58 F.4th 404
9th Cir.2023Background
- Plaintiff Francine Shulman is a California cannabis grower who, with two business entities, alleges partner Todd Kaplan and others defrauded and diverted money and property from her cannabis business after California legalized recreational cannabis.
- Plaintiffs sued in federal court asserting multiple claims including two RICO counts based on alleged mail and wire fraud; defendants moved to dismiss.
- The district court dismissed the RICO claims with prejudice on standing grounds; plaintiffs appealed only the RICO dismissal.
- On appeal the Ninth Circuit evaluated both Article III standing (injury, causation, redressability) and statutory RICO standing under 18 U.S.C. § 1964(c) (injury to “business or property” and proximate cause).
- Plaintiffs argued their state-law-recognized cannabis business and property interests satisfy both Article III and RICO standing and that money damages would redress past harms.
- Defendants argued federal law (the CSA and RICO’s definition of racketeering) treats dealing in cannabis as illegal/racketeering and precludes recognition of a federal right to recover for injury to cannabis businesses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing (injury, causation, redressability) | Shulman: injury to business/property recognized under California law; harms traceable to defendants; damages redressable | Kaplan: remedies would require recognition of federally illegal activity and thus are not redressable | Court: Article III standing satisfied — injury, causation, and redressability (money damages) met |
| Statutory RICO standing under 18 U.S.C. § 1964(c) ("injured in his business or property") | Shulman: RICO "business or property" should include state-law cannabis businesses and property | Kaplan: RICO/CSA treat dealing in cannabis as racketeering/contraband; Congress did not intend RICO to protect interests in cannabis commerce | Court: No statutory RICO standing — RICO’s definition of racketeering (including dealing in cannabis) and the CSA’s forfeiture/contraband regime show Congress did not intend to permit RICO damages for cannabis businesses |
Key Cases Cited
- Horne v. Flores, 557 U.S. 433 (2009) (Article III standing threshold and requirement to address standing before merits)
- TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021) (articulating elements of Article III standing)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (injury-in-fact and traceability principles)
- Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985) (RICO’s private cause of action and remedial purpose)
- Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143 (1987) (RICO damages framework; treble damages)
- United States v. Jeffers, 342 U.S. 48 (1951) (no cognizable property interest in federally contraband narcotics)
- Safe Sts. for All. v. Hickenlooper, 859 F.3d 865 (10th Cir. 2017) (recognizing cultivation/sale of cannabis can constitute RICO predicate acts despite state legality)
- Canyon Cnty. v. Syngenta Seeds, Inc., 519 F.3d 969 (9th Cir. 2008) (framework for RICO statutory standing analysis)