(1) GRANTING DEFENDANT CASSENS TRANSPORT COMPANY'S MOTION TO DISMISS PURSUANT TO FED. R. CIV. P. 12(c) AND FOR PARTIAL SUMMARY JUDGMENT (DKT. NO. 83);
(2) GRANTING DEFENDANT CASSENS TRANSPORT COMPANY'S SUPPLEMENTAL MOTION TO DISMISS; (DKT. NO. 95);
(4) DENYING AS MOOT DEFENDANT CASSENS TRANSPORT COMPANY'S RENEWED MOTION FOR SUMMARY JUDGMENT (DKT. NO. 82);
PAUL D. BORMAN, District Judge.
This matter comes before the Court on Defendant Cassens Transport Company's ("Cassens") Motions to Dismiss and for Partial Summary Judgment
Plaintiffs allege that they were deprived of benefits due to them under the provisions of the Michigan Workers' Disability Compensation Act ("WDCA"), Mich. Comp. Laws § 418.101 et seq. They allege that through various acts of mail and wire fraud, and in violation of the Racketeer Influenced and Corrupt Organizations Act, ("RICO"), 18 U.S.C. § 1964(c), Defendants perpetrated a scheme to deny them workers' compensation benefits. The essence of the alleged scheme is that Cassens Transport Company ("Cassens") (Plaintiffs' employer which was self-insured) and Crawford & Company ("Crawford") (which served under contract as the claims adjuster for Cassens's workers' compensation claims) deliberately selected unqualified doctors, including Defendant Dr. Saul Margules ("Margules"), to give erroneous medical opinions that would support fraudulent denials of workers' compensation benefits. Four of the six Plaintiffs allege claims against all Defendants (Fanaly, Brown, Orlikowski and Way, all of whom were seen by Defendant Margules) and two of the six allege claims only against Defendants Cassens and Crawford (Thomas and Riggs, neither of whom was seen by Defendant Margules). Plaintiffs each claim monetary damages as a result of the wrongful denial of their statutory workers' compensation benefits, "measured by the amount of benefits improperly withheld from him, plus interest as provided by law, all tripled in accordance with RICO, together with attorney fees and costs provided by law."
Defendants respond that Plaintiffs are impermissibly attempting to bypass the exclusive administrative scheme for recovery of benefits embodied in the WDCA and that, even assuming a claim outside that statutory scheme is viable, Plaintiffs cannot establish several essential elements of a RICO claim including (1) an injury which is compensable under RICO, and/or (2) the existence of a RICO enterprise. Additionally, Defendant Cassens argues that the claims against it are preempted by the Labor Relations Management Act ("LMRA") and Defendant Margules argues that Plaintiffs cannot establish that he "conducted the affairs" of the alleged RICO enterprise.
The Court concludes that Plaintiffs' exclusive remedy for their claim that they were fraudulently denied benefits under the WDCA lies within the exclusive administrative
On July 15, 2005, this Court entered an Opinion and Order Granting Defendants' Motions to Dismiss Plaintiffs' Complaint Under Rule 12(b)(6). (Dkt. No. 39) This Court ruled that Plaintiffs' RICO claims failed to allege the "key requirement" of reliance and therefore, failed to state a claim for which relief could be granted. Brown v. Cassens Transport Co., 409 F.Supp.2d 793, 808 (E.D.Mich.2005) ("Brown I"). Plaintiffs appealed this ruling which was affirmed, based upon established Sixth Circuit precedent requiring proof of detrimental reliance, in Brown v. Cassens Transport Co., 492 F.3d 640, 646 (6th Cir.2007) ("Brown II"). In Brown I, this Court also dismissed Plaintiffs' RICO claims on the alternate ground that they were reverse preempted by the McCarran-Ferguson Act, 15 U.S.C. § 1012(b). Id. at 811. In Brown II, the Sixth Circuit did not address this alternative ground for dismissal, invoking its authority to "affirm the district court on any ground supported by the record." Brown II, 492 F.3d at 646 n. 5.
The United States Supreme Court granted Plaintiffs' petition for a writ of certiorari, vacated the judgment of the Sixth Circuit in Brown II, and remanded the case to the Sixth Circuit for reconsideration in light of Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008), which established that a civil-RICO plaintiff need not show detrimental reliance on the defendant's alleged misrepresentations. On remand, the Sixth Circuit reversed this Court's dismissal of Plaintiffs' claims in Brown I, and remanded for further proceedings, holding: (1) that the WDCA does not preempt Plaintiffs' RICO claims and (2) that Plaintiffs had "sufficiently pleaded a pattern of racketeering activity under RICO given that reliance is not an element of a civil RICO fraud claim." Brown v. Cassens Transport Co., 546 F.3d 347, 351 (6th Cir.2008) ("Brown III").
Plaintiffs claim that Defendant Cassens, who employed each of the Plaintiffs, and Defendant Crawford, who adjusted workers' compensation claims on behalf of Cassens, formed an enterprise for purposes of RICO and fraudulently denied Plaintiffs' claims for benefits under the WDCA, in part through violations of the mail and wire fraud statutes, 18 U.S.C. §§ 1341, 1343, which allegedly form the predicate acts for Plaintiffs' RICO claim. (Compl. ¶¶ 4-6A.) Four of the six Plaintiffs, Fanaly, Brown, Orlikowski and Way, claim in addition that Defendant Margules, described by Plaintiffs as a "cut-off" doctor, was part of the enterprise in that he provided false and fraudulent medical opinions to Defendant Cassens and/or Crawford, which were then used to deny Plaintiffs' claims for workers' compensation benefits. (Compl. ¶ 6B.) Plaintiffs allege that in these fraudulent communications, "defendant and the IME `cut-off' doctors whose reports defendants relied upon in terminating or denying plaintiffs' benefits ... discussed means of cutting off plaintiffs' benefits or forcing them to take settlements at less than true value, even though defendants possessed medical reports from treating doctors and doctors chosen by defendants stating plaintiffs did have work-related disabilities." (Compl. ¶ 6D.) Plaintiff Brown appealed his denial of benefits and was awarded benefits by the Workers Disability Compensation Board ("WDCB"). The remaining Plaintiffs do not allege that they appealed their denial of benefits.
