The federally illegal, but state sanctioned cannabis industry has presented more than one legal qualm for cannabis entrepreneurs, consumers, and antagonists. The federal government has labeled cannabis a Schedule 1 drug, or a substance with no medicinal use and a high potential for abuse. At the same time, this past November election saw America vote for the legalization of cannabis as 8 out of the 9 cannabis ballot initiatives approved either recreational or medical marijuana in California, Maine, Massachusetts, Nevada, Arkansas, Florida, Montana, and North Dakota.In short, the future of legalized cannabis seems uncertain. The marijuana industry has quite a bit of nuance and ambiguity to contend with, and a lot of that contention causes common lawsuits.
Racketeering as defined by the Racketeer Influenced and Corrupt Organizations (RICO) Act refers to any business activity involving crimes including murder, gambling, and controlled substances as defined by the Controlled Substances Act. This means that, federally, any businesses that deal with cannabis are in violation of this federal law. Certain antagonists to the legalization movement have harped on this law as a way to combat Colorado’s marijuana industry.
RICO enables those hurt by racketeering violations to file lawsuits against the perpetrators. In February of 2015, in two distinct lawsuits, the neighbors of pot businesses filed lawsuits claiming that those businesses were declining the value of their properties. Even before it went to trial, one of those cases resulted in the closure of Medical Marijuana of the Rockies due to overwhelming legal proceedings and a lack of cooperation from banks.
In January of 2017, Colorado marijuana dispensaries faced a revival of racketeering lawsuits. The lawsuits, filed by local residents but funded by political entities from surrounding states, claim that marijuana businesses decrease property values, and, given federal law, are in violation of the RICO Act. If these lawsuits are successful, they pose a pretty significant threat to the cannabis industry, especially since, as the 2015 case demonstrated, they can have detrimental consequences before even making it to a hearing.
Product Liability Lawsuits
Since the FDA won’t treat cannabis as a legitimate crop, the marijuana industry has no systematic, structured regulatory system. That means that there are growers using dangerous pesticides on their flowers, and, if a dispensary doesn’t recognize the importance of cannabis testing, those chemicals, in addition to mold and potentially dangerous microbial agents, are being ingested by consumers.
This issue can and has lead to product liability lawsuits. Product liability suits place responsibility for defective products on the hands of the manufacturers or sellers of those goods. However, since there is no federal product liability law, states determine whether or not a manufacturer has neglected reasonable safety standards and how such a breech should be punished.
In 2015, the cannabis industry saw its first product liability lawsuit. Colorado resident Brandon Flores, a medical marijuana user for treatment of chronic back pain, discovered that the cannabis he was consuming was potentially treated with Eagle 20, a dangerous pesticide known to produce hydrogen cyanide when burned. While the pesticide has been approved for use on crops that aren’t inhaled, it has been banned from use on tobacco precisely because of the way that substance is inhaled.
The legalized marijuana industry presents an incredible multitude of benefits to its customers, but, like any industry, it is prone to a vice far more insidious than herbal intoxication: greed.
Rather than scaling back on production, some cannabis growers are attempting to maximize their growth while spending as little money as possible
This leads to sloppy practices that can include the use of dangerous pesticides. And until the FDA recognizes marijuana, the industry will continue to operate without clear guidance on how to safely treat cannabis.
Nuisance Claims Lawsuits
The law of nuisance is meant to protect property owners with neighbors whose unreasonable behavior prevents plaintiffs from enjoying their property. The nuisance must have substantial consequence and take place over an extended period of time. Because of its pervasive nature, many nuisance claims deal with offensive smells. Hence, nuisance claims targeting cannabis businesses.
The cannabis flower is a highly olfactory herb, so eradicating all smells presents cannabis businesses with a difficult challenge as Colorado producer, Dandelion Grow, discovered when it was fined the hefty total of $14,000 after two violations for failing to meet the city of Boulder’s odor rules.
Dandelion Grow defended itself with two claims. First, the company argued that the second violation it received (sentenced only a few weeks after the first) was unfair since the company was actively working with the city to remedy the odor situation. Secondly, Dandelion Grow is only one of several cannabis production companies in the vicinity. To Dandelion, it seemed that the plaintiffs were unfairly directing their complaints of a multi-organizational problem exclusively to its company.
Gun Purchase Lawsuits
As plaintiff S. Rowan Wilson discovered when she tried to purchase a gun in Nevada, her home state, 18 U.S. Code § 922 does not allow any person using illegal drugs to purchase a firearm. Wilson was prohibited from purchasing a gun because she possessed a medical marijuana registry card. Wilson sued former Attorney General Loretta Lynch in order to combat this law in defense of her second amendment rights.
In the subsequent case, Wilson v. Lynch, the US Court of Appeals for the Ninth Circuit sided with Lynch, upholding the federal law.
The court argued that the law did not prevent Wilson from owning a gun
it simply regulated the method of obtaining the gun, something that the court argued was not in violation of the second amendment. The court stated that Wilson could have given up her medical marijuana registry card, especially since, as both Wilson and the court acknowledged, she possessed the card simply to show support for the legalization movement, not out of medical need.
Trademark Protection Lawsuits
Another common but consistently disappointing area of lawsuit in the cannabis industry deals with trademark protection. Normally, a business can register a trademark through the U.S. Patent and Trademark Office’s website. However, this usually straightforward process proves to be quite difficult for cannabis businesses since cannabis is federally illegal.
Companies that sell cannabis or include any materials that seemingly validate an illegal substance will be rejected by the U.S. Patent and Trademark Office as Morgan Brown discovered when he applied to register the mark “HERBAL ACCESS” in connection with its “retail store services featuring herbs.” Despite the crafty use of the word “herb,” the USPTO cited the company’s clear connection with cannabis as the reason for its rejection of Brown’s application.