Crimson Galeria v. Healthy Pharms: update in commercial cannabis lawsuit

A recent decision in a closely-watched commercial cannabis case opens the possibility for increased commercial activity in the nascent recreational cannabis market in Massachusetts.  On August 21, Judge Burroughs of the U.S. District Court for the District of Massachusetts issued a memorandum and order on motions to dismiss in Crimson Galeria Limited Partnership, et al. v. Healthy Pharms, Inc., et al, granting a victory for the named government defendants (Massachusetts Department of Public Health, City of Cambridge, Town of Georgetown) and delaying a ruling on the motion of private defendants (Healthy Pharms, 4Front Advisors, Century Bank) on ripeness grounds.

Plaintiff’s business abuts Healthy Pharms’ registered marijuana dispensary (“RMD”) in Cambridge – they filed suit, prior to the opening of the RMD, alleging violations of RICO against the private defendants for allegedly acting and conspiring to distribute marijuana in violation of the CSA, and against the government defendants, basing this argument on federal Supremacy Clause grounds.

The Court granted the government defendants’ motion to dismiss, finding no private right of action existed within the CSA to vindicate plaintiffs alleged injuries.  On this point, the Court made reference to the Cole Memorandum as a clear indication that only the United States Department of Justice may enforce the CSA and prosecute associated violations.

On the private defendants’ motion, finding the Complaint to be unripe, the Court granted plaintiffs thirty days to file an Amended Complaint now that defendant’s RMD had recently opened.  Similarly, the Court granted all private defendants leave to renew their motions to dismiss upon that filing.  Of note, the Court appeared to favor Century Bank’s argument that, rather than participating in any racketeering activity, the bank merely provided ordinary banking services to the RMD.  Judge Burroughs reasoned that: “Plaintiffs have not adequately shown that providing ordinary banking services to marijuana-related businesses, in compliance with Treasury Department guidance aimed at enabling banks to provide such services, sufficiently demonstrates that it joined and intended to further a RICO conspiracy.”

We will continue to monitor this case for updates and developments as the deadline for the filing of Plaintiff’s Amended Complaint draws near.  Suffice it to say, the August 21 memorandum and order should be welcome news for businesses deciding whether to take the plunge into the burgeoning Massachusetts marijuana industry.


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