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UPDATE: Plaintiff Loses Colorado RICO Lawsuit (Safe Streets)

Posted by on Thursday, November 1, 2018 in News, Updates.

As reported by various new outlets (see links below), the jury in the Safe Streets case (now known as Reilly v. 6480 Pickney, LLC) rejected the plaintiff-landowners’ civil RICO claims against a state-licensed marijuana supplier. I discuss the plaintiffs’ claims in an earlier post here and in the book (pages 403-406).

Although the defendant (and indeed, all state-licensed marijuana businesses) clearly violated the RICO statute, the plaintiffs failed to prove that they had actually suffered a cognizable injury stemming from that violation. To be sure, as discussed in the post linked above, last year (2017) the Tenth Circuit held that the plaintiffs had made legally sufficient allegations in their complaint. But in that case, the court was reviewing a motion to dismiss – and for such a motion, the court is required to accept the allegations in the plaintiffs’ complaint as true. In other words, the Tenth Circuit never made any factual findings in the case; it merely held that the plaintiffs’ allegations—IF accepted as true—would state an actionable claim under the RICO statute.

This meant that following the decision in Safe Streets, the plaintiffs still had to prove their injuries to a jury – and based on yesterday’s jury verdict, it appears they were unable to do so. To be more precise, the plaintiffs failed to prove by a preponderance of the evidence (the standard used in civil trials) that defendants’ marijuana operation had actually diminished the value of their (the plaintiffs’) neighboring ranch property. (As discussed in the post linked above and in the book, the plaintiffs’ alleged two other injuries in their complaint; however, it appears that the trial focused predominantly on the diminution of land value claim.) At the trial, which lasted a couple of days, each side offered competing expert testimony concerning the impact of defendant’s marijuana grow operation on the value of plaintiffs’ land. While the plaintiffs’ expert opined that the defendant’s marijuana business had diminished the value of plaintiffs’ ranch land, it appears the jury was not convinced.

Barring a successful appeal, this RICO lawsuit against these defendants is now over. But this case is likely to have more far-reaching ramifications as well. Namely, I think the jury verdict should lessen somewhat concerns over the marijuana industry’s exposure to RICO liability. The jury verdict highlights a big obstacle to bringing successful RICO claims: to prevail under the RICO statute, a plaintiff must not only allege but also prove a very particular type of injury, namely, an injury to its business or property. I suspect there are few (if any) plaintiffs who can meet this burden when bringing lawsuits against the marijuana industry; indeed, the whole point of the RICO injury/standing requirement is to limit the ability of private parties to bring these suits. In light of the Safe Streets/Reilly jury verdict—not to mention the recent dismissal of a similar lawsuit in Oregon (see here), I suspect other plaintiffs will be less eager to file copycat RICO lawsuits against the marijuana industry.

To be sure, the verdict doesn’t eliminate the marijuana industry’s exposure to RICO liability. For one thing, every suit—and every plaintiff—is different. Just because these plaintiffs (the Reillys) couldn’t prove their damages against this defendant and before this jury doesn’t necessarily mean that another plaintiff, with another defendant, and another jury, would be unable to do so. Thus, other plaintiffs who feel they have a stronger case against other defendants might pursue their claims, notwithstanding the adverse (for plaintiffs) verdict in Safe Streets/Reilly. In addition, even if their hopes of winning a jury verdict have been somewhat diminished, some plaintiffs might yet bring RICO lawsuits against marijuana businesses merely on the hopes of extracting a positive settlement from those businesses. The idea is that a defendant might pay to settle a case to avoid all of the expenses (and uncertainty) of going to trial—even if the defendant believes she would win at trial. Safe Streets/Reilly was a bit of an aberration — few civil cases actually proceed all the way through trial.

That’s it for now. Here are some links that you might find helpful:

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