Resolving a deep split among federal circuit courts, the U.S. Supreme Court has broadened plaintiffs’ ability to sue under the Racketeer Influenced and Corrupt Organizations Act (RICO) for economic loss stemming from personal injury. The decision stands to permit plaintiffs to bring federal claims — particularly against generic drug and medical device manufacturers — utilizing an avenue many courts previously believed was foreclosed.
In a 5-4 ruling, Justice Amy Coney Barrett wrote for the court in Medical Marijuana, Inc. v. Horn that RICO’s Section 1964(c), while “implicitly denying” plaintiffs from suing to recover for personal injuries, permits plaintiffs to recover for “business and property loss that derives from a personal injury.” (emphasis added).
Barrett wrote on behalf of Justices Sonia Sotomayor, Elena Kagan, Neil Gorsuch, and Ketanji Brown Jackson. Justice Brett Kavanaugh was joined in dissent by Chief Justice John Roberts and Justice Samual Alito. Justice Clarence Thomas, who also dissented, wrote separately.
The case centered on a truck driver, Douglas Horn, who had injured his back and shoulder. When traditional therapies were unsuccessful in alleviating Horn’s chronic pain, he resorted to a CBD product sold by Medical Marijuana, Inc. Concerned about any positive drug test that might cost him his job, Horn was attracted to the company’s product, which Medical Marijuana, Inc. described as “0% THC” and “legal to consume both here in the U.S. and in many countries abroad.” A customer service representative reinforced the company’s statements. When Horn later tested positive for THC and was fired, he sued, alleging that the company was a RICO enterprise, with its “false or misleading advertising” constituting mail and wire fraud and a “pattern of racketeering activity.” See 18 U.S.C. §§1961(1), (5); 18 U.S.C. §§ 1341, 1343.
The district court had ruled for the company, reasoning that because Horn’s firing was “derivative of” a personal injury — ingesting THC — and because a plaintiff cannot sue under RICO for a personal injury, Horn was also unable to recover for business or property harm that flowed from a THC-related injury. The U.S. Court of Appeals for the Second Circuit later reversed that ruling, holding that Section 1964(c)’s use of “business” includes an individual’s employment and that nothing in the RICO statute excludes recovery for economic loss caused by personal injury.
Analyzing the statute’s text and surveying civil RICO precedent, the Supreme Court ultimately sided with the Second Circuit’s view, closing the book on what had become a 3-2 circuit split. The Sixth, Seventh, and Eleventh Circuits had interpreted Section 1964(c) to bar the sort of claims at issue. The Ninth and Second Circuits had gone the other way.
The principal dissent expressed concern that the Supreme Court’s decision will enable plaintiffs to “circumvent RICO’s categorical exclusion of personal-injury suits simply by alleging that a personal injury resulted in losses of business or property,” effectively federalizing traditional state tort suits. The dissent continued: “When enacting civil RICO in 1970, Congress did not purport to usher in such a massive change to the American tort system.”
The majority opinion left a variety of questions unanswered, including (1) whether the Second Circuit correctly interpreted “business” to include a person’s employment, (2) whether Section 1964(c)’s “injured in his . . . property” covers all economic loss, and (3) whether Horn’s THC consumption, which led to termination, actually constituted an “antecedent personal injury.” (After all, Horn argued in the lower courts that Medical Marijuana, Inc. had harmed his ability to earn a living rather than injured his body.)
More broadly, the decision stands to open a pathway for plaintiffs to bring federal claims against generic drug and medical device manufacturers where other doors have been tightly shut. The Supreme Court has already held that federal law preempts — and thus bars — state law failure-to-warn claims against generic drug manufacturers, see PLIVA, Inc. v. Mensing, 564 U.S. 604, 609 (2011), as well as design-defect claims under state law against the same, see Mut. Pharm. Co., Inc. v. Bartlett, 570 U.S. 472, 476 (2013).
Seeking the prospect of treble damages under RICO, Foley anticipates that plaintiffs will attempt to use the Court’s most recent decision to expand the scope of claims in the pharmaceutical and consumer product manufacturing space, where federal preemption has kept most of the plaintiffs’ bar’s liability theories at bay. Foley will continue to monitor the state of affairs and provide updated guidance accordingly.
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