On Wednesday, in Medical Marijuana, Inc. v. Horn, the United States Supreme Court resolved a circuit split to hold that a plaintiff may seek treble damages for business or property loss under 18 U.S.C. § 1964(c), even if the loss resulted from personal injury. While the Court’s ruling does not address the extent to which adverse employment actions that lead to lost wages or other economic losses may implicate RICO going forward, this case is a reminder for employers to remain vigilant about complying with the law to be in the best position to defend against meritless RICO claims.
Factual Background
Donald Horn, a truck driver who experienced chronic pain, took a CBD-based wellness product manufactured by Medical Marijuana, Inc. The product was advertised as THC-free. After taking the product, Horn failed a random drug screening at work and lost his job due to THC being detected in his system. Horn filed a civil RICO claim against Medical Marijuana, Inc., alleging that the manufacturer engaged in mail and wire fraud that caused him to suffer injury to “his business or property” due to lost wages and pension that resulted from the termination of his employment.
The United States District Court for the Western District of New York granted summary judgment to Medical Marijuana, finding that Horn’s lost employment “flow[ed] from, and [was] derivative of, a personal injury he suffered” and damages are not recoverable for business or property losses that result from a personal injury. Horn appealed, and the United States Court of Appeals for the Second Circuit reversed, finding that Horn had been “injured in his business” when he lost his job, and the civil RICO statute does not exclude “otherwise recoverable economic losses [that] happen to have been connected to or flowed from a non-recoverable personal injury.”
In so holding, the Second Circuit joined the United States Court of Appeals for the Ninth Circuit, deepening the circuit split on the issue (the United States Courts of Appeal for the Sixth, Seventh, and Eleventh Circuits have precluded relief under §1964(c) for any economic loss that resulted from personal injury).
The Supreme Court’s Ruling
In affirming the Second Circuit’s conclusion, the Court explained that §1964(c) allows recovery for “[a]ny person injured in his business or property by reason of a violation of [RICO] . . .”, and “[a] plaintiff has been ‘injured in his business or property’ if his business or property has been harmed or damaged.” In other words, the “business or property” requirement relates to the “kinds of harm for which the plaintiff can recover, not the cause of the harm for which he seeks relief.” Accordingly, the Court held that a plaintiff may seek damages for business or property loss under §1964(c) even if the loss resulted from a personal injury.
The Court remanded the case, and in doing so, identified several requirements that Horn would still have to satisfy on remand, which the Court recognized could be an “insurmountable obstacle.” Specifically, the Court noted that the number of steps between the injurious conduct (Medical Marijuana’s misrepresentations about the product) and Horn’s injury (losing his job) placed constraints on Horn’s ability to succeed on a civil RICO claim because he must establish “some direct relationship between the injury asserted and the injurious conduct alleged.” The Court also emphasized that a plaintiff must establish a pattern of racketeering activity rather than harm resulting from a single tort and noted that “not every monetary harm – be it lost wages, medical expenses, or otherwise – necessarily implicates RICO.”
The Court also identified several issues that were not decided as part of the Court’s ruling and specifically stated that:
- The Court was not expressing any view regarding whether Horn suffered an antecedent personal injury when he consumed THC.
- The Court was not deciding whether the Second Circuit correctly interpreted “business” to encompass “employment” under §1964(c).
- The Court was not opining whether the phrase “injured in his . . . property” under § 1964(c) encompasses all pecuniary loss.
Looking Forward
Time will tell whether Horn results in increased civil RICO claims arising from business or property losses that result from personal injury. And while the Court’s ruling does not address the extent to which adverse employment actions that lead to lost wages or other economic losses may implicate RICO going forward, employers who are vigilant about complying with the law will be in the best position to defend against meritless RICO claims.
