Oregon Wine and Cannabis Litigation: Why Can’t RICO Be Friends?

The Oregon wine and cannabis industries can’t seem to get along. Where some see a natural synergy, others see undesirable competition. And as a RICO case filed in the Oregon federal court last week makes clear, Momtazi Family, LLC v. Yamhill Naturals, LLC, et al., No. 3-19-cv-00476-BR, some see only a criminal enterprise.

At first blush this looks like a run-of-the-mine RICO cannabis case. The people behind the plaintiff Momtazi Family, LLC (“Momtazi”) are well known. They own a 532-acre property near McMinnville and in August 2018, began leasing the property to Maysara Winery, which now operates the Momtazi Vineyard. The defendants (Steven, Richard, and Mary Wagner) own adjacent property, which they purchased to produce and process marijuana through Richard’s company Yamhill Naturals. The complaint includes the usual RICO allegations that the odor from the nearby marijuana farm is a nuisance along with the somewhat striking allegation that the defendants trespassed onto Momtazi’s property and deliberately killed one its cows.

The question – as it often is in these RICO cases – is whether the plaintiff has alleged damages sufficient to withstand a motion to dismiss. Momtazi alleged diminution-in-value, which has proved problematic for many putative RICO plaintiffs. But Momtazi also alleged that this harm was reflected in the reduced rental value of the property when it leased the property to Maysara in 2018. Momtazi further alleged that one of its repeat customers canceled a six-ton order for grapes and, of course, there is always the cow. Whether these allegations suffice to plead a RICO claim that may entitle Momtazi to recover treble damages and attorneys’ fees remains to be seen.

What’s interesting about this lawsuit is its connection to an Oregon state-court lawsuit scheduled for trial in late May 2019. That lawsuit – between Maysara Winery and Yamhill Naturals was written up in 2017 in what Buzzfeed termed “Pinot v. Pot” and described by the New York Times as a clash between longtime residents and the new cannabis farmer next door. Even the Oregonian got in on the action. Some two years later that case looks like it is going to trial. (Note: Email me if you’d like a copy of the parties’ trial briefs).

This all gives Yamhill Naturals much to do in the coming weeks. One wonders if the timing of the RICO lawsuit is more than coincidental. Though a conflict between the facts described to the two courts gives me pause from making that conclusion. Specifically, Momtazi’s federal complaint alleges that from January 2017 to the present, the defendants have produced and processed marijuana on their property and distributed it for sale. But the parties in the state-court action seem to agree that, as the Wagners put it in their trial brief, they have “never grown, produced, or processed marijuana commercially” on the property. Both of these things can’t be true. I guess the lawyers will have to figure it out.

For more on wine and weed, Hilary Bricken has spoken about it here and here is a story about what California may do.

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