September 02, 2020 Feature

Yes to Cannabis! Just Not in My Backyard: An Analysis of Odor-Based Claims in the Cannabis Industry

By Christopher D. Strunk
MysteryShot/iStock via Getty Images Plus

MysteryShot/iStock via Getty Images Plus

Prudent cannabis cultivators should proactively address potential odor issues, because even legal businesses face civil liability if their actions create a nuisance.

Cannabis cultivation has had a significant and often transformative impact on the local economies and communities where it is grown. Cannabis has become a multibillion-dollar industry, which is projected to continue to expand as more jurisdictions fully legalize cannabis. By way of example, industrial hemp—which the 2018 Farm Bill removed from the Controlled Substances Act—was grown on approximately 511,442 acres in 2019, representing a 455 percent increase over 2018.1 Though the coronavirus pandemic may curtail some of the growth projections for the industry in the short term, states like California, Michigan, Oregon, and Pennsylvania identified cannabis dispensaries as “essential businesses,” allowing sales to continue notwithstanding the lockdowns.2

With the production of industrial hemp being legalized at the federal level, and more widespread legalization of cannabis generally at the state level, communities are increasingly faced with cannabis being grown outdoors in agricultural fields. Neighbors of hemp and cannabis operations have begun to push back—largely citing odor concerns—both in court and with local regulators. The result has been environmental enforcement actions brought by state regulators, state-level nuisance suits, and claims brought under the Racketeer Influenced and Corrupt Organizations Act (RICO). This article discusses and analyzes these claims and their impact on the continuing growth of the industry.

Environmental Enforcement Actions

Among the first-line responses that can be employed by government entities seeking to enforce their authority to tamp down odors are enforcement actions. With respect to cannabis odors, such enforcement authority falls under the jurisdiction of the various state and local air regulatory bodies, such as California’s Air Quality Management Districts and Colorado’s Air Quality Control Commission. However, Washington’s Pollution Control Hearings Board (PCHB) has been at the forefront of the issue, having issued six cannabis odor decisions since 2017.

In one such case, Green Freedom, LLC v. Olympic Region Clean Air Agency, the PCHB considered a violation and a civil penalty imposed by the Olympic Region Clean Air Agency (ORCAA) against cannabis business Green Freedom.3 At issue was the odor regulation promulgated by ORCAA, a clean air agency serving six counties, which provided that “[n]o person shall cause or allow the emission or generation of any odor from any source, which unreasonably interferes with another person’s use, and enjoyment of their property.”4

Green Freedom, a cannabis cultivator, operated its legal marijuana growing operation in Elma, Washington, where it had four greenhouses and a processing building. The buildings vented to the outside. On the date of the violation, it harvested some marijuana plants by moving them from a greenhouse to the processing building. To do this, it placed the plants on rolling carts and moved them approximately 25 feet between the buildings.

Green Freedom’s neighbors, who operated a trucking business on a 10-acre parcel of land adjacent to the cannabis facility, submitted an online complaint on the date of the violation claiming that the odor was causing “nausea, watery eyes, and ‘feeling of not being able to go outside and enjoy my property.’”5 An ORCAA investigation revealed marijuana odors that were noticeable on the breeze and confirmed that the complainants’ property was affected.

ORCAA issued a notice of violation to Green Freedom, which it appealed to the PCHB. Green Freedom did not dispute the facts before the board and conceded that there were no measures to contain the odors during the relevant time. In its conclusions of law, the PCHB affirmed the violation and the $750 fine, finding that the odor could be distinctly smelled and, therefore, was actionable.

