• Denial of Workers' Comp Claim May Form the Basis of RICO Claim
  • April 18, 2012
  • Law Firm: Ford & Harrison LLP - Memphis Office
  • Executive Summary:  The Sixth Circuit has held that a group of transportation workers have a property right in their entitlement to workers' compensation benefits under Michigan law, and that the denial of their workers' compensation claims may form the basis for RICO claims against their employer, its third-party claims administrator, and a physician who evaluated their workers' compensation claims.  See Brown v. Cassens Transport Co., 6th Cir. (April 6, 2012).  The court's 2-1 decision opens the door to the possibility that, at least in Michigan, employers and others may find what they thought were routine workers' compensation claims suddenly morphing into federal RICO lawsuits, complete with treble damages and attorneys' fee awards.


    Five workers sued their employer, Cassens Transport Company, as well as the employer's third-party claims administrator and the physician who evaluated them, claiming that the denial of their claims for workers' compensation benefits under Michigan's Worker's Disability Compensation Act (WDCA) was fraudulent and violated the Racketeer Influenced and Corrupt Organizations Act (RICO).

    Specifically, the workers claimed that Cassens and the third party administrator solicited fraudulent medical reports from the physician.  They also claimed that the physician lacked expertise in orthopedic medicine and that he and Cassens were engaged in a conspiracy, i.e., that the physician was "biased due to the amount of money defendants paid him over the years to examine Cassens' workers and to testify against them."  The workers further claimed that this conspiracy was orchestrated by mail or wire.  The trial court dismissed the case for failing to state a claim, and the workers appealed this dismissal to the 6th Circuit.

    The 6th Circuit reversed the dismissal of the RICO claims, reasoning that the Supreme Court intended RICO to be "read broadly" and to be "liberally construed to effectuate its remedial purpose."  The Sixth Circuit also noted that statutory entitlements are property.  In examining the Michigan statute, the Court further found that "Michigan's nondiscretionary workers' compensation scheme creates a property interest in the expectancy of statutory benefits following notice to the employer of [a work related] injury."

    The most important and potentially far-reaching finding by the Court was that "even if Michigan law does not create a property interest in such an expectancy, . . .  the plaintiffs' claim for benefits is an independent property interest, the devaluation of which also creates an injury to property within the meaning of RICO."

    The Court stated that for the workers' RICO action to succeed they must prove that they suffered an ascertainable injury.  In other words, they must prove that they would have prevailed in their workers' compensation action or obtained a better outcome but for the alleged fraud and conspiracy between the employer and the physician.  Interestingly, all of the plaintiffs' workers' compensation claims had been resolved by settlement or adjudication.  However, the Court found that losing or settling the original lawsuit does not necessarily render the injury speculative.

    Addressing damages, the Court said that "the plaintiffs should be able to put on proof of how much compensation they would have received under the WDCA's rigid schedule of compensation but for the defendants' allegedly fraudulent medical testimony."  Reversing the trial court's dismissal of the RICO claims, the 6th Circuit remanded the case back to the trial court for further proceedings.  So the story is not over yet.

    Employers' Bottom Line:

    At least in the 6th Circuit (Tennessee, Michigan, Ohio and Kentucky), employers should examine their relationships with their workers' compensation carrier, claims administrator, case managers, and any physicians who provide care to employees injured on-the-job to make sure that the employer's dealings with each of these entities is "arms-length."