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Shoultz v. Derrick

United States District Court, D. Oregon, Portland Division

February 22, 2019

GARY RODNEY SHOULTZ and JUDY ANN SHOULTZ, Plaintiffs,
v.
PATRICK LEE DERRICK, KATHERINE KINSLOW, JUDITH E. LUCKE and SAMUEL STOCKS-LADD, Defendants.

          Rachel E. McCart, PRESERVE LEGAL SOLUTIONS, PC, Attorney for Plaintiffs.

          Joshua DeCristo, JDC LAW, LLC, Attorney for Defendants.

          OPINION & ORDER

          MARCO A. HERNÁNDEZ UNITED STATES DISTRICT JUDGE.

         Plaintiffs Gary Rodney Shoultz and Judy Ann Shoultz (collectively, “Plaintiffs”) allege that Defendants Patrick Lee Derrick, Katherine Kinslow, Judith E. Lucke, and Samuel Stocks-Ladd (collectively, “Defendants”) have conspired and engaged in a pattern of racketeering activity, in violation of the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c), (d). According to Plaintiffs, Defendants violated RICO by forming an enterprise, on a property adjacent to where Plaintiffs live, for the purpose of producing and distributing marijuana. Plaintiffs allege that Defendants have interfered with Plaintiffs' use and enjoyment of their property, and that Defendants harmed Plaintiffs by diminishing the value of their property.

         Defendants move to dismiss Plaintiffs' Complaint for two reasons: (1) Plaintiffs fail to establish two of the elements of a RICO claim-that Defendants conduct or participate in the conduct of an association-in-fact enterprise, and that the alleged marijuana operation in this case is an association-in-fact, as defined by RICO; and (2) Plaintiffs fail to establish RICO standing because they do not allege injuries compensable under RICO. The Court grants Defendants' motion to dismiss because Plaintiffs fail to allege injuries compensable under RICO.

         BACKGROUND

         Plaintiffs, retired senior citizens, bought property in Colton, Oregon, in 1980. Compl. ¶ 1, 15, ECF 1. They built a home, raised a family, and continue to live on the property. Id. In 2014, Defendant Lucke purchased property (the “Elwood Property”) in the immediate vicinity of Plaintiffs' home. Id.

         Lucke, along with Defendants Derrick, Kinslow, and Stocks-Ladd, invested capital and developed a marijuana production facility (the “marijuana operation”) on the Elwood Property. Id. at ¶¶ 5-8. Defendants have produced marijuana on the Elwood Property, trafficked marijuana produced on the Elwood Property, and “knowingly received proceeds from such trafficking.” Id.

         Defendants' marijuana operation has negatively impacted Plaintiffs by interfering with their use and enjoyment of their property. Id. at ¶ 38. The production includes the use of two large greenhouses, equipped with loud, large, commercial exhaust fans which operate 24 hours a day, seven days a week. Id. at ¶ 16. When they are running at high speeds, the intense noise from the fans can be unbearably loud, making it difficult for Plaintiffs to sleep and scaring Plaintiffs' dog. Id. at ¶ 16, 20. In addition, the marijuana production creates a strong and pervasive stench on Plaintiffs' property, particularly on warm or humid days. Id. at ¶¶ 17, 20. As a result of the noise and the odors from the marijuana production, Plaintiffs no longer enjoy gardening or being outside on their property. Id. at ¶ 18. Plaintiffs are also afraid of the prospect of violence after participants in the marijuana operation repeatedly fired automatic weapons into the field immediately adjacent to Plaintiffs' property on October 15, 2017. Id. at ¶19. Plaintiffs allege that Defendants have diminished the market value of Plaintiffs' property by “making it more difficult to sell.” Id. at ¶ 38.

         STANDARDS

         A motion to dismiss for failure to state a claim may be granted only when there is no cognizable legal theory to support the claim or when the complaint lacks sufficient factual allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint's factual allegations, the court must accept all material facts alleged in the complaint as true and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012). However, the court need not accept unsupported conclusory allegations as truthful. Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992); see also Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (“we do not necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations”) (internal quotation marks and alterations omitted).

         DISCUSSION

         To maintain a federal civil RICO claim, a plaintiff must allege that the defendant engaged in: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Chaset v. Fleer/Skybox Int'l, LP, 300 F.3d 1083, 1086 (9th Cir. 2002) (citing 18 U.S.C. §§ 1962(c), 1964(c)); see also Black v. Corvel Enter. Comp Inc., No. 17-55956, 2018 WL 6620082, at *1 (9th Cir. Dec. 17, 2018). In addition, a plaintiff must establish that the defendant “caused injury to plaintiff's business or property.” Id.

         Here, Defendants challenge the first and second elements of Plaintiffs' claim. Defendants argue that Plaintiffs fail to set forth adequate allegations as to Defendants' conduct and the characterization of the marijuana operation as an “association-in-fact enterprise.” In addition, Defendants contend that Plaintiffs ...


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