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Sixth Circuit Deals Fatal Blow To RICO Claims Based On Alleged Conspiracies To Deny Workers' Compensation Benefits


Sixth Circuit Deals Fatal Blow To RICO Claims Based On Alleged Conspiracies To Deny Workers' Compensation Benefits

The Sixth Circuit recently issued a decision solidifying the rule that an employee cannot establish a valid claim under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §1961 et seq. (“RICO”) based upon an employer’s alleged introduction of false evidence in an effort to defeat an employee’s claim for workers’ compensation benefits. In Brown v. Ajax Paving Indus., Inc., 2014 U.S. App. LEXIS 9187 (6th Cir. May 19, 2014), Plaintiff Jay Brown claimed that he suffered an injury while working on his job.  He sought workers’ compensation benefits, and his employer, Ajax Paving Industries, Inc., disputed the claim for benefits and introduced medical testimony suggesting that the injury did not occur while on the job, but instead occurred outside of work.  The parties settled the worker’s compensation matter and that should have been the end of the story, or so one would think.  Not so in this matter.

Despite the settlement of the worker’s compensation matter, Brown brought a RICO suit against Ajax and the “insurers, claims administrators and the doctor.” Brown alleged that the medical evidence introduced to refute his claim for worker’s compensation benefits was false, and introduced “in order to deny or at least diminish his benefits and that it had done the same thing to other employees.” The Brown suit was a “carbon copy” of several other suits seeking to force an intersection between RICO, employer challenges to the recovery of worker’s compensation benefits, and medical testimony used to support those challenges. See e.g. Yax v. UPS, 196 F. App’x. 379 (6th Cir. 2006); Brown v. Cassens Transp. Co., 675 F.3d 946 (6th Cir. 2012); and Jackson v. Sedgwick Claims Management Services., 731 F.3d 556 (6th Cir. 2013) (en banc).

RICO only allows a civil remedy when a person is “injured in his business or property by reason of a violation of Section 1962” of the RICO Act.  18 U.S.C. §1964(c).  RICO was enacted to fight the influence of organized crime.  In addition to criminal penalties, RICO also allows certain civil remedies, permitting a person “injured in his business or property by reason of a violation of section 1962” to bring a civil action for treble damages, costs, and attorneys’ fees.  18 U.S.C. §1964(c).

In the Brown case, the Sixth Circuit held that Brown’s injuries were not the type of injuries compensable under RICO. Rather, Brown’s alleged injury consisted of “getting less worker’s compensation that he deserved.”  Brown’s injuries, therefore, were not an injury to his business or property. Rather, as the Brown Court noted, his injuries were simply the “‘loss or diminution’” of his anticipated worker’s compensation. As the Brown Court further noted, in an earlier en banc, Sixth Circuit decision of Jackson v. Sedgwick Claims Management Services, supra, the Court had reasoned that “workers’ compensation compensates for personal  injury….  [RICO], which put its spotlight on ‘business or property,’ does not cover losses that flow from personal injuries.”

The Brown and Jackson cases prohibit RICO claims against employers, insurers, claims administrators, and doctors involved  in workers’ compensation matters.  As the Brown Court noted, “[c]hanging the defendant neither weakens the link between the benefits and personal injury nor dims the  respect owed  the States’ authority over workers’ compensation.” RICO’s “applicability turns on the nature of the injury—that the plaintiff was “injured in his business or property” and not “on the nature of the defendant.  We do not see how the same harm, loss of expected workers’ compensation benefits, could count as an injury to business or property against some defendants but not against other defendants.”