Supreme Court Rules Lost Wages May Be Recoverable Under RICO for False Advertising After Drug Test Dismissal

Quick Hits

• The Supreme Court allowed a truck driver to pursue civil RICO claims for lost wages after he failed an employer drug test after ingesting an allegedly falsely marketed pain relief product.
• The Court ruled that a plaintiff may pursue treble damages under RICO for lost business or property that followed a personal injury.
• The decision raises questions about the scope of RICO, particularly whether lost wages and economic harms related to personal injuries can be considered recoverable.

The 5–4 ruling in Medical Marijuana, Inc. v. Horn held that a plaintiff may seek treble damages under RICO, a law initially designed to combat organized crime, for lost business or property, even if the damages resulted from an antecedent personal injury.

The ruling allowed a truck driver to pursue civil RICO claims seeking recovery for lost wages against the sellers of a pain relief product after he was discharged for failing a random drug test when he tested positive for tetrahydrocannabinol (THC), the psychoactive component of marijuana or cannabis. He alleged the sellers falsely marketed their pain relief product as not containing THC, only the non-psychoactive chemical cannabidiol, more commonly known as CBD.

The product sellers argued that the damages resulted from a personal injury and that RICO’s “business or property” injury limitation precludes recovery for economic harms stemming from personal injuries. Specifically, RICO allows an individual to bring civil claims for damages to “business or property by reason of” racketeering and other activities prohibited by the act and recover treble damages.  

“The phrase ‘injured in his business or property’ does not preclude recovery for all economic harms that result from personal injuries,” Justice Amy Coney Barrett wrote in the Court’s opinion, which was joined by four other justices. “We therefore affirm the Second Circuit’s judgment and remand the case for further proceedings consistent with this opinion.”

Notably, the Supreme Court expressly did not address whether the truck driver had suffered a personal injury when he consumed THC or whether the term “business” encompasses all aspects of “employment.” The Court also did not provide further explanation on what types of injuries to “property” are covered by RICO.

The Second Circuit had found that the truck driver was “‘injured in his business’” when he lost his job and that there is no bar to recovery under RICO if the economic harm is preceded by or a result of a personal injury.

The CBD product sellers argued that the Second Circuit’s approach would effectively destroy RICO’s “business or property” limitation and transform traditional personal injury suits into federal suits under RICO, which allows for recovery of treble damages.

However, the Supreme Court majority rejected the sellers’ arguments. In the Court’s opinion by Justice Barrett, the Court clarified the plain interpretation of the RICO text, stating that “‘injured’ means ‘harmed’ − with no plausible alternative in hand.” (Justice Ketanji Brown Jackson wrote a short concurring opinion to note that Congress has instructed that RICO be “liberally construed.”)

The Court further explained that while “civil RICO has undeniably evolved,” RICO claims are still limited in that they require a direct relationship between the injury and the alleged injurious conduct, and a “plaintiff must first establish a pattern of racketeering activity.” The Court also noted that the terms “business” and “property” in RICO still limit the types of claims that are recoverable.

“As we noted at the outset, ‘business’ may not encompass every aspect of employment, and ‘property’ may not include every penny in the plaintiff ’s pocketbook,” the Court said. “Accordingly, not every monetary harm—be it lost wages, medical expenses, or otherwise—necessarily implicates RICO.”  

“If the breadth of the statute ‘leads to the undue proliferation of RICO suits, the ‘correction must lie with Congress,’” the Court added.  

In a dissenting opinion joined by Chief Justice John Roberts and Justice Samuel Alito, Justice Brett Kavanaugh argued that RICO categorically excludes personal injury claims, stating that “the fundamental question here is whether business or property losses from a personal injury transform a traditional personal-injury suit into a business-injury or property-injury suit that can be brought in federal court for treble damages under RICO.”

Justice Kavanaugh further argued that the majority’s opinion “leaves substantial confusion in its wake” because it did not explain “whether lost wages and medical expenses are recoverable losses of business or property in those RICO suits.”

Justice Clarence Thomas dissented, arguing that the case was “improvidently granted” because the parties dispute whether the truck driver even “suffered a personal injury in the first place” and that there has been inadequate briefing on the meaning of the “business or property” injury requirement in RICO.

Next Steps

The Supreme Court’s ruling expands the reach of RICO’s civil component by finding that personal injury claims that have damages to “business or property” are not necessarily excluded. The CBD sellers in the case and business groups have argued that such an approach could increase federal RICO liability for businesses for product liability claims. However, the Court noted that it is up to Congress to limit the claims, if necessary.

Further, while the ruling comes in the context of an employee suing for lost wages after losing his job, the ruling leaves open questions over the extent to which lost wages or other adverse employment actions that lead to lost wages or economic losses for employees may implicate RICO. The Second Circuit had interpreted injury in “business” under RICO as encompassing “employment.” Still, the Supreme Court expressly did not decide that issue, noting the Second Circuit’s “interpretation may or may not be right.”

Whether the truck driver’s RICO suit will ultimately be successful after remand level is highly questionable. However, the concerns raised in the dissent remain—the inclusion of economic harms that stem from personal injuries as recoverable under RICO is likely to lead some crafty attorneys to attempt to further expand the applicability of the civil RICO statute. 

Ogletree Deakins’ Drug Testing Practice Group will continue to monitor developments and will provide updates on the Drug Testing blog as additional information becomes available.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts