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John represents large and small businesses in complex litigation throughout the country, especially patent, copyright, and trademark disputes. A leading litigator out of Harris Bricken's Portland office, John’s intellectual property cases typically involve representing clients in cannabis, high tech, hardware, software, consumer products, and e-commerce matters.

cannabis marijuana patent litigation

In previous posts, we’ve puzzled about why no one has filed a cannabis patent infringement case, despite the large number of patents granted for cannabis plants and compounds. See here, here, here, and here.

That all changed last week. United Cannabis Corporation (“UCANN”) has now filed what is believed to be the first cannabis patent infringement complaint. The case is United Cannabis Corporation v. Pure Hemp Collective, Inc., case no. 1:18-cv-01922-NYW, in the United States District Court for the District of Colorado.

The patent asserted is U.S.P. 9,730,911, “cannabis extracts and methods of preparing and using same.” The claims in the patent generally cover liquid cannabinol formulations using tetrahydrocannabinol (THC), cannabidiol (CBD), and various terpenes. See, for example, claim 10: “A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is cannabidiol (CBD).”

Although the UCANN complaint does not specify which claims are being asserted, it appears that the plaintiff may focus on CBD-related claims, e.g., claims 10-15, rather than claims for THC. The complaint devotes several paragraphs to discussing FDA’s recent approval of Epidiolex, a CBD-based drug, as we discuss here and here. The complaint suggests that FDA will reclassify CBDs generally as Schedule II or Schedule III drugs. While it is clear that FDA will do a reclassification, it is not clear that it will reclassify all CBDs, rather than just the Epidiolex compound.

In any event, we expect to see more cannabis patent litigation soon, perhaps in Colorado, California, Oregon or elsewhere. Whether it will be a trickle or a flood remains to be seen, but we will be following the UCANN case closely and providing regular updates.

For more on cannabis patents, see our series here:

california cbd epidiolex

At the end of June, we wrote about the FDA’s approval of GW Pharmaceutical’s drug Epidiolex (containing cannabidiol), an oral solution for treatment of seizures. On July 9, 2018, California Jerry Brown signed legislation approving Epidiolex for use under California law.

California, like many states, has its own version of the Controlled Substances Act. Similar to federal law, the California CSA classifies controlled substances into five schedules, the most restrictive being Schedule I and the least restrictive being Schedule V. Under existing California law, cannabidiol (CBD) is Schedule I because it is a compound contained in cannabis, also a Schedule I drug.

Under Assembly Bill 710, the California Legislature made the following findings:

The Legislature finds and declares that both children and adults with epilepsy are in desperate need of new treatment options and that cannabidiol has shown potential as an effective treatment option. If federal laws prohibiting the prescription of medications composed of cannabidiol are repealed or if an exception from the general prohibition is enacted permitting the prescription of drugs composed of cannabidiol, patients should have rapid access to this treatment option. The availability of this new prescription medication is intended to augment, not to restrict or otherwise amend, other cannabinoid treatment modalities including, but not limited to, industrial hemp products and derivatives containing cannabidiol, currently available under state law.

Section 3 of A.B. 710 then adds statutory language that harmonizes federal and California state law on cannabidiol:

if cannabidiol is excluded from Schedule I of the federal Controlled Substances Act and placed on a schedule of the act other than Schedule I, or if a product composed of cannabidiol is approved by the federal Food and Drug Administration and either placed on a schedule of the act other than Schedule I, or exempted from one or more provisions of the act, so as to permit a physician, pharmacist, or other authorized healing arts licensee acting within his or her scope of practice, to prescribe, furnish, or dispense that product, the physician, pharmacist, or other authorized healing arts licensee who prescribes, furnishes, or dispenses that product in accordance with federal law shall be deemed to be in compliance with state law governing those acts.

Essentially, this language provides that once CBD can legally be prescribed under federal law, any authorized health care professional who complies with federal law will be deemed to comply with California state law. A.B. 710 goes on to provide that this harmonization does not apply to a CBD-containing product that is made or derived from industrial hemp, as regulated by existing California law.

