Photo of Lisa Baird

No surprise, we are not fans of civil RICO.  We don’t like how it is misused by lawyers on the other side to convert run-of-the-mill pharmaceutical and medical device cases into class actions.  We don’t like that it carries the possibility of treble damages and attorneys’ fees.  We don’t like the elasticity of its terms.  And we don’t like its nationwide personal jurisdiction and venue provisions, 18 U.S.C. 1965(a)-(d). 

In short, we think it is madness to use civil RICO outside of the racketeering context for which it was designed.  Today’s discussion of RICO madness comes by way of Medical Marijuana, Inc. v. Horn, where a pending Supreme Court cert petition raises an issue with significant ramifications for our clients and readers.  

RICO permits plaintiffs “injured in [their] business or property by reason of” a defendant’s racketeering activity to sue for treble damages and attorneys’ fees. 18 U.S.C. § 1964(c). 

The good news is that the “business or property” requirement “exclud[es] … personal injuries.”  RJR Nabisco, Inc. v. Eur. Cmty., 579 U.S. 325, 350 (2016).  

The bad news is that some federal circuits split hairs to conclude, notwithstanding the Supreme Court’s clear holding in RJR Nabisco, that economic damages that flow from personal injuries—think medical expenses and lost wages that are part of every personal injury case— are “business or property” within the meaning of the civil RICO statute.

Not all do.  The Sixth, Seventh, and Eleventh Circuits have rejected the idea that economic damages flowing from personal injuries are an injury to “business or property.”  See Jackson v. Sedgwick Claims Mgmt. Servs., 731 F.3d 556 (6th Cir. 2013) (en banc); Evans v. City of Chicago, 434 F.3d 916, 926-27 (7th Cir. 2006), overruled on other grounds by Hill v. Tangherlini, 724 F.3d 965, 967 n.1 (7th Cir. 2013); and Grogan v. Platt, 835 F.2d 844, 848 (11th Cir. 1988).  These circuits, in our view, are on solid ground.  A distinction between personal injuries and injuries to “business or property” is pretty much black letter law.  See Black’s Law Dictionary 925 (Rev. 4th ed. 1968) (A “personal injury” is a “hurt or damage done to a man’s person … as distinguished from an injury to his property or reputation.”).

But the Ninth Circuit has been fine with the premise that personal injury damages like medical expenses and lost wages are “business or property” for quite some time now.  See Diaz v. Gates, 420 F.3d 897, 900 (9th Cir. 2005) (en banc). 

And then, in August, the Second Circuit joined that view in Horn v. Med. Marijuana, Inc., 80 F.4th 130 (2d Cir. 2023), deepening the circuit split to 3-2 and potentially teeing up the issue for Supreme Court resolution.

Does it matter that much that the Second and Ninth Circuits have opened the RICO door to personal injury cases when economic damages are alleged?  Given that civil RICO provides for treble damages and attorneys’ fees, and that New York (Second Circuit) and California (Ninth Circuit) already are populous magnets for both business and litigation, we think so.

It also matters because the nationwide jurisdiction and venue provisions of civil RICO make it relatively easy (as compared to ordinary product liability claims) for civil RICO plaintiffs to go forum shopping for favorable courts .  Venue is proper for a civil RICO claim any district in which a defendant “resides, is found, has an agent, or transacts his affairs.”  18 U.S.C. § 1965(a).  Civil RICO plaintiffs can join defendants with no connection to the forum if “the ends of justice” so require.  18 U.S.C. § 1965(b).  Defendants can be served “in any judicial district in which such person resides, is found, has an agent, or transacts his affairs.”  21 U.S.C. § 1965(d); see also Laurel Gardens, LLC v. McKenna, 948 F.3d 105, 114, 118-19, 121-22 (3d Cir. 2020) (allowing nationwide service of process for civil RICO cases where justice so requires). The litigation corollary of Gresham’s Law will apply, with bad jurisdictions crowding out the good.

We will be watching to see if the Supreme Court takes this case and if it does, hoping that it steps in to stop this one particular form of RICO abuse.