Key Takeaways:
- In Medical Marijuana v. Horn, the U.S. Supreme Court is poised to decide the scope of RICO’s civil treble damages provision—specifically, whether economic harms resulting from personal injuries (such as lost wages) qualify as injuries to “business or property” under the statute.
- The case is on appeal from the Second Circuit, which held that although the civil RICO statute “implicitly excludes recovery for personal injuries,” it does not exclude “otherwise recoverable economic losses [that] happen to have been connected to or flowed from a non-recoverable personal injury.” The Second Circuit followed a similar ruling by the Ninth Circuit and created a split with the Sixth, Seventh and Eleventh circuits.
- A ruling in plaintiff’s favor could create a surge of civil RICO claims in suits involving personal injuries resulting in economic losses, such as lost wages.
In October 2024, the Supreme Court heard oral arguments in Medical Marijuana, Inc. v. Horn, a case poised to resolve a circuit split over whether economic harms resulting from personal injuries (such as lost wages) are injuries to “business or property” and thus eligible for treble damages under the civil provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO).[1] If the Court rules for the plaintiff, businesses are likely to face a sharp increase in civil RICO claims seeking treble damages for economic harms flowing from personal injuries.
The case arose when plaintiff Donald Horn, a truck driver who experiences chronic pain, filed a civil RICO claim against the manufacturers of a CBD-based wellness product that was advertised as THC-free. Horn had taken that product and was subsequently fired after testing positive for THC, and alleged that he suffered injury to “his business or property” based on his lost wages and pension.
The U.S. Court of Appeals for the Second Circuit ruled that Horn’s injuries qualified as injuries to “business or property” under the civil RICO statute,[2] following the Ninth Circuit’s similar ruling in Diaz v. Gates[3] and contradicting prior rulings by the Sixth, Seventh and Eleventh circuits.[4]
In so doing, the Second Circuit recognized that the civil RICO statute “implicitly excludes recovery for personal injuries” but rejected the manufacturers’ argument that RICO “bars plaintiffs from suing simply because their otherwise recoverable economic losses happen to have been connected to or flowed from a non-recoverable personal injury.”[5]
But the manufacturers have argued that the RICO statute distinguishes between injury – which must be an injury to business or property – and the damages flowing from that injury. Here, the manufacturers argued Horn’s injury was personal and not an injury to “business or property,” and the fact that Horn may have suffered economic damages as a result of his injury did not make those damages compensable under RICO. In other words, because civil RICO excludes personal injuries, it also precludes recovery for damages resulting from personal injuries, even if those damages are economic in nature.
The Court’s liberal bloc was particularly critical of the manufacturers’ theory of the case, challenging the idea that losing employment and benefits could be fairly characterized as a purely “personal injury” beyond the scope of civil RICO.
For example, Justice Sonia Sotomayor pointed to the petitioner’s own hypotheticals as “quintessential personal injuries” that are related to “business loss” and therefore recoverable.[6] Justice Ketanji Brown Jackson was skeptical of the idea that there was a personal injury at all and pointed out that Horn did not rely on any theory of personal injury in his RICO claim (such as a bodily injury typical of a product liability case) but rather on a theory of mail and wire fraud.[7] Justice Elena Kagan similarly posited, “If you’re harmed when you lose a job, then you’ve been injured in your business, haven’t you?,” before commenting that “the simplest, clearest reading of th[e] statutory language is it doesn’t . . . distinguish by what causes the harm. It just says if you’re harmed in a way that’s in your business or property which has been understood to include being harmed by loss of a job . . . then you’re entitled to threefold damages” under RICO.[8]
But members of the Court’s conservative majority similarly pushed back against the plaintiff’s theory of the case. Justice Clarence Thomas opened the questioning of Horn’s counsel by probing the injury damages distinction advocated by the manufacturers, responding to counsel’s explanation that Horn’s firing was his injury by stating bluntly: “Medical Marijuana did not fire you.”[9] And Justice Brett Kavanaugh later pointed out that in many cases, damages for “personal injuries” include things such as lost wages that Horn claimed were injuries to his “business,” which raised the question “if [lost wages] are damages from personal injury, can you just recharacterize them as injury to business or property and get around . . . the limitation that Congress at least thought was important?”[10]
Some justices also expressed concern that a ruling for Horn would open the floodgates to civil RICO claims in the lower courts. Chief Justice John Roberts began his questioning by stating that he “understood the business-or-property limitation as having been intended to be a significant limitation on the reach of RICO” and asked why Horn’s position would not “make every slip and fall a RICO violation.”[11] And Justice Kavanaugh stated that finding liability in this case would be a “dramatic, really radical shift in how tort suits are brought throughout the United States.”[12]
That said, not all of the conservative justices were openly hostile to Horn’s position. Justice Samuel Alito, for example, posed questions to Horn’s counsel about subsequent cases, assuming the Court was to “agree with [Horn’s] position” but reserve the issue of medical expenses for a later case. And Justice Barrett quipped that she “share[d]” the “confusion” expressed by Horn’s counsel about “what [petitioners’] test is.” Whether that “confusion” translates into an opinion affirming the Second Circuit’s holding, however, remains to be seen.
[1] Transcript of Oral Argument, Medical Marijuana, Inc. v. Horn, 144 S.Ct. 1454 (2024) (No. 23-365) (Transcript), available at https://www.supremecourt.gov/oral_arguments/argument_transcripts/2024/23-365_9o6b.pdf.
[2] Horn v. Medical Marijuana, Inc., 80 F.4th 130 (2nd Cir. 2023).
[3] Diaz v. Gates, 420 F.3d 897 (9th Cir. 2005).
[4] See Jackson v. Sedgwick Claims Mgmt. Servs., 731 F.3d 556 (6th Cir. 2013); Evans v. City of Chicago, 434 F.3d 916 (7th Cir. 2006), overruled on other grounds by Hill v. Tangherlini, 724 F.3d 965 (7th Cir. 2013); Grogan v. Platt, 835 F.2d 844 (11th Cir. 1988).
[5] Horn, 80 F.4th at 133.
[6] Transcript at 6-7.
[7] Id. at 18-19, 67-68.
[8] Id. at 12.
[9] Id. at 46.
[10] Id. at 50-51.
[11] Id. at 47.
[12] Id. at 52.
[View source.]
