Morrison v. Syntex Laboratories, Inc.

Citations: 101 F.R.D. 743; 1984 U.S. Dist. LEXIS 16865; 17 Fed. R. Serv. 587Docket: Civ. A. No. 82-2100

Court: District Court, District of Columbia; May 8, 1984; Federal District Court

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Plaintiffs filed a motion on March 27, 1984, to amend their complaint to include a RICO cause of action under 18 U.S.C. 1964(c), following recent depositions that allegedly revealed fraudulent advertising practices related to the infant formula Neo-Mull-Soy. Originally, the case, initiated on July 27, 1982, centered on claims of negligence, breach of warranty, and strict liability. The defendant opposed the amendment, arguing it was untimely, would necessitate additional discovery, and was unlikely to succeed as a valid cause of action.

Magistrate Arthur L. Burnett conducted a thorough review, including oral arguments on May 3, 1984, and determined that the motion to amend should be denied for two primary reasons. First, the case had been pending for nearly two years, and the plaintiffs appeared to have sufficient information to pursue the amendment much earlier, indicating unnecessary delay. The plaintiffs should have anticipated the need for this claim based on the nature of the product and prior discovery.

Second, the RICO statute's provision for treble damages is limited to injuries in business or property, which does not extend to personal injuries resulting from products liability claims. The statute's language suggests that if Congress intended to cover broader injuries, it would have used more inclusive terms. Therefore, allowing the amendment would likely lead to a futile outcome, reinforcing the decision to deny the motion. The trial is set for August 13, 1984, and the amendment would require postponement for further discovery.

RICO’s application in products liability cases involving false representations and interstate commerce is questioned. The adequacy of misrepresentation for common law fraud to meet the higher standards of guilty knowledge and intent for mail fraud under 18 U.S.C. § 1964(c) is addressed but left unresolved for the purpose of amending the complaint. The case Guerrero v. Kai-zen emphasizes that mere use of the mails does not establish injury 'by reason of' a RICO violation. Similarly, the court in In Re Action Industries Tender Offer concluded that RICO was not intended for private plaintiffs to claim treble damages for routine torts, noting the statute’s focus on commercial injuries and the legislative intent to protect legitimate businesses from racketeering. Courts have interpreted 'business or property' in a manner that limits remedies under § 1964(c) to business losses resulting from racketeering. The Magistrate does not agree with the broader interpretation of 'economic loss' from the unpublished case Joseph Sinai v. ARCO Medical Products Company, asserting that the plaintiffs have not sufficiently alleged criminal acts under § 1962, which distinguishes this case from Sinai where clear criminal acts were identified. The Magistrate favors a restrictive view on extending civil causes of action under federal criminal statutes, emphasizing the need for clear congressional intent.

Rule 15(a) of the Federal Rules of Civil Procedure allows for liberal amendments to complaints, but applying this broadly in products liability cases involving personal injuries could significantly expand federal jurisdiction, potentially drawing many tort cases into federal courts that should be addressed in state courts. Without clear Congressional intent to broaden federal jurisdiction, courts are advised to interpret such statutes cautiously. A Magistrate noted that a related case, Sinai, had denied a motion to dismiss a RICO claim and certified issues for appeal due to a lack of precedent in the Ninth Circuit regarding RICO actions in similar contexts. Despite the Sinai court's stance, the Magistrate believes the motion to amend the complaint to include a RICO claim should be denied, emphasizing that the phrase "business or property," derived from the Clayton Act, should not encompass personal injury claims, as indicated by the Supreme Court in Reiter v. Sonotone Corp. The Magistrate concludes that the injuries claimed by Dante Morrison, including medical expenses and diminished earning capacity due to alleged negligence related to the Neo-Mull-Soy formula, do not fall under RICO's purview. Therefore, the motion to amend the complaint to assert a RICO cause of action is deemed futile and is denied.