Denver verdict on pot odor and property values could discourage homeowners from filing RICO lawsuits

A Colorado jury likely threw cold water on future legal challenges against cannabis companies by homeowners who consider filing racketeering lawsuits alleging that proximity to pot operations hurts their property values, analysts and industry lawyers said Thursday.

A federal jury in Denver on Wednesday rejected claims involving the odor from a pot farm made in a case that was closely watched by the marijuana industry.

It was the first such lawsuit to reach a jury. Three others are pending in California, Massachusetts and Oregon.

“The big takeaway is that the verdict is likely to curb the enthusiasm for bringing these lawsuits in the future,” Vanderbilt University law professor Rob Mikos said.

He said it’s easy to show marijuana companies are violating federal laws against pot, but the Colorado verdict shows the difficulty in proving actual harm.

“There was a thought that this would be easy money,” Mikos said about such claims.

Congress created the Racketeer Influenced and Corrupt Organizations Act — better known as RICO — to target the Mafia in the 1970s. It allowed prosecutors to argue that leaders of a criminal enterprise should pay a price along with lower-level defendants.

The law also allows private parties to file lawsuits claiming their business or property has been damaged by a criminal enterprise. Those who can prove it can be financially compensated for damages plus attorneys’ expenses.

Scott Schlager, a lawyer who filed a similar lawsuit against a dispensary in Cambridge, Mass., dispensary agreed with Mikos, saying racketeering lawsuits are expensive to litigate.

“They shouldn’t be the next cottage industry,” he said. “There is a lot of uncertainty.”

Schlager said the Denver verdict will have no effect on his case because the two legal actions have important differences.

The Colorado plaintiffs complained that a farm’s odor lowered their property value by about $30,000.

Schlager’s clients in Harvard Square argue that the stigma of a marijuana dispensary in the upscale business district lowered property values by $29 million.

Attorney Ken Stratton, who represents a pot farmer being sued by eight homeowners near Petaluma, in the heart of California wine country, said he was surprised the Denver case reached a jury.

“I think we’ll see more and more of these knocked out before they go to trial,” Stratton said. “The racketeering law wasn’t meant to litigate land disputes.”

He also predicted the Denver verdict will make other lawyers and disgruntled neighbors look elsewhere to settle their disputes with marijuana operations.

He said showing that cannabis operations impact land prices is difficult, especially if the homeowners are speculating rather than arguing they lost money in actual sales.

Emma Quinn-Judge, a Boston lawyer defending the Cambridge dispensary, agreed that showing harm is the biggest hurdle.

“If you know anything about Cambridge home prices, then you know that arguing their value has dropped $29 million is laughable,” she said.