Skip to contents
Crime and Courts

How a property dispute over views and smells could pose a major threat to Colorado’s marijuana industry

A lawsuit going to trial on Monday could create a blueprint for using the federal RICO act to take down marijuana businesses in civil court

A sign on a gate leading to property owned by Michael and Phillis Reilly. The Reillys' property sits right next to a marijuana grow warehouse. Photographed on Oct. 28, 2018. (John Ingold, The Colorado Sun)
  • Credibility:

PUEBLO COUNTY — The plots of land that caused the neighbor dispute that led to the lawsuit that could provide legalization opponents with a blueprint for how to destroy Colorado’s marijuana industry sit on a quiet, shortgrass plain just east of Interstate 25 and south of Pueblo.

On one plot, a sign on a steel gate reads, “Bless this ranch.” On the other plot, a chainlink fence surrounds a humming marijuana grow warehouse. Starting Monday, in a first-of-its-kind trial in federal court, a jury will hear arguments about whether the latter has caused any harm to the former.

In many ways, this is a typical land-use battle. The ranch is owned by Michael P. and Phillis Windy Hope Reilly, who raise horses there and say they bought the property for peaceful rural solitude. The grow is owned by Parker Walton, a state-licensed marijuana cultivator who says he has done his best to be a good neighbor. The Reillys disagree and say the grow has marred their vistas and diminished their property value.

But here’s where the lawsuit becomes very much atypical: Because marijuana cultivation remains illegal federally, the Reillys didn’t just sue Walton and his business. They — with the help of a national anti-legalization group and a law firm that has ties to U.S. Attorney General Jeff Sessions — sued Walton under the Racketeer Influenced and Corrupt Organizations Act. That’s also known as the RICO act, the same law that the feds use to take down mob bosses.

MORE: Read the lawsuit

Anyone found civilly liable under RICO must pay out three times the amount of damages — such as a loss in property value — that a jury finds. And, so, if the lawsuit is successful, it could create a plan for how to dismantle the Colorado marijuana industry, brick-by-brick: Find someone whose property value was hurt by a marijuana business and then use RICO to sue that business out of existence.

“If they win a jury verdict and win a big judgment, that would be big news,” said Robert Mikos, a law professor at Vanderbilt University who is a national expert on marijuana law and has been following this case for years. “Then you have even more incentive to look out there for potential plaintiffs to sue these big companies.”

A gate leading to a plot of land owned by Michael and Phillis Reilly lies right next door to a marijuana grow warehouse near Colorado City, as seen on Oct. 28, 2018. (John Ingold, The Colorado Sun)

The legal fight

It took a winding road to bring the case to this precipice.

When it was originally filed in 2015, the lawsuit attempted a more direct approach to ending marijuana commercialization in Colorado — by arguing that Gov. John Hickenlooper and the rest of state government were impermissibly breaking federal law by regulating marijuana businesses. But the 10th U.S. Circuit Court of Appeals rejected that argument, while allowing the Reillys’ RICO claim to go forward.

Along the way, the Washington, D.C.-based anti-drug group Safe Streets Alliance was dismissed as a co-plaintiff. (Safe Streets, of which the Reillys are purportedly members, was chaired by a former appointee of President Ronald Reagan, but, other than being involved in this and another Colorado lawsuit filed in 2015, it is unclear what exactly it did. Its website, in addition to hosting anti-drug articles, now contains what appears to be sponsored content for hiking jackets, licensed electricians and other products or services.)

The Reillys are represented by the conservative D.C. law firm Cooper & Kirk, where Sessions — who is no fan of marijuana legalization — turned when he needed a private attorney to represent him on matters related to the FBI’s Russia investigation.

And, with RICO, they have a potent tool. Colorado U.S. District Court Judge Robert Blackburn has already ruled that Walton and his business are in violation of the act. State-legal marijuana businesses are inherently federal criminal conspiracies, Mikos said.

“Those are pretty simple elements to meet,” he said.

So, Walton’s only hope is to convince jurors that his business hasn’t caused any harm to the Reillys’ ranch. His attorney is confident that it hasn’t.

