DOUGLAS J. HORN, Plaintiff-Appellant, CINDY HARP-HORN, Plaintiff, v. MEDICAL MARIJUANA, INC., DIXIE HOLDINGS, LLC, AKA DIXIE ELIXIRS, RED DICE HOLDINGS, LLC, Defendants-Appellees. DIXIE BOTANICALS, Defendant.
Docket No. 22-349-cv
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
August 21, 2023
August Term, 2022. Submitted: February 22, 2023.
Before: WALKER, LYNCH, and ROBINSON, Circuit Judges.
Jeffrey M. Benjamin, The Linden Law Group, P.C., New York, NY, for Plaintiff-Appellant.
Roy A. Mura, Scott D. Mancuso, Mura Law Group, PLLC, Buffalo, NY, for Defendants-Appellees.
GERARD E. LYNCH, Circuit Judge:
Plaintiff-Appellant Douglas J. Horn lost his job as a commercial truck driver, which he had held for more than ten years, after a random drug test detected tetrahydrocannabinol (“THC“) in his system. He maintains, however, that he ingested THC unwittingly by consuming a cannabis-derived product that was marketed as THC-free by Defendants-Appellees Medical Marijuana, Inc., Dixie Holdings, LLC, a/k/a Dixie Elixirs, and Red Dice Holdings, LLC (“Appellees“). He then brought this lawsuit in the United States District Court for the Western District of New York,
We disagree. RICO‘s civil-action provision,
BACKGROUND
I. Factual Background
The following facts are undisputed for purposes of this appeal.
In February 2012, Horn was in a car accident that caused injuries to his hip and right shoulder. [J.A. 31, Compl. ¶ 12] He was prescribed medicine for those injuries, but in the months following his accident, “he investigated natural medicines as an alternative to his other prescriptions.” J. App‘x 31. In or around September 2012, Horn discovered a magazine advertisement for Dixie X CBD Dew Drops Tincture (“Dixie X“), a product that was jointly produced, marketed, and sold by Appellees. [J.A. 30-35, Compl. ¶¶ 6, 8, 10, 13-14, 22, 30] The advertisement read as follows:
CBD for Everyone!
Using a proprietary extraction process and a strain of high-CBD hemp grown in a secret, foreign location, Colorado‘s Dixie Elixirs and Edibles now offers a new product line called Dixie X, which contains 0% THC and up to 500 mg of CBD. This new CBD-rich medicine will be available in several forms, including a tincture, a topical and in capsules. Promoted as “a revolution in medicinal hemp-powered wellness,” the non-psychoactive products will first roll out in Colorado MMCs (medical marijuana centers), with plans to quickly expand outside the medical-marijuana market. “It has taken a tremendous amount of time, money and effort, but finally patients here in Colorado - and ultimately all individuals who are interested in utilizing CBD for medicinal benefit - will be able to have access to it,” says Tripp Keber, Dixie‘s managing director. “We are importing industrial hemp from outside the US using an FDA import license - it‘s below federal guidelines for THC, which is 0.3% - and we are taking that hemp and extracting the CBD. We have meticulously reviewed state and federal statutes, and we do not believe that we‘re operating in conflict with any federal law as it‘s related to the Dixie X (hemp-derived) products.”
Id. at 47. [See also J.A. 32-33, Compl. ¶¶ 13, 19]
It was important to Horn that Dixie X was free of THC and compliant with federal
To Horn‘s dismay, after he consumed the product, he failed his employer‘s random drug test and later a confirmatory drug test. [J.A. 32, Compl. ¶¶ 16-17] Consequently, he lost his job, current and future wages, and insurance and pension benefits. [J.A. 33, Compl. ¶ 20] At that time, he had twenty-nine years’ experience as a commercial truck driver, including more than ten years driving for Enterprise Transportation Company. [J.A. 32, ¶ 15] At some point, Horn‘s wife resigned from her job, believing it was unsafe to work as a commercial truck driver without her husband. [Horn I, 383 F. Supp. 3d at 122]
Suspecting that Dixie X was to blame for his positive test, Horn purchased some more and had an independent lab test the product. [J.A. 32-33, Compl. ¶ 18] Those tests confirmed that Dixie X contained THC. [Id.]
II. Procedural History
On August 6, 2015, Horn and Harp-Horn filed a nine-count complaint in the United States District Court for the Western District of New York. Count 2 asserted a claim of RICO conspiracy under
The district court dismissed Harp-Horn‘s claims and whittled Horn‘s claims to two: (1) the civil RICO claim, as predicated on mail and wire fraud; and (2) the state-law fraudulent inducement claim. See Horn v. Med. Marijuana, Inc. (Horn I), 383 F. Supp. 3d 114, 135 (W.D.N.Y. 2019); Horn v. Med. Marijuana, Inc. (Horn II), No. 15-cv-0701, 2019 WL 11287650, at *3 n.3, *5 (W.D.N.Y. Nov. 22, 2019).
