The U.S. Supreme Court is now considering whether the Racketeer Influenced and Corrupt Organizations Act (RICO) can be extended to personal injuries sustained as a result of a falsely advertised product.
In Medical Marijuana, Inc. et al v. Horn, 80 F.4th 130 (2d Cir. 2023), Respondent, a commercial truck driver, took a hemp-derived CBD product to treat his pain. While hemp and marijuana come from the same plant, hemp is made without the psychoactive effects from THC in marijuana. He sued Petitioners, the manufacturers of the medication, when he failed a routine drug test at work and lost his job.
RICO states that “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue thereafter in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including reasonable attorney’s fee . . . .” 18 U.S.C. § 1964(c). Congress enacted RICO to combat “organized crime and its economic roots.” Russello v. United States, 464 U.S. 16, 26 (1983). As a result, RICO claims have been strictly limited to harms to “business or property.” This limitation has led many courts, including the Supreme Court, to hold that the RICO statute does not extend to personal injuries.
Do lost wages constitute injury to “business” under the RICO statute?
Despite these precedents, there is a circuit split with respect to whether RICO’s “business or property” limitation reaches economic harms arising from personal injuries allegedly caused by a RICO conspiracy. In Horn, the Second Circuit held that plaintiffs bringing civil suits under this provision can recover for economic harms arising from personal injuries, including in product liability lawsuits. The appellate court reasoned that nothing prevented Respondent from suing “simply because [his] otherwise recoverable economic losses happen to have been connected to or flowed from a non-recoverable personal injury.” 80 F.4th at 133. The court nevertheless turned a blind eye to existing precedents to the contrary and found that, “[b]ecause the term ‘business’ encompasses ‘employment,’ Horn has suffered an injury ‘in his business,’ as contemplated by the RICO statute.” Id. at 136.
This reasoning seems overly nuanced and subverts the Supreme Court’s 2016 ruling explicitly stating that the “business or property” requirement “exclude[es] . . . personal injuries.” RJR Nabisco, Inc. v. Eur. Cmty., 579 U.S. 325, 250 (2016) (emphasis added). In any event, there now is an entrenched circuit split regarding whether economic damages arising from personal injuries (medical expenses, lost wages, etc.) fall within that definition. The Sixth, Seventh, and Eleventh Circuits have held that such alleged economic harms arising from personal injuries do not qualify. See, e.g., Jackson v. Sedgwick Claims Mgmt. Servs., 731 F.3d 556, 565 (6th Cir. 2013) (en banc). The Second and Ninth Circuits disagree. See Horn, 80 F.4th 130; Diaz v. Gates, 420 F.3d 987, 905 (9th Cir. 2005) (en banc) (“The distinction between ‘business’ and employment is so tenuous and uncertain that it is hard to see why we should attribute to Congress a purpose of making it, especially since they did not make it expressly.”).
The Supreme Court has agreed to address the split and will do so with the benefit of an amicus brief filed, pro bono, by Reed Smith on behalf of the U.S. Hemp Roundtable, Inc., an industrial hemp advocacy group. The brief provides background on the public benefits provided by the hemp industry and explains the adverse impacts that would follow from the extension of the RICO statute to personal injury recoveries. The harmful impacts in this instance extend to the manufacturers, suppliers, and distributors of industrial hemp products and, ultimately, to the consumers who benefit most from those products.
But the adverse impacts would not stop with the hemp industry, providing additional motivation for the filing of the Reed Smith brief. Given RICO’s generous venue and attorney fee provisions, RICO liability could be weaponized by plaintiffs’ lawyers to reach a wide variety of products and industries when lawsuits seeking recoveries for personal injuries – frequently including economic damages stemming from lost wages and medical expenses – are ubiquitous. The potential consequences include greater liability exposure, increases in defense costs, and, in all likelihood, higher prices for liability insurance. The Reed Smith brief emphasizes that these adverse effects should be avoided by keeping RICO liability within its intended and historic bounds.
What to look out for
Oral argument is set for October 15, 2024. Amici, including the U.S. Hemp Roundtable, Inc., have advised the Court of the harms that will follow if the Second Circuit’s reasoning is embraced. Law360 has highlighted the amici briefs. The Reed Smith brief for the U.S. Hemp Roundtable, Inc. can be found online.
Client Alert 2024-167
