“Requiring a Straight Line” – Ratfield v. United States Drug Testing Laboratories, Inc.
A Seventh Circuit Clarification of Proximate Cause and Direct Injury under Civil RICO

Introduction

Andrea Ratfield v. United States Drug Testing Laboratories, Inc. (7th Cir. 2025) is a high-stakes dispute arising out of positive alcohol biomarker tests that jeopardised the livelihoods of pilots, a physician, a nurse, and an attorney. The plaintiffs alleged that the testing laboratory (USDTL) fraudulently promoted its dried-blood-spot PEth test as accurate, inducing third parties to rely on the results and thereby causing the plaintiffs to suffer suspensions, employment consequences, and reputational harm. They sued USDTL and an intermediary vendor (Choice Labs Services, “CLS”) under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) and complementary state-law theories.

The district court dismissed the RICO counts under Rule 12(b)(6) for failure to plead proximate cause and declined supplemental jurisdiction over the remaining claims. On appeal, the Seventh Circuit affirmed, issuing a tightly focused opinion that fortifies two procedural-substantive principles:

• In civil RICO cases, plaintiffs must allege direct injury – not merely foreseeable or downstream harm – linking the defendant’s predicate acts to the plaintiff’s injury;
• When a federal court’s jurisdiction rested solely on federal claims that are dismissed, the usual course is to dismiss (not remand) the pendant state claims if the action originated in federal court.

Summary of the Judgment

Judge Lee, writing for a unanimous panel, concluded that the plaintiffs’ second amended complaint did not satisfy RICO’s “by reason of” causation requirement. Although the court assumed arguendo that defendants had made misrepresentations about test reliability, the panel held that the pleadings failed to show any direct causal link between those misstatements and the plaintiffs’ professional injuries. Key observations include:

• No allegation that the decision-makers (employers, licensing bodies, HIMS program administrators) ever received or relied on USDTL’s marketing claims;
• The presence of an independent intermediary (CLS) rendered the causal chain “serpentine” and broke any direct connection;
• Specificity defects under Rule 9(b) further undermined proximate cause because the “who, what, when, where, and how” of each misrepresentation reaching a decision-maker were absent;
• Because all substantive RICO counts (§§1962(a), (b), (c)) failed, the conspiracy claim (§1962(d)) necessarily failed.

With no surviving federal claim, the district court’s dismissal without prejudice of the state causes of action was affirmed; a “remand” to state court was unavailable because the suit began in federal court.

Analysis

1. Precedents Cited and Their Influence

• Holmes v. SIPC, 503 U.S. 258 (1992) – inaugurates the “direct relationship” test for RICO proximate cause; the panel reiterated Holmes’ core holding that common-law proximate cause principles govern §1964(c).
• Anza v. Ideal Steel, 547 U.S. 451 (2006) – emphasises that courts must ask whether the alleged violation led directly to the plaintiff’s injury. Ratfield quotes Anza when defining the central inquiry.
• Hemi Group v. City of New York, 559 U.S. 1 (2010) – plurality reaffirmed that foreseeability is insufficient. Ratfield lifts the phrase: “The key word is ‘direct’; foreseeability does not cut it.”
• Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) – recognised that reliance can evidence directness; Ratfield notes that absence of reliance makes proximate cause “difficult.” The opinion also references Bridge’s discussion of intervening causes.
• Medical Marijuana, Inc. v. Horn, 604 U.S. ––– (2025) – a fresh Supreme Court decision employed to reinforce that foreseeability alone is inadequate.
• Seventh Circuit authorities: Empress Casino Joliet Corp. (2014), United Food & Commercial Workers v. Walgreen (2013), Yash Venture Holdings (2024) – relied on for standards of review and proximate cause analysis.

Collectively, these cases create a concentric ring of authority around directness. Ratfield adds thickness to that ring by applying it to high-tech laboratory testing and multi-tier supply chains.

