Medical Marijuana and the principal dissent made a compelling argument that antitrust precedents settle the interpretive dispute over the meaning of "injured."

Although, as I argued last time, acknowledging civil RICO as a statutory tort facilitates its interpretation, the U.S. Supreme Court majority in Medical Marijuana v. Horn turned to recent precedent as support for its conclusion that Mr. Horn had suffered a compensable injury.

The majority saw its analysis buttressed by the court's recent decision in Yegiazaryan v. Smagin, which undertook the question whether a particular injury to property (a massive California judgment) was "domestic" and thus actionable under Section 1964(c). And while it is true that the court there rejected the defendants' assertion that an injury is located at the plaintiff's domicile, there was no sweeping pronouncement that tort-law principles are irrelevant in the context of Section 1964(c). Indeed, the court's analysis explicitly cast the plaintiff's injury in tort-law terms: the defendant's racketeering acts "were devised, initiated, and carried out … through acts and communications initiated in and directed towards Los Angeles County, California, with the central purpose of frustrating enforcement of [the] California judgment." And what did this "frustrating" entail? Invading plaintiff's rights to his judgment, "including the right to obtain postjudgment discovery, the right to seize assets in California, and the right to seek other appropriate relief from the California District Court." And because the alleged RICO scheme thwarted those rights and thereby undercut the orders of the California District Court and plaintiff's collection efforts, plaintiff sufficiently alleged domestic injury.

Further, to the extent that Justice Barrett posits that Medical Marijuana's "tort-centric" reading of Section 1964(c) "stands in significant tension with" Yegiazarian, that distorts the common-law argument proffered in that case. In what's really just an aside in Yegiazarian, given its factual finding that plaintiff had indeed sufficiently alleged a domestic injury, the court interrupted its analytical flow to consider defendants' common-law arguments, which—as already noted—would lodge any injury at the plaintiff's residence. But defendants got there by relying on what Professor George Bermann, in an amicus brief, called "shockingly outdated" authority. The court thus concluded:

Although the First Restatement was in effect in 1970, when RICO was enacted, numerous jurisdictions had by then moved away from the First Restatement's methodology and toward a 'most significant relationship' test, which resembles 'the kind of multi-factor analysis the Court of Appeals conducted here.' This shift was reflected in Section 145 of the Restatement (Second) of Conflict of Laws, which superseded the First Restatement the following year in 1971. Thus, even assuming choice-of-law principles are relevant, petitioners' identification and application of those principles is questionable.

At bottom, then, the place-of-injury dispute was not so much wrangling over whether common-law tort theories have any bearing on RICO, but instead what an appropriate reading of the common law would yield as a result. Cast in this light, the Yegiazarian opinion doesn't have much at all to say about the nature of a Section 1964(c) injury, as opposed to whether an injury—however conceived—is foreign or domestic.

Medical Marijuana and the principal dissent made a compelling argument that antitrust precedents settle the interpretive dispute over the meaning of "injured." As already noted, antitrust law is relevant to RICO because the operative language of Section 1964(c) of RICO is derived from Section 4 of the Clayton Act, both of which give private plaintiffs standing to sue for otherwise criminal violations that cause them injury. Because the meaning of Clayton Act Section 4 had been litigated for over half a century at the time of Section 1964(c)'s adoption, it's reasonable to ask whether the two sections should be interpreted and applied eodem modo, given the symmetrical lingo. Justice Kavanaugh thinks it is: "Those prior antitrust holdings interpreting that same statutory language carry weight both as a matter of precedent and because the court presumes that in enacting RICO, Congress adopted the 'the interpretation federal courts had given the words earlier Congresses had used' in the antitrust laws."

Taking this approach would seem to settle the matter because venerable authority held that an antitrust claim arises only for "one who has been injured in his business or property. Injury implies violation of a legal right." From this, the principal dissent—in agreement with Medical Marijuana—concluded that "'injured' referred to the violation of a legal right, not to the harm or damage resulting from the damage resulting from the violation of a legal right." Later courts "applied those basis principles to hold that that the antitrust laws exclude personal injuries." Accordingly, "antitrust precedents therefore strongly buttress … that RICO excludes personal-injury torts, regardless of what kinds of losses or damages ensue." I'll bracket for now the phrase that I italicized, but it's a point that begs for amplification.

The majority mostly sidesteps the Section 4/Section 1964(c) analogy by noting that (1) RICO has no specialized "racketeering injury" requirement, unlike Section 4, which has been read to demand a showing of "antitrust injury," (2) case law supporting the dissent's position is sparse, and (3) there is plenty of precedent holding "that the Clayton Act and 1964(c) are not 'interchangeable.'" With respect to the second point, it's not all that surprising that there is little antitrust authority dealing with personal injuries. For as both the majority and dissent agree, "[f]ew antitrust violations are likely to inflict personal injury [because] anticompetitive acts break laws, not legs." And with respect to the third point, the majority is correct that courts routinely follow Section 4 precedent—or not—depending on whether it supports—or not—an ultimate holding. This case amply illustrates that observation. And so, once again, we're left with no principled guidance as to how Section 4 interpretive precedent can illuminate the meaning of Section 1964(c); rather, we're left to puzzle over an ever-growing pile of ad hoc split decisions.

