Marijuana lawsuit

Marijuana plants grow in a high tunnel at a farm near McMinnville, Ore. A federal judge has dismissed with prejudice a lawsuit accusing an Oregon marijuana operation of racketeering.

Marijuana’s alleged impact on property values cannot legally justify a racketeering lawsuit by Oregon landowners over the controversial crop, according to a federal judge.

A speculative drop in property value doesn’t count as a “concrete financial loss” under the Racketeer Influenced and Corrupt Organizations Act, even if it reduces the amount of money that can be borrowed against the value of a home, the ruling said.

U.S. District Judge Michael McShane has dismissed with prejudice a complaint filed by neighbors of a marijuana-growing operation near Lebanon, Ore., which means they can’t revive their RICO allegations.

The 10 plaintiffs claimed to be adversely affected by marijuana’s “unmistakable skunk-like stench,” noise from greenhouse fans, guard dogs running loose, as well as frequent traffic on previously quiet rural roads.

Since marijuana remains illegal under federal law, the plaintiffs alleged the owners of the marijuana-growing parcel and their associates were engaged in a “criminal enterprise” to manufacture and sell a controlled substance.

Last year, the judge dismissed the original complaint because an “abstract reduction in the fair market value of the plaintiffs’ lands” doesn’t provide sufficient grounds to sustain a RICO claim in federal court. However, the plaintiffs were allowed to refile the lawsuit to show they’d suffered a concrete financial loss.

In a revised version of the complaint, two of the plaintiffs — Karl and Lucinda Frink — argued they could have obtained a larger home equity loan if not for the depressed property value caused by the neighboring marijuana operation.

McShane ruled that borrowing a smaller amount of money isn’t considered a “compensable property injury” under the 9th U.S. Circuit Court of Appeals interpretation of RICO law.

Because they owe less money, the plaintiffs will end up paying less interest and their “financial position is no worse than it would have been absent the racketeering activity,” the judge said.

For example, the allegedly reduced property value did not cause the plaintiffs to be “charged a higher interest rate or otherwise offered the same loan on less favorable terms,” he said.

Rachel McCart, attorney for the plaintiffs, did not respond to requests for comment.

Although McShane’s decision isn’t binding, it’s solidly in line with 9th Circuit precedent and its reasoning will likely doom similar RICO litigation against Oregon marijuana growers over property values, said Alex Tinker, an attorney for the defendants.

“That theory in the 9th Circuit has pretty well been dispatched,” Tinker said.

However, the ruling probably won’t end the controversy over alleged RICO violations involving marijuana in Oregon, where voters fully legalized the crop under state law in 2014.

Another lawsuit over a marijuana-growing operation in Yamhill County also cites RICO without solely relying on marijuana’s effect on property values.

Rather, the complaint argues that grapes grown by the Momtazi family were refused by a buyer because they’d been contaminated by the “pungent stench” of marijuana grown on a nearby property.

The plaintiff in that case is also represented by Rachel McCart, who’s filed several lawsuits against marijuana producers in Oregon.

Alleging that marijuana rendered grapes unmarketable may allow that complaint to survive a motion to dismiss based on “concrete financial loss,” though it’s likely to encounter other difficulties, said Tinker, who’s aware of the case but isn’t representing the defendants.

“They’re still going to have proof problems, they’re still going to have causation problems,” he said.

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