Three Arkansas medical marijuana cultivators and one Arkansas medical marijuana testing company are the latest to be hit by a federal lawsuit alleging that medical marijuana businesses are violating federal law by testing or producing a product illegal under federal law.
A lawsuit was filed July 12 in the U.S. District Court for the Eastern District of Arkansas by medical marijuana patients Don Plumlee, Jakie Hana and Pete Edwards, on behalf of themselves and all others similarly situated, against Steep Hill Inc., the only Arkansas Department of Health-certified cannabis testing lab in the state, and the cultivation facilities Bold Team LLC, Natural State Medicinal and Osage Creek Cultivation. Osage Creek, near Berryville, has announced plans to open a dispensary in Eureka Springs.
“Each Plaintiff files this suit to vindicate the federal laws prohibiting the cultivation and sale of marijuana and their rights under the Racketeer Influenced and Corrupt Organizations Act (RICO),” the lawsuit states. “Each Plaintiff is in chronic pain who has been prescribed medical marijuana by a physician. Plaintiff seeks redress under RICO, which requires those who engage in racketeering activity-including the commercial production of marijuana to pay those they injure treble damages, costs, and attorneys’ fees. Each Plaintiff also seeks an injunction under RICO directing the marijuana operations defrauding Plaintiff and the Class to stop violating the federal drug laws.
“It is a bedrock principle of the United States Constitution that federal law is the supreme law of the land. State laws that are flatly inconsistent with constitutionally authorized federal law have no force or effect. On the issue of medical marijuana, federal law is clear: it is a felony under the Controlled Substances Act of 1970 (CSA) to deal in marijuana. Despite the express federal prohibition on marijuana, Arkansas has enacted laws, ordinances, and regulations designed to promote the growth of a billion-dollar commercial marijuana industry. Yet notwithstanding that medical marijuana is now ‘legal’ in Arkansas, the drug’s cultivation, sale, and possession remain serious federal offenses in Arkansas, just as they are everywhere else in the United States. Indeed, those associated with Arkansas’s largest-scale marijuana producers’ risk being sent to federal prison for the rest of their lives.
“The people of Arkansas are free to advocate for a change in this federal criminal prohibition, but they must do so through their elected representatives in Congress. Under our federal system, Congress alone can authorize revision of federal laws prohibiting the commercial trade in medical marijuana.”
MJBizDaily, a trade publication for the marijuana industry, published in a recent online article that RICO lawsuits have been tried previously in several other similar situations across the nation, and those suits typically have not succeeded in shuttering licensed cannabis operations. “However, some RICO lawsuits have led to pricey settlement agreements,” MJBizDaily reports in an article about a similar lawsuit filed in Oklahoma.
The Arkansas lawsuit, which presents only one side of the argument, said in recent years the U.S Department of Justice has largely declined to bring prosecutions under the federal marijuana laws, prompting hundreds of millions of investment dollars and thousands of new customers to flow into Arkansas’s commercial marijuana industry.
“But the Justice Department’s current policy of non-enforcement does not strike a single word from the U.S. Code or deprive private individuals of their judicially enforceable rights under federal law,” the lawsuit states. “The Department of Justice can no more amend a federal statute than can the State of Arkansas, and marijuana remains just as illegal under federal law today as it was when Congress passed the Controlled Substances Act in 1970.”
The lawsuit further states that marijuana businesses that market their products as medicine should be held to reasonable production standards to ensure this “medicine” is effective. “But Defendants have intentionally refused to implement reasonable production standards, instead preferring to do business with Steep Hill that regularly intentionally inflates the amount of THC in its customers’ flower,” the lawsuit states. “The net effect is to defraud the Plaintiff and putative clause by over-representing the amount of THC in flower to the detriment of the Plaintiff and Class so that Steep Hill, the cultivators, and the dispensaries can make more money. Together, Plaintiff is filing this suit to vindicate their federal rights under RICO and the Supremacy Clause.
“Dealing in marijuana is racketeering activity under RICO, and those who engage in a pattern of racketeering activity through a corporation or other enterprise are liable for three times the economic harm they cause plus costs and attorneys’ fees. Those who conspire with racketeers by agreeing to assist them are likewise liable. RICO also gives federal courts the power to order racketeering enterprises and their coconspirators to cease their unlawful operations. Accordingly, The Plaintiff and the Class ask this Court to award them the damages, costs, and fees to which they are entitled, and both Plaintiffs request that the Court order the RICO Defendants to cease their open and notorious violation of federal law.”
Arent Fox Schiff, LLP, a law and lobbying firm with offices in many larger cities in the country, said RICO suits have been brought against cannabis companies for a wide range of injuries, including a vineyard whose grapes were “tainted” by the cannabis farm next door, and a business owner who claimed that he lost profits because of the smell wafting from a neighboring grow operation.
“The good news for legal cannabis companies is that as of this publication, no plaintiffs have succeeded in recovering RICO damages from a legal cannabis company, and several suits have been dismissed,” the firm published in an online article. “Most courts presented with the issue have side-stepped the racketeering question and dismissed plaintiffs’ claims on grounds of inadequate injury. These decisions indicate there is a strong argument that the simple presence of a grow operation without any plausible financial impact upon neighbors is not a sufficient injury.”
Steep Hill did not respond to a request for comment prior to deadline.
The lawsuit was filed by Luther Oneal Sutter, Sutter & Gillham, PLLC, Benton.