In 2018, the PCHB affirmed two additional $1,000 civil penalties against Green Freedom for additional odor violations. However, a key aspect of this new enforcement action was the PCHB’s rejection of Green Freedom’s defense that it was operating on agricultural land and was entitled to a categorical “agricultural exemption” from nuisance odor claims.6

Most recently, in Emerald Jane’s v. Puget Sound Clean Air Agency, Emerald Jane’s sought to avoid using odor control equipment at a newly constructed facility in Tacoma, Washington, to which it planned to relocate.7 In support of its request, the company pointed to odors emanating from nearby industrial activity (such as the operation of a rendering plant) as a basis to avoid installing such equipment, and also argued that existing neighborhood air pollution and cost concerns further justified the exemption. The Puget Sound Clean Air Agency (PSCAA), however, disagreed and instead issued an order to prevent construction, which Emerald Jane’s appealed. In rejecting Emerald Jane’s argument, the PCHB pointed out the regulatory requirement that a new source of air pollution—such as Emerald Jane’s Tacoma facility—must achieve best available control technology (BACT) to control emissions, and that technology is carbon absorption. It also noted that all indoor cannabis facilities must have carbon control. A total lack of control measures, the board reasoned, was not BACT.

And these issues are not just confined to the Pacific Northwest. They have been identified as concerns in other states and jurisdictions where cannabis is heavily cultivated. For example, Santa Cruz County’s Planning Department recognized in its 2017 cannabis draft environmental impact report (EIR) that “[c]annabis cultivation, and to a lesser degree manufacturing, is often accompanied by strong odors. Odors vary by variety, including pepper, balsamic vinegar, pine, citrus, and skunk-like odors.”8 The EIR recommended the use of scrubbing and filtration systems to minimize these odors. In addition to odors, the EIR also identified other compounds that could create hazards when released, including particulate matter. Any one of those releases could prompt a notice of violation from regulators—with or without a citizen complaint. Similarly, the Denver Department of Public Health & Environment (DDPHE) published a cannabis best management practices guide in 2018. In its publication, the DDPHE specifically advocated the use of control technologies to mitigate odors and volatile organic compound (VOC) releases both from the cultivation of plants and during extraction at infused product facilities.9

The takeaways for cannabis businesses and their counsel is that state air authorities take odor concerns seriously, and failure to take steps to control odors risks regulatory enforcement. Attorneys representing cannabis businesses would be well-advised to ensure that the best available technology is used to control odors and that such measures are carefully implemented.

Nuisance Claims

Nuisance is a common tort claim and is divisible into two classes: public and private nuisance. The landmark case of Spur Industries, Inc. v. Del E. Webb Development Co. held that the difference between them is one of degree.10 A private nuisance affects “a single individual or a definite small number of persons in the enjoyment of private rights not common to the public,” while a public nuisance affects “the rights enjoyed by citizens as a part of the public.”11 The Spur court further noted that a public nuisance must affect a considerable number of people or an entire community or neighborhood.

Another key distinction between public and private nuisance is that private nuisances require interference with the use and enjoyment of the plaintiff’s own land. By contrast, a public nuisance is not limited to one’s own land but instead arises where an entire community or a large number of people are impacted.

California’s Civil Jury Instructions Nos. 2020 and 2021 highlight some common ground between the two classes of nuisance tort. In both cases, a plaintiff must demonstrate that an ordinary person would be reasonably annoyed or disturbed by the condition alleged to be a nuisance; the nuisance complained of must be “indecent or offensive to the senses.”12 And most importantly, both nuisance claims employ a balancing test: for public nuisance claims, the plaintiff must show that the seriousness of the harm outweighs the social utility of the defendant’s conduct; and for private nuisance claims, the plaintiff must show that the seriousness of the harm outweighs the public benefit of the defendant’s conduct. Damages typically include equitable or injunctive relief to abate the nuisance, as well as monetary relief to compensate the plaintiff for the nuisance’s impact.

Odors are a common, “garden-variety” nuisance claim. Indeed, Spur itself involved odors emanating from the defendant’s cattle feedlot. It is therefore unsurprising that these claims have quickly emerged as a significant issue for the cannabis industry as it has grown. Cannabis odors, described as “skunky,” “pungent,” and distinctive, originate from terpenes, organic compounds present in cannabis that evolved over time, attracting some organisms and repelling others.13 Terpenes impact the aroma and flavor of cannabis, with connoisseurs able to use terpenes to distinguish one strain from another.

