California cannabis grower sues another under federal racketeering laws

In what may be a potential first for the marijuana industry, a Southern California cannabis farmer filed suit against another grower in federal court and is attempting to use anti-racketeering laws to back up the legal claims.

In a lawsuit filed in U.S. District Court in the Central District of California, Santa Barbara County businesswoman Francine Shulman and her company, Iron Angel, contend that the operators of Vertical Companies, a Los Angeles-based marijuana cultivation firm, defrauded her and stole her property.

The 126-page lawsuit outlines 25 different counts of alleged wrongdoing, ranging from conspiracy and racketeering to breach of contract and elder financial abuse – the latter charge because Shulman is a 66-year-old grandmother.

Shulman’s suit against Vertical seeks at least $200 million in damages.

The suit follows an initial legal action by Vertical Companies, which sued Shulman in Santa Barbara Superior Court earlier this year in an effort to enforce a cultivation lease on land owned by Shulman.

Vertical said in a statement that Shulman had been ordered on June 19 – a day before she filed her Racketeer and Influenced and Corrupt Organization (RICO) suit – to participate in arbitration related to the cultivation-lease lawsuit that Vertical had filed against her.

“We believe that this action is an attempt to transform a non-newsworthy, typical business dispute into sensational allegations of a wide-reaching conspiracy, with the intent of making salacious allegations of criminal conduct in public court filings,” Vertical Companies President Smoke Wallin said in a statement.

“We strongly refute the … allegations.”

While the RICO statutes have provided the basis for several lawsuits in recent years against marijuana companies – with varying degrees of success – they were typically utilized by cannabis opponents in attempts to shut down MJ operations, as opposed to being used by former business partners to win financial disputes.

John Schroyer can be reached at [email protected]