A Racketeering Lawsuit Brought by an Oregon Equine Lawyer Is Part of a National Strategy to Upend Legal Weed

If the lawsuit succeeds at trial, the impact on the cannabis industry would be dramatic.

Laura Underwood doesn't like living next to the Oregon Candy Farm.

That's the weed processing plant next door to Underwood's home in Sandy. The plant squeezes the THC-filled oil out of marijuana flower and turns it into candies.

This summer, Underwood joined forces with Rachel McCart, a lawyer from Beavercreek, Ore., who once specialized in equine law. These days, McCart has a new specialty: She sues legal cannabis businesses for racketeering.

On July 20, Underwood sued more than 200 businesses—every company that had ever done business with the Oregon Candy Farm. The suit, filed in U.S. District Court for the District of Oregon, alleges that every grower and dispensary that ever did business with her neighbor conspired to commit crimes that damaged the value of Underwood's Sandy home.

The crime? Growing a product that the federal government has outlawed.

The lawsuit is the latest to come out of a national playbook created by anti-cannabis groups and their lawyers, who hope suits like Underwood's will combine to reshape the future of legal weed.

If Underwood's lawsuit succeeds at trial, the impact on the weed industry would be dramatic. Cannabis businesses across the country would constantly be at risk for expensive lawsuits from annoyed neighbors. And many Oregon cannabis businesses are already struggling under financial strain from record-low wholesale prices in an oversaturated market (see page 6).

So some of the defendants have decided to confront the attack directly—and take the case to court.

"It's essentially a shakedown," says Mason Walker, who is a defendant in the case with his business partners and his company, East Fork Cultivars. "We don't want to be shaken down, and we don't want this to happen again."

McCart, 47, made a legal career representing clients in equine law—mostly in cases involving horse sales. She owns her own horses and cultivates a vegetable and flower garden on her 11-acre property in Beavercreek, a tiny Clackamas County town 19 miles southeast of Portland.

Her interest in racketeering lawsuits began in her own backyard. McCart filed her first racketeering suit against her neighbors in June 2017—for lowering the value of her property by growing weed next door, filling the air with what the suit described as the "powerful and unmistakable skunklike stench of marijuana."

Then, she found more plaintiffs in rural Lebanon with complaints about their neighbors' legal marijuana operations, and filed a second suit. The first case, first reported by The Oregonian, settled out of court. The second, first reported by the Portland Tribune, was dismissed before trial on Aug. 17, but could be amended and re-opened. (Correction: WW initially wrote that both cases were settled out of court, but the second case was dismissed.)

McCart is following a national blueprint for attacking state-sanctioned cannabis businesses in the courts. The strategy employs the 1970 Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO. The federal act allows multiple defendants to be criminally prosecuted or sued in civil court in the same case as part of a criminal enterprise. The law was designed to make it easier to go after drug cartels, mobsters and organized crime rings in court.

The strategy began in Massachusetts and Colorado in 2017, where two lawyers are currently moving forward with extremely similar lawsuits.

"I think this is a novel use of the RICO statute," says Scott Schlager, one of the lawyers who pioneered the strategy in Boston. "Before our case and the Colorado case, no one even thought about using the RICO statute. So this is brand new."

The approach seems to be catching on. At least one popular legal education company now offers $150 courses instructing plaintiff's lawyers how to sue the marijuana industry using RICO. (It's not clear whether McCart was familiar with these courses.) More than a half-dozen cases have been filed in federal courts across the U.S. invoking the federal statute.

None of these cases have yet gone to trial. But experts think the strategy could work. University of Washington law professor Sean O'Connor told Bloomberg last year the RICO approach "could have its intended impact."

Schlager says his Boston clients are not anti-marijuana activists, but the plaintiff in Colorado is Safe Streets Alliance, a Washington, D.C.-based anti-drug advocacy group that does not approve of the legal cannabis industry.

And in Oregon, both McCart and Underwood have histories of opposing the industry.

Underwood has worked with a group called Unwanted Pot Grows, which is based in Clackamas County and rallies around efforts to combat the expanding legal marijuana market. Its complaints mostly center on disputes between cannabis companies and their angry neighbors.

Underwood's suit says the cannabis businesses "directly and proximately injured Plaintiff's Property by interfering with Plaintiff's use and enjoyment of Plaintiff's Property, burdening it with noxious odors, diminishing its market value and making it more difficult to sell."

But this time, unlike in McCart's previous two cases, the defendants plan to fight back.

Attorneys representing some of the defendants in the case say the lawsuit abuses RICO and is not in the spirit of the law—which was designed to make it easier to prosecute drug cartels and organized crime rings.

"Plaintiffs' lawyers are learning how to file meritless, harassing lawsuits like this at a national continuing legal education event on how to sue the marijuana industry," says Portland lawyer Bear Wilner-Nugent, who represents one of the defendants. "My client and I will aggressively defend this lawsuit and seek all available remedies against the lawyer who is misusing the legal process in this case."

Despite the risk of losing the case, many of the defendants don't want to settle because they also cannot afford to be continually bombarded with more lawsuits.

"We really don't want to just settle, even though that would be the cheapest and least risky thing to do," Walker of East Fork Cultivars says. "It would incentivize [McCart] to keep doing it."

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