Oregon Marijuana Racketeering Lawsuit Settled

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Rural landowners in Oregon have settled a lawsuit filed that accused their marijuana-growing neighbors of violating federal anti-racketeering law and reducing property values.

However, the question of whether Oregon marijuana growers can be successfully sued under the Racketeer Influenced and Corrupt Organization Act may still be answered, as a similar lawsuit was recently filed against another cannabis operation.

Last year, Rachel and Erin McCart of Beavercreek, Ore., filed a RICO complaint against more than 40 defendants involved in medical marijuana production, including landowners, growers, retailers and a bank.

Apart from lowering the value of their 11-acre property, the McCarts claimed that two nearby marijuana operations attracted unwanted visitors, increased traffic and generated foul odors, among other problems.

While medical and recreational marijuana were legalized by Oregon voters, the plaintiffs claimed their neighbors were still subject to RICO because the substance is illegal under federal law.

“Given the strict federal prohibitions against each of those purposes, defendants knew these purposes could only be accomplished via a pattern of racketeering. In furtherance of that goal, defendants pooled their resources and achieved enterprise efficiency that no one defendant could have achieved individually,” the complaint said.

The complaint was filed on the heels of a ruling by the 10th U.S. Circuit Court of Appeals, which ruled that RICO claims should be allowed to proceed against a Colorado marijuana operation.

With the large number of defendants in the Oregon case, initial procedural steps took several months before the defendants filed motions to dismiss the complaint.

U.S. Magistrate Judge John Acosta in Portland had planned to take those requests under advisement in early 2018, but then stayed proceedings in the case when the parties notified him of a pending settlement.

On Jan. 26, the judge dismissed the case with prejudice, meaning it can’t be refiled, at the request of the plaintiffs, “without an award of fees or costs to any party.”

Rachel McCart, who is an attorney, did not respond to requests to comment on the settlement deal.

Cliff Davidson, an attorney for a landowner defendant, said the dispute has been resolved but he cannot discuss the terms of the agreement.

In light of uncertainty about marijuana enforcement from the Trump administration, controversies over the crop are bound to continue, he said.

Under the Obama administration, the U.S. Justice Department issued a memorandum allowing states to regulate legalized marijuana as long as they followed certain parameters, such as keeping it out of interstate commerce.

However, the memorandum was withdrawn by current U.S. Attorney General Jeff Sessions, who has instead directed federal prosecutors to use their discretion in pursuing criminal cases against marijuana producers in states where it’s legal.

Alleging violations of the federal RICO statute is an attractive strategy for plaintiffs, since it allows them to recover triple the amount of damages as well as attorney fees, said Davidson.

“If you’re a plaintiff, it’s a good way to maximize the damages you can recover,” he said. “It’s troubling. It’s just another form of shakedown.”

Ten rural landowners near Lebanon, Ore., filed a lawsuit last month alleging RICO violations against seven neighboring marijuana growers and a mortgage company that had loaned them money to buy property.

The complaint claims the defendants built a greenhouse on the property and converted other buildings to grow and process the psychoactive crop, in addition to cultivating it outdoors in 2017.

Aside from odors, traffic and noise, the marijuana operation has reduced property values due to concerns about the potential for armed robberies and other crime, the complaint said.

Neighbors also fear for their safety due to pit bull guard dogs roaming loose and an uncontrolled fire that resulted from the burning of marijuana debris, the plaintiffs claim.

Rachel McCart is representing the plaintiffs in the new lawsuit, which has been assigned to U.S. District Judge Michael McShane in Eugene, Ore.