Will The Cannabis Industry Face Civil Suits?


(Summary of an article written by Josh Heinlein and Jacob Ayres, 7/28/2017.).

Although selling marijuana is legal in several states; but, still illegal under federal law, a recent appellate decision may give rise to civil lawsuits against people in the cannabis industry. In Safe Streets Alliance v. Hickenlooper, 859 F.3d 865 (10th Cir. June 7, 2017), the Tenth Circuit reversed the dismissal of civil Racketeer Influenced and Corrupt Organizations Act (RICO) claims against a cannabis growing operation in Colorado, leaving open the possibility of future civil challenges to cannabis businesses.


Although commonly associated with anti-mob criminal prosecutions, RICO contains a provision that creates a federal civil private right of action that “vests a private citizen with substantive rights to avoid ‘injuries’ to ‘his business or property’ caused by a pattern of racketeering activity.” Safe Streets, slip op. at 15 (quoting 18 U.S.C. § 1964(c)). The plaintiffs in Safe Streets, Michael and Phillis Reilly, used precisely this mechanism to pursue federal civil claims against a cannabis cultivation operation that neighbored the Reillys’ property.

The Reillys owned a piece of land in Pueblo County, Colorado, where they did not live but occasionally used for recreation such as horseback riding. Defendants operated a cannabis cultivation operation on the neighboring property. The Reillys alleged the defendants’ operation caused a “distinctive and unpleasant marijuana smell” to waft onto their property. The Reillys filed a federal RICO lawsuit in Colorado, but the trial court dismissed their complaint. The Reillys then appealed to the Tenth Circuit.


Under the citizen suit provision of RICO, a plaintiff must prove (1) a violation of RICO section 1962; (2) that his or her business or property has been injured; and (3) that the RICO-prohibited activity caused the injury. The court concluded the Reillys plausibly pled the defendants’ cannabis cultivation operation constituted a violation of RICO section 1962. The court reasoned that racketeering activity defined under RICO expressly includes dealing in a controlled substance, which is illegal under federal law, and therefore a cannabis cultivation operation was racketeering activity conducted by an association in fact.


Most interestingly, the court concluded the Reillys may be able to prove the cannabis cultivation operation harmed their property interests by (1) substantially reducing their use and enjoyment of their property due the “noxious odor” of the cannabis—i.e. a nuisance; (2) reducing the value of their property due the cannabis smell nuisance; and (3) reducing the value of the property by having a neighbor that is “openly operating criminal enterprise.”


The above decision provides two methods by which neighboring civil plaintiffs may legally challenge cannabis businesses: (1) via claims of nuisance and (2) via property value reduction due to criminal activities.

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