Plenty of legal experts were concerned that a lawsuit filed by two Pueblo County landowners who claimed that a nearby marijuana grow facility has reduced their property values in part because the smell makes horseback riding less pleasant could negatively impact the marijuana industry in Colorado and beyond because it was based on federal racketeering laws.
But on October 31, a Denver-based federal jury rejected the claims of Phillis Windy Hope Reilly and Michael P. Reilly, delivering a victory to CannaCraft owner Parker Walton that his attorney, Matthew Buck, notes was swift and decisive.
"We got the case to them at 11:20 a.m. yesterday," Buck says. "We got the call that we had a verdict at 2:43 p.m. And in the middle of that, the jurors had lunch."
The Reillys, who are married, hold the deeds for three lots in a Rye, Colorado, development called the Meadows at Legacy Ranch — "approximately 105 acres of beautiful rolling pasture with sweeping mountain vistas that include views of Pike's Peak," according to the original suit, filed in conjunction with the anti-pot group Safe Streets Alliance; it's accessible below. In February 2015, when the complaint was submitted, the couple didn't live on the property full-time, but liked to visit there on the weekends so that their kids could ride horses and hike. Today, Buck says, they've permanently located there after converting a barn into a residence.
Adjacent to the property is a marijuana grow facility owned by Walton, one of the remaining three defendants in the latest version of the suit; the others are 6480 Pickney LLC and Camp Feel Good LLC, companies owned by Walton that were responsible for obtaining the initial license and purchasing the land, respectively. The complaint maintained that this proximity is a problem, because "growing recreational marijuana is 'noxious, annoying or offensive activity' by virtually any definition because marijuana plants are highly odorous, and their offensive smell travels long distances." Hence, the suit claimed, the grow violates assorted covenants governing Meadows at Legacy Ranch, thereby impinging on their ability to enjoy their land as they'd like.
On top of that, the sight of a building under construction on the grow site "exacerbates the injury, for when the Reillys and their children visit the property, they are reminded of the racketeering enterprise next door every time they look to the west."
The suit also maintained that the grow has hurt property values — plus, "the large quantity of drugs at marijuana grows makes them targets for theft, and a prospective buyer of the Reillys’ land would reasonably worry that the 6480 Pickney Road marijuana grow will increase crime in the area."
The Reillys' attorneys are with Cooper & Kirk, a powerhouse law firm whose clients include cannabis-loathing U.S. Attorney General Jeff Sessions — and the tool they attempted to use against Walton was the Racketeer Influenced and Corrupt Organizations Act. In June 2017, the U.S. Court of Appeals for the Tenth Circuit ruled in favor of RICO usage for reasons summarized in the following excerpt from its decision:
"RICO is founded on the concept of racketeering activity. The statute defines ‘racketeering activity’ to encompass dozens of state and federal offenses, known in RICO parlance as predicates. These predicates include any act ‘indictable’ under specified federal statutes,' and among them is 'drug-related activity that is ‘punishable’ under federal law.' As relevant here, 'racketeering activity' includes 'dealing in a controlled substance or listed chemical as defined in' the CSA [Controlled Substances Act]. Racketeering activity also includes 'any offense involving...the felonious manufacture, importation, receiving, concealment, buying, selling, or otherwise dealing in a controlled substance or listed chemical,' as defined in the CSA, that is 'punishable under any law of the United States'....
"It follows, therefore, that operating a marijuana cultivation facility of the type the Reillys described in their Second Amended Complaint necessarily would involve some racketeering activity. As just one example, cultivating marijuana for sale — which the Marijuana Growers admit they agreed to do and they allegedly began and are continuing to do — is by definition racketeering activity. We conclude the Reillys have adequately alleged that the Marijuana Growers are each engaged in racketeering activity."
The court's blessing of RICO, which is routinely utilized in prosecuting members of organized-crime enterprises, sent shock waves through the burgeoning cannabis industry. But the weakness of the case as a whole appears to have been a bigger factor in the jury's decision to side with Walton.
