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District of Oregon Holds that Vineyard’s RICO Suit Against Neighboring Marijuana Grower is More than just Sour Grapes

The United States District Court for the District of Oregon recently denied a marijuana grower’s motion to dismiss a Racketeer Influenced and Corrupt Organizations Act (“RICO”) lawsuit in Momtazi Family, LLC v. Wagner et al., No. 3:19-cv-00476-ER (D. Or. Aug. 27, 2019) [Doc. No. 26] (“Order”). The plaintiff in the case is the former operator and current lessor of a biodynamic vineyard in Oregon, whose property abuts the defendant’s marijuana farm.

The crux of the plaintiff’s claim is that its neighbor’s marijuana growing operations caused the plaintiff to suffer lost sales and decreased rental revenue. Id. at 3-4. Specifically, the plaintiff alleges that one of its customers cancelled an order for six tons of grapes grown on the portion of the vineyard adjacent to the defendant’s property, based on the belief that the odors emitted by the marijuana would permeate the grapes and taint any wine made from them. Id. The plaintiff further claims that terracing on the defendants’ property caused runoff into its reservoirs, endangering fish and wildlife that form “an essential part of Plaintiff’s biodynamic operation.” Id. Additionally, according to the plaintiff, it was forced to accept decreased rent from its winery tenant due to a perceived diminution in property value. Id.

RICO is a federal law enacted to combat organized crime in the United States, including illegal drug trafficking. RICO provides a civil cause of action for a person “injured in his business or property by reason of a violation of RICO[.]” Order at 11. While several states have legalized the manufacturing and sale of marijuana, the drug remains illegal under federal law. As a result, marijuana cultivation remains sufficient to support a RICO claim. See Id. at 18-19.  Due to  RICO’s treble damages and attorneys’ fees provision, the cause of action is an appealing alternative to state law nuisance claims. Indeed, in the past few years alone, multiple RICO lawsuits against cannabis growers have cropped up around the country.

Many of these claims have ultimately proven unsuccessful, largely due to the plaintiffs’ inability to establish an injury-in-fact and non-speculative damages.  In cases where the plaintiffs have not attempted to sell, lease, or otherwise monetize their property interests prior to filing suit, courts have typically rejected their claims of an unrealized diminution in value or “loss of enjoyment” allegedly suffered as the result of neighboring marijuana operations. See Order at 12-13.

In contrast, in Momtazi, the Court held that the plaintiff’s allegations of financial loss were sufficiently concrete to confer standing because the plaintiff had already experienced a quantifiable diminution in value, in the form of cancelled orders and decreased rental revenue from an existing lessee. Order at 10, 16-17. Momtazi could therefore pave the way for farmers with similarly concrete injuries to assert RICO claims for damages suffered due to their proximity to marijuana growing operations.

© 2020 Bilzin Sumberg Baena Price & Axelrod LLPNational Law Review, Volume IX, Number 277

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About this Author

Shalia Sakona, LItigation Attorney, Bilzin Sumberg Law Firm
Associate

Shalia Sakona is an associate in the Litigation Group. Her practice is focused on complex commercial litigation, including the representation of sellers and originators of mortgage loans against major financial institutions in mortgage repurchase and indemnification suits throughout the U.S. 

While attending law school, Shalia interned with the general counsel of a commercial real estate investment and development company. She also served as a notes and comments editor...

305-350-7216
Lori Lustrin, Commercial Litigation Attorney, Bilzin Sumberg Law Firm
Partner

Lori is a general commercial litigator who focuses on complex class-action and plaintiff opt-out antitrust litigation in federal court. In addition to antitrust work, her class action experience includes defending clients in the consumer products, homebuilding, real estate investment, and food and beverage industries.

Lori has also taken an interest in the emerging area of healthcare antitrust litigation and she has authored several articles on the subject. In addition to her varied federal court work, Lori has substantial experience in complex business litigation throughout the country, and has litigated cases involving intellectual property disputes, landlord-tenant disputes, land use disputes, bankruptcy issues, employment disputes, professional malpractice actions, unfair and deceptive trade practices issues, fraud, defamation, and products liability. Lori also has significant experience in alternative dispute resolution proceedings, including international arbitrations.

305-350-2385