruled later that year the suit could proceed, and court
documents indicate the case is still pending.
- Jeff Smith
February 2021 | mjbizdaily.com 45
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MJBizMag February 2021

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