Much Ado About RICO

Our Oregon lawyers have been fielding many questions regarding a recent civil RICO complaint filed in the federal court in Portland, Oregon styled as McCart v. Beddow et al. This case was filed on the heels of the Safe Streets decision out of Colorado that we discussed recently, and was clearly heavily influenced by that decision. You will recall that in Safe Streets, the Tenth Circuit allowed a private civil RICO action by a neighbor of a cannabis grow operation to survive a motion to dismiss.

As a reminder, RICO is a federal statute that provides for a civil cause of action for acts performed as part of an ongoing criminal organization (in addition to criminal penalties). It has become fashionable for meddlesome neighbors to bring these lawsuits against cannabis operators and their business affiliates. Because RICO complaints sound in federal law and implicate supply chain defendants, these cases differ from your ordinary nuisance-and-tresspass actions, which pursue only the marijuana grower itself, and also have been recently brought against Oregon marijuana growers.

Though McCart shares many similarities to the facts in Safe Streets, it is the differences that make things interesting. These differences let us tease out a couple of lessons for other cannabis companies seeking to avoid a similar lawsuit.

Oregon Cannabis First the similarities: Plaintiffs in both suits are bringing RICO claims against neighboring cannabis grow operations and alleging direct injuries to plaintiffs’ properties in the form of noxious odors that allegedly reduce property values. They also allege the mere presence of a “criminal enterprise” next door decreases property values.

But McCart is not Safe Streets. Taking the McCart complaint on its face, the direct operators of the neighboring grow operation are alleged to have gone out of their way to intentionally provoke the Plaintiffs at every turn. This isn’t just a case about noxious odors and neighboring criminal enterprises (although it is that); rather, the Plaintiffs are asserting this case is the culmination of a bitter dispute between neighbors in which cannabis is more of an extra than a star.

Specifically, the McCart Plaintiffs allege that:

  • The defendant cannabis growers menaced Plaintiffs and “made obscene gestures” and “screamed obscenities” at Plaintiffs;
  • The grow operation increased traffic on a shared driveway by an excessive amount;
  • The Defendants caused direct injuries to the property by leaving tire tracks on Plaintiffs’ property;
  • The Defendants revved their car engines when they saw Plaintiffs outside;
  • The Defendants “discharge firearms for extended periods”;
  • The Defendants frequently “blast the air horn of their dump truck”;
  • The Defendants damaged the shared driveway and at times blocked it; and
  • The Defendants littered on Plaintiffs’ property.

Whether these allegations are true will be Plaintiffs’ burden to prove. However, two immediate lessons come to mind:

Lesson 1: To paraphrase Wil Wheaton: don’t be a jerk. Be a good neighbor. If the McCart allegations are true, the behavior of these growers reflects poorly on the entire industry. If you want to be treated like a serious business, act like one. Recognize the precarious legal situation afforded by inane prohibition policies, and strive to be ideal neighbors.

Lesson 2: Control the odors. The Safe Street court found that the cannabis smell released by the Colorado grow op was enough to assert a claim for RICO damages. You should do everything you can to minimize odors on your businesses.

But what about the other McCart defendants?

Like in Safe Streets, the McCart plaintiffs seem to have sued everyone even tangentially related to their hated neighbors, including cannabis dispensaries that just happened to stock the neighbors’ products. These “Dispensary Defendants” are probably in much better shape than the growers.

A civil RICO claim under 18 U.S.C. Section 1962(c) (at issue in both Safe Streets and McCart) requires a plaintiff prove:

  • The existence of an enterprise affecting interstate or foreign commerce;
  • The specific defendant was employed by or associated with the enterprise;
  • The specific defendant conducted or participated in the conduct of the enterprise’s affairs;
  • The specific defendant’s participation was through a pattern of racketeering activity; and
  • Plaintiff’s business or property was injured by reason of defendant’s conducting or participating in the conduct of the enterprise’s affairs.

In Reves v. Ernst & Young, the US Supreme Court held that the language of 1962(c) requires the defendant have “participated in the operation or management of the enterprise itself.” (page 183). There are a few out of jurisdiction cases that have held that mere business relationships and supplier-purchaser relationships are insufficient to establish RICO liability, even with knowledge of the illegal activity. If you are curious, take a look at In re Mastercard Intl. Inc., (page 487) and Arenson v. Whitehall Convalescent & Nursing Home, Inc. It seems unlikely the Dispensary Defendants in this case had anything to do with operating or managing the enterprise. They appear to have merely been customers, in which case they shouldn’t have liability here.