Finally, the Legislature provides that “in order to ensure that patients are able to obtain access to a new treatment modality as soon as federal law makes it available,” A.B. 710 is an “urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect.”

The story of A.B. 710 shows that federalism concerns will continue to arise even once cannabis is federally legal. Because the states are permitted to pass their own controlled substances acts and food and drug statutes, it is possible that federal legalization will not lead to universal availability, just as the repeal of prohibition did not prevent localities from opting out. But we expect that similar laws harmonizing state and federal policy on CBD will be forthcoming, at least in states where cannabis is legal for medical use.

fda epidiolex cannabis
Big win today for GW Pharma.

In a previous post, we discussed GW Pharmaceuticals, the leading developer of cannabis-based pharmaceuticals. Today, the FDA announced the approval of GW Pharmaceutical’s drug Epidiolex (cannabidiol), an oral solution for treatment of seizures associated with two rare forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, in patients two years of age and older. This announcement is important for several reasons.

First, although the FDA has previously approved drugs using synthetic THC as the active ingredient (Marinol, Sydros, and Cesamet), Epidiolex is the first approval for a purified drug substance derived from marijuana plants.

Second, this is the first approval for cannabidiol (CBD), which is not psychoactive, unlike tetrahydrocannabinol (THC), which is.

Third, and perhaps most importantly, the approval of Epidiolex could present the Drug Enforcement Administration (DEA) with an opportunity to review the status of cannabinoids under the Controlled Substances Act (CSA). Currently, CBD from marijuana is a Schedule I substance because it is a chemical component of the marijuana plant. In support of the Epidiolex new drug application, GW Pharmaceuticals conducted clinical and nonclinical trials assessing the abuse potential of CBD, a critical factor in determining appropriate scheduling under the CSA. This means that DEA will likely now consider the appropriate CSA scheduling of Epidiolex in light of these data. It is too early to tell whether DEA will reschedule Epidiolex, but DEA has previously approved Schedule II and Schedule III status for THC-containing products Marinol, Sydros, and Cesamet.

Finally, the FDA confirmed that while it continues to support the development of medical marijuana therapies, it does so only under the existing drug approval process. According to FDA Commissioner Scott Gottlieb, M.D.:

“This approval serves as a reminder that advancing sound development programs that properly evaluate active ingredients contained in marijuana can lead to important medical therapies. And, the FDA is committed to this kind of careful scientific research and drug development. Controlled clinical trials testing the safety and efficacy of a drug, along with careful review through the FDA’s drug approval process, is the most appropriate way to bring marijuana-derived treatments to patients. Because of the adequate and well-controlled clinical studies that supported this approval, prescribers can have confidence in the drug’s uniform strength and consistent delivery that support appropriate dosing needed for treating patients with these complex and serious epilepsy syndromes. We’ll continue to support rigorous scientific research on the potential medical uses of marijuana-derived products and work with product developers who are interested in bringing patients safe and effective, high quality products.”

CBD producers should note that FDA Commissioner Gottlieb makes clear that this does not mean that CBD is now legal:

“But, at the same time, we are prepared to take action when we see the illegal marketing of CBD-containing products with serious, unproven medical claims. Marketing unapproved products, with uncertain dosages and formulations can keep patients from accessing appropriate, recognized therapies to treat serious and even fatal diseases.”

Regardless of how Epidiolex is eventually scheduled, it’s now approved, and GW Pharmaceuticals’ aggressive research and development program has pushed the cause of medical marijuana one large step forward.

cannabis litigation mediationIn Part 1 of this series we discussed how mediation works in most cannabis disputes. Today, we discuss some strategic considerations to increase the likelihood of success in cannabis mediation.

     Know your audience(s): Unlike in litigation or arbitration, where your audience is a disinterested third party judge, jury, or arbitrator, your primary audience in mediation is the other side. After all, mediation will not result in settlement unless both sides agree. But consider the other audiences, i.e., those on your own side. Many cannabis businesses have multiple owners or decision makers. Mediation can be an excellent way for your management team to fully understand the dispute, so that the team itself can decide on a resolution that will best satisfy all the stake holders.