A marijuana grow facility near Colorado City that is at the heart of a RICO lawsuit is seen on Oct. 28, 2018. (John Ingold, The Colorado Sun)

The land

The Reillys’ ranch sits in a shallow valley about 2 miles east of the interstate and the town of Colorado City. It is mostly open prairie, with some rolling hills and shrubs.

In their lawsuit, the Reillys describe the property as having “sweeping mountain vistas that include views of Pikes Peak.” When a Colorado Sun reporter visited the area on Sunday, Pikes Peak — which is about 65 miles away — was faintly visible in the distance. Much closer is imposing Greenhorn Mountain on the west side of I-25. From the Reillys’ land, though, their view of the mountain also takes in something else: Walton’s marijuana grow.

The Reillys say the grow is an eyesore, and they also say their property value is harmed by the grow’s smell and by its connection to federally illegal activity. They plan to present an expert witness at trial who will testify to these harms’ effects on value.

“Our clients are looking forward to their day in court and are looking forward to having the opportunity to tell their story,” said David Thompson, a Cooper & Kirk attorney representing the Reillys. He declined to provide additional comment.

But Walton’s attorney said the Reillys’ claims are baseless.

Matthew Buck said the grow doesn’t vent to the outside, meaning no smell could escape. He said he has hired an expert witness who has taken multiple readings using a Nasal Ranger smelling device and come back with no discernible odor. (During The Sun reporter’s visit to the area, no odor could be detected outside the grow.)

The Reillys have not attempted to sell their property during the course of the lawsuit, he said. Rather, they have expanded their ranch — adding another 35 acres in 2016, according to county records, bringing their property to more than 140 acres spread across four lots. The couple did not live on the property when they brought the lawsuit but have since moved there full-time, Buck said.

MORE: Read a federal judge’s breakdown of the case

Buck said he will have his own expert at trial who will argue that the Reillys’ land, which they paid about $125,000 for combined, according to county records, has actually increased in value since the marijuana grow went in. And Buck said that, though the grow sits on a plot of land right next to a plot owned by the Reillys, the Reillys’ house is another plot over — “ludicrously far,” he said.

“Our contention is that marijuana is good for business,” he said. “Everything says that the plaintiff’s property value has gone up.”

A barn on Michael and Phillis Reillys’ property (lower left) is seen in relation to a marijuana grow warehouse owned by Parker Walton (lower right) on Oct. 28, 2018. (John Ingold, The Colorado Sun)

The impact

It’s not automatic that Colorado’s marijuana industry is headed for doom if the Reillys’ lawsuit succeeds.

Mikos said it takes a specific kind of plaintiff to file these lawsuits — someone who can prove financial harm and can show that harm is directly tied to a marijuana business.

“It’s not necessarily the case that you could always find such a plaintiff,” he said.

Even the 10th U.S. Circuit Court of Appeals said as much, writing in its decision that allowed the Reillys’ case to go forward, “We are not suggesting that every private citizen purportedly aggrieved by another person, a group, or an enterprise that is manufacturing, distributing, selling, or using marijuana may pursue a claim under RICO.”

But the possibility is worrisome enough to keep Colorado’s marijuana industry on its toes — especially since, Buck said, paying the plaintiffs’ damages might not be the worst part about losing such a case. Losing defendants in a RICO lawsuit also must pay the plaintiffs’ legal costs, which, in the Reillys’ case, likely stretch into the millions of dollars, Buck said.

This is why Kristi Kelly, the executive director of the Marijuana Industry Group, a Colorado trade association, said it is best for cannabis businesses to be good neighbors and to stay out of court altogether.

“In many cases, it’s things that could and should be resolved outside of the court system,” she said.

But, if the Reillys’ lawsuit is successful, that may not be so easy. Shortly after the lawsuit was filed in 2015, Brian Barnes, another Cooper & Kirk attorney, gave an interview to The Associated Press in which he suggested that legalization opponents hoped to use this lawsuit as the test case for a new campaign.

“If our legal theory works, basically what it will mean is that folks who are participating in the marijuana industry in any capacity are exposing themselves to pretty significant liability,” Barnes said then.

“We’re putting a bounty on the heads of anyone doing business with the marijuana industry.”

Rising Sun

More from The Colorado Sun