RICO Not Applicable To Employee’s Workers’ Compensation Dispute and Claims Holds En Banc Panel of Sixth Circuit

In a significant opinion that is bound to be pushed up to the Supreme Court by the plaintiffs, the Sixth Circuit today issued an en banc decision reversing its previous holding in this case and overruling Brown v. Cassens Transport, 675 F.3d 946 (2012) (Brown II), in which the Court had previously allowed claims against employers and third-party administrators to proceed under the federal Racketeering Influenced and Corrupt Organizations (RICO) act, 18 U.S.C. sec. 1962(c).

The plaintiffs pursued a theory that through a conspiracy to defraud or otherwise bar the payment of workers’ compensation benefits, employers, third-party claims administrators and medical personnel (esp. doctors) cut off and/or denied claims for continuing workers’ compensation benefits.

The Sixth Circuit originally held the claims could go forward.  The defendants in this case moved for rehearing, en banc, so the entire Sixth Circuit could be impaneled to determine the viability of a RICO claim under these circumstances.

As the majority opinion points out, the Michigan Workers’ Disability Compensation Act provides for a complete system of review, including claims of alleged fraudulent denial of benefits, including appeals and review.  As the majority notes:  “The process for disputing benefits therefore contains multiple tiers of review that are designed to prevent benefits decisions from being tainted by fraud.”  Slip Op. at p. 6.

Further basis for the majority’s holding is that RICO has been interpreted to require damage to business or property interests, not personal injuries, including pecuniary losses therefrom.  Id. at 12.  The Court holds that alleged loss of workers’ compensation benefits to which the plaintiffs claim they were entitled are precisely the type of pecuniary loss of benefits arising out of personal injuries compensation for which is not allowed or recoverable by the RICO scheme.

The majority thereby rejected the reasoning in the Brown II case that workers’ compensation benefits, once decided, become a property right and are no longer pecuniary losses suffered as a result of personal injury.  Id. at p. 13.  As is foreshadowed in the beginning of its opinion, the Court here returns to its discussion that the Workers’ Compensation system is an intricate and complex set of bargains and trade offs between injured employees and employers that allows the employee to receive compensation for personal injuries arising out of and in the course of employment.  Id. at 14.  The Court concludes “racketeering activity leading to a loss or diminution of benefits the plaintiff expects to receive under a workers’ compensation scheme does not constitute and injury to ‘business or property'”.  Id. at 14-15.

The Court shores up its holding by reasoning that concerns about federalism are particularly strong where a collateral attack is made under federal law (here RICO) against a state administrative scheme created to supplant personal injury tort claims.  Id. at 15.  There is no clear statement by Congress in RICO of an intent to supplant state law administrative schemes.  Id.

Judge Clay writes a very balanced concurrence.  He sympathizes with the dissent’s position that the claims by employees they are being prevented from seeking fair adjudication might be cognizable under RICO.  Yet, ultimately, he agrees with the majority on the basis of the majority’s citation to the “clear statement rule”, i.e., the rule that Congress must speak with precision if it intends a statute to intrude upon subject matters of the law traditionally reserved to the states.  Judge Clay points out the growing number statements from the U.S. Supreme Court strengthening this notion and identifying its parameters.

Judge Nelson Moore, who authored the initial decision (see post below), dissents.  She believes the plaintiffs have stated an interest (or a damage to) an interest in property sufficient for their RICO claims to survive.

The opinion is attached here:  Jackson v. Sedgwick et al.09.24.13

My previous post provides some background context to these cases as well.  Sixth Circuit Allows RICO Claims by Workers’ Compensation Claimants

If anyone has questions about the consequences of this case, and potential future claims of this nature call Carson J. Tucker at Lacey & Jones, LLP, (248) 283-0763

About cjtucker06

Owner of law firm since July 2014; Handles all types of appellate matters and assists other lawyers with complex litigation and insurance coverage issues; Admitted to the Supreme Court of the United States, the Sixth Circuit Court of Appeals and the State Bar of Michigan; Expertise in prosecuting and defending appeals with several significant successes in the Sixth Circuit Court of Appeals, the Michigan Supreme Court and the Michigan Court of Appeals; Author of briefs amicus curiae in the Michigan Supreme Court for the Michigan Defense Trial Counsel and the Insurance Institute of Michigan; Represents Insurance Companies, Major International Business, Governmental Entities, Law Enforcement Officers and County Sheriffs. Board of Directors, Michigan Defense Trial Counsel Amicus Committee Co-Chair, Michigan Defense Trial Counsel Military - Retired Major in the Judge Advocate General (JAG) Corps of the United States Army, Brigade Judge Advocate and Staff JAG officer for the Maneuver Training Center, Camp Grayling, Michigan; Recipient of the Army's Meritorious Service Medal (the highest medal of honor available to Soldiers serving in non-combat roles); 2012 Graduate of the Judge Advocate Officer Advanced Course, at The Judge Advocate Legal Center and School, Charlottesville, Virginia. United States Navy Reserves, Combat Warfare Qualification, January 1989 to July 2003 Former law clerk to Justice Stephen J. Markman, Michigan Supreme Court, Research Attorney, Michigan Court of Appeals. Insurance Coverage Associate Plunkett Cooney; Environmental Law Attorney at Squire Sanders, now Squire Patton Boggs; Master's Degree in Environmental Law; Environmental Law Scholar, ALI/ABA Washington, D.C., Juris Doctorate, Vermont Law School, Environmental Editor, Vermont Law Review; Treasurer and Finalist, Moot Court Advisory Board.
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