The U.S. Supreme Court has decided that an employee who tested positive for THC after using a product falsely advertised as THC-free, refused to enter a substance abuse program, and was subsequently fired, can seek damages under civil RICO for job losses resulting from fraudulent product representations.
The case involves D.H., a commercial truck driver who purchased a cannabidiol (CBD) product called Dixie X, marketed by Medical Marijuana Inc., which claimed to be THC-free. After D.H. tested positive for THC in a random drug screening, he was terminated by his employer upon refusing a substance abuse treatment program. D.H. then filed a lawsuit against Medical Marijuana under the Racketeer Influenced and Corrupt Organizations Act (RICO), alleging that the company’s false advertising constituted mail and wire fraud—a pattern of racketeering activity that led directly to his loss of employment.
Initially, the District Court ruled in favor of Medical Marijuana, stating that D.H.’s job loss was tied to a personal injury (ingesting THC), and therefore did not qualify for recovery under RICO, which explicitly excludes personal injuries. However, the U.S. Court of Appeals for the Second Circuit reversed this decision, asserting that his lost employment constituted a direct injury to his “business” under RICO, irrespective of any antecedent personal harm.
In affirming the Second Circuit’s ruling, the Supreme Court clarified that under RICO’s civil remedies, the statute explicitly allows recovery for harm to business or property, excluding only direct personal injuries, but not economic harms arising from personal injuries. The court reasoned that the phrase “injured in his business or property” plainly means harm or damage to business or property, not limited by the cause of the harm.
The Supreme Court rejected Medical Marijuana’s interpretation that the statute required an “invasion of a legal right” rather than general harm or damage. The Court emphasized that the statute clearly provides for recovery of monetary damages incurred by a plaintiff as a direct result of racketeering activities, without regard to whether the plaintiff also suffered a personal injury. It further explained that if a plaintiff’s injury forces business closure or job loss, that constitutes a business or property loss under RICO, despite being indirectly linked to personal injury.
This decision settles a significant circuit split, aligning with the Ninth Circuit, and rejects contrary interpretations by the Sixth, Seventh, and Eleventh Circuits, which previously barred economic claims derived from personal injuries under RICO.
In its analysis, the Supreme Court dismissed Medical Marijuana’s arguments regarding the risk of broadening RICO claims and noted that existing constraints, such as the requirement for direct causal links and proof of a pattern of racketeering activity, sufficiently limit the statute’s reach. The Court also emphasized that if any correction to prevent potential abuse of civil RICO claims is needed, it remains within the purview of Congress, not the courts.
Justice Barrett authored the majority opinion, joined by Justices Sotomayor, Kagan, Gorsuch, and Jackson. Justice Jackson concurred separately, emphasizing Congress’s instruction that RICO be liberally construed to fulfill its remedial purposes. Justices Thomas and Kavanaugh dissented.
The case has been remanded for further proceedings consistent with the Supreme Court’s clarification.
See the full ruling at https://www.supremecourt.gov/opinions/24pdf/23-365_6k47.pdf