The alleged predicate acts which are specifically referenced in the Complaint are either Notices of Dispute sent from Crawford to Plaintiffs, in which Crawford challenged the validity of the claim as being unsupported by medical evidence or not job related, or opinion letters sent from Margules to Plaintiff and/or Cassens and/or Crawford, opining that his examination revealed that the alleged injury was not job related or not sufficiently disabling. Plaintiffs also make several nonspecific allegations regarding additional "communications" in furtherance of the scheme, without expressly identifying the means of communication, the speaker/author or recipient, or the specific date of the alleged communication.
Plaintiff Fanaly alleges that on December 14, 2001, he injured his right foot while walking to his Cassens car-hauling truck.
On February 17, 2002, Fanaly alleges that he dislocated his left shoulder while loading his Cassens car-hauling truck and filed a claim for benefits under the WDCA. Fanaly further alleges that "Defendants" sent him to Dr. Margules for an examination. Fanaly alleges that "defendants expressly or impliedly communicated to Dr. Margules that it wanted him to write reports stating plaintiff was not disabled due to work-related injuries, regardless of the true circumstances." (Compl. ¶¶ 10-12.) Fanaly alleges that sometime "in February or March, 2002, Margules opined to defendants that plaintiff had no job-related disability relating to his shoulder." On February 21, 2001, Tina Litwiller sent Fanaly a Notice of Dispute which stated that the "condition is chronic-per Dr. Marglious
Plaintiff Thomas claims that on April 16, 2001, he tore his rotator cuff while working for Cassens and filed a workers compensation claim with Crawford and Cassens. Thomas alleges that despite having possession of a physician's statement dated December 13, 2001 regarding the incident, Tina Litwiller filed a Notice of Dispute of the claim on or about January 21, 2002, stating "no medical establishing causation." (Compl. ¶¶ 22-23.) Thomas claims that this statement was fraudulent because Litwiller possessed a medical statement establishing causation. Thomas claims that he "relied on the fraudulent communications to the extent he suffered the financial loss of having to pay attorney fees, medical care and medical mileage" and was injured because he was "deprived of workers compensation benefits" and "caused him the expense of paying attorney fees, medical care and mileage to and from medical care." (Compl. ¶ 25.)
Plaintiff Brown claims that on April 12, 2000, he injured his left knee while climbing off of a Cassens' car hauler. Plaintiff Brown further claims that on February 15, 2002, he injured his shoulders pulling down on a tie-bar and later that day injured his knee. He filed a claim for workers compensation benefits and was sent to Dr. Margules for an examination. (Compl. ¶¶ 30-32.) Brown alleges that "defendants expressly or impliedly communicated to Dr. Margules that it wanted him to write reports stating plaintiff was not disabled due to work-related injuries, regardless of the true circumstances." (Compl. ¶ 32.) Brown alleges that his treating orthopedic surgeons, Drs. Pinto and Page, operated on Brown's knees and shoulders and wrote reports stating that Brown had job-related disabilities due to the condition of his knees and shoulders. (Compl. ¶ 33.) Brown alleges that "Margules opined to the other defendants that plaintiff had no job-related disability" and that Tina Litwiller mailed a Notice of Dispute on March 19, 2002 stating that the "medical condition was not job related." Brown alleges that this statement was fraudulent. (Compl. ¶¶ 34-35.) Brown claims that he "relied on the fraudulent communications to the extent he suffered the financial loss of having to pay attorney fees, medical care and medical mileage" and was injured because he was "deprived of workers compensation benefits" and "caused him the expense of paying attorney fees, medical care and mileage to and from medical care." (Compl. ¶ 38.)
Brown appealed the denial of benefits and on March 30, 2003, the magistrate awarded benefits to Brown. Defendants appealed the magistrate's ruling but were required to pay Brown benefits while the appeal was pending. Brown alleges that Defendants ultimately paid the benefits but only after Brown filed a motion to have the benefits paid during the appeal. (Compl. ¶¶ 39-41.) Brown alleges that this additional fraudulent refusal to pay full benefits during the appeal "caused him the expense of paying attorney fees, medical
Plaintiff Orlikowski injured his left knee on or about November 6, 2000 while employed as a car-hauler by Cassens. Orlikowski alleges that the injury was caused by trauma suffered that day and/or by aggravation caused by years of car-hauling work for Cassens, and from degenerative arthritis from a 1980 injury to his left knee that did not occur while working for Cassens. (Compl. ¶ 55.) Orlikowski filed a claim and was sent for an examination to Dr. Margules who opined that Orlikowski could return to work without restriction. On or about November 8, 2000, Margules allegedly reported to Cassens and Crawford that Orlikowski's injuries were not work related. Orlikowski claims that this statement was fraudulent. (Compl. ¶¶ 56, 57.) On November 21, 2000, Tina Litwiller sent Orlikowski a Notice of Dispute denying benefits on the ground that the injury was not work related "based on opinion of authorized physician [sic]." Orlikowski claims that this statement was fraudulent because Cassens and Crawford knew Orlikowski's injury was compensable. (Compl. ¶ 58.) Orlikowski claims that he provided Cassens and Crawford with further medical evidence of his condition but they "continued in their scheme to deny benefits." (Compl. ¶¶ 59-60.) Orlikowski claims that he "relied on the fraudulent communications to the extent he suffered the financial loss of having to pay attorney fees, medical care and medical mileage" and was injured because he was "deprived of workers compensation benefits" and "caused him the expense of paying attorney fees, medical care and mileage to and from medical care." (Compl. ¶ 61.)