     Look for a resolution, not a victory: The goal in most mediation is for all parties to resolve the dispute, not for one party to emerge victorious at the other’s expense. It is the rare case where a party in mediation will find it in its best interests to completely capitulate. If you expect to get all or most of what you might get at trial, you are unlikely to succeed in mediation.

     Don’t just trade offers: Even when the principal issue between parties seems to be how much money will change hands, just exchanging numbers is not always effective in mediation. The concept of “principled negotiation,” developed by Roger Fisher and Bill Ury in the book Getting to Yes, involves considering the parties’ underlying motivations and interests, rather than just their negotiating positions. Seeking to address each party’s interests can change the dispute from a zero-sum game to one where both parties will benefit. For example, if one marijuana business is suing another for intellectual property (IP) infringement, a possible resolution could involve a cross-license agreement where each party agrees to license its IP to the other party.

     Mediation is a process: It is not uncommon for parties to engage in two or more rounds of mediation before reaching a settlement. During litigation, there are several critical points at which mediation might take place. Early mediations are attractive, because the parties will not have spent time and money litigating. But the parties will be handicapped because they will not have the documents and other information that becomes available during discovery. For this reason, some parties choose to voluntarily exchange critical information, e.g., sales data, very early in a case to enable a more informed mediation. In general, as the parties spend more time and money on litigation they will be less likely to settle. However, certain expensive litigation events, such as expert discovery, summary judgment, and especially trial, may encourage parties to mediate later. Consider your mediation strategy at the beginning of a dispute, and be ready to reconsider your strategy as the case develops.

     Get Authority: Each party must bring to the mediation the person or people who have actual power to decide the case that day, preferably in person. This often include a representative from any insurer who might contribute to a settlement. Most experienced mediators will insist upon this.

     Get it in writing: If a settlement is reached, even if it is partial, that agreement should be reduced to writing and signed by all parties before they leave the mediation session. It is essential that this writing capture the agreed-upon terms, even if the parties contemplate drafting a more detailed agreement later on. It is also essential that this writing be enforceable. An oral agreement, while potentially enforceable, is likely to lead to more litigation, thereby undermining the objective of settling the case.

The majority of cannabis disputes are likely to go to mediation at some point. Making the most out of your mediation can help you get, at least some, satisfaction.

Mediation and arbitration are the two major “alternative dispute resolution” (ADR) techniques used in business disputes. We’ve discussed arbitration in cannabis cases in several previous blog posts, here, here, here, here, and here. Although arbitration gets more attention these days than mediation (see the Supreme Court’s recent arbitration decision), mediation is probably the most commonly used form of ADR in cannabis businesses.

Some basics:

Arbitration is essentially stripped-down litigation, in which a third party lawyer or judge decides issues of fact and law, in a setting that in some cases is less formal and costly than going to court. Both litigation and arbitration are usually binding. Both result in an order than can be enforced like any other court order, e.g., by garnishing the losing party’s assets.

Mediation differs from arbitration in that the mediator cannot require the parties to resolve the dispute. Her role is to help parties work together to find a solution to their problem, that they both can agree on. If mediation is successful, the parties often enter into a written settlement agreement, resolving the dispute.

How mediation works in a cannabis dispute:

For our discussion, imagine a dispute between co-owners of a marijuana dispensary. Hopefully, the owners have a solid operating or shareholder agreement with a dispute resolution clause requiring mediation before litigation can be filed. Even without such a clause, once a dispute arises, the owners can make an on-the-spot agreement to mediate.

The parties must next choose a mediator. In a business dispute, it is important to choose someone who is not only an experienced mediator, but also has experience in the subject matter of the dispute. One of the responsibilities of a mediator is to give each party its real world options if those parties settle, or fail to settle, the dispute. Particularly in a cannabis case, with overlapping local, state and federal laws that are changing sometimes every week, a mediator must have knowledge not only of the applicable laws, but of the business environment.