In states with legal cannabis, including California and Colorado, complaints have been made to state and local enforcement authorities during the growing season, including during flowering. Once the cannabis is harvested, new opportunities for odors arise. The cannabis must be dried, with the process typically taking 5–15 days to complete; this is usually done indoors in a temperature-controlled facility with proper air circulation and ventilation.14 Extraction of cannabidiol (CBD), tetrahydrocannabinol (THC), and other compounds from the cannabis plant can also release odors. Indeed, the Colorado DDPHE specifically recognized that both the growth of cannabis and the extraction processes emit VOCs; and while certain solutions exist for odor management—for example, carbon filtration—no available technology can completely prevent odor and VOC emissions.15

Some local authorities have imposed stringent bans on cultivation as a result of odor concerns. For example, even after the 2018 Farm Bill legalized industrial hemp, Sonoma County, California, supervisors voted in April 2019 to ban its cultivation. One of the supervisors even commented that any of his colleagues voting to permit hemp cultivation would be “voting for cannabis odor to be in your district.”16 Similar concerns have been echoed by municipalities in Colorado, Oregon, and Washington. As such, local ordinances and regulations that do permit cannabis cultivation and extraction mandate that odors “not be noticeable,” providing wide discretion for a locality to enforce an odor ordinance if it desires.

Many odor complaints are made by private residential landowners, most of whom are concerned about their ability to use and enjoy their property and are worried about declining property values as a result of the cannabis grow. But odor complaints are not limited to just these individuals. Such claims are also being made by businesses that historically have operated in rural, agricultural areas and now share those areas with cannabis cultivators. Wineries are a prime example of such businesses, which have brought multiple actions against the industry in the past. These concerns and issues were recently highlighted in a June 2020 report of the Santa Barbara County Grand Jury, which provides oversight of county governance. The grand jury concluded that the Santa Barbara County Board of Supervisors erred in permitting cannabis operations near wineries, focusing on disruption of the tasting experience due to odors, as well as “terpene drift” and the impact on grape growing.17 Other outdoor-based businesses, such as equestrian facilities, have also reported impacts.

There are multiple examples of these kinds of claims around the country. In California, one such citizen’s group—the Santa Barbara County Coalition for Responsible Cannabis—recently filed several nuisance-based claims targeting offensive odors emanating from local growers near wineries and other businesses.18 Notably, the same group recently sued Santa Barbara County for improperly permitting new cannabis businesses.19 In Michigan, Ypsilanti Township prevailed in a nuisance case against a private couple for emitting marijuana fumes into their neighborhood.20 In each of these cases, the complaints sought to abate the nuisance and further sought injunctive, declaratory, and financial relief.

A prudent cannabis cultivator will recognize that nuisance civil actions are perhaps an even greater financial threat to a cannabis business than the regulatory ones. This is because a cannabis business need not run afoul of the law or of any specific regulation to be a “nuisance.” Nuisance claims can be brought against legal activities, so long as those activities create a nuisance. Thus, should cannabis be fully legalized at the federal level, the nuisance claim will remain as a weapon to be wielded by adjoining landowners.

Civil RICO Suits

RICO authorizes treble damages, attorney fees, and potential injunctive relief in a private cause of action.21 Because marijuana remains illegal at the federal level, civil RICO claims are available as a weapon by anti-cannabis interests. Initially, a series of RICO suits against the cannabis industry prompted settlements, due to concern that these cases could decimate the industry.

In one such case, Safe Streets Alliance v. Hickenlooper, the Tenth Circuit Court of Appeals held that landowners in Colorado could move forward with a civil suit under RICO against a licensed marijuana cultivation enterprise located on an adjacent property.22 The plaintiffs owned a parcel of land in Pueblo, Colorado, with two agricultural buildings. The plaintiffs used their land for hiking, riding horses, and visiting with friends. A newly constructed marijuana grow soon began operating on an adjacent plot of land. The plaintiffs alleged that the operation of the business, together with the “noxious odors” released from that business, injured the value of their property, and they brought suit against multiple entities operating that business or affiliated with it. However, rather than allege common-law nuisance claims, the plaintiffs brought suit under RICO’s citizen suit provision, alleging that the cannabis businesses were co-conspirators.