Plaintiff Way alleges that on March 12, 2002, he hurt his lower back at work when he fell off a truck and that increased stiffness in his back caused him to stop work on June 11, 2002. He filed a claim and was sent on June 12, 2002 to Dr. Margules for an examination. (Compl. ¶¶ 66-68.) On June 19, 2002, Dr. Margules sent a report to Tina Litwiller concluding that Way's disc herniation was not related to the work-related incidents. Way claims that this report was fraudulent because Margules knew that the disc herniation may have been aggravated by the workrelated incidents and therefore compensable. (Compl. ¶ 68.) On July 29, 2002, Tina Litwiller mailed to Way a Notice of Dispute denying benefits "[b]ased on Dr. Margules' 6/19/02 report and opinion ..." Way claims that this statement was fraudulent because Litwiller knew Way's injury qualified him for workers compensation benefits. (Compl. ¶ 69.) Way claims that he "relied on the fraudulent communications to the extent he suffered the financial loss of having to pay attorney fees, medical care and medical mileage" and was injured because he was "deprived of workers compensation benefits" and "caused him the expense of paying attorney fees, medical care and mileage to and from medical care." (Compl. ¶ 70.)
Plaintiffs claim that they were injured by Defendants' alleged RICO violations in that they were deprived of workers' compensation benefits, and incurred attorneys' fees, medical care expenses and mileage to and from medical care. (Compl. ¶¶ 17, 25, 38, 42, 61, 70.) As to each Plaintiff's RICO claim, the ad damnum clauses is identical: "[P]laintiff demands judgment against defendants [or against Cassens and Crawford only in the case of Plaintiffs Thomas and Riggs, who were not examined by Margules] for damages measured by the amount of benefits improperly withheld from him, plus interest as provided by law, all tripled in accordance with RICO, together with attorney fees and costs as
The standards for reviewing motions for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) are the same as those applied in considering motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Sensations, Inc. v. City of Grand Rapids, 526 F.3d 291, 295 (6th Cir.2008). Fed. R. Civ. P. 12(b)(6) provides for the dismissal of a case where the complaint fails to state a claim upon which relief can be granted. When reviewing a motion to dismiss under Rule 12(b)(6), a court must "construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir.2007). But the court "need not accept as true legal conclusions or unwarranted factual inferences." Id. (quoting Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir.2000)). "[L]egal conclusions masquerading as factual allegations will not suffice." Eidson v. State of Tenn. Dep't of Children's Servs., 510 F.3d 631, 634 (6th Cir.2007).
In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court explained that "a plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level...." Id. at 555, 127 S.Ct. 1955 (internal citations omitted). Dismissal is only appropriate if the plaintiff has failed to offer sufficient factual allegations that make the asserted claim plausible on its face. Id. at 570, 127 S.Ct. 1955. The Supreme Court clarified the concept of "plausibility" in Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009):
Id. at 1948-50. A plaintiff's factual allegations, while "assumed to be true, must do more than create speculation or suspicion of a legally cognizable cause of action; they must show entitlement to relief." LULAC v. Bredesen, 500 F.3d 523, 527 (6th Cir.2007) (citing Twombly, 127 S.Ct. at 1965). Thus, "[t]o state a valid claim, a complaint must contain either direct or inferential allegations respecting all the material elements to sustain recovery under some viable legal theory." Bredesen, 500 F.3d at 527 (citing Twombly, 127 S.Ct. at 1969).
In addition to the allegations and exhibits of the complaint, a court may consider "public records, items appearing in the record of the case and exhibits attached to defendant's motion to dismiss so long as they are referred to in the [c]omplaint and are central to the claims contained therein." Bassett v. NCAA, 528 F.3d 426, 430
Pursuant to Federal Rule of Civil Procedure 56, a party against whom a claim, counterclaim, or cross-claim is asserted may "at any time, move with or without supporting affidavits, for a summary judgment in the party's favor as to all or any part thereof." Fed. R. Civ. P. 56(b). Summary judgment is appropriate where the moving party demonstrates that there is no genuine issue of material fact as to the existence of an essential element of the nonmoving party's case on which the nonmoving party would bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "Of course, [the moving party] always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323, 106 S.Ct. 2548; See also Gutierrez v. Lynch, 826 F.2d 1534, 1536 (6th Cir.1987).
A fact is "material" for purposes of a motion for summary judgment where proof of that fact "would have [the] effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties." Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984) (quoting Black's Law Dictionary 881 (6th ed. 1979)) (citations omitted). A dispute over a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Conversely, where a reasonable jury could not find for the nonmoving party, there is no genuine issue of material fact for trial. Feliciano v. City of Cleveland, 988 F.2d 649, 654 (6th Cir. 1993). In making this evaluation, the court must examine the evidence and draw all reasonable inferences in favor of the non-moving party. Bender v. Southland Corp., 749 F.2d 1205, 1210-11 (6th Cir. 1984).
If this burden is met by the moving party, the non-moving party's failure to make a showing that is "sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial," will mandate the entry of summary judgment. Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548. The non-moving party may not rest upon the mere allegations or denials of his pleadings, but the response, by affidavits or as otherwise provided in Rule 56, must set forth specific facts which demonstrate that there is a genuine issue for trial. Fed. R. Civ. P. 56(e). The rule requires the non-moving party to introduce "evidence of evidentiary quality" demonstrating the existence of a material fact. Bailey v. Floyd County Bd. of Educ., 106 F.3d 135, 145 (6th Cir.1997); see Anderson, 477 U.S. at 252, 106 S.Ct. 2505 (holding that the non-moving party must produce more than a scintilla of evidence to survive summary judgment).
