While last week’s jury verdict in Reilly et al. v. 6480 Pickney, LLC et al. was big news and a significant victory for the particular business involved, it seems to have generated an unrealistic sense of optimism among cannabis industry commentators about the future of similar litigation. Commentators have suggested that the verdict is likely to dissuade similar plaintiffs from bringing the same kinds of claims. That seems unrealistic, in part, because of the plaintiffs’ lawyer’s statement that the “marijuana industry can expect many more days in federal court.” (Quoted here.)
Two other salient points, which seem to have been overlooked by recent media coverage, provide reason to expect similar lawsuits against cannabis businesses to continue.
Demonstrated Impact of the Tenth Circuit’s Safe Streets Ruling
First, while the defendants were not found liable by the jury, the overall landscape in the wake of the Tenth Circuit’s Safe Streets ruling remains very encouraging to plaintiffs in these cases. To establish a RICO claim like the one in the Reilly case, a plaintiff has to prove: (1) that the defendant conducted a criminal enterprise, (2) that the plaintiff was injured, and (3) that the defendant’s conduct caused the injury. Applying the rule from the Tenth Circuit’s opinion, the trial judge in the Reilly case granted the plaintiffs’ summary judgment motion on August 1, 2018, holding that running a marijuana business establishes the first element without need for proof at trial. That is a big deal.
To understand the significance of this principle, consider an analogy to a personal injury case in which the plaintiff sues after a collision with a truck. Ordinarily, the plaintiff would need to prove that (1) the truck driver was negligent, (2) the plaintiff was injured, and (3) the truck driver’s negligence caused the plaintiff’s injury. The Tenth Circuit’s Safe Streets decision, as applied in the Reilly court’s summary judgment decision, is the equivalent of relieving a personal injury plaintiff of the obligation prove that the truck driver did anything wrong. In other words, civil RICO plaintiffs suing cannabis businesses really have a running start.
Treble Damages
Second, plaintiffs in these kinds of cases also have a huge incentive in the form of treble (i.e., triple) damages which are available under the RICO statute. One damage model suggested by the Reillys during closing argument was that their property had been diminished by about $67,000. If the jury had agreed, the statute provides for tripling that amount, and then adding the plaintiff’s attorneys’ fees, which would easily run hundreds of thousands of dollars in a case like this. So a $67,000 award would have become a $300,000+ award under the statute, representing a lucrative opportunity for plaintiffs and their lawyers.
In sum, there is every reason to believe that, rather than being discouraged by the Reilly verdict, plaintiffs’ lawyers will take the lessons of the Reilly case and apply them to bring similar suits in the future.
Andrew Orr is a litigator who follows the cannabis industry, and has represented agricultural companies in a variety of commercial and other complex cases.