Issues
Do economic harms, such as losing employment, qualify as injury to “business or property” under the Racketeer Influenced and Corrupt Organizations Act, if those harms stem from personal injuries, such as ingesting an unwanted drug?
This case asks the Supreme Court to decide whether economic harms resulting from personal injuries are injuries to “business or property” for the purposes of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Commercial truck driver Horn ingested Dixie X to alleviate his back pain, after learning from the sellers that it contained no THC, even though it did. After testing positive for THC in a random drug test from his employer, Horn was fired. He then sued the sellers for injury to his business under RICO. Medical Marijuana, Inc. argues that ingestion of an unwanted substance like THC is a personal injury, and that economic damages from such an injury do not turn it into an injury to “business or property.” Horn claims that losing his job because of Medical Marijuana’s alleged fraud is an injury to “business or property.” This case has significant implications for the rights of human trafficking victims, the cost of doing business in consumer products, and the vitality of the hemp industry.
Questions as Framed for the Court by the Parties
Whether economic harms resulting from personal injuries are injuries to “business or property by reason of” the defendant’s acts for purposes of a civil treble-damages action under the Racketeer Influenced and Corrupt Organizations Act.
Facts
Respondent, Douglas Horn, was a commercial truck driver for fourteen years before the event leading to this case occurred. Brief for Respondent, Horn at 3–4. In February 2012, he was involved in a trucking accident in which he sustained injuries to his shoulder and back. Horn v. Medical Marijuana, Inc. at 4. Later that year, Horn conducted research on medical marijuana and, through a magazine advertisement, discovered Medical Marijuana, Inc.’s product, Dixie X. Id. The advertisement stated that Dixie X contained 0% THC and instead, contained CBD. Id. at 4–5. THC, or tetrahydrocannabinol, is the psychoactive compound in cannabis that causes users to experience a high, while CBD, or cannabidiol, is a compound in cannabis which generally does not cause the user to experience a high. Terence Ng & Maureen C. Keshock, Tetrahydrocannabinol (THC), The National Library of Medicine (Nov. 12, 2023). Because Horn’s employer, U.S. Department of Transportation, conducted random employee drug tests and terminated employment for positive THC tests, Horn conducted further internet research on Dixie X. Horn at 6. This research included checking Dixie X’s website and calling a customer service number to ensure that the product did not contain THC. Id. In October 2012, Horn purchased Dixie X and, after consuming the product, failed his employer’s drug test which led to his termination. Id. Horn then purchased more Dixie X and had it tested by an independent laboratory, where it tested positive for THC. Id.
Horn and his wife sued Medical Marijuana, Inc., et al., (“Medical Marijuana”) in the United States District Court for the Western District of New York and included a civil RICO claim under 18 U.S.C. §§ 1962(d) and 1964(c), alleging a RICO conspiracy. Id. at 6–7. Section 1962(d) criminalizes conspiracies to violate the rules outlined in subsections (a)–(c) of section 1962. Id. at 7. Section 1964(c) allows anyone harmed in their business or property through conduct forbidden by section 1962 to sue for and recover triple the damages sustained, as well as costs including attorney’s fees. Id. at 8–9.
The district court granted summary judgment to Medical Marijuana on Horn’s civil RICO claim concluding that the claim fell outside of the scope of a civil RICO action under Section 1964(c). Id. at 7–8. The court reasoned that Horn’s loss of earnings were derived from a personal injury and thus “do not constitute an injury to business or property.” Id. The United States Court of Appeals for the Second Circuit reversed, concluding that injuries to business, including employment, are not invalid under Section 1964(c) simply because they flow from a personal injury. Id. at 16. The court explained that the “business or property” requirement addresses the nature of the harm and not the source. Id. The court reasoned that because the term “business” encompasses employment, Horn suffered an injury to his business when he was fired. Id. at 11. Furthermore, the court found that the civil RICO statute includes a proximate-cause limitation that bars claims where the plaintiff’s harm is too remote from the act causing the harm. Id. at 17. The court concluded that this limitation implies that plaintiffs can still bring some claims that flow from personal injuries. Id.
The United States Supreme Court granted Medical Marijuana’s petition for certiorari on April 29, 2024. Brief for Petitioners, Medical Marijuana, Inc., at 1.
Analysis
DISPUTE ABOUT THE NATURE OF HORN’S INJURY
Medical Marijuana argues that the nature of injury Horn suffered, which it describes as ingestion of an unwanted substance, is a personal injury. Brief for Petitioners, Medical Marijuana, Inc. at 20–21. Medical Marijuana cites the Black’s Law Dictionary to define personal injury as an injury “done to a man’s person, such as a cut or bruise, a broken limb, or the like, as distinguished from an injury to his property or his reputation.” Id. at 21. According to Medical Marijuana, the alleged fraud that induced Horn to ingest Dixie X was not the event that caused his injury. Id. at 24. Instead, Medical Marijuana contends that Horn’s ingestion of Dixie X was a personal injury that caused downstream economic damages, distinct from direct injuries to business or property that sustain a civil RICO claim. Id. at 24–25.
