Will Product Liability Cases Be Getting RICO’d?

We often say here that we try not to do the other side’s homework for them or give them ideas about new ways to sue our clients.  When the Supreme Court takes a well-known statute and says, essentially, that it can now be applied in personal injury cases that also have economic damages, we do not think we are letting any felines out of sacs.  For 55 years, the civil RICO statute has been broadly understood not to apply to personal injury claims such as those advanced against the manufacturers of drugs and medical devices.  The Supreme Court seemed pretty clear about this less than nine years ago in RJR Nabisco, Inc. v. European Cmty., 579 U.S. 325, 350 (2016).  More generally, we have detailed how rarely RICO claims have survived motions to dismiss in the context of cases that focused on consumer protection claims against medical product manufacturers.  Admittedly, we have not had to spill much virtual ink on the “antecedent-personal-injury bar” in our posts because the plaintiff lawyers had apparently understood RICO’s authorization of a civil claim for someone “injured in his business or property by reason of a [criminal RICO] violation” as not applying to personal injuries.  In fact, while plaintiff lawyers are not exactly known for restraint in pleading, we have seen many cases where the plaintiffs made clear that they did not have personal injuries in the mix as they sought a route to RICO’s treble damages.  That all appears to have gone out the window because of a strange case with an unusual procedural history and an interesting alignment of justices on the Supreme Court.  We will not belabor why we think the dissenting opinion from Justice Kavanaugh, joined by Chief Justice Roberts and Justice Alito, was more persuasive than the majority decision authored by Justice Barrett, joined by Justices Sotomayor, Kagan, Gorsuch, and Jackson.  (Justice Jackson also wrote a short concurrence, and Justice Thomas wrote a dissent focused on justiciability.)  Instead, we will mostly address where things might go from here in drug and device product liability actions.

We say Medical Marijuana, Inc. v. Horn, 604 U.S. __ (2025) (“MMI”) (discussed at prior stages here and here) is a strange case because the “injury”—we will return to that—was that the plaintiff was fired from his job for refusing to complete a substance abuse program after failing a drug test.  Assuming that there was no other possible reason for the failed drug test beyond his use of a “tincture infused with cannabidiol—more commonly known as CBD” that he apparently thought would not show up on a drug test, plaintiff could have done various things to try to keep his job.  Purchasing another bottle of the CBD tincture for testing for THC and then suing the manufacturer for costing him his job, asserting civil RICO and a range of other theories, was not one of them.  We also find it strange that the decision is silent on whether plaintiff had other possible THC exposures, whether the tincture’s manufacturer claimed it would not show up on a drug test, whether plaintiff researched drug tests—surely, everyone has heard the urban legend about poppy seed bagels—how plaintiff obtained the bottle of the tincture, how it affected him, the FDA’s regulatory treatment of CBD products, and the legality of this product with or without THC in it in New York [where plaintiff bought and used at least some of the product, although that is also not in the decision].  The closest to any of this in the decision are references to defendants advertising the product as “0% THC” and “legal to consume both here in the U.S. and in many countries abroad.”  This set of facts might offer a path to a false advertising claim where the alleged damages are the purchase price (of the first bottle, not the one purchased for testing), but no other physical or economic injury.  Without a physical injury—exposure to a recreational drug substance without more is not a cognizable physical injury anywhere—there is not even an arguable product liability claim.  A violation of the Racketeer Influenced and Corrupt Organizations Act?  Forget about it.  (Pronounce that as you see fit.)  Racketeering would include if the seller of the tincture had extorted plaintiff to pay it to keep quiet that he had purchased and used the product.  We have all seen enough shows about organized crime, fictional or otherwise, to know the difference between being the victim of a racket and believing implausible product claims.

We say the procedural history of MMI was unusual because the district court granted summary judgment on the basis that plaintiff’s loss of employment “‘flow[ed] from, and [was] derivative of, a personal injury he suffered’—the introduction of THC ‘into his system through the ingestion of Dixie X.’”  Other than THC ingestion not being a personal injury and plaintiff losing his job for an intervening decision he made, we understand this as a predicate for the correct conclusion that civil RICO provided for damages for injuries to business and property but not for physical injuries.  On appeal, the Second Circuit went a different route.  It concluded that plaintiff had been “injured in his business” by losing his job.  That would have been sufficient to reverse.  Without deciding if plaintiff’s case was based on a personal injury—something he denied—the Second Circuit also went ahead and found that, while RICO “implicitly excludes recovery for personal injuries,” it nonetheless allows for recovery of business losses that are causally connected to a prior personal injury.  Then the Supreme Court’s majority decision considered only the issue of “whether civil RICO bars recovery for all business or property harms that derive from a personal injury.”  That is a strange question to resolve in a case where plaintiff did not claim to have suffered a personal injury and did not have a personal injury that would have been cognizable under state law.  Even setting aside TwIqbal and the heightened pleading required for the fraud-based allegations in plaintiff’s complaint, the fact that the appeal was from summary judgment for the defendant should have obviated the need for the majority decision to rely on so many assumptions about the facts and allegations in the case.  The dissenting opinions spelled out a number of reasons why this history weighed against the decision the majority reached.  As the Thomas dissent stated, “I would not decide whether losses flowing from person injuries are injuries to business of property in a case where no one know whether the plaintiff suffered a personal injury.”