Opening arguments took place early on October 29, and shortly thereafter, Buck recounts, "we heard from one of the plaintiffs, Hope Reilly. She talked about being a fifth-generation Coloradan, which is why she wants to live where she's living. But she admitted that the odor was intermittent, which was backed up by every single witness; everyone says it's not persistent. For example we heard from the president of the homeowners' association, who also testified that the odor was intermittent. He didn't testify about smelling it on the Reillys' property but said he could smell it from the road."
Expert witnesses followed, including Stephen Billings, a real estate professor at the University of Colorado Boulder. "In his reports," Buck says, "he likened the noise and traffic of a marijuana grow to living next to O'Hare airport in Chicago, which is laughable, and likened the smell of living next to a grow to living next to a landfill in Africa."
During his testimony, Billings left out the Africa reference, Buck acknowledges, "but he did say the odor from a landfill was similar to the odor of a marijuana grow or a feedlot."
He adds that the Reillys' legal team attempted to prove their assertions about rising crime and falling property values in what he considers to have been quizzical ways.
"Their evidence that crime had gone up was that a little old lady who lived across the street had bought a gun," Buck says. "And they didn't really present any evidence that property values had gone down. They admitted that the value of the Reillys' property had gone up 12 percent — but they said it would have gone up 15 percent if it wasn't next to a marijuana grow. And I don't think that's compelling evidence of property damage."
After the plaintiffs wrapped, Buck got his turn. "I started off calling Parker, who talked about how the grow came to be and his plans to create a grow that was airtight — and the reasons one might want a grow that didn't exhaust or intake air from the outside. I then put on our real estate expert, Ivor Hill — and I ended the day with what I thought was our best witness, Melanie Borsage. She's an odor expert who's trained on the Nasal Ranger, the same device both the City and County of Denver and the Colorado Department of Public Health and Environment use to determine whether someone is in violation of odor standards."
Borsage "did 128 separate readings around Parker's facility," Buck goes on, "and of the 128 readings, she was able to detect marijuana at eight of those using her naked nose. And using the Nasal Ranger, she was able to discern the lowest reading possible, which is in the 0-2 range. But the City and County of Denver records a violation at 7 on the Nasal Ranger. So this was well below a nuisance. And she testified that readings for a landfill or a feedlot can be in the 30-60 range — an odor thirty to sixty times stronger than my client's grow facility."
The closing argument by the Reillys' attorneys "was basically that my client was producing odor and that it couldn't possibly be from any of the other numerous legal and illegal grows in Pueblo County, that marijuana has increased crime in the area, and that the plaintiff's property values had been decreased. And our closing was short and simple. It effectively was that the plaintiffs had presented no evidence my client had damaged them. We'd actually presented evidence that my client wasn't the source of any marijuana that they may be smelling, and given the intellect of the jury, we expected them to come back with a no-responsibility finding, which they did."
This result doesn't kill the prospect of federal racketeering laws being turned against owners of marijuana businesses in states where cannabis is legal. Buck points out that two federal RICO suits of this sort are pending — one in Massachusetts, the other in California — while a third was recently dismissed in Oregon because "they don't recognize use-and-enjoyment damages, as Colorado does."
In Buck's view, "a wily plaintiff's attorney could probably pull the transcripts and filing from this case and figure out what the plaintiff's lawyers did wrong. But I still feel it will be an uphill battle to prove RICO, because it's so hard to prove property damage. Every objective study shows that marijuana businesses improve the property value of businesses around them, because once marijuana moves into your neighborhood, it's proof that the neighborhood has arrived."
By the same token, he believes "this victory will hopefully give a road map to how other defense attorneys involved in existing and future RICO claims can defeat them."
Click to read the original lawsuit, Safe Streets Alliance, et al., v. Alternative Holistic Healing, LLC, et al.
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