Turner Padget Insights

RICO Liability Expanded: What Medical Marijuana, Inc. v. Horn can mean for employers and CBD Providers

Posted On May 14, 2025

The United States Supreme Court recently issued an important decision in Medical Marijuana, Inc. v. Horn, significantly expanding the potential liability of CBD and marijuana providers under the federal Racketeer Influenced and Corrupt Organizations Act (RICO). This ruling has significant implications for employers, especially in states like South Carolina, where marijuana remains illegal for most purposes.

Douglas Horn, a commercial truck driver, was terminated after testing positive for THC following his use of "Dixie X," a CBD product marketed as THC-free by Medical Marijuana, Inc. Following his termination, Horn sued Medical Marijuana, Inc., under civil RICO alleging that false advertising and misrepresentation led to the loss of his job. The District Court initially dismissed the claim, reasoning that RICO does not allow recovery for business or property losses that stem from a personal injury. The Second Circuit reversed, and the Supreme Court affirmed, holding that civil RICO does not categorically bar recovery for business or property losses simply because they derive from a personal injury.

The Supreme Court clarified that a plaintiff may seek treble damages under civil RICO for business or property losses, even if those losses result from a personal injury. For example, if an employee loses their job due to a positive drug test after using a mislabeled CBD product, that job loss is a business injury and is actionable under RICO. The Court rejected the argument that any business or property loss flowing from a personal injury is automatically excluded from RICO’s reach. Instead, the focus is on the nature of the harm, not its cause.

This decision potentially opens the door for consumers to bring RICO claims against CBD and marijuana companies for economic losses tied to alleged misrepresentations, even if those losses are indirectly related to personal injuries.

The legality surrounding marijuana and CBD in South Carolina remains restrictive. Despite recreational marijuana use being illegal, the sale and possession of hemp-derived CBD products with less than 0.3% THC are legal, provided they comply with federal and state regulations. Employers in South Carolina are not required to accommodate marijuana use, and positive drug tests can be grounds for termination, even if the product was purchased legally elsewhere or was marketed as THC-free.

Employers should be mindful that employees terminated after positive drug tests may now have a federal cause of action against CBD or marijuana providers if the product was mislabeled or falsely advertised as THC-free. While South Carolina, an at-will employment state, supports strict workplace drug policies, employers may find themselves entangled in litigation as witnesses or third parties if employees pursue RICO claims against product manufacturers.

CBD and marijuana providers, should ensure that product representations, especially regarding THC content, are accurate and substantiated. Mislabeling can now expose companies to significant liability, including treble damages under RICO. Producers should be attentive to quality control, testing, and marketing practices to minimize the risk of inadvertent THC contamination and misrepresentation.

Ethan Jedziniak is an associate attorney in the Firm’s Greenville, SC office and is part of the litigation practice area. Ethan focuses his practice on insurance litigation, commercial and business disputes, contract interpretation, and zoning. He has successfully represented clients at various levels, including state, federal, and appellate courts, arbitration proceedings, and various boards and commissions.