2. The Court’s Legal Reasoning

1. Pleading Standard – Because civil RICO predicates (mail/wire fraud) sound in fraud, the complaint must meet Rule 9(b). The plaintiffs did not allege the “time, place, content, and method” of the specific fraudulent statements that travelled from USDTL through CLS to employers.
2. But-For v. Proximate Causation – Even if but-for causation existed (positive DBS tests → adverse employment action), proximate causation faltered. The court identified three gaps:
   • No transmission of the misstatements to the decision-makers.
   • Intervening Independent Actors – CLS and possibly the testing labs could choose alternative tests or convey their own statements, breaking the causal chain.
   • No allegation of reliance – Without reliance, the chain was too indirect.
3. Conspiracy Liability – A §1962(d) conspiracy must stand on a viable underlying violation. Once the substantive claims collapsed, so did the conspiracy allegation.
4. Supplemental Jurisdiction – The court simply applied 28 U.S.C. §1367(c)(3) and long-standing Seventh Circuit practice (e.g., Groce v. Eli Lilly) to dismiss state claims when all federal issues disappear.

3. Potential Impact of the Judgment

Ratfield’s import is felt in at least four directions:

• Supply-Chain Fraud Cases – Plaintiffs injured by downstream professional or consumer decisions must now plead, with Rule 9(b) detail, that the defendant’s misstatements reached and were relied on by the entity that made the harmful decision.
• Laboratory-Testing Litigation – Laboratories marketing novel biological assays face less RICO exposure unless plaintiffs can tie promotional claims directly to employer or agency action.
• Role of Intermediaries – The presence of an intermediary who does not propagate the fraudulent statements may function as an “intervening cause” that breaks causation. Future litigants will scrutinise the conduct of middlemen to establish or refute directness.
• Pleading Strategy in the Seventh Circuit – Ratfield signals continued rigor in proximate cause pleading. It aligns the circuit with a recent Supreme Court term (Medical Marijuana, Inc.) and may dissuade forum shopping by plaintiffs with attenuated RICO theories.

Complex Concepts Simplified

• RICO (§1964(c)) – A law allowing private plaintiffs to sue for treble damages if they were injured by a pattern of criminal acts (mail, wire fraud, etc.) that violates §1962. The plaintiff must show (i) a RICO violation and (ii) that the violation directly caused injury to business or property.
• Proximate Cause – Legal shorthand for the idea that an injury must be closely enough connected to the defendant’s conduct to justify liability. Courts often ask: Is the link direct or “too remote”?
• Intervening Cause – An independent action that breaks the causal chain. If someone else’s conduct becomes the dominant cause of harm, the original actor may avoid liability.
• Rule 9(b) – Federal rule requiring fraud allegations to specify the who, what, when, where, and how. General accusations won’t survive a motion to dismiss.
• Supplemental Jurisdiction (§1367) – Authority allowing federal courts to hear state claims that are related to federal ones. When the federal claims drop out early, the state claims are usually dismissed without prejudice so they can be re-filed in state court.

Conclusion

Ratfield v. USDTL is not just another RICO dismissal; it is a clarion endorsement of the “straight-line” approach to proximate cause. By refusing to stretch RICO liability through multi-layer professional programs and intermediaries, the Seventh Circuit tightens the pleading screws on plaintiffs who allege fraud-based schemes. The decision reminds litigants that:

1. The path from misrepresentation to injury must be direct, not merely foreseeable.
2. Intervening actors who neither repeat nor rely on the misrepresentation can sever liability.
3. Rule 9(b) is a gateway, not a technicality.

Going forward, lawyers crafting civil RICO complaints in the Seventh Circuit must map an unbroken causal chain at the pleading stage or risk early dismissal. Ratfield therefore stands as a modern restatement – and slight sharpening – of Holmes and its progeny, ensuring that RICO remains a remedy for direct, not derivative, injuries.