The district court granted the defendants’ motion to dismiss, but the Tenth Circuit reversed, ultimately finding “three plausibly alleged” injuries, including odor and property value diminution, and remanded the case back to the district court for further proceedings.23 Importantly, the court specifically addressed the “odorous nuisance injury” in its RICO analysis. The court found that the plaintiffs had plausibly pleaded an injury to their property in the form of an interference with the use and enjoyment of their land resulting from the “foul odors” emitted from their neighbors’ property.24 A jury, however, refused to award damages in the suit. Instead, it returned a verdict in favor of the cannabis business, finding that the plaintiffs had not suffered an injury.

Two decisions out of the Ninth Circuit Court of Appeals quickly followed Safe StreetsAinsworth v. Owenby25 and Bokaie v. Green Earth Coffee LLC.26 Each held that the plaintiffs failed to properly allege injury to person or property under RICO and dismissed the claims. In language of particular significance to cannabis businesses everywhere, the Bokaie court expressly stated that RICO was “intended to combat organized crime, not to provide a federal cause of action and treble damages to every tort plaintiff.”27

Despite Ainsworth and Bokaie, the Oregon federal district court denied the defendant’s motion to dismiss for failure to state a claim and lack of subject matter jurisdiction in a similar action, Momtazi Family, LLC v. Wagner.28 In Momtazi, the defendant was an adjacent property owner who grew marijuana legally on his premises under Oregon law. The plaintiff, the owner of a vineyard, had alleged damages due to a cancellation of an order of grapes as a result of odor from the defendant’s operations. The court found that this allegation, along with the plaintiff’s concerns about “diminished marketability,” was sufficient to demonstrate an actual, concrete invasion of a legally protected interest and thus survive a motion to dismiss.

Though a “nuisance-like” claim, civil RICO cases permit the recovery of treble damages and pose a greater danger to a marijuana business owner than a garden-variety nuisance case. This is largely because—so long as marijuana remains illegal at the federal level—the growing of marijuana remains a “racketeering” activity.

Conclusion

Between regulatory enforcement actions, nuisance claims, and civil RICO suits, the cannabis industry faces significant civil liability from odor-based claims alone. Further, it is likely that nuisance claims will be the new frontier of NIMBY pushback from impacted neighbors, providing a civil cause of action against businesses that will survive broad legality of the industry for years to come. In order to navigate this reality, cannabis cultivators must take steps recommended by regulators to minimize odor and other impacts that might prompt a nuisance suit or regulatory violation.

Notes

1. Tom Angell, Hemp Farming Quadrupled in the U.S. This Year, New Report Shows, Forbes (Sept. 5, 2019), https://www.forbes.com/sites/tomangell/2019/09/05/hemp-farming-quadrupled-in-the-u-s-this-year-new-report-shows.

2. Dana Hull, Cannabis Is Deemed Essential Business in Bay Area Virus Shutdown, Bloomberg (Mar. 17, 2020), https://www.bloomberg.com/news/articles/2020-03-18/cannabis-is-deemed-essential-business-in-bay-area-virus-shutdown; Dan Levin, Is Marijuana an “Essential” Like Milk or Bread? Some States Say Yes, N.Y. Times (Apr. 10, 2020), https://www.nytimes.com/article/coronavirus-weed-marijuana.html.

3. No. 16-048, 2016 WL 7233503 (Wash. P.C.H.B. Dec. 2, 2016).

4. Id. at *2.

5. Id. at *5.

6. See Green Freedom, LLC v. Olympic Region Clean Air Agency, No. 17-028c (Wash. P.C.H.B. Mar. 20, 2018) (citing Wash. Rev. Code § 70.94.640(5)(c)).

