Get a free, confidential consultation.

Residents Use Federal Law to Challenge Recreational Pot

In a groundbreaking move, some of Colorado’s own residents and a business have joined the governments of two neighboring states in suing Colorado for allowing marijuana to be legally grown and sold. The plaintiffs hope the case will ultimately go the U.S. Supreme Court.

The owners of a horse farm and a Holiday Inn each recently filed suits claiming that federal laws banning marijuana supersede state law and that Colorado’s cannabis industry is thus engaged in racketeering. Each of the lawsuits seeks unspecified damages by claiming that a nearby pot-related business threatens their property values.

In the case of the hotel, its owner argues that the inn’s customers will be driven away by a pot shop across the street because such places draw "undesirable visitors, criminal activity and traffic,” and “emit pungent, foul odors.” The owners of the Pueblo County horse farm object to marijuana cultivation on an adjoining property, saying that it spoils their plans to build a home by interfering with their views of the Rocky Mountains.

Unique Use of Racketeering Law

An attorney for Safe Streets Alliance, a Washington D.C., advocacy group that opposes legalization of marijuana, said the Holiday Inn is a favorite for families with children bound for nearby Breckenridge ski slopes. The Pueblo County property owned by Michael and Hope Reilly will have a steel-walled marijuana-growing business and a smaller retail pot shop.

“Their views are beautiful in what is a rural but residential neighborhood [of] 40-acre tracts where people build homes and have horses,” said Brian Barnes, one of a half dozen staff attorneys at Cooper and Kirk, counsel for Safe Streets Alliance.

“So having this recreational marijuana facility 15 feet from their property is bad for their views but more significantly it’s bad for their property values,” Barnes said in an interview. “You go there for a sense of being out in the mountains.”

Those suits follow one brought by Nebraska and Oklahoma that seeks to have the U.S. Supreme Court reject the parts of Colorado's 2012 ballot initiative that legalize commercial marijuana operations.

That lawsuit accuses Colorado of flouting federal law by legalizing a drug considered by Congress to be "subject to the most severe restrictions,” and consequently of contributing to a “substantial expansion” of marijuana trafficking in Nebraska and Oklahoma that’s “particularly burdensome” for law enforcement and residents there.

The Ongoing Conflict of Federal vs. State

Central to all of the lawsuits is the conflict between federal law that classifies marijuana as illegal, and laws in several states that legalize it either for medicinal or recreational use. Colorado has legalized both. The lawsuits assert what is called the Supremacy Clause, which Barnes explains as simply this: federal laws trump state laws.

The Colorado residents and business seek redress under the Racketeer Influenced and Corrupt Organizations act (RICO), which allows private citizens to sue for triple damages when "organized crime and racketeering” are found to have infiltrated “legitimate organizations operating in interstate commerce.” It’s believed to be the first time that residents of a state where marijuana has been legalized have taken such a stand against pot using the RICO act. In federal court, the prevailing party’s legal fees must be paid by the losing party.

The suits name Colorado Gov. John Hickenlooper and several other government officials as conspiring to break the federal law, along with marijuana businesses and those seen as assisting them financially or materially in some way. If a federal judge were to accept the RICO assertion, Barnes said that anyone found to be assisting in the marijuana business — their banker, accountant or property manager — would be in violation of RICO.

That strategy has already paid off as one of the plaintiffs named in the suit, Bank of the West, closed the accounts of a pot dispensary owner named as a defendant in the case. That happened Feb. 27 — just over a week from the lawsuit filing. Safe Streets Alliance, in turn, has dropped the lawsuit against the bank, Barnes said.

“It just shows that the lawyers at The Bank of the West read the federal statutes the way we do — that knowingly operating a bank account for a known marijuana business is money laundering and exposes a financial institution under federal law (RICO),” Barnes said.

One Defendant Already Balks

The individuals filing the lawsuit against the governor and other public officials claim in the suit that those defendants “are facilitating and encouraging Colorado’s recreational marijuana trade, including the racketeering activity that is injuring their property, through a licensing regime that purports to authorize federal drug crimes.” Some legal observers doubt the strategy will hold up in court.

For an individual filing a RICO lawsuit to prevail, “you have to show that your business or property interest were harmed by a corrupt organization,” Sam Kaim, University of Denver professor of law, said at a press conference the day the suits were filed. He told the Denver Post that the harm would have to be provable and directly linked to the actions of, in this case, the marijuana cultivator. “Displeasure is not good enough.”

Whichever side prevails, it’s assumed that the verdict would be appealed, plaintiff’s attorney Barnes said. The suit has been filed in federal court and would next go to the U.S. Court of Appeals, 10th Circuit, whose region includes Colorado. Any appeal of that verdict would go to the U.S. Supreme Court, which can choose to hear the case or decline.

By Nancy Wride

Follow Nancy on Twitter at @NWride

Posted on June 10th, 2015

Get a free, confidential consultation.
Call 844-876-5568 or fill out the form below.