Marijuana Business Magazine November December 2018

T he number of federal civil racketeering lawsuits filed against marijuana businesses is on the rise, forcing com- panies named in a lawsuit to spend tens of thousands of dollars trying to fight the claims. Plaintiffs are using the Racketeer Influenced and Corrupt Organizations Act (RICO) to target cannabis companies under the premise that their enterprises are illegal under federal law – even if they are abiding by the rules of state-legal programs. Legal experts are divided about the financial risk the lawsuits pose to the industry, but the growing number of cases is concerning to many, especially cultivators. “There is a greater risk of (racketeering) litigation at this point because of the greater publicity, and the potential for copycat litigation is heightened,” California cannabis attorney Omar Figueroa said. In a nutshell, RICO: • Was enacted in 1970 to target organized crime. • Now includes other federally illegal activities such as drug trafficking. • Awards triple financial damages plus attorney fees if defendants lose. “My advice is don’t be too shocked if you’re named in a lawsuit,” said Mason Walker, owner of East Fork Cultivars in Oregon, which grows cannabis for the adult-use market. Walker should know. He was named as a defendant in a RICO lawsuit in July brought by Oregon attorney Rachel McCart, who has filed three RICO suits in the state. As bad as it sounds, however, a RICO case is a civil suit, not a criminal one. “It’s not like you’re going to be hauled away and go to jail,”Walker said. Here are steps cannabis companies can take to prevent RICO lawsuits in the first place – and what to do should you suddenly find your company is the target of one. Preventing RICO Lawsuits “The best antidote to RICO litigation is to be a good neighbor,” Figueroa said. He recommended marijuana business owners: • Become part of the neighborhood by hosting a community block party or barbecue, for example. • Develop a sense of community solidarity by starting or participating in a neighborhood crime-watch program. • Show you’re a real-life human being doing your best by responding to neighbors’ concerns and complying with marijuana laws and regulations in your jurisdiction. Interacting with the community is “far more constructive than not engaging in the neigh- borhood and having the neighbors develop irrational fears based on reefer mad- ness,” Figueroa said. The California attorney recalls that some of the early marijuana businesses in distressed parts of Oakland formed solid relationships with neighbors by working to help beautify their neighborhoods. “They literally were sweeping the streets,” he said. “Neighbors appreciated how the beautification was making their lives better.” Address Neighborhood Concerns Being proactive will lower the odds of being the target of a RICO suit, although it’s impossible to completely insulate your business. “It’s hard to eliminate the risk of a lawsuit, but at the minimum it helps to reduce (your exposure),” said Robert Mikos, a cannabis law professor at Vanderbilt Law School. That said, addressing neighbors’ concerns quickly can help diffuse situations before they escalate. For example, a common complaint among neighbors of marijuana operations is that facilities emit a “skunklike stench.” To prevent such claims before they happen, Kris Krane, president of cannabis consulting firm 4Front Advisors, encourages indoor cultivators to invest in air-filtration systems and other technology to reduce odors. Installing such equipment might be expensive, but the upfront fee is not as costly as hiring a legal team to defend yourself against a racketeering suit. Parker Walton, owner of CannaCraft in southern Colorado and a defendant in a RICO suit, said air filtration for his business is handled within an HVAC system that cost Omar Figueroa is a cannabis attorney in California. Photo courtesy of Omar Figueroa EXECUTIVE SUMMARY Racketeering suits have been proliferating against marijuana cultivators, alleging the growers are depressing property values in their neighborhoods. Here’s what companies can do to protect themselves ahead of time: • Be a good neighbor. Let your community get to know you through activities such as a block party or barbecue. • Develop a sense of neighborhood solidarity by starting or participating in a neighborhood crime-watch program. • Proactively install odor-control equipment. • Respond to neighbor concerns and show you’re complying with marijuana laws and regulations. • Hire an attorney experienced in litigation if your company is targeted in a racketeering suit and consider pooling resources with other defendants. November/December 2018 • Marijuana Business Magazine • 105

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