U.S. Supreme Court Expands the Scope of Potential Civil RICO Claims

In Medical Marijuana Inc. v. Horn, the United States Supreme Court has resolved a circuit split, holding that a plaintiff may bring a civil RICO claim for business or property harm resulting from a personal injury. Douglas Horn, a commercial truck driver, injured his back and shoulder in an accident. Months later, after unsuccessfully trying numerous treatments for his chronic pain, he began using “Dixie X,” a product sold by Medical Marijuana, Inc., which was infused with CBD and which Medical Marijuana marketed as being THC-free. Several weeks later, Horn’s employer selected him for a random drug screening, which detected THC in his system. After refusing to complete a substance-abuse program, Horn’s employment was terminated.

Horn sued Medical Marijuana in federal district court, asserting a number of state-law claims as well as a civil RICO claim. Horn alleged that Medical Marketing was a RICO enterprise engaged in the marketing, distributing, and selling of Dixie X. He also alleged that Medical Marijuana’s false or misleading advertising involved mail or wire fraud and constituted a pattern of racketeering activity. The district court granted summary judgment on the RICO claim, finding that Horn’s lost employment arose from the personal injury he suffered due to the THC introduced into his system. Therefore, his lost employment was derivative of his personal injury, and he was not injured in his business or property such that he could pursue a cause of action under RICO. On appeal, the Second Circuit reversed, finding that the term “business” could encompass an individual’s employment and was not strictly limited to a commercial or industrial enterprise, concluding that Horn was “injured in his business” when he lost his job.

The Supreme Court granted certiorari to resolve the circuit split on whether economic harm resulting from personal injury constitutes an “injur[y] to business or property” under RICO or are only personal injury damages. The Supreme Court limited its holding to the interpretation of the term “injured,” noting that it did not decide the underlying questions of whether Horn suffered a personal injury when he ingested THC or whether the Second Circuit correctly interpreted the term “business” to include employment.

Section 1964(c) provides that “[a]ny person injured in his business or property by reason of a violation of [RICO] may sue…” The Court determined that the ordinary meaning of the term “injured” is to “cause harm or damage to,” and therefore, a plaintiff is injured in his business or property under Section 1964(c) if his business or property has been harmed or damaged. The Court noted that Section 1964(c) implicitly excludes recovery of damages for personal injury but noted that the “business or property” requirement applies to the “kinds of harm for which the plaintiff can recover, not the cause of the harm for which he seeks relief.” In other words, a plaintiff may recover damages for business or property loss under RICO even if the loss resulted from personal injury.

In doing so, the Supreme Court rejected Medical Marijuana’s and the principal dissent’s arguments that the definition of the term “injured” as used in Section 1964(c) should be limited to the “invasion of a legal right,” noting that the context of the statute cut in favor of using the ordinary meaning rather than the specialized legal meaning. The Court also dismissed Medial Marijuana’s assertions that the presence of the term “damages” suggests that “injured” conveys a specialized meaning because otherwise the terms would be interchangeable as meaning “loss, hurt, or harm.” The Court responded that the term “damages” already has a specialized legal meaning referring to monetary damages, rather than general loss or harm, so there was meaningful variation in the use of the two separate terms.

The Court majority rejected the defendant’s argument that Court rulings in antitrust cases compel the conclusion that  RICO does not apply to personal injury losses or damages. First, the Court denied that antitrust law requires plaintiffs to assert business or property claims that are consistent with particular common-law torts. Second, the Court pointed out that a violation of antitrust law requires a particular type of injury, “an injury of the type the antitrust laws were intended to prevent.” However, the Court specifically declined to extend a similar requirement to civil RICO claims. In other words, the Court has held that a civil RICO plaintiff does not have to specifically allege a racketeering or RICO-type injury, only that a business or property harm resulted from the defendant’s RICO activities.

The Court also rejected Medical Marijuana’s proffered definition of “injured” due to the difficulty of determining whether a plaintiff has asserted a qualifying “legal right.” The Court noted that Medical Marijuana’s proposed sources—the complaint, state law, and general tort principles—would create a lack of consistency in what constitutes a “legal right.” The Court reasoned that it would be difficult to fit the allegations of a complaint asserting a civil RICO claim into a particular business or property tort, because a number of RICO offenses do not have obvious tort analogues, such as harboring undocumented immigrants and trafficking in counterfeit labels for phonorecords. Additionally, torts are not neatly categorized under “business,” “personal,” or “property” torts under state law, and relying on state law to determine a “legal right” would create significant choice-of-law issues. Finally, the Court noted that applying “general tort law” to determine a “legal right” does not solve the issue because tort law is not static or uniform, and there would be circumstances in which no majority rule exists, the law is unsettled, or there is no analogous tort.

The Supreme Court attempted to assuage fears that its ruling would “eviscerate RICO’s ‘business or property’ limitation” by potentially converting any personal injury claim into a RICO claim. The Court emphasized that RICO still requires a direct relation between the injury asserted and the injurious conduct alleged. Specifically, the Court noted that this requirement may present an “insurmountable obstacle” in Horn’s case, due to the number of steps in his theory and the actors involved. RICO also requires a plaint to establish a pattern of racketeering activity. Finally, the Court noted that RICO will not be implicated by all monetary harms because “business” may not include all aspects of employment and “property” “may not include every penny in the plaintiff’s pocketbook.”

Finally, the Court recognized that “civil RICO has undeniably evolved ‘into something quite different from the original conception of its enactors’” since suits are more often brought against ordinary business than “archetypal, intimidating mobsters.” However, the Court noted, “[i]f the breadth of the statute leads to the undue proliferation of RICO suits, the correction must lie with Congress.”