It is important that the mediator be completely disinterested in the outcome. The mediator’s primary objective is not in benefitting either side, but in settling the dispute, if possible.

Mediating parties are often represented by counsel, although this is not necessary, especially early on in the process. Each party must present the mediator with its version of the facts and what outcome it is seeking. This can be done in written submissions before the mediation, or in oral discussions at the mediation itself. Each party can choose to share their correspondence with the mediator, or not, depending on that party’s mediation strategy.

The mediation will usually take place in a location where each party can have private discussions with the mediator. Once a party has explained its side, the mediator can ask questions, probing areas of agreement or disagreement. A good mediator will not just ferry offers between the parties, but will privately advise each side about its goals and how they can be achieved. A very good mediator will give each side candid advice about the likelihood of success before an arbitrator or a court, and will advise not only on the out of pocket costs but the opportunity costs that occur when a party chooses to spend its time litigating rather than running its business.

Mediations are often set for a single day, although multi-day mediations are common in complicated cases. Once initial information is exchanged, the mediator will work towards a solution that each side can live with, moving back and forth between each party’s room. If a solution is reached, the mediator should put at least the most important points of the solution in writing, and have each party sign the agreement.

If the mediator does not believe that the parties will settle now, she may call off the mediation for the day. She may also ask the parties to agree to meet again to continue the mediation, or to take additional steps, such as exchanging information, before reconvening. It is not uncommon to mediate at several points in the dispute resolution process, as each party gets more information about its own and the other party’s position. It may take several mediations to reach a settlement.

Next week, we will examine how a party can increase its likelihood of success at a mediation. While you can’t always get what you want….

gardner marijuana cannabis
Martin Sheen? Or Cory Gardner? Either way, good news!

In January 2018, Cory Gardner, Colorado’s junior senator (and Martin Sheen doppelgänger) made news by announcing that he would block Trump Administration Department of Justice appointments after Attorney General Jeff Sessions released a memo suggesting that U.S. Attorneys could consider prosecution of federal marijuana laws despite state legalization. In keeping his promise, Gardner has held up about 20 DOJ nominees proposed by the Administration.

Senator Gardner released the following statement today, April 13, 2018:

“Since the campaign, President Trump has consistently supported states’ rights to decide for themselves how best to approach marijuana. Late Wednesday, I received a commitment from the President that the Department of Justice’s rescission of the Cole memo will not impact Colorado’s legal marijuana industry. Furthermore, President Trump has assured me that he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.

Because of these commitments, I have informed the Administration that I will be lifting my remaining holds on Department of Justice nominees. My colleagues and I are continuing to work diligently on a bipartisan legislative solution that can pass Congress and head to the President’s desk to deliver on his campaign position.”

White House legislative affairs director Marc Short confirmed on Friday that Trump “does respect Colorado’s right to decide for themselves how to best approach this issue.”

While no specific legislation has been announced, the Washington Post reports that “Gardner has been talking quietly with other senators about a legislative fix that would, in effect, make clear the federal government cannot interfere with states that have voted to legalize marijuana.”

Sessions has been on the outs with Trump since he recused himself from the Mueller Russia investigation. The Trump Administration’s willingness to back off from Sessions’ attempts to revise the Cole Memo suggests a further wedge between the President and his Attorney General.

Or not. Consult the oracle at Twitter for the latest.

marijuana cannabis FDA
Can GW Pharma get there with Epidiolex?

In previous posts we’ve discussed the process for FDA approval of cannabis drugs. Today’s topic is GW Pharmaceuticals, a British biotech company focusing on prescription cannabinoid medicines, including developing and commercializing pharmaceutical products which address clear unmet needs.

GW Pharmaceuticals was founded in the UK in 1998 by two British biotech entrepreneurs, Dr. Geoffrey Guy and Dr. Brian Whittle. The Company is well known to many in the cannabis industry, because it was able to obtain UK licensing for broad pharmaceutical research and development into cannabis and its active compounds, including delivery methods other than smoking.