The gravamen of Plaintiffs' Complaint is that Defendants failed to abide by their statutory duty under the WDCA to provide benefits for claimed work place injuries. Plaintiffs seek "damages measured by the amount of benefits wrongfully withheld" described as "the expense of paying attorney fees, medical care and mileage to and from medical care." These are the very damages for which compensation is provided under the WDCA. Regardless of how Plaintiffs frame their claim, a conclusive finding that Plaintiffs were wrongly denied workers compensation benefits is essential to their theory and resolution of such workers compensation benefits claims has been firmly vested in the comprehensive administrative enforcement scheme embodied in the WDCA.
An injured employee seeking workers' compensation benefits must utilize the WDCA's comprehensive administrative process and has no private right of action for such benefits: "The right to recovery of benefits as provided in this act shall be the employee's exclusive remedy against the employer for a personal injury or occupational disease. The only exception to this exclusive remedy is an intentional tort." Mich. Comp. Laws § 418.131. When Michigan adopted the WDCA it essentially
The WDCA provides that: "Compensation shall be paid promptly and directly to the person entitled thereto and shall become due and payable on the fourteenth day after the employer has notice or knowledge of the disability or death, on which date all compensation then accrued shall be paid. Thereafter compensation shall be paid in weekly installments." Mich.Comp.Laws § 418.801(1). The WDCA further provides that weekly benefits, in the absence of a dispute over a claim, must be paid within thirty days of when the claim becomes due and owing and employers must pay a penalty of $50 per day, with a maximum penalty of $1,500, for failure to timely pay such benefits. Mich. Comp. Laws § 418.801(2).
An insurer can delay the payment of benefits by filing a timely Notice of Dispute. Richardson v. GMC, 139 Mich.App. 727, 363 N.W.2d 22 (1984). Michigan law is clear that a timely filed notice of dispute will relieve the employer's obligation to pay benefits without regard to whether the claim is disputed in bad faith or for legitimate reasons. Warner v. Collavino Bros., 133 Mich.App. 230, 236-237, 347 N.W.2d 787 (1984) (affirming an administrative decision refusing to assess a penalty and holding that section 418.801(2) "merely requires an `ongoing dispute' and does not distinguish good faith disputes from bad faith or unreasonable disputes"); Couture v. General Motors Corp., 125 Mich.App. 174, 178-179, 335 N.W.2d 668 (1983) (reversing a penalty award above the statutory limit, finding that the Legislature intended to limit liability for failures to pay benefits, even those failures to pay that are motivated by bad faith).
A disputed claim for benefits is first reviewed by a mediator, or at a hearing before a workers compensation magistrate. Mich. Comp. Laws § 418.847. The statute provides that the parties may seek review of the magistrate's decision by the Workers Compensation Appellate Commission. Mich. Comp. Laws § 418.859(a). Finally, the decision of the WCAC is subject to judicial review. Mich. Comp. Laws § 418.861(a). If the magistrate's decision awards benefits to the worker, the worker is entitled to begin receiving benefits immediately, even though the employer may chose to appeal the magistrate's decision. In fact, this process was followed successfully by Plaintiff Brown, who appealed his denial and was awarded benefits by the magistrate and paid those benefits during the appeal process.
The WDCA contains its own procedures for policing abuses of the obligations imposed to timely pay benefits. First, under Mich. Comp. Laws 418.631(2), a self-insurer, like Cassens, can lose its privilege to self-insure if it "repeatedly or unreasonably fails to pay promptly claims for compensation for which it shall become liable." Also, under section 418.861b, the WCAC may dismiss a claim submitted for review, and assess costs and take other disciplinary action if it determines that the claim is proceeding vexatiously or was taken without
Plaintiffs argue that reliance on these procedures is misplaced because "there is no provision for proving or punishing fraud which occurs at the claims stage (before a proceeding is filed with the Agency), or during the pendency of proceeding." (Pls.' Resp. to Supp. Mot., Dkt. No. 102 at 7.) However, Michigan courts have expressly rejected this argument, in refusing to assess penalties against employers for bad faith denials of benefits:
Couture, 125 Mich.App. at 178-179, 335 N.W.2d 668. See also Warner, 133 Mich. App. at 236-237, 347 N.W.2d 787 ("From our reading of similar statutes, we infer that the Legislature was aware that prompt payment of compensation benefits could be encouraged by imposing a penalty for the bad faith denial of payments." Holding that the Legislature's failure to so provide precluded the assessment of a penalty for bad faith denials.).
Similarly, as the Sixth Circuit noted in both Brown II and Brown III, Michigan courts have routinely denied claims based upon allegedly tortious denial of workers' compensation benefits. See Brown II, 492 F.3d at 647 and Brown III, 546 F.3d at 364, citing Lisecki v. Taco Bell Restaurants, Inc., 150 Mich.App. 749, 755, 389 N.W.2d 173 (1986) (holding that bad faith denials of claims for benefits under the WDCA, even those based upon some ulterior motive of the employer, while calling into serious question the employer's business practices, cannot support an independent claim for tortious denial of benefits, concluding that: "An adequate remedy for the defendants' termination of benefits was available to and exercised by Plaintiff Lisecki, i.e. his filing of a petition for hearing with the Bureau of Worker's Disability Compensation, which resulted in an open award of benefits.") See also Wright v. DaimlerChrysler Corp., 220 F.Supp.2d 832, 845 (E.D.Mich.2002) ("[W]rongful, even bad faith refusal to offer benefits to which Plaintiff is entitled is not tortious.") (emphasis in original).
