The Denver Post

Marijuana, property values are focus of upcoming trial

- By Kathleen Foody

A federal trial in Colorado could have farreachin­g effects on the United States’ budding marijuana industry if a jury sides with a couple who say having a cannabis business as a neighbor hurts their property’s value.

The trial set to begin Monday in Denver is the first time a jury will consider a lawsuit using federal antiracket­eering law to target cannabis companies. But the marijuana industry has closely watched the case since 2015, when attorneys with a Washington, D.C.based firm first filed their sweeping complaint on behalf of Hope and Michael Reilly.

One of the couple’s lawyers, Brian Barnes, said the Reillys bought the southern Colorado land for its views of Pikes Peak and have since built a house on the rural property. They also hike and ride horses there.

But they claim “pungent, foul odors” from a neighborin­g indoor marijuana grow have hurt the property’s value and their ability to use and enjoy it.

“That’s just not right,” Barnes said. “It’s not right to have people in violation of federal law injuring others.”

An attorney for the business targeted by the suit plans to argue the couple’s property has not been damaged, relying in part on the county’s tax valuations of the Reillys’ land ticking up over time.

Vulnerabil­ity to similar lawsuits is among the many risks facing marijuana busi nesses licensed by states but still violating federal law. Suits using the same strategy have been filed in California, Massachuse­tts and Oregon.

Mirroring the Reilly complaint, several claim the smell of marijuana damages neighborin­g owners’ ability to enjoy their land or harms their property value.

The question now is whether jurors accept the argument.

“They 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 Rob Mikos, a Vanderbilt University law professor who specialize­s in drug law. “That’s why there are a lot of eyes on the case.”

Congress created the Racketeer Influenced and Corrupt Organizati­ons Act — better known as RICO — to target the Mafia in the 1970s, allowing prosecutor­s to argue leaders of a criminal enterprise should pay a price along with lowerlevel defendants.

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

Starting in 2015, opponents of the marijuana industry decided to use the strategy against companies producing or selling marijuana products, along with investors, insurers, state regulators and other players. Cannabis companies immediatel­y saw the danger of high legal fees or courtorder­ed payouts.

That concern only grew when a Denverbase­d federal appeals court ruled in 2017 that the Reillys could use antiracket­eering law to sue the licensed cannabis grower neighborin­g their property. Insurance companies and other entities originally named in the Reillys’ suit have gradually been removed, some after reaching financial settlement­s out of court.

The case focuses on property in Pueblo County, where local officials saw marijuana as an opportunit­y to boost an area left behind by the steel industry. Most Colorado counties ban outdoor grows, forcing pot cultivator­s to find expensive warehouse space.

Pueblo officials positioned their sunny, flat plains as the alternativ­e. They created financial incentives in hopes of drawing growers to outdoor fields or cavernous buildings left vacant by other industries.

Parker Walton was among the early comers, buying 40 acres in the rural town of Rye in 2014.

Barnes said the Reillys made three separate land purchases between 2011 and 2014, gradually reaching more than 100 acres. They learned about plans for the marijuana business bordering their final purchase four months after completing the sale, he said.

Walton put up a 5,000squaref­oot building to grow and harvest marijuana plants indoors. The Reillys filed their lawsuit in early 2015. A year later, Walton announced the company’s first harvest via Instagram.

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