Horn counters that his injury suffered is economic in nature. Brief for Respondent, Horn at 29. Horn claims that he did not suffer an injury from his ingestion of THC because he was unaware of it until after he was fired. Id. Moreover, Horn asserts that mail fraud and wire fraud, which were the criminal activities Horn relied on in his civil RICO suit, can create injuries to business or property, and not just personal injury as Medical Marijuana contends. Id. at 26.
THE TEXT OF 18 U.S.C. § 1964(C): THE MEANING OF “INJURY” AND “DAMAGES”
Medical Marijuana argues that civil RICO does not allow recovery for personal-injury damages. Brief for Petitioner at 14. More specifically, Medical Marijuana contends that the “textual distinction between injury and damages” supports the statutory interpretation that plaintiffs cannot bring a civil RICO claim on the grounds that economic damages arose from personal injuries. Id. at 15.
First, Medical Marijuana notes that civil RICO excludes personal injuries and thus personal-injury damages by citing RJR Nabisco, Inc. v. European Community, which held that Congress “cabin[ed] RICO’s private cause of action to particular kinds of injury—excluding, for example, personal injuries.” Id. at 14. Medical Marijuana further supports this position by suggesting that Congress would have included a reference to personal injuries if it had intended to include them in civil RICO, as Congress has done in the Anti-Terrorism Act, the Federal Tort Claims Act, and the Federal Anti-Tampering Act. Id. at 15. Next, Medical Marijuana emphasizes the language of the statute that entitles a plaintiff “injured in his business or property” to “threefold damages he sustains” as evidence that Congress ruled out civil RICO cases for damages from personal injuries. Id. Because “injury” means “[t]he invasion of a legal right” and “damages” means “the loss, hurt, or harm resulting from the injury,” Medical Marijuana argues that plaintiffs cannot recast economic damages from a personal injury into an economic injury as a basis for a RICO suit. Id. Finally, Medical Marijuana underscores the distinction between “injury” and “damages” as separate legal concepts in other civil RICO cases. Id. at 16. For example, Medical Marijuana notes that the Court has previously held that a party can be injured within the United States even if they suffer damages abroad, which shows that “injury” and “damages” are separate legal concepts. Id. Conversely, Medical Marijuana notes that plaintiffs cannot bring a civil RICO claim for overseas injuries just because they suffered damages in the United States. Id. Medical Marijuana also claims that “injury” and “damage” have been used as separate legal concepts in other legal contexts, such as patent law and personal jurisdiction. Id. at 16–17.
Horn counters that civil RICO permits recovery for loss of employment caused by racketeering activity, such as fraud. Brief for Respondent at 14. Horn reads the statute differently than Medical Marijuana, positing that “injured” means “harmed” and “damages” are compensation for that harm. Id. at 13. Under Horn’s reading, plaintiffs who lost their employment because of racketeering suffered injury to their business and can thus recover damages in a civil RICO suit. Id. at 14. Horn notes that Medical Marijuana fails to distinguish the word “damage” from the plural “damages.” Id. at 15–16. According to Horn, most dictionaries, including the one that Medical Marijuana used, define “damages” as a form of compensation and “damage” as the injury itself, rather than a consequence of the injury. Id. Horn further contends that even if “damages” means “harmed,” Congress often uses different words to convey the same meaning and that the word “injured” can therefore mean the same as “harmed.” Id. at 17. Next, Horn cites the text of the RICO statute that instructs courts to “liberally construe” the statute to “effectuate its remedial purpose.” Id. at 17–18. Horn therefore urges the Court to interpret civil RICO to cover economic harm proximately caused by racketeering activity. Id. In addition, Horn asserts that defining injury as an “invasion of legal right,” as Medical Marijuana proposes, would still include any harm caused by racketeering activity, including his. Id. at 24. Horn contends that civil RICO does not just permit plaintiffs to bring claims for specific kinds of injury that Congress sought to protect against. Id. at 25. Horn also warns that only recognizing invasions of legal rights that are “cognizable” and “compensable” under state law would be a mistake. Id. Finally, Horn challenges the legal authorities Medical Marijuana relies on in asserting that the terms “injury” and “damages” are distinct legal concepts in civil RICO cases. Id. at 16–17. For example, Horn argues that in Yegiazaryan v. Smagin, the only issue was whether the plaintiff “felt” their injury within or outside the U.S., not whether the injury was a consequence of a racketeering activity, as here. Id.
STATUTORY HISTORY
Medical Marijuana argues that Congress modeled RICO after the Clayton Act, and that courts have “repeatedly noted” that injury to “business or property” under that statute excludes personal injuries. Brief for Petitioners at 17–18. Further, Medical Marijuana contends that the Court should take a parallel approach to civil RICO cases and distinguish “business damages” from “damages resulting from personal injury,” as it has under the Clayton Act. Id. at 18. In addition, Medical Marijuana warns that allowing suits based on personal injuries contravenes the statutes’ shared goal of remedying economic injuries. Id. at 18–19. Medical Marijuana highlights that the Clayton Act does not authorize suits arising from personal-injury damages, whether those injuries arise from participating in professional sports or using defective cosmetics. Ultimately, Medical Marijuana suggests the same standard be applied to civil RICO cases. Id. at 19.