This same reasoning has been employed by courts interpreting the provisions of the Longshore and Harbor Workers' Compensation Act ("LHWCA") which, though a federal statute, contains similar exclusivity and penalty provisions to those in the WDCA. In Atkinson v. Gates, McDonald & Co., 838 F.2d 808 (5th Cir.1988), the court examined plaintiff's claims, essentially sounding in intentional infliction of emotional distress, that her employer's insurance carrier had wrongfully and fraudulently terminated her disability compensation benefits without notice or explanation. Id. at 809. Plaintiff filed a claim to have her benefits reinstated, following the procedures of the LHWCA and ultimately was awarded benefits. Her employer, who had not timely disputed the claim before terminating benefits, was assessed a penalty. Plaintiff then filed suit, claiming that the termination of benefits had been wilful and in bad faith and claimed damages for mental and emotional distress. Affirming the district court's dismissal of plaintiff's claims based upon the exclusivity provision of the LHWCA, the court observed:
838 F.2d at 812 (internal quotation marks and citation omitted) (emphasis in original). The court affirmed the district court's ruling that plaintiffs' sole avenue of relief was the exclusive administrative process set forth in the LHWCA. Rejecting the notion that the LHWCA penalty provisions did not fully compensate Plaintiff, the court observed: "`[A]lthough the penalties may in some instances be inadequate, this does not, within the overall nature of the compensation concept, make them invalid. At most, it may be cause to apply to the legislature for a more suitable penalty level.'" 838 F.2d at 814 (quoting 2A Larson, Workmen's Compensation Law § 68.34(c) (1987) at 13-145-146 now at 6-104 Larson's Workers' Compensation Law § 104.05[3] (2010)).
Some courts have allowed departures from exclusive workers' compensation schemes in rare instances where the defendant's behavior has been found to be particularly
6-104 Larson's Workers' Compensation Law § 104.05[3] (2010). Quoting this passage from Professor Larson's treatise in Sample v. Johnson, 771 F.2d 1335 (9th Cir.1985), another case interpreting the parallel provisions of the LHWCA, the court distinguished intentional infliction claims, which are "conspicuously contemptible," from all other denials or terminations of benefits:
771 F.2d at 1347. As this Court previously held, and as the Sixth Circuit twice confirmed, this case simply does not present allegations of such "cruel" or "venal" conduct.
Moreover, claims for intentional infliction of emotional distress are based upon separate tortious conduct of the defendant which in no way involves a determination of the plaintiff's underlying entitlement to benefits. In Broaddus, where the court permitted plaintiffs' claim for intentional infliction of emotional distress to stand, the court recognized this "subtle yet crucial distinction:"
84 Mich.App. at 599, 269 N.W.2d 689. Plaintiff in Broaddus was already receiving workers' compensation benefits pursuant to a settlement, and was seeking damages for a separate and independent tort, intentional infliction of emotional distress, that did not in any way involve a determination of her entitlement to benefits.
The court in Gates commented on this same "subtle" distinction. Rejecting plaintiffs' argument that the exclusivity rationale inevitably would bar even the most egregious behaviors of an insurer or employer, the court distinguished scenarios which involved separate tortious conduct (for example where an insurer gained illegal entry into a claimant's home in the course of an investigation), the proof of which was independent of the underlying claim for benefits:
838 F.2d at 814-815.
At the hearing on this matter, in response to Defendants' argument regarding the underlying nature of the injury Plaintiffs are claiming in the instant case which is addressed more fully infra in section IIIB, Plaintiffs' counsel posed the following hypothetical to the Court: what if the RICO scheme involved the theft of Plaintiffs' benefit checks before Plaintiffs received them, would the injury still be derivative of Plaintiffs' personal injuries and thus not compensable under RICO? This hypothetical is inapt and crystallizes the fundamental flaw in Plaintiffs' claim—this scenario involves a separate and independent tort (theft or conversion or some similar claim) which is in no way dependent upon proof of Plaintiffs' underlying entitlement to their workers' compensation benefits. Plaintiffs in the instant case have made clear that they are not seeking damages for emotional distress (likely because
Regardless of how they package their RICO claim, Plaintiffs are asking this Court to decide whether they were entitled to receive workers' compensation benefits and, secondarily, if they were so entitled, whether Defendants' initial denial of those benefits was fraudulent. They seek to impugn the character and credibility of Dr. Margules and to show that the injuries they sustained were in fact work related or sufficiently disabling to entitle them to workers' compensation benefits. The gravamen of their claims is that the physician chosen by their employer was unfairly influenced by their employer's interests and conducted an unfair, even fraudulent, medical exam which they claim resulted in the denial of their benefits. Plaintiffs' Complaint is replete with allegations of conflicting medical opinions as to each Plaintiff's injury, asserting that one doctor's pedigree and opinion trumps that of Dr. Margules or another doctor. This is precisely the fact finding process that the Michigan legislature placed squarely and exclusively within the special competence of the WCDB and the WCAC, with the possibility of limited judicial review following an administrative determination. As the court observed in Feld v. Robert & Charles Beauty Salon, 435 Mich. 352, 459 N.W.2d 279 (1990), the unfairness of which these Plaintiffs' complain is best addressed through the WDCA procedures:
435 Mich. at 365-366, 459 N.W.2d 279. This perceived unfairness is inherent the scheme and is part of the delicate balance struck by the legislature in deciding to impose what is in essence a no-fault system on employers for workplace injuries sustained by their employees.
As recognized by the courts in Feld, Warner and Couture, and by the courts in Sample and Gates interpreting the parallel provisions of the LHWCA, the procedures and remedies set forth in these workers' compensation schemes are Plaintiffs' exclusive avenue for redressing their claims of even allegedly bad faith denials of workers compensation benefits. To allow actions for allegedly bad faith claim denials to proceed in tandem, or in lieu of, this system would subvert the clear intent of the legislature to vest these factual determinations in the workers compensation boards created to decide them and would create an intolerable potential for inconsistent results. As the court noted in Gates, discussing the provisions of the LHWCA:
Gates, 838 F.2d at 815.
Regardless of how Plaintiffs' characterize the alleged "fraud" in this case, they cannot disentangle their RICO claim from their underlying claim for benefits, the resolution of which lies within the exclusive jurisdiction of the WDCA. As noted by the courts in so many of the cases discussed above, if Plaintiffs' feel that the penalty provisions of the statute fail their essential purpose, this is an issue best addressed by the legislature.
