This case is interesting because other recent attempts by neighbors of cannabis growers to sue for diminished land values and enjoyment of real property have met with dismissal by district courts finding that allegations of diminished market value of land are insufficient to constitute an injury under RICO where that statute requires “proof of concrete financial loss rather than mere injury to a valuable, intangible property interest.” But this case isn’t going that way. The court has decided to let the claims proceed against the marijuana grower.
The plaintiff, Momtazi Family LLC, who operated and owned a vineyard that is now leased to Maysara brought a RICO action against the owners of a neighboring property who purchased the tract and began developing a cannabis cultivation and processing facility – Yamhill Naturals.
The plaintiff’s grievances include assertions that:
- One of its customers cancelled an order for six-tons of grapes on account of the neighboring marijuana operation believing the smell created by the marijuana contaminated the grapes and would affect the wine made from those grapes; and
- The cannabis growers terraced their land which caused large amounts of dirt to flow downhill into one of the fish-stocked reservoirs located on plaintiff’s property creating a hazard to the fish.
The plaintiff argues the marijuana operation on defendants’ property has “directly and materially diminished the Momtazi property’s fair market value,” decreased the “marketability of grapes grown on that vineyard property,” and decreased the rental income of the property.
You’d normally believe this would be a simple trespass case, but since the federal status of marijuana is still that of a Schedule 1 controlled substance, that potentially gives rise to the necessarily illegal a predicate act to sustain a claim for racketeering under the RICO act, allowing for its damages multiplier and attorneys fees that wouldn’t normally be available in a trespass action.
The cannabis defendants brought a motion to dismiss the claims for a few different theories, the important one we’re concerned with was a move to kick the RICO action because marijuana and the grower’s activities weren’t connected to the losses the plaintiffs alleged. But the court found fault with this argument noting that the primary causal question for RICO purposes remains: “[w]as the injury the direct or indirect result of the defendant’s conduct?”
The court held that because one of the damages was the lost grape sale based on the smell of marijuana, this met the standard because this allegation was that the damage was the direct result of the marijuana growing activity – the federally illegal activity and predicate crime.
You can read the opinion in Momtazi Family LLC v. Yamhill Naturals et al., here.
In an environment where growing, cultivating, processing and dispensing cannabis remains federally unlawful, the reality of facing a lawsuit for treble damages and attorneys fees leaves many marijuana businesses open to excessive and unfair penalties in this republic.