A Colorado federal jury sided with the owner of a state-licensed cannabis cultivation business last Wednesday in a federal Racketeer Influenced and Corrupt Organizations Act (RICO) suit brought against him by his neighbors.
In 2015, Michael and Hope Reilly brought a federal RICO lawsuit in Colorado against Parker Walton and his cannabis cultivation operation that neighbored their property. The Reillys claimed that the smells and sounds from the cannabis facility caused damage to their property. The trial court dismissed their complaint on the grounds that they failed to prove any cognizable injury stemming from the RICO violation. The Reillys appealed to the Tenth Circuit.
The Tenth Circuit reversed the dismissal in 2017, reasoning that a cannabis cultivation operation, which is illegal under federal law, amounted to racketeering activity in violation of RICO section 1962 and that the Reillys had made legally sufficient allegations in their complaint. The suit went to trial last Monday and the jurors heard from various experts on whether the cannabis cultivation operation was releasing a smell and if so, how such smell impacts the value of a neighboring property. Ultimately, the jurors rendered a verdict in Walton's favor, unconvinced that the cannabis cultivation operation had diminished the value of the Reillys' land.
Industry players have been paying close attention to this case as the revival of the suit by the Tenth Circuit has spurred other RICO suits against cannabis operations. Because cannabis cultivation is still illegal at the federal level, the Reillys were able to transform their state law nuisance cause of action into a federal RICO action. However, this jury verdict highlights the difficulty for plaintiffs in a RICO action to not only allege but prove an injury to their business or property. This verdict, along with the high costs to litigate such racketeering lawsuits, will likely curb the eagerness to bring these lawsuits in the future.
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