Plaintiffs' attempt to convert their dispute over entitlement to workers compensation benefits into a RICO claim is foreclosed by the extensive administrative scheme which has been specifically enacted as an exclusive remedy to address the wrongful denial of those benefits. Several courts have addressed this issue in other contexts and have held that where there exists a comprehensive statutory scheme, that does not provide for a private right of action, a plaintiff cannot create a RICO claim out of a matter that would otherwise be exclusively addressed by that administrative scheme. In Jackson, Judge Edmunds conducted this inquiry specifically with respect to the WDCA, on facts materially indistinguishable from the present case, and concluded that Plaintiffs' sole remedies were those set forth under the WDCA and rejected Plaintiffs' attempt to avoid those procedures and exclusive remedies "simply by characterizing a denial of benefits as `fraudulent.'" 2010 WL 931864 at *18.
As noted by the court in Jackson, several cases compel this conclusion. For example, in Danielsen v. Burnside-Ott Aviation Training Center, Inc., 941 F.2d 1220 (D.C.Cir.1991), employees of various Navy aircraft maintenance contractors brought a RICO claim against their employers alleging that the employers had misclassified the workers as "technicians" when they should have been classified as "aircraft workers." Classifying the workers as "aircraft workers" would have entitled them to earn a higher wage. Id. at 1225-26. The employees claimed that the predicate acts were mail and wire fraud which consisted of entering into the contracts and using the mails and wires in furtherance of the contracts. Id. at 1226. The court found that the employee's claims were cognizable under the Service Contract Act, 41 U.S.C. § 351 (the "SCA") which specifically addressed wage and other issues under federal or federally assisted contracts. Id. at 1223. The statutory scheme involved multiple levels of administrative review of claims and numerous regulations relating to the methodology by which wage classification determinations were to be made. Id. The court concluded that the SCA did
941 F.2d at 1228 (citing Miscellaneous Service Workers, etc. v. Philco-Ford Corp., 661 F.2d 776 (9th Cir.1981)).
In McCulloch v. PNC Bank Inc., 298 F.3d 1217 (11th Cir.2002) the court came to the same conclusion analyzing claims cognizable under the Higher Education Act ("HEA"). Parents of college-bound students brought claims under HEA and RICO against lenders and marketers of student loans who allegedly failed to disclose that there were alternative lending arrangements available to students whose parents did not qualify for federal parent loans. The court held that there was no private right of action under HEA and concluded that plaintiffs' RICO claims were similarly foreclosed:
298 F.3d at 1226-27. The court relied in part on the Eleventh Circuit opinion in Ayres v. General Motors Corp., 234 F.3d 514 (11th Cir.2000), where the court found that violations of the National Traffic and Motor Vehicle Safety Act could not serve as the basis for the predicate acts for a RICO claim. Citing the court's decision in Danielsen, the McCulloch court held: "[I]n light of the HEA's enforcement scheme, granting the Secretary of Education exclusive authority to remedy violations of the HEA, and the fact that the HEA does not confer a private right of action, the Court finds that the failure to disclose Stafford Loan information, even if in violation of the HEA, cannot form the basis for a civil RICO claim seeking treble damages and injunctive relief." 298 F.3d at 1227. See also Bodimetric Health Servs., Inc. v. Aetna Life & Casualty, 903 F.2d 480, 486-487 (7th Cir.1990) (holding that RICO claims were foreclosed by the exclusive benefits determination process of the Social Security Act); Norman v. Niagara Mohawk Power Corp., 873 F.2d 634, 637 (2d Cir.1989) (relying on Danielsen to hold that the Energy Reorganization Act provides the exclusive remedy for violations of its proscriptions and dismissing plaintiffs' RICO claim, cautioning that "artful invocation of controversial civil RICO, particularly when inadequately pleaded, cannot conceal the reality that the gravamen of the complaint herein is section 210 harassment."); Bridges v. Blue Cross and Blue Shield Assoc., 935 F.Supp. 37, 41-43 (D.D.C.1996) (holding that the comprehensive administrative remedy scheme embodied in the Federal Employee Health Benefits Act ("FEHBA") left no room for a remedy under RICO: "the broad enforcement and oversight powers of the OPM established in
Plaintiffs claim that they were injured by Defendants' alleged RICO violations in that they were deprived of workers' compensation benefits, and incurred attorneys' fees, medical care expenses and mileage to and from medical care. (Compl. ¶¶ 17, 25, 38, 42, 61, 70.) As to each Plaintiff's RICO claim, the ad damnum clauses is identical: "[P]laintiff demands judgment against defendants [or against Cassens and Crawford only in the case of Plaintiffs Thomas and Riggs, who were not examined by Margules] for damages measured by the amount of benefits improperly withheld from him, plus interest as provided by law, all tripled in accordance with RICO, together with attorney fees and costs as provided by law." (Compl. pp. 8, 10-11, 16, 18-19, 22-23, 26.) Plaintiffs' characterization of the denial of benefits as "fraudulent" does not change the essence of the claim, which is for deprivation of benefits to which Plaintiffs claim they are entitled under the WDCA. See, e.g. Butchers' Union, Local No. 498 v. SDC Inv., Inc., 631 F.Supp. 1001, 1011 (E.D.Cal.1986) ("Bluntly put, no matter how you cut the complaint, the only conceivable `fraud' is the deprivation of plaintiffs' rights under the labor law. Since defendants' liability, under the mail and wire fraud statutes, if any, is wholly dependent on the labor laws, judgment of the defendants' conduct ... lies exclusively with the [NLRB]."). See also Danielsen, 941 F.2d at 1229 ("To frame the action for [an award of statutory benefits] in terms of RICO fraud adds nothing.")
This Court agrees with Judge Edmunds conclusion in Jackson that:
Jackson, 2010 WL 931864 at *18.
