As I wrote yesterday, it was curious if not telling that Safe Streets filed two separate lawsuits in U.S. District Court in Denver. Today, Safe Streets filed a motion to consolidate the two cases. The two cases clearly overlap on several issues, and they are certainly driving at the same fundamental goal and question–the use of civil RICO claims to shut down marijuana businesses in Colorado. While the factual issues of standing and damages are plaintiff-specific, should any or all of the plaintiffs survive motions to dismiss on those specific points, the ultimate issues in this case have a great deal of commonality.
The first case [1:15-cv-00349-REB-CBS] involves the Safe Streets Alliance and co-plaintiffs Phillis Reilly and Michael Reilly (landowners in Rye, Colorado). The second case [1:15-cv-00350-MSK] involves co-plaintiff New Vision Hotels Two, LLC (owner of the Holiday Inn in Firsco, Colorado). Safe Streets Alliance is a party to both cases. The local rules for the U.S. District Court in Denver require the disclosure of associated litigation, and in each case Safes Streets has done that relative to the other.
Specifically, both cases concern whether those who commercially cultivate and sell recreational marijuana as authorized by Colorado law may be held liable under 18 U.S.C. § 1964 for treble damages, costs, attorneys’ fees, and appropriate injunctive relief in a suit brought by injured businesses and property owners.
Ultimately I believe there are threshold issues of law that are common enough to warrant consolidation, and the defendants in each of the cases could move for consolidation at this point as well, at least as to the common questions of law. For example, both cases appear to involve yet-to-open marijuana businesses, both cases appear to allege damages that are arguably speculative or not at this point ripe, and both cases will need to demonstrate a requite element of interstate commerce (the legal question–what is that requisite level?). These are blended factual and legal questions involving each plaintiff, but at this point Safe Streets has obviously reconsidered its strategy and believes the better course is a single case. The defendants in both cases are equally served to consider their joint strategies as well. The realities are that both cases would be assigned to the same judge, and legal inconsistencies between the court’s rulings less likely. Issues at the trial stage if the cases were to proceed would be vastly different and plaintiff-specific. If consolidation is granted now, bifurcation would be explored later.
The Safe Streets Alliance out of Washington D.C. has filed two lawsuits in federal court in Denver that pose a full frontal attack on the legalized recreational and medical marijuana industry in Colorado. Service providers, regulators, landlords and investors to the marijuana industry will take notice and follow these cases. These cases seek not only damages for the individual plaintiffs named, but also injunctive and declaratory relief shutting down the (proposed) marijuana facilities in question as well as a definitive ruling from the federal courts on preemption of federal law over the states on the issue of marijuana’s illegality.
Colorado Safe Streets Case Press
The first case [1:15-cv-00349-REB-CBS] involves the Safe Streets Alliance and co-plaintiffs Phillis Reilly and Michael Reilly (landowners in Rye, Colorado). The second case [1:15-cv-00350-MSK] involves co-plaintiff New Vision Hotels Two, LLC (owner of the Holiday Inn in Frisco, Colorado). Both were filed on February 19, 2015. Both allege interesting legal theories centered on the Racketeer Influenced and Corrupt Organizations Act (“RICO”) claims against anyone and seemingly everyone that Safe Streets believes to have a finger in the alleged “enterprise.”
What are likely to be Safe Streets’ known weaknesses in these cases become apparent when reading each of the two complaints in their entirety. The plaintiffs filed these as two separate cases. While there will be significant overlap between the cases in several areas, it is notable that two cases were filed as if one is the back-up of the obviously mission critical goal. At least one of the plaintiffs, in one of the cases, must demonstrate standing and otherwise survive a motion to dismiss in order for asingle case to proceed to the merits. In both cases it is alleged that the co-plaintiffs are members of Safe Streets, critical to Safe Streets’ ability to maintain standing as an organization (more on that in a separate post). As to actual damages or injuries, the yet-to-open marijuana facilities in both cases are alleged to have already caused reduction in the “value” of the plaintiffs’ respective properties. See New Vision’s Complaint at paragraph 60, Reillys’ Complaint at paragraph 79. Such allegations of impact on property value may become issues of proof. Other allegations of damages–such as the bricks-and-mortar construction of the facility affecting “the mountain views” from an unoccupied property–appear more tenuous.
The immediate issues that were apparent to me on reading the two complaints were standing and causation. Both issues will likely be in the top three or four issues any defense lawyer retained on these cases will be looking at very closely. The strain exerted in the two complaints to allege actual damages or injuries related to the mere prospect of marijuana trade in the vicinity of the plaintiffs’ business or property is palpable, and in some places bordering speculative on its face.