One of GW Pharmaceuticals’ first products was Sativex, an oral mucosal spray containing the cannabinoids CBD and THC, indicated as a treatment for spasticity due to multiple sclerosis. Sativex is available by prescription in the UK, EU, Canada, New Zealand and Israel. It is not approved in the United States.

GW Pharmaceuticals is now focusing on FDA approval of its liquid formulation of pure plant-derived CBD, called Epidiolex. Conditions for which Epidiolex is initially being tested are severe epilepsy syndromes including Dravet syndrome, Lennox-Gastaut syndrome, Tuberous Sclerosis Complex, and Infantile Spasms. GW Pharmaceuticals has obtained Orphan Drug and Fast Track designations from the FDA for research on Dravet syndrome. Phase 3 trials for efficacy and monitoring of adverse reactions have already shown positive effects in reducing certain seizure types from patients taking Epidiolex.

As part of its rulemaking process, FDA’s Peripheral and Central Nervous System Drugs Advisory Committee will hold a public meeting on April 19, 2018 to consider the New Drug Application (“NDA”) submitted by GW for Epidiolex. This will include oral presentations from the public, and will be webcast. We encourage any aspiring FDA applicants in the CBD space to watch the presentations.

GW Pharmaceuticals has also recently received Notices of Allowance for five new Epidiolex patent applications that will be listed in the Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”) if the NDA for Epidiolex is approved. These patent claims cover methods of treatment of treatment-resistant epilepsy with CBD oil, sometimes in combination with other compounds.

Besides Epidiolex and Sativex, GW Pharmaceuticals continues research and development on cannabidivarin, known as CBDV. Currently, Phase 2 trials for efficacy and side effects are underway for CBDV as a treatment for epilepsy, and Phase 1 trials for safety and dosage are underway using CBDV for autism spectrum disorders. Also in GW Pharmaceuticals’ R & D pipeline are Phase 1 and 2 cannabinoid studies for neonatal hypoxic-ischemic encephalopathy, glioblastoma, and schizophrenia.

Without a doubt, GW is in the vanguard of cannabis biotech companies. It now employs over 500 researchers, who have conducted over 50 Phase 2 and 3 clinical trials on cannabis-based compounds. GW has shown that it can develop and acquire regulatory approval for a cannabis pharmaceutical (Sativex) outside of the U.S., and develop a commercial market for this product.

GW Pharmaceuticals has also had great success so far with the FDA, taking its Epidiolex drug from Investigational New Drug Application to New Drug Application in less than four years. Interestingly, GW Pharmaceuticals has stated that if and when the FDA approves the NDA, it will seek to have it categorized as a Schedule IV drug under the Controlled Substances Act. Schedule IV is defined as drugs with a low potential for abuse and low risk of dependence. Currently, the lowest schedule designation of a cannabis drug is for Marinol, which is Schedule III. (A synthetic THC drug, Syndros, was recently moved to Schedule II).

Regardless of how Epidiolex might be scheduled, its potential approval by the FDA would be a major step forward for cannabis pharmaceuticals. Be sure to tune in on April 18 for further developments.

As noted before in this blogHemp Industries Assoc. v. DEA, pending in the U.S. Court of Appeals for the Ninth Circuit, appeals the DEA’s final administrative rule creating a new drug code number for “marihuana [sic] extract,” defined as “containing one or more cannabinoids that has been derived from any plant of the genus Cannabis.”  Petitioners, a cannabis industry trade group and other industry participants, argue that DEA’s rule effectively reschedules CBD as a Schedule 1 drug under the Controlled Substance Act (CSA), in violation of the Farm Act of 2014, which allows the states to set up pilot hemp programs. The DEA counters that this rule does not restrict substances that were not previously controlled, but simply adjusts DEA’s methods for tracking substances that Congress put in Schedule 1.

