The term “proximate cause,” as I’ve written many times, is meaningless and unworkable in court. Neither lawyers nor judges at any level know what the Supreme Court means by that phrase. What does it meant to say harm has been caused by a RICO violation? Does that mean the RICO violation was solely responsible? If not, then how many other things may contribute to the injury before the RICO violation ceases to be the proximate cause of the resulting damage/loss? Federal courts frequently say sole causation is not needed. But they never answer the next question. When pressed, they will say causation might be too difficult to calculate, even by experts and throw the case out. This is a defensible result when a more directly party can sue and the plaintiff’s injury is “indrect,” or premised upon the injury to someone else, such as when an overcharge is passed on to a customer. The wholesaler who first incurred the overcharge can sue. The retail customer can’t.

For some reason the question of damage to a property owner by an adjacent owner’s illegal activity has proven to be very difficult in RICO cases. Fifteen years ago the Ninth Circuit held in Oscar v. University Students Co-operative Assn. a tenant could not sue its neighbor in Berkeley, California (the student co-op) where illegal drug use was rampant. The noise or marijuana smoke, or both, were interfering with the rental value of the neighbor’s apartment. The decision was, unfortunately, unclear as to the precise reason there was no RICO claim for the nuisance. Either the plaintiff could not establish a “concrete” financial loss caused by the narcotics (RICO) violations because the plaintiff did not own the property (which seems more like a standing problem, as the landlord would be the proper plaintiff), or the Ninth Circuit did not believe the loss to the tenant could be quantified even with an economist. Either way the opinion is terrible and has led to many unfortunate rulings there and elsewhere.

Fortunately, the Tenth Circuit has resolved much of the confusion. It recently decided that a property owner can sue a neighboring marijuana grower for causing loss of value to its land. Safe Streets Alliance v. Hickenlooper. It refused to follow the Ninth Circuit’s decision and pointed out the theory of damages was actually easy to deal with. Some of key facts are important. The plaintiff was an association of property owners in Colorado suing marijuana growers legally operating under state law. (The state has approved recreational marijuana use and growing.) The plaintiffs’ claim is the legal growing near its pristine prairie has caused both a nuisance by the odor produced (unclear why marijuana causes an offensive odor while growing) and that the crop is rife for theft. The likelihood of this neighboring crime, like living close to a slum, allegedly diminishes the market value of the plaintiffs’ land. (I have two problems with the theory of damages. First, I wonder why, if recreational marijuana is popular, it does not enhance the value of the plaintiffs’ land, at least to marijuana users of which there are enough in the state to create a market. And second why would theft of the marijuana, even serial thefts, diminish the attractiveness of pristine prairie, since in its pristine state, offers nothing for thieves to take?). The RICO violations are the federal narcotics violations.

The case was dismissed by the district court on causation grounds among others. But the Tenth Circuit reversed and brushed all of these reasons aside. It ruled there are no “breaks in the causal chain” nor “complex external forces” involved in accepting both the nuisance caused by the odor and the loss of market value from the danger to crime as following “naturally” from the RICO violations. Obviously, the plaintiff will need a realtor and/or an economist to estimate the loss in monetary terms. But the theory of causation was not held to be a problem at all. And the decision criticized the “unsupported” demand for “concrete financial loss” announced by the Ninth Circuit. This should help all RICO plaintiffs pleading lost profits or other market losses in complicated cases. It is great to see Oscar get the challenge it deserves.