Case Dismissed

Special Report - Special Report: Cannabis Odor Control

Learn from these settled RICO cases how proper equipment and defense can save you from judgment.

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May 9, 2019

The site Alternative Holistic Healing purchased and on which it built its recreational cultivation warehouse in 2016; view is facing the Reillys’ property.
Photo courtesy Matthew Buck

Cannabis odor control is serious business, especially when neighbors take cultivators to court over it. Some have done just that in Colorado, California and Oregon, suing cannabis growers under the Racketeer Influenced and Corrupt Organizations Act.

Commonly referred to as RICO, this act is known for Mafia- related prosecutions by allowing ordinary citizens to sue criminals who cause them financial harm and collect three times the amount of damages jurors find, in addition to attorney’s fees. Due to marijuana’s Schedule I drug classification, marijuana cultivation and sales remain illegal under federal law, leaving the door open to RICO prosecutions.

While judges in these prominent RICO suits ruled against the plaintiffs, the cases remain notable as they highlight risks involving cannabis odor, and in the Colorado suit—the most publicized of the cases—how odor control contributed significantly to the defense.

Colorado

Michael and Phillis Reilly turned to federal court in 2015 when a cannabis grow (Alternative Holistic Healing) moved next door to where the couple kept their horses. A panel of the U.S. Court of Appeals for the 10th Circuit found that growing cannabis for sale is a violation of federal law, and thus “is by definition racketeering activity,” which could decrease the Reilly’s property value. The panel also found it plausible that alleged odor from the facility could make the couple’s property less valuable. The appeals court sent the case back to district court.

Matthew Buck, the defense attorney representing the land owner, Parker Walton, argued during the trial that the grow did not cause any odor due to its odor-control system, which did not vent outdoors. He added that the Reillys’ property value had actually increased, not decreased, as claimed. On Oct. 31, 2018, a jury in Denver decided that the grow facility did not hurt the Reilly’s property value, ending the closely watched case in favor of Walton.

California

In August 2018, residents in a Sonoma County, Calif., neighborhood filed a lawsuit in San Francisco federal court accusing Carlos Zambrano and his company, Green Earth Coffee, of violating racketeering laws by running his cannabis cultivation operation without local permits or a state license. Zambrano had applied for a cultivation permit, which was not issued and was pending an appeal at the time of the lawsuit. The neighbors alleged that the grow’s noise and odor were major disruptions to the area.

Zambrano filed a motion to dismiss the case in October 2018. In it, he said that the nine neighbors suing him had not stated a valid claim under RICO, as they had not suffered financially. On Dec. 27, 2018, U.S. District Judge Jon Tigar ruled in Zambrano’s favor—that the neighbors could not sue Zambrano and his operation under RICO because bad odors and noise are nuisances that do not cause the kind of measurable financial losses required to pursue a case. The ruling came several weeks after Green Earth Coffee ceased its operations as part of an agreement with Sonoma County’s permitting department, which said the business did not comply with all its rules.

Oregon

Plaintiffs in Ainsworth v. Owenby filed a RICO lawsuit in December 2017 against a cannabis cultivation operation with a greenhouse on a neighboring property. The landowners argued that noise from the facility and the “persistent stench of marijuana,” among other complaints, had disrupted their lives and made their properties “worth materially less than they otherwise would be” and “harder to sell at any price.” The district court summarized the plaintiffs’ complaints into three injuries: “(1) diminished use and enjoyment of their properties; (2) reduction in the fair market value of their lands; and (3) expenditures on additional security measures.”

Ultimately, the court found that—similar to the Colorado case—these three injuries were not actionable under RICO, and the case was dismissed in August 2018.