RICO and Workers’ Compensation: Staying on the Right Side of the Law

When most people think of the Racketeer Influenced and Corrupt Organizations Act (RICO), theyimmediately think of the mafia and organized crime.  However, a recent decision by the Sixth Circuit Court of Appeals may open the door for future RICO claims in a workers’ compensation setting.

In Brown v. Cassens Transport Company, Sixth Circuit, No. 10-2334, (April 6, 2012), the U.S. Court of Appeals for the Sixth Circuit held that employers who have seemingly colluded with their insurers and physicians to deny a claimant workers’ compensation benefits can be sued for damages under the civil portions of the RICO Act.  In Brown, six Plaintiffs, all of whom were current or former employees of Cassens, alleged that the Defendants schemed to wrongfully deny them workers’ compensation benefits.  The Defendants named included the employer, their insurer, and an employer-chosen physician.

Specifically, the Plaintiffs alleged that the Defendant doctor was biased due to the amount of money that Cassens had paid to him over the years for his evaluations.  Additionally, the Plaintiffs also alleged that Cassens had solicited fraudulent medical reports from the doctor and ignored other medical evidence to wrongfully deny the Defendants of workers’ compensation benefits.  The Plaintiffs attempted to tie these actions into the RICO Act by alleging that the Defendants had used the mail and wire to defraud them, thereby committing mail fraud and wire fraud under the RICO Act.

The Defendants’ two main arguments against the RICO claim were that Michigan’s Workers’ Compensation Act’s Exclusive Remedy Clause prevented the Plaintiffs from filing suit, and that the Plaintiffs did not have a property interest in workers’ compensation benefits.  The District Court dismissed the Complaint, citing the Exclusive Remedy Clause as sufficient to prevent the RICO suit.

On appeal, the Court of Appeals held that Michigan’s Workers’ Compensation Act could not forbid the pursuit of a federal claim, as this would violate the Supremacy Clause.  The Court of Appeals also held that under its interpretation of Michigan’s definition of a property interest, the Plaintiffs had a property interest in the receipt of workers’ compensation benefits.  Even if the Michigan courts later decided that this was not a property interest, the Court held that the Plaintiffs’ claim for benefits is an independent and separate property interest that is sufficient to trigger RICO.  The case was remanded to the District Court.

Although Brown is a Michigan case, the principles that the Court applied in deciding whether or not an employee can bring a RICO claim for workers’ compensation benefits may be applied in other jurisdictions.  Specifically, the fact that the Court held that Michigan’s Exclusive Remedy Clause, which is similar to Georgia’s Clause, does not prevent the filing of a federal action may be drawn upon by other Courts.  The way that the Court defined a claim for workers’ compensation as a property interest in and of itself may also be drawn upon by other Courts in deciding future cases.

Following the Brown decision, the main point for employers and insurers to take away is that they should be careful not to give the appearance of collusion with physicians to deny a claimant’s workers’ compensation benefits.  The Defendants in Brown allegedly colluded very blatantly, even to the point of suggesting to the doctor what should be in his medical reports.  The Defendants also relied on one physician, an orthopedist, for most all of their claims.  Certainly, this is an extreme case, and no prudent employer or insurer would ever rely solely on one physician for most of their claims.

It should be noted that the Court did not hold that the Defendants had violated the RICO Act.  Rather, it merely remanded the case and allowed the Plaintiffs to proceed with their lawsuit.  Actually proving that the Employer and Insurer violated the RICO Act is sure to be much more difficult, and it is unlikely that the Plaintiffs will win their suit.  We will continue to follow this case and update you as to its outcome.

Should you have any questions about this or any other workers’ compensation issues, please feel free to contact us.

By: W. Joseph “Joey” Turner

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