Brown v Cassens Transport Co., 6th Circuit Court of Appeals (Docket No. 05-2089, Opinion issued and recommended for publication on October 23, 2008)
In this important case relating to workers’ compensation in Michigan, the Plaintiffs were current or former employees of Cassens Transport, Inc. who submitted worker’s compensation claims to Cassens based on workplace injuries they had alleged to have each sustained. On June 22, 2004, the plaintiffs filed a complaint raising Racketeer Influenced and Corrupt Organization (RICO) claims and Intentional Infliction of Emotional Distress (IIED) claims against the defendants. In their complaint, the plaintiffs alleged that Cassens, which was self-insured for purposes of paying benefits under the Worker’s Disability Compensation Act (WDCA), contracted with Crawford & Company to serve as a claims adjuster for the worker’s compensation claims of Cassens’s employees. They further pleaded that Cassens, Crawford, and Dr. Saul Margules, as well as other “cut-off” doctors, engaged in a pattern of racketeering activity that denied the plaintiffs’ worker’s compensation claims. Specifically, the plaintiffs alleged that Cassens and Crawford deliberately selected and paid unqualified doctors, including Dr. Margules, to give fraudulent medical opinions that would support the denial of worker’s compensation benefits, and that defendants ignored other medical evidence in denying them benefits. The plaintiffs claimed that the defendants made fraudulent communications amongst themselves and to the plaintiffs by mail and wire in violation of 18 U.S.C. §§ 1341, 1343, which serve as the predicate acts for their RICO claims.  Id.

The district court granted the defendants’ motion to dismiss pursuant to Rule 12(b)(6) on July 15, 2005. The plaintiffs filed a timely appeal. A majority of the 6th Circuit panel affirmed the dismissal on the ground that plaintiffs failed to plead that they relied on misrepresentations by defendants. The U.S. Supreme Court, however, granted plaintiffs’ petition for a writ of certiorari, vacated the 6th Circuit’s judgment, and remanded the case to us for reconsideration in light of the decision in Bridge v Phoenix Bond & Indemnity Co., 128 S. Ct. 2131 (2008), which held unanimously that a civil-RICO plaintiff does not need to show that it detrimentally relied on the defendant’s alleged misrepresentations.
On remand, the 6th Circuit held:

(1)    Thirteen predicate acts with the same purpose (to reduce Cassens’s payment obligations towards worker’s compensation benefits by fraudulently denying worker’s compensation benefits to which the employees are lawfully entitled) constituted a pattern of racketeering activity for a RICO claim, regardless of whether injury to each worker independently consisted of a pattern of racketeering activity;

(2)    Relationship-plus-continuity standard for establishing pattern of racketeering activity was satisfied by allegations as each of the plaintiffs has also sufficiently pleaded that they were injured by the defendants’ “pattern of racketeering activity” under 18 U.S.C. §§ 1964(c) because the defendants’ fraud deprived the plaintiffs of worker’s compensation benefits and caused them to incur attorney fees and medical care expenses;

(3)    The injured workers were not required to plead or prove reliance on misrepresentations;

(4)    The worker’s allegations were sufficient to satisfy proximate causation requirement for civil RICO claim because the defendants’ fraudulent acts were a “substantial and foreseeable cause” of the injuries alleged by the plaintiffs: the deprivation of their worker’s compensation benefits and expenses for attorney fees and medical care;

(5)    The Michigan worker’s compensation statutes did not reverse preempt RICO under McCarran-Ferguson Act because RICO would not “invalidate, impair, or supersede” the WDCA or frustrate the goal of the state law to punish the improper denial of benefits if it was part of racketeering activity, and because worker’s compensation benefits are not a form of insurance; however

(6)    The denial of workers’ compensation benefits by the defendants was not sufficiently outrageous to support claim for intentional infliction of emotional distress.  Id.

In light of these holdings, the 6th Circuit Court of Appeals reversed the dismissal of plaintiffs’ RICO claims and remanded the case back to the district court for further proceedings consistent with the panel’s opinion. However, the Court affirmed the dismissal of the plaintiffs’ IIED claims.