The Blame Game: Cannabis Edition

Cannabis is a topic that is relatively new to litigation, and is gaining in popularity with every passing day. A recent Senate committee hearing revealed that about 65 percent of Americans support the legalization of marijuana, and 93 percent of Americans support medical marijuana. Americans’ access to cannabis has also grown as states pass various laws allowing medical and adult use of the plant. It is no surprise, then, that civil litigation and the claims that culminate in civil jury trials are also seeing cannabis becoming an element.

We recently searched for jury verdicts that involved cannabis in order to test whether your assessment of the impact of cannabis is on point with these outcomes, including as much detail as gleaned from jury verdicts and news reports concerning liability and damages. As each case is reviewed, consider the probable outcomes. Will the “cannabis factor” affect the outcome? Should the case end in a plaintiff or defense verdict? Are punitive damages a risk? Helping us out today is Rick Byrne, quality assurance analyst for Knight Insurance Group, who will share his assessment and predicted outcome of each case before the actual verdict is revealed. Let’s play The Blame Game!

Case One: Bait and Switch?

Our first case was venued in state court in Los Angeles. The plaintiff, an investor, along with his associated companies, invested in a plan to build and operate a cutting-edge medical marijuana dispensary and cultivation center in Los Angeles. In return, the defendant, a longtime cannabis businessman and activist in the city, allegedly promised to make the plaintiff a director in his medical marijuana collective (which was named as a co-defendant), and to give operational control of the new cannabis business to a nonprofit controlled by the plaintiff. The plaintiff claimed that, once the new facility was constructed, the individual defendant and a group of armed men arrived to remove the plaintiff from the property using physical violence and intimidation.

The plaintiff and his companies sued the defendant and his companies. The plaintiff alleged that the defendants’ actions constituted fraud, constructive fraud, negligence, negligent misrepresentation, breach of contract, breach of good faith and fair dealing, and quantum meruit (a claim for the reasonable value of services performed). The plaintiff claimed that the defendants fraudulently induced him and his companies to invest $2 million into the defendants’ plan to build and operate a state-of-the-art medical marijuana dispensary and cultivation center, and that the defendants never intended to compensate him or his companies for their investment or give up any control of the facility. He claimed that, instead, the defendants waited until the facility was built and then attempted to take everything for themselves. The plaintiff sought to have the written agreement rescinded and to enforce the original oral agreement to make him a 50/50 partner in the plaintiff’s company. The defendants sought recovery of monetary damages for costs incurred in the build out of the facility.

Evaluation and Verdict: “The fact that cannabis is involved in a business will probably not be a factor,” says the aforementioned Rick Byrne, quality assurance analyst for Knight Insurance Group. “In order to assess verdict potential, one would need to see the contract at issue and have more details about the alleged oral agreement. Counsel for both sides should consider whether there may be insurance coverage in play, and that will also require looking at the terms of any available insurance policies. Assuming there is some potential for coverage, there may have been an insurance carrier defending some of the claims here. Most likely, coverage counsel for any potential carriers would be retained to make that call. Also, the strong-arming of the plaintiff, if it can be proven, will probably not go over well before a Los Angeles jury. Other than these observations, the outcome is hard to predict.”

The jury found for the plaintiff and his companies on all their claims, and it determined that the plaintiffs’ damages totaled $4.3 million. Specifically, the jury awarded the plaintiffs $1 million for the fraud claim; $700,000 for the claim of breach of an oral contract; $600,000 for the claim of negligent misrepresentation (which may have been covered by insurance); $400,000 for the claim of breach of the covenant of good faith and fair dealing; $300,000 for the claim of negligence (another claim potentially covered by insurance); $200,000 for the claim of breach of fiduciary duty; $175,000 for the claim of constructive fraud; plus $175,000 in quantum meruit and $750,000 in punitive damages. In addition, the jury agreed that the written management transfer agreement should be rescinded, as it was obtained through either fraud, undue influence, or made with imperfect knowledge of its material facts.

