Cannabis Case Summary: Civil RICO

Cannabis attorneysCan your neighbors file a civil RICO suit against you in federal court and allege that your state-legal cannabis business is an organized crime operation? A decision from the Tenth Circuit of Appeals handed down this month suggests they can.

The case, Safe Streets Alliance v. John Hickenlooper, concerned a dispute between neighbors that own adjacent plots of open land in rural Colorado. Though neither party lived on their respective properties, one of the defendants used his to house a state-legal commercial cannabis grow operation on his. The plaintiffs, on the other hand, preferred to use their land to ride horses and recreate with their children. The plaintiffs alleged that the odor of cannabis prevented them from enjoying their land and diminished its value; they also alleged that they were harmed by the indignity of having to see a “criminal operation” from their land.

So far this story sounds like a fairly garden-variety nuisance lawsuit with which many other cannabis growers have had to deal. See California Cannabis NIMBYs and Land Use Disputes and How To Handle A Neighbor Who Wants To Shut Down Your Cannabis Business. But what makes this case so important is that one of plaintiffs’ causes of action was a RICO claim. RICO, which stands for Racketeer Influenced and Corrupt Organizations Act, is a law originally intended to thwart conventional organized crime and it brings down the hammer: losing a RICO suit can mean the plaintiff is awarded three times its actual money damages as well as attorney’s fees. By its very design, RICO is intended to be ruinous to organizations caught in its crosshairs.

The Tenth Circuit addressed the RICO claim with the same basic federal supremacy arguments with which all cannabis litigants struggle. The court stated that the organization with the cannabis grow operation was indeed a “criminal organization” as defined under federal law and sided with the plaintiffs’ contention that it is reasonable to infer that property owners do not want their land to be adjacent to a criminal enterprise. Note, however, that as an appellate court the Tenth Circuit decides issues of law and ultimately sent this case back to the trial court for a factual determination. Indeed, the panel speculated that it might be true that the plaintiffs’ land was in fact, more valuable because of its suitability for the cultivation of marijuana. Stay tuned to see how the district court resolves this issue.

The takeaway from this case for the cannabis industry is this that state legality probably will not shield you from civil RICO suits in federal court. Cannabis businesses should consider their business operations and risk exposure in light of this and, if possible, avoid alienating their neighbors. This case does not, however, mean that cannabis businesses are now at increased risk of criminal RICO exposure. Federal criminal RICO enforcement is subject to the same measures and enforcement priorities that have kept the federal government from enforcing the Controlled Substances Act.

As NORML attorney Keith Stroup notes, there is some good news to be found in the decision. The Tenth Circuit rejected a handful of other arguments that the court should void and enjoin the enforcement of Colorado’s Amendment 64 – a ruling that would have dealt a serious blow to state legal cannabis programs.

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