Landmark trial focuses on whether Colorado cannabis firm hurts property values

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A federal trial in Colorado this week could have far-reaching effects on the marijuana industry if a jury sides with a couple who say having a marijuana business as a neighbor hurts their property’s value.

The trial, set in Denver, is the first time a jury will consider a lawsuit using federal anti-racketeering law to target cannabis companies. The marijuana industry has closely watched the case since the complaint was first filed in 2015, on behalf of Michael Reilly and Phillis Hope Reilly.

Suits using the same strategy have been filed in California, Massachusetts and Oregon, claiming the smell of marijuana damages neighboring owners’ ability to enjoy their land or harms their property value.

In a recent case in Oregon, a judge dismissed claims, ruling that the plaintiffs failed to show a concrete loss in the value of their property.

The question now is what jurors in Colorado think.

“They (plaintiffs in the suits) can claim a $1 million drop in property value, but if a jury does not agree and says $5,000 – that’s not that big of a deal,” said Robert Mikos, a Vanderbilt University law professor who specializes in drug law. “That’s why there are a lot of eyes on the case.”

The defendant in the Colorado case, Parker Walton, operates CannaCraft, a small-batch marijuana greenhouse in southern Colorado.

Walton told Marijuana Business Daily in a recent interview that if he were to suffer a large monetary loss it would put him out of business. He said he has had to spend tens of thousands of dollars but is determined to fight rather than settling the suit or closing his business.

“Tucking your tail in and running, that’s not the right precedent to set,” he said. “That’s giving them a victory.”

The Reillys, who own dozens of acres of pasture-like property near Walton’s operation, claim the marijuana operation emits a “noxious odor” that has diminished the value of their property.

But Walton told MJBizDaily that each room of his cultivation area is sealed, and the flower rooms have air-sanitation units. He said a consultant earlier this year used a field olfactometer to measure odors at his property and the perimeter of the Reillys’ land and picked up odors on only two instances inside his fence line.

Congress created the Racketeer Influenced and Corrupt Organizations Act (RICO) to target the Mafia in the 1970s, allowing prosecutors to argue leaders of a criminal enterprise should pay a price along with lower-level defendants.

But the RICO law also allows private parties to file lawsuits claiming their business or property has been damaged by a criminal enterprise. Those who prove their allegations can be financially compensated for damages times three, plus attorneys’ expenses.

– Associated Press and Marijuana Business Daily