First, the United States District Court for the Central District of California relied on the illegality doctrine to find that certain federal causes of action could not be asserted by an individual engaged in cannabis cultivation.
She alleged in her lawsuit that the partner lied about his experience, background, and capabilities, and she sought lost profit damages under RICO, the Lanham Act, and a host of state law claims. Id.
The court ruled that Ms. Shulman could not pursue her RICO claim because granting relief would require the court to violate the Controlled Substances Act reasoning that lost profits for sales of cannabis violate the CSA.
The Board had approved the plaintiff, Mr. Brinkmeyer, as a debt financer for cannabis businesses, but because he did not satisfy the state’s residency requirements, he could not become an equity financer and could not share in the profits of his investments.
The court applied the Ninth Circuit’s test for invoking Pullman abstention, which asks 1) if the case touches on a sensitive area of social policy, 2) if a definite ruling on the state issue would terminate the controversy, and 3) if the possible determinative issue of state law is uncertain.
In 2019, the Ninth Circuit applied Younger abstention, declining to hear a case in light of an ongoing state judicial proceeding in a case involving the seizure of a hemp shipment.
Later in 2019, a district court in Washington invoked Burford abstention, declining to hear a contract dispute concerning the rights to a license to distribute medical cannabis.
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