Case Two: Medical Marijuana Mystery

Our second case comes from the state court in Jacksonville, Florida. The plaintiff, a woman of unknown age, alleged that the defendant ran his vehicle through a red light, striking the plaintiff’s vehicle and seriously injuring her. The plaintiff later amended her complaint to add an uninsured/underinsured motorist claim against the defendant’s insurer. After the plaintiff settled her claims against the other driver, the case went to trial against the insurer, which admitted that the insured defendant driver’s negligence caused the collision, but denied that the accident had caused the plaintiff to suffer permanent injuries.

The verdict report for this case gives no details at all about the specifics of the plaintiff’s injuries or alleged damages. We can assume that the injuries were at least somewhat serious because the plaintiff used a life-planning expert at trial, and the defense used an orthopedic surgeon expert and a radiologist expert. We also know that the plaintiff had expenses for chiropractic treatment. As for the cannabis connection, the plaintiff claimed that her future medical expenses included $25,200 for the cost of medical marijuana. For those who want to crunch the numbers, the verdict report reflected that, in addition to the expense of medical marijuana, special damages included past medical expenses totaling about $20,000, future chiropractic treatment and physical therapy totaling $ 63,000, and future orthopedic care costing $35,000.

Evaluation and Verdict: “There are so many unknowns here that the outcome is almost impossible to evaluate,” says Byrne. “The cannabis factor here is that the plaintiff seeks recovery for the expense of medical marijuana. In a large city where medical marijuana is legal, a jury will likely not balk at awarding damages for medical marijuana, but not knowing what the plaintiff’s actual injuries were, it is hard to estimate the outcome. On the other hand, this is an admitted liability case. As such, the plaintiff must prove the injuries were caused by the accident. The parties will need to assess the severity of the impact and potentially retain a biomechanical expert to determine if the nature of the collision could have caused the type of injuries alleged. Likely, a forensic expert will be needed by the defense to assess the reasonableness of the charges, including the charges for medical marijuana. Assuming the plaintiff can establish causation and reasonableness of the charges, the plaintiff will likely recover all of her special damages (totaling about $140,000), and pain and suffering at a multiplier of two-to-three times the special damages, for a total of $280,000 to $420,000. The plaintiff’s use of a life-care planner shows that the injuries may be more severe than they seem, and an outcome of up to $450,000 would not be unexpected. In fact, in some jurisdictions in Florida, juries are known to give high valuations of pain and suffering, so this case has potential for a runaway verdict.”

With roughly $150,000 in medical specials, the jury returned a verdict of $937,640 for the plaintiff. The verdict included $19,540 for past medical expenses; $63,360 for future chiropractic and physical therapy care; $35,000 for future orthopedic care; $1,500 for future over-the-counter medications; $25,200 for future medical marijuana costs; $127,440 for past pain and suffering; and $665,600 for future pain and suffering. For those who rely on multipliers, the verdict was more than eight times the medical specials. Clearly, something was going on in this case that suggests the plaintiff was either very seriously injured beyond what the numbers suggest, or would require significant future treatment and care, causing great pain and suffering. Either way, the jury did not seem to mind at all that this plaintiff was a medical marijuana user, and even gave her money to purchase cannabis.

Case Three: Shady Business in Chicago

Our third case comes from the federal court in the Northern District of Illinois, Eastern Division. The facts here are somewhat convoluted, but here are the essentials. Chicago police officers detained and handcuffed a suspect for misdemeanor reckless conduct. The suspect was then transported to the police station, where he claims he was threatened with being locked up without bail unless he identified his source of cannabis. The suspect allegedly identified an individual by the name of “Hitman” as a source and told the officers he knew the general location where he had bought marijuana from Hitman before, but he had not purchased marijuana from him in three or four months. The suspect allegedly identified a gangway between two houses in Chicago as the location of the marijuana purchases.