Under RICO’s “by reason of” requirement, to state a claim the plaintiff is required to show that a RICO predicate [unlawful] offense not only was a “but for” cause of his injury, but was the proximate cause as well. Sufficiently establishing the element of causation—both actual and proximate—is crucial to proving any violation of RICO. When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiff’s injuries. (internal citations and quotes omitted).
Whether in response to a motion to dismiss or later in these proceedings, it may be difficult for the plaintiffs here to show “proximate cause” in addition to “injury in fact.” The federal courts also limit “standing” in such cases to plaintiffs who suffer injuries that are proximately and factually caused by the alleged violations of RICO. While the courts treat “standing” and “causation” of damages as interrelated concepts, the U.S. Supreme Court has held in Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461 (2006) that:
When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiff’s injuries. (emphasis added).
The U.S. Supreme Court has interpreted the RICO statute in civil cases to require the plaintiff to demonstrate conduct that is the “but-for” cause of plaintiff’s injury and also the “proximate cause.” To establish standing under RICO, the Safe Streets plaintiffs must show that they have been “injured in [their] business or property by reason of a violation of section 1962.” 18 U.S.C. § 1964(c).
The allegations of damages by the plaintiffs in the two Safe Streets cases filed in Denver are seemingly thin, prospective, and may be the type of issues in the immediate cross-hairs of the defendants that will surely be seeking to dismiss this case. A decision on whether the plaintiffs’ allegations withstand the first round of motions in this case is months away. I’ll be digging deeper into the allegations of injuries set forth in the complaints, as well as the prospective nature of the operations alleged to have even caused any damages. How a yet to operate business is engaged in activities affecting interstate commerce (also an element to prove a RICO violation) is yet another worthy of exploration.
The Colorado Supreme Court is seeking public comment on proposed changes to the Colorado Rules of Civil Procedure. Amendments to rules 1, 12, 16, 16.1, 26, 30, 31, 34, 37, 54, and 121, § 1-22 are proposed; some of the amendments, including those for Rule 16, “Case Management and Trial Management,” are extensive. A redline of the proposed changes is available here.
Written comments to the proposed rule changes can be submitted to Christopher Ryan, the Clerk of the Colorado Supreme Court, at 2 East 14th Ave., Denver, CO 80203. Comments must be received no later than 5 p.m. on April 17, 2015.
A public hearing on the changes will be held on April 30, 2015, at 1:30 p.m. in the Colorado Supreme Court courtroom. The courtroom is located on the 4th floor of the Ralph Carr Justice Center at 2 East 14th Avenue in Denver.
I intend to provide detailed comments and commentary on the rules. Many of the amendments are modeled on the CAPP (Civil Action Pilot Project) rules and have mixed reviews from attorneys. Having handled several cases under the CAPP rules, I see the pros and cons, many of which are a function of adapting litigation practice and strategy to the new rules.
The call is familiar. Someone has ripped them off, stolen property, and won’t return it.
They’ve already contacted law enforcement, and the response was the typical refrain.
Sorry, ma’am. There’s nothing we can do. This is a civil matter. You’ll need to contact an attorney.
And, that’s exactly what they do. Discouraged already, they seem to know the response the lawyer is going to give them–that there’s nothing the lawyer can do for them either. The reasons are usually the same–the amount they are pursuing isn’t enough to justify the lawyer’s fees, or the crook isn’t good for it anyway. It’s why they turned to the police in the first place, because at least if the cops did something, there could be punishment if not repayment.
Having handled the above calls and seen the scenario dozens of time, I was happy to recently read that Boulder County District Attorney Stan Garnett has actually ventured into the civil realm and filed a civil case against Defendants Boulder Marathon, LLC, and Jeffrey Mason. I know nothing about the case, but I can tell you that it involves a little known and little exercised provision under Colorado’s civil code (C.R.S. 6-1-103) that allows Colorado DAs and the Attorney General’s office to enforce the Colorado Consumer Protection Act. According to the Complaint, it is alleged that entry fees for the 2013 Marathon that was canceled without refunds “ranged from $80.00 to $121.00 per runner.”
Enforcement of the Consumer Protection Act is typically handled by privately retained attorneys. Sometimes the resources and ability of law enforcement are turned to for justice, and from reviewing the case, significant investigation went into this case before it was filed. The DA’s office here getting involved and following through is a welcomed sight as any one of the runners most certainly could have been told “It’s a civil matter” may now have their interests represented and see their day in court.