Sixth Circuit Court of Appeals Allows “RICO” Claims to Proceed Against Employers, Doctors, and Claims Administrators Despite Exclusive Remedy Provisions of State Workers’ Compensation Disability Laws

On November 2, 2012, the Sixth Circuit handed down a second opinion within the last six months in which it held that plaintiffs might have a remedy under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. secs. 1961(1)(B), 1962(c), and 1964(c), against their employers, the employers’ claims administrators and medical doctors for allegedly conspiring to preclude, i.e., deny, claims by the plaintiffs for workers’ compensation disability benefits.

While their underlying claims for benefits were pending before Michigan’s administrative system for workers’ compensation claims, the plaintiffs sued in federal court claiming that defendants violated RICO by conspiring with the medical doctors to fraudulently use the mail (mail and wire fraud) to deny their rightful claim to benefits due to their work-related disability.  The district court dismissed the claims holding that (1) RICO does not create a cause of action that acts as an end-run around the exclusive remedy provisions and procedures established for recovery of benefits under Michigan’s Workers’ Compensation Disability Act; (2) the plaintiffs’ claims were not ripe (primarily because the administrative and judicial proceedings relating to their claims in the state court system were ongoing); and (3) plaintiffs’ failed to state a cognizable RICO claim.  The district court also ruled that even if the plaintiffs had stated a valid RICO claim, the Burford abstention doctrine and/or the doctrine of primary jurisdiction precluded the federal court proceedings pending the final resolution of the state-court and administrative proceedings.

The Sixth Circuit majority (Judge Nelson Moore authoring) reversed the district court, consistent with its previous opinion in Brown v. Cassens Transport, Inc., 675 F.3d 946 (2012), and held that the plaintiffs stated a claim under RICO and could proceed in federal court on those claims the exclusive remedy provisions of the state’s Workers’ Compensation Disability Act notwithstanding.  The majority also holds that the employees’ / plaintiffs’ interest in workers compensation benefit are a property interest harmed or damaged by the alleged fraud.  The Court majority had to use this reasoning in order to allow the RICO claims to proceed. However, as the concurring opinion pointed out, the right is essentially not vested until the employee has had an opportunity to fully and fairly litigate his claim therefor under the State’s workers’ compensation administrative scheme.

The majority’s reasoning appears to be a stretch.   The plaintiffs are not entitled to workers’ compensation benefits merely because they claim an injury without first demonstrating that they have suffered a “compensable” work-related injury.  There is a host of proofs and requirements for pleading and proving such a claim.  The mere assertion of the right to some future benefits that one may or may not be entitled to depending on his or her ability to prove all the statutory prerequisites for an actual injury is not a vested property right which can be infringed upon without some stretch of the judicial imagination.  The deprivation of the benefit having not yet occurred, the entitlement to damages for a denial of such benefit under RICO is specious, at best.

There are several other cases on this issue that are in the Sixth Circuit or lower federal courts.  Brown is likely headed back to the Supreme Court.

This case and Brown also establish dangerous precedent.  Many state-run, insurance-funded accident and injury or disability compensation systems are based on an administrative or quasi-administrative claims processing format.  Each state has its own administrative agencies, regulations, and laws governing the recovery of benefits under those schemes.  Medical doctors are used by both plaintiffs and defendants to prove or disprove a case.  The conspiracy and fraud theories here, as they have been allowed to go forward, can be plead in many different scenarios against many different people.  It is equally applicable to plaintiffs’ doctors and even to lawyers who use the same doctors over and over again to conclude that a particular plaintiff suffered a particular injury the characteristics of which just happen to satisfy the technical and legal prerequisites to recover benefits under whatever scheme the plaintiff is alleging he was entitled to such benefits.  See Judge Batchelder’s concurrence in this case. Her concurrence was only a concurrence because she is obliged to follow the Sixth Circuit’s earlier opinion in Brown, supra.

The opinion is suspect, for many reasons.  Perhaps the Supreme Court will address it once and for all.  Read the Sixth Circuit decision here:  Jackson, et al. v. Segwick[sic] Sixth Circuit Opinion

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