In a closely split 5-4 ruling, the U.S. Supreme Court recently sided with a commercial truck driver who sued three CBD firms under the federal RICO statute. The driver, Douglas Horn, claimed he was fired after a drug test came back positive for THC, despite using a CBD product that was labeled as THC-free.
At the center of the case was a legal debate over whether people can bring civil RICO claims to recover financial damages that result from a personal injury. Some courts had previously allowed such lawsuits to move forward, while others dismissed them on the grounds that RICO was not intended to cover harm tied to bodily injuries. The Supreme Court’s decision has clarified that if someone suffers economic losses—like losing a job or future earnings—because of a personal injury, they can still sue under RICO.
This ruling opens the door for more civil lawsuits under RICO against marijuana-related businesses. Legal experts expect attorneys may start using the case as a model to bring similar actions, especially where consumers believe they were misled by false advertising or inaccurate product labels.
Originally enacted in 1970 to combat organized crime, the RICO law allows individuals to sue if they suffer harm to their business or property due to a pattern of unlawful conduct carried out by an organization. That conduct can include fraud, like falsely labeling and shipping a product through the mail or over digital networks.
Horn had been using “Dixie X,” a CBD tincture he bought to help relieve pain from a car accident. It was advertised as free of THC. However, after testing positive for the substance during a surprise drug screening at work and refusing to enroll in a treatment program, he was let go. Later lab tests revealed that the product did contain THC.
Horn sued the companies behind the product in federal court in New York, accusing them of fraud and alleging they worked together as a RICO enterprise to distribute mislabeled goods. While the trial court initially dismissed his lawsuit, saying RICO doesn’t cover claims linked to personal injury, an appeals court disagreed—and now, so has the Supreme Court.
Justice Amy Coney Barrett, writing for the majority, stated that while physical injuries themselves aren’t covered under RICO, the financial consequences tied to them, such as being fired, are. This distinction could mean big changes for the marijuana industry, which may now face increased legal exposure, stricter oversight, and greater pressure to accurately label and market their products.
Marijuana industry companies like Canopy Growth Corp. (NASDAQ: CGC) (TSX: WEED) will have plenty to think about regarding the possible global ramifications of the U.S. Supreme Court ruling in this case.
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