Horn claims that the Court has interpreted “business or property” more broadly under RICO than under the Clayton Act. Brief for Respondent at 38. Horn adds that even though Congress modeled civil RICO after the Clayton Act, it included a liberal-construction provision only in civil RICO, to create a stronger remedy for victims. Id. Furthermore, Horn argues that although one district court has held that the Clayton Act does not apply to economic harms derived from personal injuries, another district court held the opposite. Id. Finally, Horn notes that courts long counted loss of employment as an injury to business or property under the Clayton Act before Congress borrowed that language for the civil RICO provision. Id. at 39.
Discussion
IMPACT ON BUSINESS AND HUMAN TRAFFICKING VICTIMS
The U.S. Hemp Roundtable, Inc. (“Roundtable”), in support of Medical Marijuana, asserts that applying civil RICO to business harms that flow from personal injuries could adversely impact the hemp industry and its customers through expanded tort liability. Brief of Amicus Curiae U.S. Hemp Roundtable, Inc. (“Roundtable”), in Support of Petitioners at 14–15. The Roundtable posits that costs from increased liability from civil RICO will not incentivize manufacturers to make safer products because the Food and Drug Administration already heavily regulates the hemp industry. Id. at 19–20. Additionally, the Roundtable proposes that those who rely on the health benefits of hemp-based products may be unable to meet these rising costs. Id. at 18.
The U.S. Chamber of Commerce et al., argue that if the Court sides with Horn, small businesses will more frequently be sued under civil RICO resulting in pressure to settle potentially frivolous but expensive RICO suits. Brief of Amici Curiae Chamber of Commerce of the United States of America, et. al., in Support of Petitioners at 22–23. Lastly, the DRI Center for Law and Public Policy and the Atlantic Legal Foundation claim that by increasing potential verdict amounts for plaintiffs suing for product liability under civil RICO, a decision for Horn will increase the cost of liability insurance for American businesses and stifle scientific and technological innovation because inventors will “fear liability.” Brief of Amici Curiae DRI Center for Law and Public Policy and Atlantic Legal Foundation, in Support of Petitioners at 21.
Addressing the concerns of increased costs for businesses based on broader tort liability, Horn argues that the stringent requirements of civil RICO exclude most average tort claims from its scope, including products-liability cases. Brief for Respondent, Horn at 34–35. For example, Horn notes that plaintiffs must establish a pattern of racketeering activity, show that the offense was committed by an enterprise, and prove that the offense is both the proximate and but-for cause of the injury. Id.
The Human Trafficking Legal Center (“HTLC”), in support of Horn, argues that civil RICO must apply to business harms that flow from personal injuries because human trafficking victims cannot obtain effective and complete remedies otherwise. Brief of Amicus Curiae Human Trafficking Legal Center (“HTLC”), in Support of Respondent at 16. HTLC emphasizes that Medical Marijuana’s interpretation of civil RICO would disqualify many human trafficking victims from recovering because defendants could claim that a victim who they physically harmed has economic damages stemming from a personal injury. Id. at 18–19. HTLC notes by contrast that a trafficking victim who is not physically harmed, through assault or other means, would have a claim under civil RICO. Id. Additionally, HTLC notes that the threat of treble damages is needed to deter human traffickers from subjecting victims to poor conditions, including forced labor in war zones and forced relocation. Id. at 15. Lastly, HTLC assures that a ruling for Horn will not create a massive influx of civil RICO claims because of the stringent requirements for pleading a RICO claim. Id. at 18–19.
DUE PROCESS CONCERNS AND PUBLIC POLICY
The Washington Legal Foundation (“WLF”), in Support of Medical Marijuana, claims that, because civil RICO allows for treble damages, its punitive nature raises significant due process concerns. Brief of Amicus Curiae Washington Legal Foundation (“WLF”), in Support of Petitioners at 15–16. Furthermore, WLF elaborates that the civil-criminal nature of RICO—violations can carry both civil and criminal penalties—also requires fair notice as is required by the Due Process Clause of the Constitution. Id.
The American Association of Justice (“Justice”), in support of Horn, argues that the Supreme Court should not consider policy arguments when deciding the scope of civil RICO. Brief of Amicus Curiae American Association for Justice (“Justice”), in Support of Respondent at 21. Justice further states that it is the role of Congress to consider policy arguments, and the Court’s role is to follow the policy and broad construction of RICO that Congress has enacted. Id. at 22.
Conclusion
Acknowledgments
Additional Resources
- Jimmy Hoover, Justices Will Eye Reach of Civil RICO Law in Medical Marijuana Case, The National Law Journal (Apr. 29, 2024).
- John Kingston, Supreme Court to Hear Case of Truck Driver Who Failed CBD-Related Drug Test, FreightWaves (Sept. 10, 2024).