Horn v. Med. Marijuana

DOUGLAS J. HORN, et al., Plaintiffs, v. MEDICAL MARIJUANA, INC., et al., Defendants.

No. 15-CV-701-JWF

United States District Court, W.D. New York

September 14, 2021

DECISION AND ORDER

JONATHAN W. FELDMAN UNITED STATES MAGISTRATE JUDGE

PRELIMINARY STATEMENT

On July 22, 2021, defendant Dixie Holdings, LLC ("Dixie LLC") filed a motion in limine to preclude the testimony of Mark P. Zaporowski, Ph.D., plaintiff's expert economist. Docket # 194. While styled as a motion in limine in truth Dixie LLC's motion is of a dispositive nature it contends that the kinds of damages that plaintiff seeks to recover are not recoverable through either of his remaining claims. Defendants Medical Marijuana, Inc. and Red Dice Holdings, LLC join in the motion. Docket # 200. Plaintiff opposes the motion. Docket # 198.

On August 3, 2021, the Court informed the parties that it intended to dismiss plaintiff's civil RICO claim (with a written Decision and Order to follow) and requested the parties brief the issue of the Court's subject matter jurisdiction over the state law fraud claim. Docket ## 203-05.

Having reviewed all the briefing submitted, and for the reasons set forth below, the Court concludes that plaintiff's civil RICO claim must be dismissed as a matter of law, that plaintiff's fraud claim is viable insofar as plaintiff seeks to recover lost earnings, and that the Court retains subject matter jurisdiction over the fraud claim. Accordingly, defendants' motion is GRANTED IN PART and DENIED IN PART.

DISCUSSION

Prior to the scheduled jury trial, plaintiff had two remaining causes of action: a civil RICO claim and a state-law fraudulent inducement claim.^[1] In both claims plaintiff sought to recover damages for the losses he incurred when his employment as a truck driver was terminated, including "past and future lost compensation, lost health benefits, lost retirement savings and difference in work effort mileage driven." Docket # 179 at 2. To support his damages calculations, plaintiff intended to proffer at trial the testimony of Dr. Zaporowski, who calculated the value of plaintiff's total economic damages. Id. Defendants contend that plaintiff cannot recover these kinds of "loss of earnings" damages in connection with either a civil RICO or state-law fraud claim. As will be discussed below, defendants are correct with respect to the former claim, but not the latter.

Delay and Prejudice to Plaintiff; Before discussing the merits, the Court will address plaintiff's arguments on the timing of Dixie LLC's motion. See Docket ## 197, 198. As the Court stated on the record at the prior conferences on this motion, the timing of the motion and the prejudice to plaintiff resulting therefrom is both concerning and unfortunate. However, the Court has already concluded that the Dixie LLC's delay in raising these potentially dispositive issues was not attributable to bad faith. Furthermore, once raised, the Court could not avoid deciding the issue. If defendants were correct on the damage issue, it would have made little sense to proceed to trial, as the Court would be required to instruct the jury on the law as to recoverable damages. If plaintiff cannot, as a matter of law recover the type of damages he seeks, the trial would have essentially been a pointless exercise in futility. Deciding the issue now, however late it has been raised, still ensures that the parties, the Court and the jurors do not spend time or energy on claims for which plaintiff cannot recover the damages he seeks. While the Court acknowledges the costs plaintiff has incurred due to the delay of trial, judicial economy and fairness to the parties require resolution of the damage issues prior to the commencement of trial.

Plaintiff also makes two threshold arguments that merit only brief comment. First, plaintiff cites Dixie LLC's eleventh affirmative defense in its answer to argue that Dixie LLC has long known about this issue. See Docket # 9 at 11; Docket # 198 at 6. The eleventh affirmative defense is that plaintiff's injuries "do not arise out of any [RICO] predicate acts" and that plaintiff "is therefore without standing." Docket # 9 at 11. That issue is different than the one Dixie LLC now raises - that plaintiff's damages are not recoverable as injuries to "business or property" under the RICO statute. Second, plaintiff claims that Judge Geraci decided this issue at summary judgment, which is incorrect. See generally Horn v. Medical Marijuana, Inc., 383 F.Supp.3d 114 (W.D.N.Y. 2019). Accordingly, the Court turns to the merits of the pending motion.

