Over fifty years ago, Congress enacted the Racketeer Influenced and Corrupt Organizations Act (RICO) to fight against organized crime, from the mafia to minor money laundering schemes. This act allows not only for criminal penalties for violations, but also permits private individuals to file civil lawsuits as a result of the defendant’s “racketeering activity,” if they have suffered injuries to their “business or property”. This includes a vast range of criminal offenses. Now, one of the petitions under consideration by the courts examines whether someone can sue under RICO to recover lost earnings.
Douglas Horn, a commercial truck driver, began using a CBD supplement known as Dixie X in 2012 to alleviate pain and inflammation after a car accident. He was attracted by the company’s assertion that the product offered numerous health benefits and did not contain any THC, the active ingredient in marijuana. As a commercial truck driver, Horn faced random drug tests and did not want to jeopardize his employment. To this end, he scrutinized the product’s FAQ page and contacted a customer-service hotline to ascertain that the product was genuinely THC-free.
After commencing use of Dixie X, Horn failed a random drug test at work which resulted in his termination. He suspected the supplement to be the cause and, after sending a batch to an independent lab, discovered that the product did indeed contain THC. In response, Horn sought legal recourse by bringing a suit in a federal court in New York against the company that sold Dixie X, Medical Marijuana, Inc. Despite its name, this company deals only in hemp-based CBD products.
Horn’s lawsuit accused the company of being responsible for his termination as the product’s inclusion of THC led to his positive drug test. He charged that he was fraudulently induced to buy the supplement, unaware of the risks. Additionally, he argued that the company had conspired to commit federal mail and wire fraud resulting in the loss of his salary, causing him injury to his “business or property” under RICO.
The company counter-argued that Horn could not recover his lost earnings under either RICO or his state-law claim. The district court ruled in favor of the company on Horn’s RICO claim, speculating that as RICO authorizes lawsuits only for injury to business or property, it did not extend to personal injury, such as being misguided into buying an alternative health supplement.
The U.S. Court of Appeals for the 2nd Circuit, however, disagreed. This higher court asserted that RICO’s purpose is to address economic harm from corrupt activity and that “business” is generally understood to include employment. Despite the law’s implicit exclusion of personal-injury claims, the court held that there was no reason to believe that Congress intended it to dismiss loss of employment, salary, and pension due to a conspiracy to commit fraud, simply because that harm ensues from a personal injury.
In Medical Marijuana, Inc. v. Horn, the maker of Dixie X urges the justices to review and reverse the 2nd Circuit’s ruling. The company alleges that an economic harm resulting from a personal injury has no basis under RICO and that if such personal injuries were considered as injuries to “business or property” due to the inevitable economic damage they cause, Congress’ stringent limitation on civil RICO claims would be rendered “toothless.”
This case forms part of the broader legal landscape that scrutinizes the roles and responsibilities of companies and consumers in regulated industries, especially in emergent areas such as hemp-based products, where regulatory frameworks continue to evolve. The outcome of this case carries potential implications for all professionals operating within this legal sphere.
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