Plaintiffs argue that this result is foreclosed by the Sixth Circuit's opinion in Brown III, where, in dicta in its analysis of the issue of preemption under McCarran-Ferguson, that court stated that "the WDCA provision regarding sanctions for failure to pay benefits does not appear to contemplate the fraudulent denial of
This Court concludes that Plaintiffs' remedy for recovery of their workers compensation benefits lies exclusively within the administrative scheme contained in the WDCA which forecloses any claim under RICO and for that reason their RICO claims are dismissed.
The RICO statute does not permit recovery of damages for personal injuries. See 18 U.S.C. § 1964(c). By its express terms, RICO provides for recovery only for "any person injured in his business or property." 18 U.S.C. § 1964(c). See Drake v. B.F. Goodrich Co., 782 F.2d 638, 644 (6th Cir.1986) (holding that the phrase "business or property" excludes personal injuries suffered, rejecting plaintiffs' RICO claims, based on personal injury and wrongful death, alleging pecuniary loss as a result of exposure to toxic chemicals) (citing Reiter v. Sonotone Corp., 442 U.S. 330, 339, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979)). See also Genty v. Resolution Trust Corp., 937 F.2d 899, 918-19 (3d Cir. 1991) ("RICO plaintiffs may recover damages for harm to business and property only, not physical and emotional injuries due to harmful exposure to toxic waste.").
Not only do personal injuries themselves not provide standing in civil RICO cases, "but also [ ] pecuniary losses flowing from those personal injures are insufficient to confer standing under § 1964(c)." Evans
Grogan v. Platt, 835 F.2d 844, 847 (11th Cir.1988) (quoting Morrison v. Syntex Laboratories, 101 F.R.D. 743, 744 (D.D.C. 1984)) (emphasis in original). See also Doe v. Roe, 958 F.2d 763, 770 (7th Cir.1992) (holding that miscellaneous expenses, including attorneys' fees and loss of earnings, which were totally derivative of plaintiff's alleged personal injuries, were not recoverable under RICO).
A court reached a similar conclusion in Fisher v. Halliburton, No. 06-1168, 2009 WL 5170280 (S.D.Tex. Dec. 17, 2009) which involved an attack by Iraqi insurgents on a group of civilian contractors driving fuel convoys in Iraq. Id. at *1. Plaintiff contractors, who suffered physical injuries in the attack, alleged that Haliburton fraudulently failed to disclose the true risks of working in Iraq and sought in part, under RICO, damages in the amount of continued compensation they allegedly lost due to the injuries they sustained in Iraq as well as the difference in pay they would have received had the true risks of the work been disclosed. Id. at *4. Rejecting plaintiffs' argument that their loss of compensation was caused not by personal injuries but by Haliburton's alleged predicate acts of mail and wire fraud in failing to inform them of the danger of the job, the court found that plaintiffs' alleged pecuniary injuries were a direct result of their personal injuries suffered in Iraq. Id. "The injuries that plaintiffs suffered in Iraq caused their alleged loss of compensation, and that loss is intimately related to plaintiffs' personal injuries. Consequently, because personal injuries and their resulting pecuniary consequences are not an "injury to business or property" under section 1964(c), plaintiffs' "continued compensation" injury does not confer standing to bring a RICO claim." Id. at *5. See also Allman v. Philip Morris, Inc., 865 F.Supp. 665, 668-669 (S.D.Cal.1994) (finding that "federal courts that have addressed [the] question have all held that Congress intended the `business or property' language to exclude civil RICO actions seeking recovery of expenses resulting from personal injury," and holding that medical expenses incurred as a result of personal injury (the expense of medical treatment and nicotine patches incurred by smokers who had become addicted to tobacco, allegedly through defendant's fraudulent acts) were the economic consequence of the underlying personal injury and not compensable under RICO); Morrison v. Syntex Laboratories, Inc., 101 F.R.D. 743, 746 (D.D.C.1984) ("Thus, injury in one's property under the RICO provision would not include damages for the money lost as a result of the costs of medical attention and treatment incurred from the injuries allegedly sustained ... from consumption of the alleged chloride deficient.")
2006 WL 2547350 at *21. The court held that plaintiffs' claims for "out-of-pocket medical expenses, lost income, diminished earning capacity, although capable of valuation, all derive from his [underlying medical condition] and the denial of his workers' compensation claim ... Therefore, Plaintiff's alleged injuries are not the type of "injury" that creates RICO standing."
In the instant case, Plaintiffs claim that they were deprived of workers' compensation benefits, and incurred attorneys' fees, medical care expenses and mileage to and from medical care and claim damages "measured by the amount of benefits improperly withheld from [them], plus interest as provided by law, all tripled in accordance with RICO, together with attorney fees and costs as provided by law." These damages unquestionably were incurred as a direct result of Plaintiffs' on-the-job injuries. But for their workplace injuries, Plaintiffs would have no claim at all. The fact that the WDCA allows these Plaintiffs to bypass the legal proofs of negligence and causation normally associated with a personal injury claim does not change the nature of their claims—they seek to recover for injuries they allege that they suffered while working for Cassens and they seek medical benefits and related expenses. Regardless of how Plaintiffs characterize the wrong, their medical expenses, workers' compensation benefits, medical mileage and attorneys fees are damages which are indisputably wholly derivative of their personal injuries and as such are not injuries to "business or property" under RICO. Plaintiffs' seek damages in the amount of benefits they were denied and related medical expenses, i.e. they seek reimbursement for the pecuniary loss they suffered as a result of their workplace injuries, damages not recoverable under RICO, and therefore lack standing to bring their RICO claims.
