U.S. Supreme Court takes up RICO case brought by CBD companies

The U.S. Supreme Court has agreed to take up a case involving a trio of cannabis companies that could have wide-ranging financial impacts for companies that dabble in non-psychoactive CBD products.

According to Law360, the nation’s high court will hear arguments in a case that illustrates a legal divide between five of the country’s circuit courts on whether civil personal injury claims can be brought under federal racketeering statutes.

The case in question, which was a personal injury claim filed in 2015 by trucker Douglas Horn, alleged that CBD products manufactured by Medical Marijuana Inc., Dixie Holdings LLC, and Red Dice Holdings LLC – the defendants in that case – contained enough THC to cause a failed drug test, which led to Horn being fired. As a result, Horn lost his income, insurance, and pension.

Horn lost initially in district court but won on appeal in the Second Circuit last August, which ruled that the trio of cannabis companies are liable for civil claims under the Racketeer Influenced and Corrupt Organizations (RICO) Act.

Though RICO was originally used to target broad criminal conspiracies, such as the mafia, it’s been used with varying degrees of success against state-legal marijuana companies for years, given the federal illegality of cannabis.

CBD products, which can be derived from federally legal hemp, exist in more of a legal gray area as a result of the 2018 Farm Bill. Hemp-derived products under federal law are supposed to contain no more than 0.3% THC by weight.

The three defendant companies requested that the Supreme Court take up the case, citing national division on the RICO liability question among five of the national circuit courts.

The Ninth Circuit Court of Appeals already issued a similar finding as the Second Circuit’s August ruling for Horn, but the Sixth, Seventh, and Eleventh circuits all found that RICO doesn’t cover “economic harms that arise from personal injuries,” such as Horn’s losses, Law360 reported.

“The circuits are divided on whether economic damages arising from personal injuries — like lost wages or medical expenses — support civil RICO liability. Only this court can resolve that split, and this case is the ideal vehicle for doing so,” the companies’ petition to the Supreme Court stated.

Depending on the outcome of the case, it could have significant ripple effects and financial fallout for CBD product makers, given that many employers still have a zero-tolerance policy for THC.