Pot vs Pinot: Can't We All Just Get Along?

This article by William Travis was originally published on The Leaflet, a newsletter by Feuerstein Kulick.

With all the social and economic destruction wrought by the Controlled Substances Act and marijuana’s Schedule I status, it’s easy for some of the lesser outrages to get lost in the shuffle.  But if you’re reading the Nerd Corner of The Leaflet (welcome and thank you!), we’re guessing you get your kicks by diving headfirst into the nitty gritty of cannabis law (like us!).  So bear with us while we tell you the tale of Pot vs. Pinot, with a short prelude on federal RICO law.  
 
RICO refers to the Racketeering Influenced and Corrupt Practices Act (18 U.S.C. Sec. 1961), a federal statute that was largely enacted to prosecute organized crime.  RICO, however, also provides for civil causes of action, and under the civil provisions, a private claimant can recover treble (that’s Latin for triple) damages and attorneys’ fees for any harm they suffer as the result of a RICO defendant’s “racketeering” activity.  
 
There’s a lot that goes into stating a valid RICO claim – federal judges have referred to it as “the litigation equivalent of a thermonuclear device” (i.e., something to be used sparingly) – and it can be quite difficult for a RICO plaintiff to survive a motion to dismiss.  See Gross v. Waywell, 628 F. Supp. 2d 475, 479-83 (S.D.N.Y. 2009) (noting all 36 RICO cases resolved on the merits in the S.D.N.Y. between 2004 and 2007 resulted in judgments against the plaintiffs, mostly at the motion to dismiss stage).  This is in no small part because a RICO plaintiff must plead the existence of racketeering activity – a defined term that includes a list of criminal acts – and specifically allege that the activity was recurring over an extended period of time.  This can be difficult, which is why so many civil RICO claims are felled by a motion to dismiss and never make it to discovery.  
 
But here’s where our story takes an unfortunate turn (especially if you’re a state-legal cannabis operator).  Because cannabis is still a Schedule I drug, individuals and businesses operating their state-legal cannabis companies are (by definition) engaged in racketeering activity under the federal RICO statute.  And while this alone is not enough to sustain a RICO claim (a plaintiff still has to show proximate causation and damages), it does make it considerably easier for a civil RICO plaintiff to survive a motion to dismiss.  State-legal cannabis operators, therefore, face an increased risk of protracted federal litigation (along with significant penalties) simply by virtue of running their businesses.  
 
And here is where the Pot meets the Pinot.  The case of Momtazi Family, LLC v. Wagner arises from a dispute between a state-legal cannabis cultivator in Oregon and his neighbor, the owner of an adjoining vineyard.  Momtazi Family, LLC v. Wagner, 3:19-cv-00476-BR, 2019 WL 4059178 (D. Or. 2019).  The cannabis operator bought the land in the Willamette Valley of Oregon in part because the same conditions that made it suitable for growing grapes made it a good place to cultivate cannabis.  
 
But the owner of the adjoining vineyard wasn’t thrilled.  He filed a state-law nuisance action, followed by a federal RICO complaint, alleging that the cultivator was engaged in unlawful racketeering activity, and that the growing of cannabis on the adjoining land was tainting the wine.  The vineyard owner alleged that one of his customers cancelled an order of grapes because the grapes were grown on the portion of land that bordered the cannabis.  In light of that allegation, the Court denied the defendant’s motion to dismiss the RICO claim – finding that the alleged loss of a customer was sufficient to state a valid RICO claim at the pleading stage.  The case is ongoing and currently bogged down in discovery.  
 
So long as marijuana remains a Schedule I substance and cannabis operators try to co-exist alongside neighbors with an axe to grind, more of these cases are likely to follow.  Though, it’s worth noting, that many of the civil RICO cases brought against state-legal cannabis businesses have ultimately failed, due to the RICO plaintiffs’ inability to establish actual damages.  Still, unnecessary civil RICO litigation against state-legal cannabis businesses is a shame for so many reasons – but mostly because the marriage of these two age-old vices would be a lot more fun for everyone involved. 
 
(For information contact William@dfmklaw.com and David@dfmklaw.com.)

Más contenido sobre cannabis en Español en El Planteo.