Cognizable Damages in Civil RICO claims: Defendants argue that plaintiff's requested "loss of earnings" damages are not recoverable in a civil RICO action because they are predicated on the bodily invasion plaintiff allegedly sustained when THC was introduced into his system through the ingestion of Dixie X. The Court agrees.

RICO establishes a private right of action to "[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter." 18 U.S.C. § 1964(c). Defendants' argument implicates the first clause in this provision: that one must be injured "in his business or property" in order to recover under Section 1964(c).

This statutory language has a long history. Congress modeled Section 1964(c) and its private right of action on the "the civil-action provision of the federal antitrust laws, § 4 of the Clayton Act," Holmes v. Secs Inv'r Protection Corp., 503 U.S. 258, 267 (1992), which provides:" [A] ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States . . . ." 15 U.S.C. § 15(a) (emphasis added) . In the context of the Clayton Act, the Supreme Court has held that the "business or property" clause encompasses harm to "commercial interests or enterprises," Hawaii v. Standard Oil Co. of California, 405 U.S. 251, 264 (1972), but not "personal injuries suffered." Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979). Compare id. ("[A] consumer . . . acquiring goods or services for personal use[] is injured in 'property' when the price of those goods or services is artificially inflated by reason of the anticompetitive conduct complained of."), with Chadda v. Burcke, 180 Fed.Appx. 370, 371-72 (3d Cir. 2006) (summary order) (consumer's injuries suffered from use of a cosmetic "at most" asserted a "personal injury" that did not support an antitrust claim).

In interpreting and applying Section 1964(c), courts have taken the same approach. "[A] plaintiff only has standing [under civil RICO] if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation."^[2] Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (emphasis added). An injury to "business or property" under Section 1964 (c) contemplates "a proprietary type of damage" or "economic injury." Bascunan v. Elsaca, 874 F.3d 806, 817 (2d Cir. 2017) . As a simple example, "a person physically injured in a fire whose origin was arson is not given a right to recover for his personal injuries; damage to his business or his building is the type of injury for which § 1964(c) permits suit." Bankers Trust Co. v. Rhoades, 741 F.2d 511, 515 (2d Cir. 1984), vacated on other grounds, 473 U.S. 922 (1985).

The limitation is perhaps easier to state than to apply. A fundamental difficulty is that money "is a form of property," Reiter, 442 U.S. at 338, and" [m] ost personal injuries" will entail "some pecuniary consequences," including "loss of earnings, loss of consortium, loss of guidance, mental anguish, and pain and suffering." Doe v. Roe, 958 F.2d 763, 770 (7th Cir. 1992). A litigant could easily recast damages for personal injury as a financial loss of "property" in order to invoke civil RICO. See, e. g., id. (noting that, theoretically, one could view the "economic aspects of [a personal injury]" as "injuries to 'business or property'"); Grogan v. Platt, 835 F.2d 844, 846 (11th Cir. 1988) (discussing plaintiffs' argument that "persons who are killed or injured by RICO predicate acts suffer real economic consequences as a result"). As a result, in deciding whether an injury is "to business or property" - and thus recoverable under civil RICO - or is personal - and thus not recoverable - courts do not look solely at whether there is a "financial loss." Doe, 958 F.3d at 770. Instead, they ask whether the plaintiff seeks to recover for a loss that flows from, or is derivative of, a personal injury. If it does, then it is not recoverable under civil RICO. See Jackson v. Sedgwick Claims Mgmt. Servs., Inc., 731 F.3d 556, 565-66 (6th Cir. 2013) ("[B]oth personal injuries and pecuniary losses flowing from those personal injuries fail to confer relief under § 1964(c)."); Grogan, 835 F.2d at 848 (holding that plaintiffs "cannot recover under RICO for those pecuniary losses that are most properly understood as part of a personal injury claim").

In recognition of this distinction, courts have held that lost earnings or wages are not recoverable if they flow from a personal injury. See Evans v. City of Chicago, 434 F.3d 916, 92627 (7th Cir. 2006) ("The loss of income as a result of being unable to pursue employment opportunities while allegedly falsely imprisoned . . . are quintessentially pecuniary losses derivative of personal injuries arising under tort law."), overruled on other grounds Hill v. Tangherlini, 724 F.3d 965 (7th Cir. 2013); Jackson, 731 F.3d at 565. Here, plaintiff does not allege that defendants engaged in a fraudulent scheme that directly caused his loss of employment. To the contrary, plaintiff acknowledges that" [t]he nexus between t...