The police allegedly then pursued a search warrant for Hitman with an address at the location identified by the suspect. The suspect contended the police falsely stated they were approached by a cooperating individual who wanted to give information on a narcotics dealer, that the cooperating individual purchased marijuana from Hitman in the location identified in the search warrant, and such purchases had occurred 30 times over the prior three months. The police officers reportedly took the suspect before a judge to get judicial approval for the warrant and threatened that if he wanted to get out of jail, then he should do as they told him and tell the judge that everything in the warrant was true. A Cook County judge reportedly signed the warrant. Another warrant was later requested and issued with similar facts, but for a different address near the address listed in the first warrant. The suspect was again brought into court and allegedly threatened that he had to tell the judge the statements in the warrant were true if he wanted to get out of jail.

The police purportedly executed the search warrant for the residence identified in the second search warrant. The plaintiffs, a woman and her elderly mother, resided at the location. When police kicked in the front door with their guns drawn and yelled for everyone to get down on the floor, the woman was sleeping on the couch and her elderly mother was in bed. The woman reportedly demanded to see a copy of the search warrant, but was told by one of the officers that she could not see the warrant until she took her dog out of the house. The woman reportedly told the officers that her son was a Chicago police detective and picked up the phone to call him. One of the officers allegedly told her that she was not going to call anyone. Officers were in the home for approximately one hour before the grandson, a Chicago police detective, arrived, and the search was reportedly called off.

The plaintiffs reportedly suffered unspecified physical and emotional injures and were transported to the hospital. The original suspect was reportedly arrested for perjury. The suspect then brought claims under 42 U.S.C.A. 1983 for false arrest/unlawful detention. The two women also brought claims for false arrest/unlawful detention and unlawful seizure of property. All plaintiffs sued for conspiracy and intentional infliction of emotional distress, and they also all sought damages for physical and emotional suffering and humiliation, lost wages, and injury to reputation. They further requested punitive damages against the officers.

The defendants denied any wrongdoing and asserted, as affirmative defenses, qualified immunity; immunity for discretionary actions, law enforcement actions, institution, or prosecution of any judicial or administrative proceedings; and comparative and contributory fault. They also argued that the city was not liable under state law if its employees were not liable. The officers brought a motion for partial summary judgment, arguing that they had reasonable suspicion to stop the suspect because he fit the description of a young male flashing gang signs.

After motions for summary judgment/summary adjudication, the causes of action for false imprisonment and intentional infliction of emotional distress survived, and those claims went to jury trial.

Evaluation and Verdict: “This is a tough case!” says Byrne. “If the police department served a search warrant on the wrong address, then there may be a legitimate claim for negligence, which could be covered by insurance. There appears to be damages related to ‘unspecified physical injuries.’ As such, there are ostensibly damages that could be compensated for. If the allegations are true, then a verdict for the prosecution is likely. As far as the cannabis factor goes, cannabis will likely not be an issue for a big city jury. Potentially, one or both parties may move to exclude evidence relating to cannabis sales/purchases as irrelevant. That aside, calculating the outcome is difficult without more specifics. Additionally, in a big city, there is a risk of bias against police, which is a factor to consider. The defendants should be especially concerned if there is any basis for the plaintiffs to recover attorney’s fees, as even a small award of damages could turn out badly with a significant attorney’s fees award.”

In the end, the original suspect was awarded $100,000 for compensatory damages. The woman was awarded $50,000 for compensatory damages, and the elderly woman was also awarded $50,000 for compensatory damages. The plaintiffs were also awarded attorney’s fees of $469,498. As Byrne predicted, this win is something of a hollow victory considering the sizable attorney’s fees, which were more than double the liability exposure.

The Cannabis Factor

Overall, in these cases, there did not appear to be much of a cannabis factor. The businessperson who wanted to invest in a cannabis business prevailed in his case for breach of contract, the woman injured in the car accident was awarded damages to cover the cost of medical marijuana, and the plaintiffs who sued the police department and individual police officers received sizable awards (though the plaintiffs’ lawyers really won that case) even though one plaintiff admitted to buying cannabis, and the other plaintiffs lived in/near an area where cannabis was frequently sold. Based on this very small sampling, the defense team in litigation involving cannabis may be wise to expect that the involvement of cannabis will have little-to-no impact, although it’s worth noting that these cases were all venued in larger cities. The cannabis factor could be different in smaller cities and less-populated venues, and/or in jurisdictions where cannabis has not yet been legalized.