In key consumer case, U.S. Supreme Court expands the scope of injuries actionable under RICO

Background 

Douglas Horn is the plaintiff at the center of this case. Horn, a commercial truck driver, injured his back and shoulder in a trucking accident. Months after the accident, Horn was still suffering from chronic pain, and neither physical therapy nor traditional medicine provided relief. At this point, Horn came across “Dixie X,” a tincture infused with cannabidiol—more commonly known as CBD—sold by Medical Marijuana, Inc. CBD is a naturally occurring chemical compound found in the cannabis plan and a “cousin” of tetrahydrocannabinol (THC). Only THC, however, has the psychoactive properties associated with marijuana. 

Aware that he could lose his job if a drug test detected THC in his system, Horn avoided any product that might contain THC. In its advertising materials, Medical Marijuana represented that Dixie X was THC-free. Additionally, a customer service representative assured Horn that Dixie X did not contain THC. Horn then used the product only to fail a subsequent drug test with his employer due to trace THC levels. Horn was then fired from his job. After being fired, Horn ordered another bottle of Dixie X and arranged to have it tested at a third-party lab. This test also came back positive for THC. 

Horn sued Medical Marijuana in federal court in New York under RICO. As background, Congress enacted RICO to provide legal recourse for individuals and entities harmed by organizations engaged in racketeering activity. In enacting RICO, Congress limited the private cause of action to “[a]ny person injured in his business or property.” Horn claimed that Medical Marijuana’s false advertising of Dixie X (via mail and wire fraud) constituted a pattern of racketeering activity and caused him to lose his job. Horn alleged that the loss of his employment constituted a “business injury” actionable under 18 U.S.C. § 1964(c). 

The federal district court dismissed Horn’s RICO claim on the grounds that Horn’s lost employment “flow[ed] from, and [was] derivative of, a personal injury he suffered”—i.e., the introduction of THC “into his system through the ingestion of Dixie X.” However, since a plaintiff cannot recover for a personal injury under RICO, the district court concluded that he also cannot recover for a business or property harm that derives from a personal injury. 

On appeal, the U.S. Court of Appeals for the Second Circuit reversed. The Second Circuit held that § 1964(c) does not impose an “antecedent-personal-injury bar.” While acknowledging that § 1964(c) “implicitly excludes recovery for personal injuries” because the statute grants recovery to someone “injured in his business or property,” the court found that “RICO's text or structure” did not justify excluding recovery for all business or property injuries that happen to stem from a personal injury. As the Second Circuit concluded, Congress “expressly authorized” a plaintiff to sue for injuries to his business or property and “business and property are no less injured simply because” the plaintiff also suffered “an antecedent personal injury.” 

The Supreme Court Resolves the Circuit Split in Favor of the Second and Ninth Circuits 

At the time of Second Circuit’s decision, the Sixth, Seventh, and Eleventh Circuits interpreted § 1964(c) to preclude relief for any economic loss (including loss to business or property) that results from a personal injury. By contrast, the Second and Ninth Circuits had refused to distinguish between a business or property loss suffered as a direct consequence of a RICO violation and one stemming from a personal injury. 

After granting certiorari, the U.S. Supreme Court resolved the circuit split in favor of the Second and Ninth Circuits’ view and concluded that § 1964(c) did not deny a remedy for business and property loss stemming from a personal injury simply because the statute forecloses relief for a direct personal injury. The majority decision, authored by Justice Amy Coney Barrett, focused on the ordinary meaning of “injure” in the context of § 1964(c). The Court found that a plaintiff is “injured in his business or property” for purposes of § 1964(c) “if his business or property has been harmed or damaged.” The Court concluded that RICO’s “business or property requirement operates with respect to the kinds of harm for which the plaintiff can recover, not the cause of the harm for which he seeks relief.” To emphasize this point, the Court offered the following hypothetical: 

[A] gas station owner beaten in a robbery cannot recover for his pain and suffering. But if injuries from the robbery force him to shut his doors, he can recover for the loss of his business. A plaintiff can seek damages for business or property loss, in other words, regardless of whether the loss resulted from a personal injury. 

While acknowledging that civil RICO actions have “undeniably evolved” from their “original conception,” the majority decision waived off Medical Marijuana’s warning that weakening RICO’s “business or property” requirement would transform garden-variety personal injury claims into RICO suits for treble damages. First, the Court noted that RICO has a “direct-relationship requirement” that demands “some direct relation between the injury asserted and the injurious conduct alleged.” In the Court’s words, “foreseeability does not cut it.” 

Second, the Court observed that RICO requires pleading a “business or property” harm and a “pattern of racketeering activity,” which requires identifying two or more predicate acts “within a single scheme that were related and that amounted to, or threatened the likelihood of, continued criminal activity.” In other words, “harm resulting from a single tort is not a ticket to federal court for treble damages.” Finally, the court acknowledged that “not every monetary harm—be it lost wages, medical expenses, or otherwise—necessarily implicates RICO” because the reach of § 1964(c) hinged on the meaning of “injured.” Without deciding the question, the Court also cautioned that, for purposes of RICO, a “business” may not encompass every aspect of employment, and “property” may not include every penny in the plaintiff ’s pocketbook. 

Key Highlights 

The ruling resolves a circuit split in favor of the Second and Ninth Circuits’ broader view that RICO’s civil remedy extends to business or property losses even if they stem from personal injuries. This decision increases litigation risks for businesses—especially drug companies, medical device makers, and consumer product manufacturers—as plaintiffs gear up to leverage RICO claims for treble damages. The decision also paves the way for plaintiffs asserting RICO claims to withstand early dismissal by characterizing personal injuries as injuries to business or property. 

Hogan Lovells will continue to monitor any developments in how this decision is applied in the lower courts and provide updated guidance accordingly. 

This article was authored by James L. Bernard and William C. Winter. For questions about this case, please contact them by email.