With a trial date approaching, on July 22, 2021, Dixie Holdings moved to preclude the trial testimony of Horn‘s damages expert, arguing that his lost earnings are not recoverable under RICO or the remaining state-law claim. [D. Ct. Dkt. No. 194; see also J.A. 24] The district court construed that motion as dispositive, agreed with Dixie Holdings as to the RICO claim but not the state-law claim, and accordingly granted partial summary judgment to Appellees on the RICO claim. [D. Ct. Dkt. No. 202; see also J.A. 35] Horn v. Med. Marijuana, Inc. (Horn III), No. 15-cv-0701, 2021 WL 4173195 (W.D.N.Y. Sept. 14, 2021). Following out-of-circuit precedent, the district court reasoned that Horn‘s lost earnings “flow[] from, and [are] derivative of, a personal injury” - that is, an unconsented bodily invasion by THC - and therefore “do not constitute an injury ‘to business or property’ that is recoverable in a civil RICO action” brought under
DISCUSSION
Horn challenges the district court‘s decision to grant summary judgment to Appellees on his RICO claim. “We review de novo a district court‘s decision to grant summary judgment, construing the evidence in the light most favorable to the party against whom summary judgment was granted and drawing all reasonable inferences in that party‘s favor.” Covington Specialty Ins. Co. v. Indian Lookout Country Club, Inc., 62 F.4th 748, 752 (2d Cir. 2023), quoting Bey v. City of New York, 999 F.3d 157, 164 (2d Cir. 2021). We agree with Horn that the district court erred in holding that he cannot sue for his loss of earnings.2 RICO‘s civil-action provision,
injuries to business or property simply because they flow from, or are derivative of, an antecedent personal injury. In reaching that conclusion, we outline the plain and ordinary meaning of injury to “business” as used in
I. The Plain and Ordinary Meaning of “Injured in His Business”
“[W]e start . . . with the text of the statute,” Van Buren v. United States, 141 S. Ct. 1648, 1654 (2021), “seek[ing] to discern and apply the ordinary meaning of its terms at the time of their adoption,” BP P.L.C. v. Mayor & City Council of Baltimore, 141 S. Ct. 1532, 1537 (2021). Section 1964(c) authorizes “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter [to] sue therefor in any appropriate United States district court . . . .”
As alluded to above, the key text here is the phrase “business or property.” By using the disjunctive “or” to separate “business” from “property,” Congress made clear that “‘business’ was not intended
At the time of
Because the term “business” encompasses “employment,” Horn has suffered an injury “in his business,” as contemplated by the RICO statute. His suit is premised on his long-time employer terminating his employment as a commercial truck driver (for which he had twenty-nine years’ total experience) because he tested positive for THC. That termination cost him current and future wages and his insurance and pension benefits - all of which were tied to his employment. [J.A. 33, Compl. ¶ 20]
That is sufficient to state a “business” injury under the RICO statute. “A person does not have to wear a suit and tie to be engaged in ‘business.‘” Diaz v. Gates, 420 F.3d 897, 905 (9th Cir. 2005) (en banc) (Kleinfeld, J., concurring). Nor does a person need to own a sole proprietorship or be an independent contractor. Id. at 905-06. “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.” Id. at 906. And, as the Supreme Court has instructed, “RICO is to be read broadly.” Sedima, 473 U.S. at 497. “This is the lesson not only of Congress’ self-consciously expansive language and overall approach, but also of its express admonition that RICO is to ‘be liberally construed to effectuate its remedial purposes.‘” Id. at 497-98, citing United States v. Turkette, 452 U.S. 576, 586-87 (1981), and quoting Pub. L. 91-452, § 904(a), 84 Stat. 947. There is, in short, no reason to suppose that Congress sought to protect enterprises to the exclusion of ordinary employees, or to protect certain means of livelihood but not others. Accordingly, when Horn lost his job, he suffered an injury to his business within the plain meaning of
II. The Antecedent-Personal-Injury Bar
Rather than apply the plain and ordinary meaning of the phrase “business or property,” the district court adopted an atextual restrictive interpretation of the statute, adopted by the en banc Sixth Circuit over the dissent of five judges, that
We understand the justification of that rule, which we call the antecedent-personal-injury bar, to be as follows: (1) by expressly authorizing suit for injuries to “business or property,”
We are not persuaded, and thus reject the antecedent-personal-injury bar. Cf. Diaz, 420 F.3d at 901-02. As an initial matter, we agree that
But the negative implication that RICO excludes recovery for personal injury does not mean that a plaintiff cannot sue for injuries to business or property simply because they flow from, or are derivative of, a personal injury. “The force of any negative implication . . . depends on context,” N.L.R.B. v. SW Gen., Inc., 580 U.S. 288, 302 (2017), quoting Marx v. Gen. Revenue Corp., 568 U.S. 371, 381 (2013), and nothing in RICO‘s text or structure “provides for ignoring damage to a[] . . . legal entitlement because it arose following a personal injury,” Jackson, 731 F.3d at 579 (Moore, J., dissenting). Thus, “[w]hile it seems undisputed that RICO liability will not attach where the injuries alleged are personal ones, there is no textual reason to extend that bar” to an injury to business or property “for which a personal injury was a necessary precursor.” Id. at 570-71 (Clay, J., concurring in the judgment) (internal citations omitted); see also Diaz, 420 F.3d at 903 (Kleinfeld, J., concurring) (“The RICO statute tells us what kinds of injuries give rise to RICO claims.“).
