When Douglas Horn drove a truck into a ditch in 2012, he could not have imagined it was the first step in a series of events that would eventually land him in front of the U.S. Supreme Court.
The wreck left Horn with shoulder and hip injuries and aggravated existing issues with his back. Seeking relief, he looked to a CBD product derived from hemp that was advertised as not containing THC, the active ingredient in marijuana. As a driver, he had to submit to regular drug testing. A positive THC test could cost him his job.
But he did flunk a THC test soon after he began taking a CBD product called Dixie X and was fired. According to court documents, his team driver – his wife, Cindy – did not feel safe going on the road without Horn, so she quit her job also. The result was financial loss to the couple and their family.
The test result also led to action in the U.S. District Court for the Western District of New York. The outcome there has led to a question of such legal significance that the Supreme Court will hear arguments in October over whether Horn can sue the manufacturers of Dixie X under the federal Racketeer Influenced and Corrupt Organizations Act (RICO).
Driver loses in district court, wins on appeal
The lower court said Horn could not do so, based on its interpretation of the ability to bring lawsuits under the law.
But the 2nd U.S. Circuit Court of Appeals reversed the lower court’s ruling on a RICO-based civil suit, saying the law provided that avenue to Horn. (Other charges brought by Horn in the lawsuit were mostly denied on summary judgment or were withdrawn.)
The manufacturers of the CBD product then appealed to the Supreme Court.
The Supreme Court accepts less than 2% of its petitions for review, known as certiorari. It has rejected trucking-related certiorari requests in the recent past, on issues such as whether California’s trucking industry could be subject to independent contractor law AB5 or whether a broker is liable for a fatality involving a truck it hired to deliver freight. It rejected certiorari on that latter question twice in recent years, also passing on a review of Miller vs. C.H. Robinson (NASDAQ: CHRW).
But in late April the court decided to take Horn’s case. Oral arguments will be heard Oct. 15, shortly after the new Supreme Court term starts on Oct. 7.
The three petitioners to the Supreme Court asking the nine justices to overturn the 2nd Circuit decision are Medical Marijuana Inc., Dixie Holdings (also known as Dixie Elixirs) and Red Dice Holdings. Red Dice, according to its legal brief filed with the court, is a joint venture of Medical Marijuana and Dixie Holdings.
It was Red Dice that sold the Dixie X consumed by Horn. The petitioner’s brief notes that Horn and his wife, whose employer was Enterprise Transportation Co., found out about Dixie X by looking at a copy of legendary drug magazine High Times, which was on a table in a bookstore the couple visited while waiting to meet friends for dinner. (The Red Dice brief is so granular at times that it notes the dinner was to be at Chili’s (NYSE: EAT).
Dixie X was “manufactured … from mature hemp stalk,” which means that it “at all times [has] been legally distributed under federal law,” according to the brief.
The brief also notes that “although hemp and marijuana are derived from the same plant, cannabis sativa, they differ in important ways. Most significantly, hemp has been engineered to contain low concentrations of THC.”
The concentrations were apparently not low enough to have stopped Horn from flunking his drug test, given that the test could only be passed if zero THC was detected.
Key question: does RICO allow this type of lawsuit?
But the Supreme Court’s reason for taking the Red Dice vs. Horn case is not that it is concerned Red Dice and its partners may have fraudulently advertised 0% THC content in Dixie X when the results of Horn’s drug test suggested otherwise. The issue, rather, is whether RICO allows Horn to sue Red Dice under the act for damage to his “business or property” because of its actions, or whether what Horn suffered was a “personal injury.” Suing under RICO for that latter reason is not permitted by the law.
Summing up the arguments from the 2nd Circuit, Horn’s attorneys wrote in its brief to the court that RICO “does not bar a plaintiff suing for injuries to business or property simply because they flow from, or are derivative of, a personal injury.”
The 2nd Circuit, according to the brief, “concluded that the term ‘business’ covered ‘concepts like employment, occupation or professions engaged in for gain or livelihood.’”
“Because Mr. Horn was harmed in his employment – he lost his job – he has been injured in his business or property for civil RICO purposes,” according to the Horn brief.
The brief filed by Red Dice and its parent companies does appear to take the occasional subtle swipe at Horn’s consumption of its own product. It notes that the Horns previously had “experience with such varied hemp-based products as hemp milk, hemp shakes, hemp
seeds, and hemp shampoo.” It says they “did their own research” on the THC content of CBD products by, among other things, “watching YouTube videos.” And the brief also says Horn never asked his doctor about Dixie X.
But that is a side issue in the Red Dice brief compared to the question of whether the companies can be sued under RICO for Horn’s losing his job.
“This is a classic personal-injury claim,” according to the brief. “Horn cannot reclassify his lost wages as a discrete injury to ‘business or property.’ Those lost wages flow from his ingestion of a THC-containing product, which prompted his employer to terminate him for failing a drug test. Those lost wages are thus damages from an alleged personal injury, not a freestanding injury to business or property.”
The significant legal issue that may have led the Supreme Court to take the Horn case was also summed up by Red Dice’s attorneys.
“The Second Circuit and Horn would instead allow plaintiffs to sue for the consequences of personal injuries, so long as those consequences harm plaintiffs’ business or property,” they said in the brief. “That approach would nullify RICO’s ‘business or property’ requirement.”
Numerous friend-of-the-court briefs have been filed in the case, including from the U.S. Chamber of Commerce supporting Red Dice and its parent companies.
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