The End of RICO? In Workers' Comp Cases in the 6th Circuit, Apparently So

Brown thought that Ajax had introduced false medical testimony to deny or at least diminish his benefits and that it had done the same thing to other employees. As a result, he sued Ajax and its alleged accomplices – insurers, claims administrators, and the doctor – under RICO. The district court dismissed the complaint, and Brown appealed.

The circuit court's decision

The Sixth Circuit affirmed.

In its decision, it explained that, in order to sue under RICO, Brown had to show that illegal racketeering activities "injured [him] in his business or property." 18 U.S.C. § 1964(c); see also id. § 1962. The circuit court then rejected Mr. Brown's efforts to meet this requirement by arguing that his employer's use of false testimony prompted him to accept a small settlement, and so cost him some of the workers' compensation benefits he otherwise deserved – in other words, that his "expected [workers' compensation] benefits" were "property" for purposes of RICO.

The Sixth Circuit pointed out that, in Jackson v. Sedgwick Claims Management Services,731 F.3d 556 (6th Cir. 2013) (en banc), it had rejected a lawsuit challenging a scheme to introduce false testimony at workers' compensation hearings, holding that "loss or diminution of benefits the plaintiff expects to receive under a workers' compensation scheme does not constitute an injury to 'business or property' under RICO." There, the circuit court continued, it gave two key reasons for its holding: One was that workers' compensation compensated forpersonal injury, while RICO, with its spotlight on "business or property," did not cover losses that flowed from personal injuries. Second, it reasoned, a contrary rule would allow RICO to police fraud in the workers' compensation system, "planting the national banner on land traditionally patrolled by the States." In the circuit court's opinion, RICO did not speak with enough clarity to authorize such an intrusion.  

In this case, the circuit continued, Brown's alleged injury consisted of getting less workers' compensation than he deserved, but because "loss or diminution" of expected workers' compensation did "not constitute an injury to 'business or property,'" his claims had to fail.

In concluding, the circuit court added that Jackson applied not only to disputes between employer and employee, but also to an employee's claims against insurers, claims administrators, and doctors – "all of the defendants." RICO's applicability "turns on the nature of the injury –that the plaintiff was 'injured in his business or property.'… It does not turn on the nature of the defendant."

The case is Brown v. Ajax Paving Industries, Inc., No. 11–1391 (6th Cir. May 19, 2014). Attorneys involved include: Marshall Lasser, Marshall Lasser, P.C., Southfield, Michigan, for Appellant. James J. Urban, Paul M. Mersino, Butzel Long, Lansing, Michigan for Appellee Ajax Paving. Joseph A. Fink, Jeffery V. Stuckey, D. Lee Khachaturian, Dickinson Wright PLLC, Lansing, Michigan, for Appellees American Contractors, Ward North, VeriClaim and NovaPro. Daniel B. Tukel, Butzel Long, Detroit, Michigan, Michael F. Smith, The Smith Appellate Law Firm, Washington, D.C., for Appellee Drouillard.

Originally published on FC&S Legal: The Insurance Coverage Law Information Center. FC&S Legal is the industry's ONLY single-source, comprehensive portal developed specifically for insurance coverage law professionals. To find out more, visit www.fcandslegal.com. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice is required, the services of a competent professional person should be sought.