By Kathleen Foody, Associated Press
(AP) — 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 set to begin Oct 29 in Denver is the first time a jury will consider a lawsuit using federal anti-racketeering law to target cannabis companies. But 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 southern Colorado land for its views of Pikes Peak and have since built a house on the rural property. They also hike and ride horses there.
But 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.
Vulnerability to similar lawsuits is among the many risks facing marijuana businesses licensed by states but still violating federal law. Suits using the same strategy have been filed in California, Massachusetts and Oregon.
Mirroring the Reilly complaint, several claim the smell of marijuana damages neighboring owners’ ability to enjoy their land or harms their property value. The question now is whether jurors accept the argument.
“They can claim a $1 million drop in property value, but if a jury does not agree and says $5,000, that’s not that big of a deal,” said Rob Mikos, a Vanderbilt University law professor who specializes in drug law. “That’s why there are a lot of eyes on the case.”
Congress created the Racketeer Influenced and Corrupt Organizations Act — better known as RICO — to target the Mafia in the 1970s, allowing prosecutors to argue leaders of a criminal enterprise should pay a price along with lower-level defendants.
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.
That concern only grew when a Denver-based federal appeals court ruled in 2017 that the Reillys could use anti-racketeering law to sue the licensed cannabis grower neighboring their property. Insurance companies and other entities originally named in the Reillys’ suit have gradually been removed, some after reaching financial settlements out of court.
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.
Barnes, though, said the number of racketeering lawsuits awaiting action suggests attorneys with no ties to his firm believe in the strategy.
AP Photo/David Zalubowski