Tenth Circuit Allows Rural Adjacent Landowner to Bring RICO Action Against Neighboring Marijuana Cultivators

Last week the Tenth Circuit ruled that defendant parties, who agreed with each other to cultivate marijuana at an indoor facility adjacent to a rural getaway for the plaintiffs, are each engaged in racketeering activity under the federal Influenced and Corrupt Organizations Act (RICO).

The plaintiffs claimed that the “publicly disclosed drug conspiracy” injured the value of their property. They asserted that people buy lots in their rural ranching area to keep horses or build homes in a pleasant residential area, and their land became less suitable for those uses because of the marijuana cultivation on adjacent land. They asserted “the large quantity of drugs at marijuana grows” purportedly “makes them targets for theft,” and a prospective buyer of the plaintiffs’ land “would reasonably worry” that the cultivation “increases crime in the area” and would pay less to purchase the land.

The plaintiffs also alleged that after completion of the cultivation facility’s construction, its operations repeatedly caused “a distinctive and unpleasant marijuana smell to waft” onto their property, making their property less suitable for recreational and residential purposes, interfering with their use and enjoyment of their property, and diminishing their property’s value.

The court noted that because marijuana is a controlled substance under federal criminal law (21 USC §802(16), the manufacture, distribution, and sale of that substance is, by definition, racketeering activity under RICO (18 USC §1961(1)(A), (D)). When coupled with the plaintiffs’ assertion that the defendants began cultivating marijuana at their facility, the court concluded that plaintiffs’ allegations plausibly stated “the requisite pattern of predicate acts that present a threat of ongoing criminal activity” and that “this pattern of illegal acts is the direct cause” of the plaintiffs’ alleged injuries to their property.

So the court allowed the RICO cause of action brought by the plaintiff to proceed, reversing the district court’s opinion. But this was not an appeal from a judgment but from a motion to dismiss the cause of action, so it will be a case that will be watched by owners and marijuana businesses alike as it progresses to trial and a likely appeal from any judgment.

Interestingly, the Tenth Circuit rejected other significant claims in the same case:

  • Regarding the Controlled Substances Act’s preemption provision, the court concluded that the plaintiffs did not have any federal substantive rights that were injured by Colorado’s or the county’s actions in legalizing marijuana. Consequently, their preemption claims––for a declaration that federal law preempted Colorado’s marijuana laws and for concomitant injunctive relief blocking statewide enforcement––were not viable.
  • The court vacated the lower court’s order that granted intervention in the case to the States of Nebraska and Oklahoma; this, rejecting their claims that (1) Colorado’s legalization of marijuana injured their sovereign interests and those of their citizens and (2) its enforcement was preempted by the CSA.
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