On February 15, 2018, a Ninth Circuit panel of three judges heard oral argument. You can watch the argument here. Because federal appellate courts never issue decisions at oral argument, we won’t know how the court decides for several months. But watching the argument gives some clues to how the judges are thinking about this case.

Before you watch, consider first that this case is a challenge to a rule made by the DEA, a federal administrative agency exercising rule-making power expressly delegated to it by Congress. Under established law, the court must defer to the DEA’s exercise of this power. The court may set aside DEA’s rule only if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” The court’s review is narrow: it must simply determine whether the DEA articulated a rational connection between the facts found and the choice made. As long as the DEA’s decision was “based on a consideration of relevant factors and there is no clear error of judgment,” the agency’s action is not arbitrary and capricious.

Second, consider that there are many administrative procedures that must be followed before a petitioner can even ask for review of an agency rule. All rulemaking is open to public comment by any interested party. If you fail to weigh in at the rulemaking procedure, you may not get to complain in court. Also, the petitioner has to show particular identified harm that it will suffer because of the rule.

Third, keep in mind that lower appellate courts such as the Ninth Circuit will often (though not always) try to decide a case on the narrowest grounds possible. This means that these judges may choose to decide on a technicality or procedural issue, rather than reaching the merits of the claim. That could very well happen here.

Keeping these points in mind, observe that the judges ask the lawyers: isn’t this rule just a change in the numbering system used by DEA made in order to facilitate record-keeping and reporting activities? Of course, the DEA lawyer agrees, while the cannabis industry lawyer strongly disagrees. Also notice that the judges continue to press the cannabis lawyer about whether evidence supporting harm claimed to be suffered is found “in the record.” This is an important point, because courts of appeal are not allowed to refer to facts that were not brought up in the original proceeding– in this case, the rulemaking process. Finally, there is no discussion about whether de-scheduling CBDs is a good or a bad policy. That is not an issue raised by this case, and the panel will almost certainly not address this in its opinion.

It is also worth reading a brief filed not by the parties to this case, but by several members of Congress who are appearing as amici, that is, friends of the court, Their brief supports the cannabis industry group, broadly arguing that DEA had no authority to issue its rule. The amicus brief also broadly urges that the Farm Act of 2014 allows states to effectively legalize CBD sales. Although many of the amici were among those who voted for the Farm Act, this brief is unlikely to sway the judges, who will likely say nothing about what the Farm Act does or doesn’t cover.

Check back in a few months, when we will discuss the opinion of the panel. My guess is that the opinion will narrowly decide the case, perhaps on procedural grounds, but that there will be no controlling ruling on scheduling of CBDs, keeping this area of law as confusing as ever. Stay tuned.

As we’ve discussed before on this blog, cannabis can be and is being patented. It is important to remember that patents are a balance between competing social values. In classical legal theory, patents exist to encourage innovation by offering innovators a limited monopoly in return for making inventions, and eventually releasing them to the public. Although the common law disfavors restraints on trade such as patents, the prevailing theory is that granting a partial monopoly is justified by the social benefit of innovation. This is known as the contract model of patents. Whether this model really produces net social utility in particular cases, or ever, is hotly debated.

What isn’t debated is that the contract model fails if what is patented is not new. One of the biggest challenges of our patent system is determining what is “new enough” to reward with a patent. In general, the patent system examines novelty by comparing a claimed invention to existing products (known as the “prior art”) that are in the same or related fields. (In some patents, an invention must also be “non-obvious” in light of prior art. I don’t address obviousness here.) The practical problem is searching the historical haystack for the needle of relevant prior art. Searching the text of patents is relatively easy. But most of the world is not patented, and is more difficult to search; e.g., plants and other living things are not text-searchable. So how do we keep living prior art, such as cannabis strains, available to the public and not covered by the patent monopoly?

This question is being addressed by an Oregon non-profit, the Open Cannabis Project (“OCP”) (full disclosure: I am a legal advisor to the OCP). According to the OCP:

Cannabis is in danger of going the way the rest of agriculture has gone: toward monoculture, centralization, and restrictive patenting…The growing wave of legalization – and the intellectual property competition that comes with it – may have the unintended consequence of narrowing and restricting [cannabis] diversity….Open Cannabis Project (OCP) was established by industry leaders to resist these forces and to protect the genetic diversity of the Cannabis plant as well as the economic diversity of the cannabis industry….

