We’ve previously discussed a RICO case that is slowly worming its way through federal court in Portland, Oregon. Styled as McCart v. Beddow et al., the case was filed by an attorney who is fed up with two neighboring cannabis grow operations next to her rural home. But rather than focusing solely on the allegedly troublesome cannabis producers, the McCart plaintiffs have filed suit against anyone even tangentially related to the producers’ business, including many dispensaries (“Dispensary Defendants”) that only purchased their product. We counted over 70 named defendants!
In our previous discussion, we suggested that the plaintiffs’ case against the Dispensary Defendants is fairly weak and our opinion hasn’t changed. Since we last checked in, the plaintiffs have filed a substantially expanded amended complaint, and numerous defendants have filed motions to dismiss. Although the Court won’t consider the motions to dismiss until January, it is worth checking in on the parties’ current positions. We are going to continue to focus on the Dispensary Defendants because there could be serious repercussions in the industry if the Dispensary Defendants are found liable even though they apparently didn’t have anything to do with the grow operation.
RICO law is complex, but as a general matter the RICO statutes allow a plaintiff to recover treble damages in a civil claim if the plaintiff can prove the following:
- 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.
Of course, the devil is in the details, as the Dispensary Defendants point out in their motion to dismiss.
The Amended Complaint
The plaintiffs filed their amended complaint on September 1, which added 95 paragraphs onto their hefty original complaint. The amended complaint adds many new defendants, including employees at the farms and it alleges that nearly all of the defendants were exporting product out of Oregon.
In broad terms, the plaintiffs’ claims against the Dispensary Defendants have not changed in that they still allege the following:
- The cannabis grow operation (“Marijuana Operation”) is an enterprise affecting interstate commerce, as defined in the RICO statutes;
- All of the defendants were associated with and conducted the Marijuana Operation’s affairs through racketeering activity;
- Plaintiffs suffered a variety of kinds of harm as a result of the Marijuana Operation:
- Physical Injury to Real Property: littering, driveway damage, tire tracks, damage to some trail cameras, and unreasonable use of easements.
- Diminution of Property Value: noise pollution, light pollution, vibration, odors, exhaust fumes.
- Personal Injuries: harassment and damage to plaintiffs’ use and quiet enjoyment of their property.
The Motions to Dismiss
Eighteen Dispensary Defendants joined together in a single motion asking the Court to throw out plaintiff’s entire case against them. Their motion is well worth the read, not least for its colorful language, such as the lipstick-on-a-pig quote below the pig picture above. The arguments in this motion fit into two general categories:
The Dispensary Defendants are not part of a racketeering enterprise.
To establish an “enterprise” exists for RICO purposes, plaintiffs must show there was an ongoing organization with a common purpose. Both of these elements get to the same idea: a criminal enterprise is a group of people all working together to enrich themselves. Courts have found “ongoing organizations” among disparate businesses when there are legitimate interconnections between the entities, such as similar ownership and overlap in personnel. Similarly, courts have found a common purpose where the alleged members are working to promote a single economic interest, and not where they are simply pursuing individual economic interests. There don’t appear to be any of these kinds of links in this case. The Dispensary Defendants appear to be owned, operated, and staffed by distinct individuals working towards their own individual business purposes. This ties back to our initial read of this case: mere supplier-purchaser relationships like these do not rise to the level of RICO enterprises.
In any event, plaintiffs need to establish that the Dispensary Defendants were associated with and conducted or participated in the enterprise. Yet plaintiffs have not alleged that the Dispensary Defendants had any say over the operation of the farms. Their case against the Dispensary Defendants will likely die here.
Plaintiffs’ alleged harms cannot be recovered as a matter of law.
Even assuming plaintiffs can get over the hurdle of establishing that the Dispensary Defendants directed the farms, plaintiffs still must establish that their specific harms are actionable. The Dispensary Defendants also seem to be on the right side of the law here, arguing that the alleged harms and the speculative claim that the value of plaintiffs’ home has decreased cannot form the basis of a RICO claim against any of the defendants and cannot form the basis of a state-law claim nuisance claim against the Dispensary Defendants, in particular.
The plaintiffs face a number of legal obstacles that seem insurmountable. First and foremost, Oregon has long since decided that it is in the best interests of the state to protect farming uses and it has decided to treat cannabis the same as any other farm crop. Accordingly, Oregon’s Right to Farm Act likely bars plaintiffs’ nuisance and trespass claims for damages based on odors, noise pollution, light pollution, vibrations, and smoke fumes. The Dispensary Defendants rely on ORS 30.936(1), which provides farmers in farming areas with immunity from suit for any trespass or nuisance claims, defined elsewhere as claims “based on noise, vibration, odors, smoke, dust, mist from irrigation, use of pesticides and use of crop production substances.” Since RICO case law suggests that harms to property interests should be determined by state law, plaintiffs’ diminution of value claims are likely dead on arrival.
In any event, plaintiffs’ specific diminution of value claims are likely too speculative. The Dispensary Defendants argue that a RICO plaintiff must plead and prove that plaintiff has suffered a “concrete financial loss” but that plaintiffs’ complaint only contains pure guesswork that the odors, etc. diminished the value of plaintiffs’ property. Even if the plaintiffs could plead a specific dollar amount of diminished value, Oregon law bars claims for diminution of property value if the nuisance can be stopped. In other words, if the harm would disappear if the grow operations shut down, plaintiffs cannot recover damages for loss of value. Instead, plaintiffs should be asking the court to shut down the grow operations, which would have little to no effect on the Dispensary Defendants.
Plaintiffs will also likely fail on their claims for loss of quiet enjoyment and harassment because personal injuries like these are not compensable under RICO.
We will have to wait until next year to find out if the Court agrees with the Dispensary Defendants but we predict vindication for the dispensaries. In fact, we predict the claims against all of the defendants will get tossed, except possibly some small state-law claims. It seems that if you are a good neighbor and you don’t set up your operations next door to property owned by a lawyer, then you’ll likely never be drawn into a mess like this.