7. No. P19-025c (Wash. P.C.H.B. Nov. 18, 2019).

8. Cty. of Santa Cruz Planning Dep’t, SCH No. 2017022052, Draft Environmental Impact Report (EIR) for the Commercial Cannabis Cultivation and Manufacturing Regulations and Licensing Program 3.3-6 (2017), http://www.sccoplanning.com/Portals/2/County/Planning/env/Cannabis_EIR/Santa%20Cruz%20Co%20Cannabis%20Draft%20EIR.pdf.

9. Denver Dep’t of Pub. Health & Env’t, Cannabis Environmental Best Management Practices Guide (2018) [hereinafter DDPHE Cannabis Best Practices Guide], https://www.denvergov.org/content/dam/denvergov/Portals/771/documents/EQ/MJ%20Sustainability/Cannabis_BestManagementPracticesGuide_FINAL.pdf.

10. 108 Ariz. 178 (1972).

11. Id. at 183.

12. See Venuto v. Owens-Corning Fiberglas Corp., 22 Cal. App. 3d 116, 124 (1971).

13. See Ethan B. Russo, Taming THC: Potential Cannabis Synergy and Phytocannabinoid-Terpenoid Entourage Effects, 163 British J. Pharmacology 1344 (2011), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3165946.

14. Your Guide to Drying and Curing Cannabis Buds, Leafly (Aug. 8, 2016), https://www.leafly.com/news/growing/drying-curing-cannabis.

15. See DDPHE Cannabis Best Practices Guide, supra note 9.

16. Guy Kovner, Sonoma County Bans Hemp Cultivation, Citing Need for Tighter Regulation, N. Bay Bus. J. (Apr. 3, 2019), https://legacy.northbaybusinessjournal.com/northbay/sonomacounty/9460508-181/sonoma-cannabis-hemp-regulation.

17. Santa Barbara Cty. Grand Jury, Cannabis (2020), http://www.sbcgj.org/2020/Cannabis.pdf.

18. Nick Welsh, Public Nuisance Lawsuit Filed against Cannabis Growers, Santa Barbara Indep. (Mar. 2, 2020), https://www.independent.com/2020/03/02/public-nuisance-lawsuit-filed-against-cannabis-growers.

19. Melinda Burns, Lawsuit Seeks to Shut Down Busy Bee’s Organics in Wine Country, Edhat (Apr. 30, 2020), https://www.edhat.com/news/lawsuit-seeks-to-shut-down-busy-bees-organics-in-wine-country.

20. Tom Perkins, Ypsilanti Township Wins “Seminal” Case against Couple Pumping Intense Marijuana Fumes into Neighborhood, MLive (July 1, 2014), https://www.mlive.com/news/ann-arbor/2014/07/ypsilanti_township_wins_semina.html.

21. 18 U.S.C. §§ 1961, 1964; see also Nat’l Org. for Women, Inc. v. Scheidler, 267 F.3d 687, 700 (7th Cir. 2001); Religious Tech. Ctr. v. Wollersheim, 796 F.2d 1076, 1077 (9th Cir. 1986).

22. 859 F.3d 865 (10th Cir. 2017).

23. Id. at 890–91.

24. Id. at 886.

25. 326 F. Supp. 3d 1111 (D. Or. 2018).

26. No. 18-cv-05244-JST, 2018 WL 6813212 (N.D. Cal. Dec. 27, 2018).

27. Id. at *3.

28. No. 3:19-CV-00476-BR, 2019 WL 4059178, at *1, *7 (D. Or. Aug. 27, 2019).

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Christopher D. Strunk

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Christopher D. Strunk is a partner at Gordon Rees Scully Mansukhani LLP in the firm’s Oakland office and has more than 20 years of experience defending complex environmental claims, with particular expertise in issues facing cannabis cultivators and the ancillary businesses supporting them. He is a vice-chair of the TIPS Cannabis Law and Policy Committee and has published and lectured nationally on cannabis-related environmental issues.