Legal Marijuana Opponents Seek to Cripple Industry with Racketeering Law

By - August 29, 2018
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States across the US are continuing to embrace legal marijuana legislation and shed the longtime stigma of the plant. Some may feel as if weed has become mainstream American culture. But even though there are some types of marijuana legal reform on the books in more than half the US, legal pot still has a lot of enemies.

This can be seen in a new lawsuit that was filed in federal court this past summer. One lawyer in Oregon is trying to take that battle as far as he can, as he continues a fight for more than a year to stop state approved marijuana businesses with federal racketeering laws that are intended to break up organized crime organizations.

The Willamette Weekly stated earlier this month that Rachel McCart, an Oregon attorney, filed a RICO lawsuit against Oregon Candy Farm, an edibles producer, as well as more than 200 companies that have done business with the infused candy organization. The lawsuit claims that the business which is legal in the state actually comprises a federal crime ring whose existence is lowering the value of the property that belongs to her client.

This latest lawsuit is just one of several court cases from the neighbors of legal marijuana businesses. In 2017, McCart and her husband filed a RICO suit against a cannabis company next door. By ignoring the states in their own state and bringing a lawsuit to federal court, McCart and others intend to increase pressure on judges to decide how viable these state marijuana legalization projects are in light of the federal banning on pot. At this point, the precedent to invoke the RICO Act against cannabis businesses has ben upheld in a Colorado court, but none of the cases that were pursued resulted in victory for the opponents of marijuana.

According to Mason Walker, a defendant in the Oregon Candy Farm RICO case, the cases is essentially a shakedown. Our company does not want to be shaken down and we want to be left alone.

Also, in 2017, the owners of a Colorado ranch sued their neighbors that were growing marijuana by using the RICO law against them, claiming that the smell of the plant and the menacing, rude neighbors had decreased their property value. In this case, the owners of the marijuana farm were not formally prosecuted, but a federal court ruled that the RICO claim did have merit. This opened the door for similar lawsuits from McCart and other unhappy neighbors.

The Marijuana Business Daily reports that a US district judge threw out another case in Oregon that was filed under the same racketeering pretext recently. He ruled that a coalition of five neighboring property owners did not prove their proximity to a pot farm had caused damage to the property or a loss of value.

Circuit judges have ruled repeatedly that the location and smell of pot does not involve property damage. This has effectively ended each RICO claim. Still, if a federal judge does decide that a pot farmer or product producer is working in a racketeering organization, the result could put a dent in the growing legal pot business in the country. This could give unhappy neighbors the ability to put their pot growing neighbors out of business, and anyone they have done business with.

At this time, federal lawsuits are just another tool that pot prohibitionists are trying to use to damage the legalization effort. Plaintiffs have learned how to file what some say are meritless, harassing lawsuits such as these at a national continuing education event on how to bring lawsuits against the marijuana industry, says one Portland lawyer. He is representing one of the defendants in the Oregon Candy Farm case. He said that he will aggressively defend the lawsuit and will seek all possible remedies against the attorney that is misusing the legal process in the matter.

While these RICO lawsuits have had limited success so far, they could open the floodgates to other lawsuits if one works out. RICO cases are unique in nature in that co-conspirators can be found financially liable for as much as three times the financial damages, plus legal fees, even if they did not directly injure the plaintiffs.

This is why two of the three lawsuits also named financial institutions as defendants for enabling marijuana companies by providing them with banking services. Other companies the pot growers have done business with also are being named.

Several marijuana industry lawyers believe there will be more RICO cases because the lawsuits can cause expensive out of court settlements, or a long, expensive court fight. Either of these results is a win for the attorneys for the plaintiffs.

A California marijuana attorney has advised clients on the possibility for neighbors to file RICO legislation. He noted that civil RICO legislation is a serious threat, in that it encourages investors and potential operators to do due diligence to ensure that neighbors are accepting and are not going to file RICO.

Geoffrey G. Nathan, Esq.

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