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Are You Vulnerable to a Racketeering Charge?

A recent ruling by the 10th U.S. Circuit Court of Appeals has some cannabis business owners understandably concerned that they may face lawsuits from their neighbors.

The three-judge panel decided a case brought by a Colorado horse farm against a neighboring grow operation had enough merit to be heard in court, overruling a federal district court which shot the case down. The farm’s owners, the Reillys, filed the suit in 2015, claiming that the nearby warehouse would ’emit noxious odors,’ and attract unsavory visitors, thus lowering the farm’s property value.

The judges allowed the claim to proceed arguing that ‘The landowners have plausibly alleged at least one racketeering claim.’ Racketeering laws are an important tool for fighting organized crime syndicates, and if the case goes successfully for the Reillys, it could open the door to a lot of lawsuits.

Private citizens who oppose legalization would have a way to sue their local grower, and through the 1970 Racketeer Influenced and Corrupt Organizations Act (RICO), any company doing business with them. Because cannabis is still illegal at the federal level, financial penalties for all businesses would be tripled.

If this strategy proves successful in court, it could have a major chilling effect, making banks think twice before working with cannabusinesses. “We’re putting a bounty on the heads of anyone doing business with the marijuana industry,” said Brian Barnes, a lawyer for the anti-crime group Safe Streets Alliance, and lawyer for the plaintiff. “Just because you see what appears to be this unstoppable growth of marijuana, we disagree. We’re starting to change the economics of the marijuana industry.”

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