U.S. Supreme Court Considers CBD Lawsuit Under RICO Act: A Case of Job Loss and Drug Testing

On October 15, 2024, the Supreme Court heard arguments in a case that could have broad implications for civil lawsuits under the Racketeer Influenced and Corrupt Organizations (RICO) Act. The RICO Act seeks to strengthen the legal tools in evidence gathering by establishing new penal prohibitions and providing enhanced sanctions for dealing with the unlawful activities of those engaged in organized crime. The case centers on a New York state man, Douglas Horn, who was fired from his job as a commercial truck driver after failing a drug test due to a mislabeled medication sold as cannabidiol (CBD) which he was assured lacked tetrahydrocannabinol (TCH), the psychoactive compound in marijuana [1]. 

Horn, who sustained injuries in a 2012 trucking accident, had used a CBD tincture sold by Medical Marijuana Inc. under the brand name Dixie X. The product was advertised as a natural pain reliever containing no TCH. However, after a random drug test mandated by his employer, Horn tested positive for TCH and was subsequently dismissed from his position despite maintaining his position of not consuming marijuana or being a frequent user [2]. Horn’s suit, filed in 2015, claims that the company’s false advertising and the mislabeling of the product violated federal law and caused him significant harm in the form of job loss, which he argues qualifies as an injury to his “business or property” under the RICO Act. 

The central question before the Court is whether Horn’s employment termination constitutes an actionable injury under RICO. The 1970 RICO Act, originally designed to combat organized crime, includes provisions that allow private individuals to sue for “any person injured in his business or property” due to certain criminal activities, including mail fraud, wire fraud, and violations of the federal Controlled Substances Act [3]. If Horn’s case proceeds, he could recover triple the damages he sustained if he can prove that the company’s conduct amounted to a pattern of racketeering activity. 

At the heart of the legal dispute is the interpretation of what constitutes an injury to “business or property” under RICO. While the RICO statute’s language is broad, some justices expressed concern that allowing individuals to claim personal injury,  such as job loss or health-related issues, as an injury to “business or property” could open the floodgates for a wide range of lawsuits. Conservative Justice Brett Kavanaugh voiced concerns about this potential shift, arguing that the RICO statute was never intended to address personal injuries like employment disputes, which are typically dealt with under state law. 

Representing Medical Marijuana Inc., attorney Lisa Blatt argued that the company should not be liable under RICO, emphasizing that the law was not intended to cover every personal injury or employment dispute. She contended that allowing Horn’s suit to proceed could create a precedent that opens the door to countless claims for common workplace issues, such as slip and fall accidents, which should be governed by state tort law rather than federal law. 

Whether allowing Horn’s lawsuit to proceed under the RICO Act would be a good or bad thing depends on one’s perspective, especially considering the broader legal and policy implications. 

Allowing individuals to use RICO to challenge misleading or fraudulent business practices could enhance consumer protection. If Rico is applied in such cases, accountability would set a stronger foot in businesses while they focus on the financial consequences of harming consumers or employees. As cannabis and CBD companies grow, existing legal frameworks like RICO could be used to ensure that companies comply with consumer safety and labeling laws. Furthermore, extending this power to include deceptive consumer products could help curb fraudulent practices that harm individuals- such as selling products with undisclosed or mislabeled ingredients, as in the Horn case. 

The Horn case serving as a precedent can also pose potential drawbacks. RICO was designed to address organized criminal enterprises, and extending it to include cases of personal injury claims could potentially dilute the law’s effectiveness in dealing with the original targets: organized criminal syndicates. Potentially, it could even hurt the business market by discouraging companies from developing new products, entering certain markets, or hiring employees if they fear the possibility of costly RICO lawsuits, which allow for triple damages if a plaintiff successfully proves their case. Moreover, applying it to smaller-scale business disputes could result in disproportionate penalties for relatively minor wrongs, potentially leading companies to go bankrupt.

Sources:

1.  John Cruzel, US Supreme Court hears case of trucker fired for failed drug test from cannabis-based CBD, (Oct. 15, 2024, 8:04 P.M.), https://www.reuters.com/legal/us-supreme-court-hears-case-trucker-fired-failed-drug-test-cannabis-based-cbd-2024-10-15/.
2. Id. 
3. 109. RICO Charges, Criminal Resource Manual, https://www.justice.gov/archives/jm/criminal-resource-manual-109-rico-charges.