In a familiar (and nearly always futile) move, the Kavanaugh dissent invoked "federalism" and "floodgate" concerns. That is, "If RICO covered personal injuries that lead to lost wages and medical expenses, as Horn advocates, then civil RICO would federalize huge swaths of state tort law in a manner that Congress never contemplated or authorized." Consequently, "RICO would suddenly authorize a vast new category of personal-injury suits seeking treble damages in federal court." As examples, Justice Kavanaugh suggested that "plaintiffs could routinely repackage"—as civil RICO violations—"claims for person injuries from drug mislabeling, dangerous products, medical malpractice, car accidents, and health consequences from pollution to name a few." This would produce many "cascading effects on the American economy," including increased litigation exposure and attendant settlement pressure, mounting insurance premiums, higher prices, fewer jobs, and lower wages.

The majority parried these objections in two ways. First, with respect to the technical "over-federalization" point, the majority met it as the court had before: "If the breadth of the statute leads to the undue proliferation of RICO suits, the correction must lie with Congress." Second, and this is perhaps the most interesting aspect of the whole case, Justice Barrett essentially says none of this will much matter in the real world. Why? Causation will do the work and tamp down any undue litigation uptrend: "Time and again, we have reiterated that Section 1964(c)'s 'by reason of' language demands some direct relation between the injury asserted and the injurious conduct alleged." With directness the key ("foreseeability does not cut it"), causation may present an "insurmountable obstacle" to Horn's case. And if that were not enough, RICO's myriad pleading and proof requirements serve as critical dampers on potential litigation explosions. Then too, as Justice Thomas noted and Justice Barrett now concedes, the majority opinion has noticeable definitional lacunae that might well prove devastating to Horn: "'[B]usiness' may not encompass every aspect of employment, and 'property' may not include every penny in the plaintiff's pocketbook. Accordingly, not every monetary harm—be it lost wages, medical expenses, or otherwise—necessarily implicates RICO."

Where Did Horn Suffer an Injury?

Much of the argument in Medical Marijuana turns on whether Horn suffered a personal injury (at least at the Supreme Court, he says "no," and Medical Marijuana says "yes,") and how that impacts any remedy for the loss of his job. To better understand what Medical Marijuana may ultimately mean, it is useful to step back and look at Horn's threshold factual assertions and where that that leads in the chain of events. In his complaint, Horn stated:

In reliance on the numerous claims, assertions, allegations, false advertising and misleading press releases of the defendants, claiming the product contains '0% THC' … plaintiff purchased and consumed from said defendants the product DIXIE X, an elixir marketed to be a natural, safe way to relieve pain, nausea, anxiety and convulsions.

Two factual aversions are embedded here: (1) Dixie X contains "0% THC" and (2) the product has medicinal value. Horn's RICO case is built on the first assertion—i.e., Medical Marijuana committed predicate acts of mail and wire fraud by falsely claiming that DIXIE X contained no THC. Had Horn known that the product contained THC, he would not have purchased it. That he parted with money because Medical Marijuana misrepresented the content of DIXIE X thus constitutes his RICO injury. Why?

How Did Horn Suffer an Injury?

Starting with Sedima, the Supreme Court has been clear that—in a civil RICO case—"the compensable injury necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern, for the essence of the violation is the commission of those acts in connection with the conduct of an enterprise." Accordingly, "Any recoverable damages occurring by reason of a violation of Section 1962(c) will flow from the commission of the predicate acts." In Horn's case, Medical Marijuana's predicate acts of mail and wire fraud induced Horn to buy DIXIE X, thus setting in motion the sequence of events in which he makes the purchase, ingests the product, fails a drug test, and is fired from his job. Somewhat ironically, assuming that a loss of money in a fraudulent transaction counts as an injury to "property," Horn may well have established that he was "injured in his business or property."

So where does that leave us? If we recall Goldberg and Zipursky's framework discussed in an earlier installment, the mail- and wire-fraud statutes constitute a directive that a person may not (for our purposes) devise a scheme to obtain money or property by means of false or fraudulent pretenses, representations, or promises. This legal directive created a legal duty in Medical Marijuana, the violation of which instantiates a legal wrong that we call the crimes of mail- and wire-fraud. That wrong in turn constitutes a violation of Horn's right not to be deceived in the particular consumer transaction alleged. And invasion of that right is Horn's injury.

Medical Marijuana leaves unresolved the meaning and impact of the second link in the chain (Horn's consumption of DIXIE X), which the parties and the court treated as the first. Though it's easy to establish injury in the first link, the second is more problematic because Horn suffered no ill physical effects from ingesting the elixir. And although it's true that he wouldn't have purchased the product had he known that it contained THC, he consumed it for its medicinal value and there was no allegation that Medical Marijuana misrepresented anything in that connection. In any event, whether we locate injury in the transaction or the ingestion, were still left with what to make of Horn's lost wages and benefits. There's a simple answer: they're consequential damages. We'll consider the implications of this conclusion in the final installment of this series.

Randy D. Gordon is the founding partner of the Dallas and Fort Worth offices of Duane Morris. He is executive professor of law, history, and performance, visualization & fine arts at Texas A&M University. This series is excerpted from a forthcoming article, "Defining Civil RICO's "Injury to Business or Property" Requirement: The Supreme Court Takes a Few Steps, Says It Punts, But Actually Fumbles," in the Penn State Law Review.

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