Wine News Dope Operation Sparks Winery Lawsuit

Dope Operation Sparks Winery Lawsuit

While cannabis cultivation is legal at state level, that's not the case in federal law.
© Budsyn.com | While cannabis cultivation is legal at state level, that's not the case in federal law.
A grower in Oregon is using federal anti-racketeering laws against a neighboring cannabis producer.
By W. Blake Gray | Posted Saturday, 07-Sep-2019

A number of people who live next to legal cannabis farms have sued in federal court, using the federal RICO racketeering law to complain about the smell. Those lawsuits have generally gone nowhere.

But a RICO lawsuit in Oregon passed an important hurdle last week because it was filed not by just any aggrieved neighbor, but by a vineyard owner. And that owner's claim was not just that growing weed smells bad – they claim the smell cost them a sale of wine grapes.

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This lawsuit should have much of the US cannabis and wine industries paying attention.

"Thus far [the RICO statute] has not been a big threat but there is a possibility that it could derail the cannabis industry in California," said Jesse Mondry, an attorney at Harris Bricken, a law firm that has expertise in cannabis law. "It could derail not the hemp industry but the marijuana side of it."

The federal lawsuit is just the latest skirmish in a long battle between the Momtazi family, whose patriarch fled Iran after the revolution and established a biodynamic vineyard in Willamette Valley, and young cannabis grower Richard Wagner. The Momtazis are already suing Wagner in Oregon state court in a case that is set for trial in December. The Momtazis told the New York Times in 2017 that they received death threats from cannabis lovers when news of their state court lawsuit was first reported.

"They opened up a new front, the winery did, by filing this RICO lawsuit," Mondry told Wine-Searcher. "The state court case had been going on for a year and half. They opened up a new front in the battle."

A victory in a RICO case can be more profitable for plaintiffs, as they would be awarded both triple damages and lawyers' fees. But it's also harder to prove.

"To date, we're not aware of a plaintiff who has successfully brought [a RICO case against cannabis growers] to judgment," Mondry told Wine-Searcher.

It's very premature to call last week's ruling a landmark decision; it's just one step along the way to an eventual jury trial or out-of-court settlement. But it's an important ruling in a case that could create precedent.

Here's the background. Momtazi Vineyard is a certified biodynamic vineyard in McMinnville, Oregon, owned by Moe Momtazi. Momtazi also owns Maysara Winery, which buys some of the vineyard's grapes. In December 2016, the Wagner family bought property next to Momtazi in order to set up a cannabis growing and processing enterprise under the brand name Yamhill Naturals.

Momtazi claims that a client winery cancelled an order for six tons of grapes because the customer believed the smell from the cannabis would contaminate the grapes. The lawsuit doesn't say what type of grapes they were. North Willamette Valley Pinot Noir grapes sell for an average of $2422 per ton, according to University of Oregon. Six tons of grapes should be able to produce about 380 cases of wine.

That isn't all that Momtazi alleges. The vineyard owners claim the Wagners' terracing caused large amounts of dirt to roll into a fish-stocked reservoir on the Momtazi property that they say is an important part of their biodynamic operation. They also claim "Defendants or their agents trespassed onto Plaintiff's property, killed a calf, and amputated part of another cow's tail."

The state court case has plodded along since 2017. In April, the Momtazis filed the federal RICO lawsuit.

RICO stands for Racketeer Influenced and Corrupt Organizations act. It was originally passed to fight the Mafia. Plaintiffs now use it to sue cannabis operations by defining cannabis cultivation as a criminal conspiracy, because although cannabis is now legal in Oregon, as it is in 10 states including the entire West Coast, it is still considered illegal under federal law.

In December, a judge in Sonoma County threw out a similar RICO lawsuit from some people in Petaluma. A similar case in Colorado made it to a jury last year, which found for the cannabis farm when it decided that the farm had not reduced its neighbors' property values.

Oregon had a similar RICO case filed in 2018 by neighbors of a cannabis warehouse, and it was dismissed by a judge.

The Momtazi case may be different because wine grapes are one of the few products that could be less valuable if they are raised in an area that smells bad. As such, it could open a new line of attack for anti-cannabis attorneys if it is ultimately successful.

It's way too early to say that, though. In her ruling last week, US Senior District Judge Anna J. Brown merely denied a motion to dismiss by the Wagner family. Brown ruled that Momtazi Vineyard has a "plausible claim" under the RICO statute. This doesn't necessarily mean it's a winnable case; it just means the case will proceed.

Interestingly, the attorney for Momtazi Vineyard, Rachel McCart, was previously a horse lawyer. She founded Equine Legal Solutions, which according to its website "represents both plaintiffs and defendants in many different types of horse-related lawsuits, ranging from horse sale disputes to equine veterinary malpractice cases".

McCart also filed cannabis-related lawsuits in 2018 against more than 200 businesses in Oregon, according to Marijuana.com. She did not return a call seeking comment.

With the rapid growth of the cannabis industry in the US, cannabis litigation could quickly become more profitable than equine litigation. And there might be no shortage of plaintiffs in California.

In Santa Barbara County, residents have complained loudly about the bad aroma from large cannabis operations, but courts have looked askance at this type of complaints under the RICO statute as not showing actual damage. But Santa Barbara County is also a major grapegrowing region. I contacted the Santa Barbara County Vintners Association and they didn't want to comment on the issue.

Sonoma and Mendocino Counties are also major growing regions for both cannabis and wine grapes. Sonoma County's government has been more supportive of cannabis than most and the state is showing the first signs of a budding cannabis tourism culture, but it's just a seed compared to the enormous, important structure of the Sonoma County wine industry.

Mendocino, where cannabis was a major commercial enterprise long before it was legal, has an ongoing contentious atmosphere around cannabis operations, but the county has been supportive of cannabis. It's also a major wine producer.

"I think it's going to depend on how wine growers and cannabis growers learn to work with each other," Mondry said. "Like most things, it's going to come down to cooperation with your neighbors."

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