This Week At The Ninth: Cannabis Law

• Jurisdiction: United States,Federal
• Law Firm: Morrison & Foerster LLP
• Subject Matter: Litigation, Mediation & Arbitration, Cannabis & Hemp, Personal Injury
• Author: Alexandra Avvocato
• Published date: 24 January 2023

This week, the Court addresses whether plaintiffs may bring civil RICO claims that allege injury to a business that violates federal law.

FRANCINE SHULMAN ET AL. V. TODD KAPLAN ET AL.

The Court holds that plaintiffs do not have statutory standing under the Racketeer Influenced and Corrupt Organizations Act (RICO) to bring claims that allege injury to cannabis-related business or property.

The panel: Judges M. Smith, Nelson, and Drain (E.D. Mich.), with Judge M. Smith writing the opinion.

Key highlight: "This [case] presents us with the following question: do either the statutory purpose of RICO or the congressional intent animating its passage conflict with the California laws recognizing a business and property interest in cannabis? We conclude that they do."

Background: Plaintiff Francine Shulman grows, markets, and sells cannabis in California. She formed an LLC and a corporation, both of which are also plaintiffs, to operate her business. Defendant Todd Kaplan was Shulman's former business partner. The relationship went south, and Shulman sued Kaplan and other defendants, alleging that they engaged in fraudulent conduct that injured her business and property. Shulman sought damages under the civil RICO statute, which provides that it is "unlawful for any person through a pattern of racketeering activity . . . to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce." 18 U.S.C. ' 1962(b), (d). The district court dismissed plaintiffs' RICO claims for lack of standing.

Result: The Ninth Circuit affirmed. Because the district court had not specified whether it had dismissed plaintiffs' RICO claims for lack of Article III standing-which goes to a court's jurisdiction to hear a case-or for lack of statutory standing-which goes to the merits of a claim-the panel addressed both issues.

To establish Article III standing, a plaintiff must show that it "suffered an injury in fact that is concrete, particularized, and actual or imminent;" "that the injury was likely caused by the defendants;" and "that the injury would likely be redressed by judicial relief." TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2203 (2021). The Court held that plaintiffs satisfied this standard. First, plaintiffs alleged injury to their property, which qualifies as an invasion of a legally protected interest and therefore as an injury in fact. Second, plaintiffs...