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10th Circuit Allows RICO Case Against Pot Farm

By William Vogeler, Esq. | Last updated on

A federal appeals court gave a family the green light to sue their neighbors for growing marijuana in violation of laws against criminal enterprises.

The growers may have been doing business legally under state law, but not federal law. The U.S. Tenth Circuit Court of Appeals said the plaintiffs alleged sufficient damages to invoke the Racketeering Influenced Corrupt Organizations Act.

"Marijuana is a controlled substance under the CSA. 21 U.S.C. sec. 802(16)," the court said in Safe Streets Alliance v. Alternative Holistic Healing, LLC. "So the manufacture, distribution, and sale of that substance is, by definition, racketeering activity under RICO."

"It's the Smell"

Michael Reilly and his family, who owned ranch land in Colorado, sued neighboring marijuana growers on various grounds, including nuisance due to "noxious odors." They also claimed the marijuana grow was a criminal enterprise under RICO.

A trial judge dismissed the claims, saying that the plaintiffs' damages were speculative. The appeals court, however, said the Reillys had pleaded enough damages to support their claims.

"We have little difficulty concluding that the Reillys plausibly pled an injury to their property rights caused by the stench that the enterprise's operations allegedly produce," the court said.

At a time when federal prosecutors have not aggressively enforced criminal laws against marijuana businesses in states that have legalized the drug, the decision opens the door for "criminal enterprise" penalties -- including treble damages and attorneys fees -- under RICO. According to reports, marijuana growers now are in a more precarious position in Colorado, Washington, California and other marijuana-friendly states.

Not in My Backyard

The Tenth Circuit drew some lines, however, dismissing some claims in the consolidated case. For example, the court said the plaintiffs had no federal substantive rights that had been injured by the government's actions in permitting marijuana cultivation and declined to enjoin the defendants.

The fate of the Reillys' case, which the court remanded, remains to be seen at trial. They have sufficiently alleged a nuisance and lost property value, but any potential plaintiff must allege and prove damages to successfully sue marijuana businesses under RICO.

"We are not suggesting that every private citizen purportedly aggrieved by another person, a group, or an enterprise that is manufacturing, distributing, selling, or using marijuana may pursue a claim under RICO," the court said.

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