A few weeks ago, a federal jury in Colorado found in favor of the owner of a cannabis cultivation business in a lawsuit brought by his next door neighbors. The lawsuit claimed that the cannabis business devalued their property because of the noticeable smell and incessant noise which the neighbors alleged were byproducts of the cannabis production.
So why is what sounds like a run-of-the-mill property dispute between two landowners in Colorado interesting to the advertising world? Because instead of bringing a simple property damage claim, the neighbors decided to make a federal case out of this and sued under the Racketeer Influenced and Corrupt Organizations Act (RICO), a law that was created to combat organized crime (and can subject the defendant to triple damages!). Generally speaking, a RICO claim requires the existence of an enterprise that is acts in furtherance of an illegal activity which causes the harm to the plaintiff. The illegal activity here? The cultivation and distribution of cannabis, which is still classified as a Schedule I narcotic under federal law.
This was the first case of its kind and demonstrates the stark divide between state and federal law in states where its citizens have chosen to legalize cannabis on some level. But for those reading this blog there are two important takeaways. First, a RICO claim can have a broad reach. The purpose of the statute is to deal with criminal enterprises, which could include individuals or entities who are allegedly acting in furtherance of an illegal scheme (e.g. the sale or distribution of marijuana). Second, but equally noteworthy, is that the cannabis business here won after trial. Given the heavy burden for plaintiffs in a RICO case, these claims are often dismissed either at the pleading stage or on summary judgment. In this case, however, the Colorado courts found that the plaintiffs were able to meet their burden and that there were sufficient facts to require a trial. Thus, even though the cannabis business won at trial, it likely spent a significant amount of time and money in the process.
The bottom line is that although cannabis continues to be an area of growth (pun intended), those who want a piece of the action should be prepared for a legal fight.