To keep existing cannabis strains freely available to the public, the OCP is building an open-source repository of genetic and chemotypic data. This repository will serve as a source of prior art, useful to the U.S. Patent and Trademark Office (“Patent Office”) and to the cannabis industry. Several labs have already pledged to contribute existing data to the repository, which is now being stored at the National Center for Biotechnology Information. The OCP’s aim is to have a comprehensive set of genetic data for all cannabis varieties that are either naturally occurring or which have been previously available to the public. Either one of these conditions renders such varieties unpatentable.

The OCP holds great promise in its goal of keeping existing cannabis strains from coming under the control of one commercial entity or another. Some questions remain, however. For example, there is sometimes a mismatch between what the Patent Office considers when it reviews plant novelty, and what is available in genetic data. Hopefully the OCP and other cannabis industry players will be able to work with the Patent Office and perhaps Congress to address this and other concerns. Given the availability of cannabis patents and the size of the industry, there is a lot at stake.

marijuana RICOWe’ve previously discussed several civil cases in Oregon where private parties sought to shut down cannabis grow operations under RICO (Racketeer Influenced and Corrupt Organizations Act), claiming that the grow was part of a criminal conspiracy that would drive down property values (see our RICO series here, herehere and here).

Today, we have an update on two marijuana RICO cases elsewhere the country, one in Colorado, and the other in Massachusetts.

Colorado: In a previous post, we discussed Safe Streets Alliance v. Alternative Holistic Healing, LLC, a case from Colorado. This case is notable because the 10th Circuit Court of Appeals has already issued an opinion addressing several key legal issues, giving the litigants the go-ahead to try their case. In dicta, the 10th Circuit noted that at trial, it was possible that a judge or jury would determine that the plaintiff’s land was actually more valuable because of its suitability for cannabis cultivation. Although the 10th Circuit’s opinion only technically applies in the states of Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming, other trial and appellate courts will consider the opinion as “persuasive” authority, in other RICO cases.

This case is now scheduled for trial beginning in late August 2018. Assuming this case does not settle, and regardless of the verdict, the result will likely have far-reaching impact on potential RICO actions nationwide. As to the trial itself, many issues will be raised, from admissibility of evidence to expert testimony. One or more of those issues will likely be appealed again to the 10th Circuit. Future litigants are likely to use the trial record as a guide to bringing and defending these RICO cases.

Massachusetts: In Crimson Galeria v. Healthy Pharms, the plaintiff, a Harvard Square property owner, claims that Healthy Pharms, a neighbor and prospective cannabis operation, will diminish the value of plaintiffs’ property. As claimed in the lawsuit, “amongst other matters, marijuana businesses make bad neighbors, which include without limitation, emitting pungent odors, attracting undesirable visitors, increasing criminal activity, driving down property values, and limiting the rental of premises.” As with the Safe Streets case, one wonders whether suitability for cannabis sale actually increases the value of the land.

The lawsuit also alleges that local and state government agencies, including the state Department of Public Health and the city of Cambridge are “facilitating and encouraging violations of the federal drug laws by licensing and permitting marijuana businesses.” One of the plaintiffs’ claims is that the federal Controlled Substance Act (CSA) “preempts the practice of state and local officials in Massachusetts of issuing licenses to operate marijuana businesses.” The 10th Circuit addressed similar preemption arguments, ultimately finding that the plaintiffs had no claims on which relief could be granted. But Massachusetts is in the 1st Circuit Court of Appeals, and the 1st Circuit judges will not be bound by the Safe Streets opinion (although they almost certainly will consider it).

It is at least theoretically possible that the 1st Circuit could find differently than the 10th Circuit, causing a circuit split that would have to be decided by the U.S. Supreme Court. That would be a doozy.