Though there is a dispensary defendant in Safe Streets, the Tenth Circuit appears to have found the conduct requirement was met because the Safe Streets defendants admitted they all “‘agreed to grow marijuana for sale’ at the facility adjacent to the [plaintiffs’] property.” The Safe Streets dispensary defendant was directly involved in operating the specific grow operation at issue. This is not the same thing as an innocent dispensary accepting product from a third-party farm.

We will be watching this case and reporting back if anything of importance breaks, but in the meantime, it never hurts to be a good neighbor, and to take steps to minimize odors.

2 responses to “Much Ado About RICO”

  1. Assuming state law prohibits sale or distribution outside the state borders, and assuming further that the business is duly licensed by local and state authorities (which might give rise to a presumption that the business is operating in accordance with those laws), the plaintiff probably cannot prove that this was an “enterprise affecting interstate or foreign commerce.” The case sounds like a traditional state-based nuisance claim, and the federal court should kick it to the state.

  2. Here are my recommendations for anyone growing in the state of Oregon.
    37 acres is not enough to keep you safe from accusations like these!
    1. Pretend like your neighbors are just on the other side of your fence, because a) they frequently are and b) so are their cameras c) bending the truth on behalf of a greater good (the fight against reefer mania) appears to be common practice
    2. Treat everyone on a need to know basis. Consider creating a place of worship within your grow site and telling people about that part of your project rather than assuming that everyone in Oregon accepts this legalized marijuana business idea we’re all excited about.
    3. Do not have people over. Definitely don’t have your 72 year old veteran father move in because even the nicest old man could be called a prowler by your neighbors. But seriously, I advise that you’re as quiet as possible even though laws may say that you can have quads and music and gatherings. The sheriff showed up because someone saw an evite on my Facebook page that invited all the music therapists in the state of Oregon to my house at 1pm on a Saturday. Apparently everyone knows that the twenty over educated underpaid music therapists planning to attend would pose a serious threat to the community.
    4. Out of state license plates make you instant racketeers. Even if it’s your grandpa visiting from California. Just be aware that neighbors may be quick to place 911 calls on visitors.
    5. Do not have dogs. These seem to be one of the easiest ways to harass your neighbors by calling in barking complaints on a regular basis. When those don’t work, they might even move on to accusations about your dogs charging the fence and trying to jump the fence to attack horses. You may even end up in mediation about a barking dog who tragically disappeared long before the meeting. You may be accused of knowing where your dead dog is even after spending days and days walking the area, mailing out flyers, dropping everything to respond to a call from someone who saw a dog somewhere nearby. So sad.
    6. Do not wave to your neighbors. Do not speak to them. Don’t drive too fast or too slow or have your music too loud or suddenly turn it down. Confused yet? Me too. Really, just mind your own business and keep your head low. Answer questions with questions or refer to #2 recommendation of creating a sanctuary.
    7. Wear a go pro. Record everything. Be one step ahead of anyone you may suspect of disliking what you do. Definitely record the land where your animals dwell. Assume that they will suspect you of anything that goes wrong in their life…down to someone throwing banana peels out their window.
    8. Get to know the local authorities as soon as possible. In our experience, almost everyone who called or came out to answer a call was respectful. Encourage them to file a report in your favor because they don’t always write a report. Remember that you can get recordings of 911 calls made against your property and get copies of complaints filed against you.
    9. Build a wall. Tragic but necessary. Keep the bigots out. We’re years away from quashing the ignorant with enlightenment. It’s just not time to share your passion about marijuana with your neighbors yet.
    10. Take this seriously and know that many people see you as a criminal. These past two years in Beavercreek have broken my heart and turned me into a suspicious, jaded woman. I had to quit working as a therapist because I was either crying my eyes out or clenching my jaw in disgust. Witchhunts still exist. Watch for community meetings – like CPO meetings where someone may weave a false tale about you that sets the stage for future disastrous assumptions. It seems like special meetings that are about you should include you, so let your local politicians know that you’d like to be involved in these community meetings. Introduce yourself before someone does it for you, but do your best to avoid the stereotypical stoner encounter because we’re a long way from being able to handle that. Present as someone who wants to address any concerns. Also, did you build your wall yet?
    Finally, if you have resting bitch face, turn that frown upside down! It may look menacing.

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