Pot, property values focus of upcoming anti-racketeering trial in Colorado
October 29, 2018
DENVER — A federal trial in Colorado could have far-reaching effects on the United States’ budding marijuana industry if a jury sides with a couple who say having a cannabis business as a neighbor hurts their property’s value.
The trial that began Monday in Denver is the first time a jury will consider a lawsuit using federal anti-racketeering law to target cannabis companies.
The marijuana industry has closely watched the case since 2015, when attorneys with a Washington, D.C.-based firm first filed their sweeping complaint on behalf of Hope and Michael Reilly.
One of the couple’s lawyers, Brian Barnes, said they bought the land in Pueblo County for its views of Pikes Peak. They claim “pungent, foul odors” from a neighboring indoor marijuana grow have hurt the property’s value and their ability to use and enjoy it.
“That’s just not right,” Barnes said. “It’s not right to have people in violation of federal law injuring others.”
An attorney for the business targeted by the suit plans to argue the couple’s property has not been damaged, relying in part on the county’s tax valuations of the Reillys’ land ticking up over time.
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Congress created the Racketeer Influenced and Corrupt Organizations Act — better known as RICO — to target the Mafia in the 1970s. But the anti-racketeering law also allows private parties to file lawsuits claiming their business or property has been damaged by a criminal enterprise. Those who prove it can be financially compensated for damages times three, plus attorneys’ expenses.
Starting in 2015, opponents of the marijuana industry decided to use the strategy against companies producing or selling marijuana products, along with investors, insurers, state regulators and other players. Cannabis companies immediately saw the danger of high legal fees or court-ordered payouts.
The Colorado case focuses on property in Pueblo County, where local officials saw marijuana as an opportunity to boost an area left behind by the steel industry. They created financial incentives in hopes of drawing growers to cavernous buildings left vacant by other industries.
Parker Walton was among the early comers, buying 40 acres in the rural town of Rye in 2014.
Barnes said the Reillys purchased their more than 100 acres in three transactions between 2011 and 2014. They learned about plans for the marijuana business bordering their final purchase four months after completing the sale, he said.
The Reillys filed their lawsuit in early 2015.
Walton’s attorney Matthew Buck said he’s confident jurors will decide the Reillys’ property has not been harmed. Buck warned, though, that defending against a similar lawsuit comes at a high cost for marijuana businesses while plaintiffs with support from a large law firm have little to lose.
Walton, who employs fewer than four people, created a website this month to raise money for his defense. He wrote that a loss could jeopardize “all legal cannabis operations in all states.”
But some lawyers who have defended companies in similar lawsuits said those fears are overhyped.
Adam Wolf, a California attorney, said he believes the suits are primarily intended to scare third-party companies into cutting ties with marijuana firms or persuading cannabis companies to shut down. But long-term, Wolf said the U.S. Supreme Court has curtailed lawsuits making civil racketeering claims against other industries.
Courts could apply the same logic to cannabis, he argued.
“What the plaintiffs seemed to be saying is anybody who touched, in any matter, any marijuana business is potentially liable,” Wolf said. “And that is a soundly rejected argument by the courts.”
Barnes, though, said the number of racketeering lawsuits awaiting action suggests attorneys believe in the strategy.