Liberal-leaning U.S. Supreme Court justices appeared inclined to allow a fired truck driver to use a federal racketeering law to sue a cannabis company and its associated brand during oral arguments on Oct. 15. Other justices expressed concerns about setting a new precedent.
The driver, Douglas J. Horn, is attempting to use the Racketeer Influenced and Corrupt Organizations (RICO) Act, to sue Medical Marijuana Inc. after he consumed a CBD wellness product, Dixie X, manufactured by the company.
Horn and his wife filed a lawsuit against Medical Marijuana and Dixie Holdings in 2015, after he was fired following a failed drug test that turned up a positive THC result, claiming the product he consumed was advertised as containing 0% THC.
While THC is the main intoxicating compound in cannabis, CBD is the main nonintoxicating compound. Companies whose workers are drivers or heavy machinery operators randomly drug test for THC and other drugs to help ensure workplace safety, as required by the U.S. Department of Transportation.
Horn, a commercial truck driver for 14 years, was involved in a car accident in February 2012, sustaining injuries to his shoulder and hip, for which he sought natural wellness medication to relieve his pain as an alternative to his prescription drugs, according to the lawsuit. Through a magazine advertisement later that year, Horn discovered a Dixie X CBD tincture that was advertised as free of THC, according to the lawsuit.
After consuming the product, Horn failed his employer’s random drug test—and later a confirmatory drug test—losing his job, current and future wages, and insurance and pension benefits as a consequence, according to the lawsuit.
“Suspecting that Dixie X was to blame for his positive test, Horn purchased some more and had an independent lab test the product,” according to the lawsuit. “Those tests confirmed that Dixie X contained THC.”
Under a RICO claim, Horn could recoup triple the damages of his lost wages as well as attorney fees from the defendants if he can prove their alleged racketeering activity caused injury to his “business or property,” The New York Times reported. Personal injuries are not included under RICO law.
The U.S. District Court of the Western District of New York sided with the defense—that Horn’s injury was personal—and dismissed the lawsuit.
However, the U.S. Court of Appeals for the Second Circuit disagreed in 2023, stating that the implication that “RICO excludes recovery for personal injury does not mean that a plaintiff cannot sue for injuries to business or property simply because they flow from, or are derivative of, personal injury,” and that nothing in RICO’s text provides for ignoring damage simply because that damage “arose following a personal injury.”
Furthermore, the appellate court pointed out that the phrase “business or property” focuses on the nature of harm, not the source of harm.
Underlying Horn’s initial RICO claim was that Medical Marijuana and its portfolio company, Red Dice Holdings, which owns the Dixie brand, had engaged in acts of mail and wire fraud as well as in transactions with money derived from specified unlawful activities, since the product in question contained THC, according to the lawsuit.
Editor’s note: Products with hemp-derived THC can still be sold in interstate commerce as long as they contain less than 0.3% delta-9 THC on a dry-weight basis, as included in the definition of industrial hemp in the 2018 Farm Bill.
However, the arguments before the U.S. Supreme Court on Tuesday were not to consider federal cannabis policy regarding the legality of product shipments but rather to weigh if Horn’s legal claims could satisfy the RICO Act’s requirements.
“The question presented in this case … is whether economic harms resulting from personal injuries are injuries to business and property,” Associate Justice Ketanji Brown Jackson said during Tuesday’s oral arguments. “[Horn] doesn’t say: ‘My injury is resulting from a personal injury.’ He says: ‘I’m injured because I got fired.’”
Lisa S. Blatt, a lawyer on behalf of Medical Marijuana Inc., said in response: “[Horn] needs to rely on consumption, or he doesn’t have causation. Consumption is personal injury.”
Jackson later asked, “But why is this a damage from personal injury? That’s the part I don’t understand. He’s not claiming that he got ill because of the product. He’s not saying he was personally injured. He didn’t even know that he had ingested THC until the testing and the firing. Isn’t that where his injury comes in?”
Earlier in the arguments, Blatt said that lost wages and medical expenses are classic damages from personal injury and excluded from RICO claims.
Associate justices Sonia Sotomayor and Elena Kagan aligned with Jackson’s line of questions.
“The harm is not ingesting the drugs. That’s the personal injury,” Sotomayor said. “The harm is from being fired. And whether there’s a connection between the predicate acts and that harm is a question of proximate cause, not a question of personal injury.”
Proximate cause considers the direct relationship between an injury (i.e., lost wages) and injurious conduct (i.e., consuming a mislabeled product). While the justices recognized that Medical Marijuana did not drug test nor fire Horn, proximate causation was not being weighed during the oral arguments.
“If you’re harmed when you lose a job, then you’ve been injured in your business, haven’t you?” Kagan asked. “This statutory language … 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 the damages you would otherwise be.”
Throughout the arguments, Blatt said that Congress did not intend to allow “every slip and fall” to constitute a RICO violation.
Chief Justice John Roberts and Associate Justice Brett Kavanaugh—both conservatives—expressed concerns over a ruling in Horn’s favor potentially opening the scope of applying RICO claims for every economic loss.
Enacted in 1970, the RICO Act was mainly intended as a tool to prosecute those involved in organized crime. However, it wasn’t until a 1981 Supreme Court decision expanding the law’s interpretation to apply to both legitimate and illegitimate enterprises that federal courts became flooded with RICO claims, USA Today reported.
On Tuesday, Roberts asked Horn’s attorney, Easha Anand, why Horn’s case wouldn’t make “every slip and fall” a RICO violation. Anand pointed to certain guardrails under the law, such as RICO fencing out complaints related to pain and suffering and emotional distress, which represent the lion’s share of recoveries in most tort cases, she said.
“In your average slip-and-fall case, you’re not going to be able to prove a predicate act, let alone a pattern of predicate acts, let alone a pattern carried on through a racketeering enterprise,” Anand said.
Kavanaugh piggybacked on Roberts’ questioning, saying that the plaintiff was trying to recharacterize personal injuries.
“What you’re doing, even though you just admitted that the statute excludes damages for personal injuries, is taking lost wages and medical expenses and saying, ‘Oh, well, we can get around that limitation that the chief justice referred to by characterizing the lost wages or medical expenses as separate injuries to your business or property,” he said. “That’s the concern.”
H/T: www.cannabisbusinesstimes.com