First, we find it significant that
Thus, by enacting a proximate-cause limitation on RICO standing, Congress made a judgment concerning the permissible degree of attenuation
between a predicate act and a redressable RICO injury. The antecedent-personal-injury bar coopts that judgment, imposing a more restrictive attenuation principle that bars suit whenever there is a necessary antecedent personal injury, even where that injury and the resulting injuries to business or property were intended or foreseeable (i.e., proximate). As a general matter, when Congress uses “explicit language in one provision,” that “cautions against inferring the same” or a similar “limitation in another provision.” State Farm Fire & Cas. Co. v. U.S. ex rel. Rigsby, 580 U.S. 26, 34 (2016) (internal quotation marks omitted) (declining to hold that the False Claims Act “mandate[s] dismissal” for “violating [its]
Second, the phrase “business or property” focuses on the nature of the harm, not the source of the harm, as demonstrated by the dictionary definitions of those terms. Section 1964(c) addresses the source of the harm elsewhere, requiring that civil suits be premised on a “violation of section 1962.” And that source restriction cuts against reading into
Third, and relatedly, the antecedent-personal-injury bar precludes various types of civil suits that are at the core of RICO‘s substantive prohibitions. Murder and kidnapping are obvious examples. So too is the broader offense of “extortion,”
While RICO‘s scope has expanded beyond its originally anticipated applications, those are core applications of RICO, as unambiguously reflected by its text and structure. But under the antecedent-personal-injury bar,
sought for pain and suffering or payment of medical bills resulting from personal injuries, but also for injuries to a victim‘s business or property whenever a personal injury is a necessary precursor.
Why, then, would Congress focus the nature of the harm specifically on “business or property,” thereby implicitly excluding recovery for personal injury? The legislative history does not offer an answer. See Patrick Wackerly, Personal Versus Property Harm and Civil RICO Standing, 73 U. Chi. L. Rev. 1513, 1522-25 (2006) (examining records from the House of Representatives and the Senate, and concluding that “the legislative history of civil RICO from both chambers is largely silent regarding the purpose of
That the rationale for excluding personal injury damages from liability under civil RICO may be mysterious does not matter in light of
Fourth, the desire to deny recovery where there is an antecedent personal injury is partly based on a concern that the Supreme Court has instructed courts to ignore: a concern with “increasing the number of RICO claims” if RICO standing were recognized. Jackson, 731 F.3d at 571 (Clay, J., concurring in the judgment). That policy “consequence[], assuming [it is] undesirable, cannot blind us to the statutory language.” Diaz, 420 F.3d at 901. To the contrary, the Supreme Court has expressly cautioned lower courts not to use that concern to impose “additional, amorphous” RICO standing requirements even when a court might reasonably anticipate that civil plaintiffs will “misuse” RICO. Sedima, 473 U.S. at 481, 495. In Sedima, the Supreme Court reversed this Circuit‘s rule that a plaintiff must show a “racketeering injury” to have RICO standing. Id. at 495, 499-500. The Supreme Court explained that “RICO was an aggressive initiative to supplement old remedies and develop new methods for fighting crime,” and that Congress enacted
Not only are we bound by the Supreme Court‘s instruction in Sedima, but that instruction seems especially appropriate here. For one, there is no “misuse” of RICO when a victim sues a criminal enterprise for violence inflicted upon him that results in injury in his business or property, and thus no reason to be dismayed by the number of claims that might be filed alleging such injury. Such suits, as noted, are core applications of RICO. In this particular case, moreover, Horn does not seek damages for any personal injury, and indeed disclaims having suffered any, beyond what could be construed as an unconsented bodily invasion based on his ingestion of a fraudulently misrepresented product. His only claimed injury is the loss of his employment due to the detection of an illegal substance in his body - the very substance that defendants had represented was not present in the product it sold him.
Moreover, the antecedent-personal-injury bar produces a different policy concern, as it would generate arbitrary and inconsistent outcomes. For example, while the antecedent-personal-injury bar would allow a plaintiff to sue “for the fraudulent devaluation of welfare benefits, which do not arise following a personal injury,” it would bar a plaintiff from suing “for the fraudulent devaluation of worker‘s compensation benefits, solely because the latter do.” Jackson, 731 F.3d at 580 (Moore, J., dissenting). Likewise, that rule leads to “the anomalous result that one could be liable under RICO for destroying a business if one aimed a bomb at it, but not . . . if one aimed at the business owner” and successfully struck him, thus preventing him from conducting the business. Diaz, 420 F.3d at 901-02. It is not appropriate for a federal court to speculate which of two alternative policy consequences (e.g., more unanticipated claims or inconsistent outcomes) would be a greater concern to Congress.
Accordingly,
CONCLUSION
For the reasons set forth above, we VACATE the district court‘s order granting Appellees’ motion for summary judgment, and REMAND for further proceedings consistent with this Opinion.