Cannabusiness Advisory

The closely watched Massachusetts cannabusiness case, Crimson Galeria Limited Partnership, et al. v. Healthy Pharms, Inc., et al., has been dismissed. On November 9, 2018, Judge Allison D. Burroughs of the U.S. District Court for the District of Massachusetts issued an order closing the action upon stipulation by the parties to dismiss the action with prejudice. Plaintiffs, whose property is located within 200 feet of Health Pharms’ registered marijuana dispensary, alleged that the operation of the RMD diminished the market value of their properties and restricted future development opportunities. They contended that the RMD made the surrounding area less desirable for prospective buyers or renters, who would “reasonably worry” about “increased crime” and “pungent odors.”

The Healthy Pharms case was followed closed by those in the cannabis industry due to several important issues raised in the complaint. The Plaintiffs asserted claims against the “Government Defendants” for declaratory and injunctive relief, arguing that federal law (i.e., the Controlled Substances Act) preempts Massachusetts’ legalization of medical marijuana dispensaries. They also asserted claims against Healthy Pharms and the other Dispensary Defendants, alleging civil violations of the Racketeer Influenced and Corrupt Organizations Act, for acting and conspiring to distribute marijuana in violation of the CSA.

This was a clear attempt by the Plaintiffs to create a private right of action under the CSA, which the court refused to acknowledge. Furthermore, though not conclusory, the close of the case should be met with a sigh of relief by those in the marijuana-related banking industry, as the court indicated that providing basic, ordinary banking services to those in the legal marijuana industry is insufficient to be held liable under RICO. The court cited similar decisions that have held that the provision of ordinary legal or accounting functions on behalf of an enterprise are insufficient acts to be held liable under RICO.

The court’s dismissal comes just as Massachusetts readies itself for recreational sales. Last Friday, the Massachusetts Cannabis Control Commission gave the green light to two retail shops—Leicester’s Cultivate Holdings, LLC and Northampton’s New England Treatment Access, LLC. The retail launch will begin on Tuesday morning, just over two years since the commonwealth voted to legalize marijuana for all adults over the age of 21. Massachusetts will now become the seventh state, and first east of the Mississippi River, to permit recreational cannabis sales.

Image courtesy of Healthy Pharms, Inc.