We trust that others will delve more deeply into the competing opinions within MMI, but we will point out some of what principal dissent said that may have implications for drug and device product liability litigation.  The legislative history on RICO made clear that it was “an act designed to prevent ‘known mobsters’ from infiltrating legitimate businesses.”  It was certainly not intended to federalize business torts, let alone personal injury and product liability claims.  See, e.g., Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1025 (7th Cir. 1992) (“RICO has not federalized every state common-law cause of action available to remedy business deals gone sour.”); Calcasieu Marine Nat. Bank v. Grant, 943 F.2d 1453, 1463 (5th Cir. 1991) (“[A]lthough Congress wrote RICO in broad, sweeping terms it did not intend to extend RICO to every fraudulent commercial transaction.”).  As the Kavanaugh dissent put it:

If the rule were otherwise, as plaintiff Horn advocates here, RICO would federalize many traditional personal-injury tort suits.  When enacting civil RICO in 1970, Congress did not purport to usher in such a massive change to the American tort system . . . . On the contrary, it excluded personal-injury suits.  And it is not remotely plausible to conclude that Congress excluded personal-injury suits under RICO and then turned around and somehow implicitly authorized most personal-injury suits under RICO.

This reminds us of the confusion many courts seem to have when it comes to the presumption against preemption, which applies in the context of field preemption but not to express or implied preemption.  To comply with constitutional principles, federalizing an area that was traditionally the subject of state law needs to be the result of clear congressional intent.  Even though the majority decision in MMI expanded RICO without much support from the statute’s text or legislative history, we are curious whether the narrow purpose of RICO and its particular requirements will prevent a sea change when it comes to product liability cases against drug and device manufacturers.

The following is certainly not intended to be comprehensive, let alone from self-described experts in all things RICO.  There are many fine treatises and other sources out there.  Instead, for the questions we pose of how hard will it be for plaintiff lawyers to add treble-damages RICO claims to their complaints about allegedly defective drugs and devices and how hard will it be to beat those claims, we highlight a few issues.  First, standing is still a thing.  For a “regular” product liability case where plaintiff actually claims a direct physical injury from the use of the product, there tends not be much of a fight over standing.  Expansion into quasi-injuries to get to RICO, as with a class action, may lead to standing issues.  Second, RICO defendants are supposed to be part of an “enterprise,” and a parent company and its own subsidiary are not an enterprise.  So, in a typical case with the plaintiff using a specific company’s device or drug, it should be hard to find sufficiently separate defendants to paint an enterprise.  Although we have seen claims based on the idea that competing drug companies or drug companies and distributors conspire together to create a market or suppress a purported risk, actual factual allegations to support an actual enterprise should be harder to muster.  Third, for a civil statute, RICO requires a high level of intent:  actual knowledge of the criminality of the activities of the enterprise.  Knowledge can be alleged generally under Fed. R. Civ. P. 9(b) or this would be a tougher requirement at the pleadings stage.

Fourth, the core of RICO is that there have to be at least two predicate acts of racketeering activity sufficient to create a pattern of criminal activity by the enterprise.  The statute includes a list of crimes traditionally associated with organized crime, such as extortion and kidnapping, but also broader categories such as mail and wire fraud.  This should present something of a hurdle in the context of a product liability claim against a medical product manufacturer.  We have seen where a drug company’s alleged off-label promotion and kickbacks to physicians were rejected as RICO predicates.  This is where the purpose of the statute should continue to play a role in precluding basic product liability allegations like the inclusion of an inadequate warning on a product label or a webpage from being seen as RICO predicates.

Last, the Court in MMI emphasized that its expansion of the kind of injuries that can lead to civil liability under RICO would be limited by the purportedly stringent requirement of “some direct relation between the injury asserted and the injurious conduct alleged.”  That may prove to be the case, but MMI is itself a case with an admittedly indirect causation theory and it got to the Supreme Court.  This is hardly encouraging for potential RICO civil defendants.  Winning a motion to dismiss or even summary judgment on causation can be a tough sell, and courts are quite variable in distinguishing between direct and indirect relationships.  MMI also cautioned:

“business” 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.

Again, we do hope that recognizing the original purpose of RICO will help courts to limit which alleged indirect economic injuries count for RICO.  However, the MMI decision provides no bright lines for what does not count.  Given that the plaintiff in MMI did not even have a cognizable physical injury, we have reason to suspect that the lack of bright lines will not be so good for the defendants.