Speculative damages are not recoverable under RICO. "The effective means of punishing a defendant in the civil RICO context is to apply the treble multiplier to damages established by competent proof, not based upon mere speculation and surmise." Fleischhauer v. Feltner, 879 F.2d 1290, 1299 (6th Cir.1989). "`Injury to mere expectancy interests or to an `intangible property interest' is not sufficient to confer RICO standing.'" Halliburton, 2009 WL 5170280 at *5 (quoting Price v. Pinnacle Brands, Inc., 138 F.3d 602, 607 (5th Cir.1998)). In Halliburton, the court discussed this requirement in analyzing plaintiffs' claims for damages measured by the amount they would have received in compensation had they been fully informed of the risks of working in Iraq (i.e. had defendants not committed the alleged predicate acts of failing to inform them of the risks of working in Iraq). The court concluded:
2009 WL 5170280 at *5.
Thus, standing to bring a RICO claim must derive from something more than a speculative, intangible property interest. "While federal law governs most issues under RICO, whether a particular interest amounts to property is quintessentially a question of state law. See Logan v. Zimmerman Brush Co., 455 U.S. 422, 430, 102 S.Ct. 1148, 1154, 71 L.Ed.2d 265 (1982) ("The hallmark of property ... is an individual entitlement grounded in state law...."); Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972) (property interests "are created and their dimensions are defined by" sources "such as state law.")." Doe, 958 F.2d at 768. As discussed at length above, "plaintiffs must prevail on a showing that their physical injuries were compensable prior to showing that defendants acted in collusion to deny those benefits...." Broaddus, 84 Mich.App. at 599, 269 N.W.2d 689. Until Plaintiffs can establish a legal entitlement to the benefits they claim to have been wrongfully denied, they cannot demonstrate a present property interest that would support of their claimed RICO injury.
At the hearing on this matter, Plaintiffs' counsel argued to the Court that Plaintiffs are not seeking damages for their physical injuries but rather seek damages flowing from Defendants' "thwarting" the system, which is the conduct Plaintiffs claim caused their injuries. In other words, they argue, they are not seeking to recover the expenses incurred as a result of their physical injuries (although admittedly their damages are measured by those expenses) but rather for their employer's wrongful failure to pay those expenses. This "spin" on Plaintiffs' claim, which appears to be a semantic distinction without a difference, presumes that Plaintiffs' have an entitlement, a protected property interest, in the claimed benefits. Plaintiffs' claim to reimbursement for medical payments and other expenses incurred as a result of their denial of workers' compensation benefits is based on pure speculation as to their entitlement to those benefits. They have not established a present property right in those benefits and cannot establish such a right, as discussed above, other than by a final determination of entitlement to benefits through the exclusive administrative procedures set forth in the WDCA. Accordingly, Plaintiffs' speculative alleged injuries, based upon the expectancy of a legal entitlement, do not confer standing to bring a claim under RICO and Plaintiffs claims are dismissed for this separate and independent reason.
To establish standing to sue under 18 U.S.C. § 1964(c), Plaintiffs must establish "injury to their business or property." Drake, 782 F.2d at 644. The phrase "business
On September 9, 2010, one week before the hearing on this matter and more than two months after the last responsive pleading was filed on the instant motions, Plaintiffs filed a motion for leave to amend their Complaint, adding three new plaintiffs, a new defendant and additional factual allegations as to existing claims. This is Plaintiffs' third proposed amended complaint. Plaintiffs previously filed a motion to amend to their Complaint, on January 14, 2005. (Dkt. No. 32). Similar to the timing of the filing of the present third proposed amended Complaint, this first proposed amendment was filed shortly after the Defendants filed their original motions to dismiss. Without explanation, Plaintiffs' withdrew their first motion to amend on February 7, 2005. (Dkt. No. 36.) On July 15, 2005, after the Court held a hearing on the Defendants' original motions to dismiss, and just days before the Court issued its Opinion and Order dismissing Plaintiffs' Complaint, Plaintiffs filed their second motion for leave to amend their Complaint. (Dkt. No. 41.) The Court denied Plaintiffs' second motion for leave to amend in its Opinion and Order dated entered July 22, 2005. (Dkt. No. 42.) The Court notes that this "practice of `testing' the strength of their claims in the face of Defendants' motions to dismiss" appears to be a technique which Plaintiffs' counsel also employed in the Jackson case. Jackson, 2010 WL 931864 at *6, *9 n. 17 ("The Court does recognize, however, the merit in Defendants' argument that Plaintiffs appear to be using Defendants' motions to dismiss as an opportunity to test the strength of their claims at Defendants' expense—suggesting that the motions to amend are made in bad faith.")
The Court has reviewed the instant proposed amended complaint and rejects Plaintiffs' third attempt to hone their claims in response to the flaws in their pleadings made manifest by Defendants' motions to dismiss. This third proposed amended complaint purports to add three new plaintiffs whose claims, like those of the Plaintiffs presently before the Court, seek damages measured by the amount of workmen's compensation benefits they claim to have been wrongly denied. There is nothing new or different in the claims of the proposed new plaintiffs, or in the added factual content with regard to Dr. Margules, which changes the nature of the claims or the damages sought. A review of the proposed amendments, which are replete with detailed allegations regarding
The third proposed amended complaint purports to add a damage component, in addition to "the amount of benefits improperly withheld," measured by "the time delay in receipt of hose benefits." (See e.g. Proposed Amended Complaint, Dkt. No. 117, 33.) It is not clear whether this proposed amendment to the ad damnum clause is a claim for monetary or emotional damages but in either case, as discussed above, such damages flow directly from the injuries suffered by these workers and are of a type not compensable under RICO's requirement that a plaintiff plead injury to business or property. Additionally, such damages are based upon a presumption of a legal entitlement and are therefore too speculative to confer standing under RICO.
The Court concludes that resolution of the claims set forth in the third proposed amended complaint, which ask this Court to decide whether these workers were entitled to the workers compensation benefits that they claim they were fraudulently denied, has been committed by statute to a determination by the WCDB and the WCAC under the exclusive administrative scheme embodied in the WDCA. Additionally, the damages sought in the proposed amended complaint, which seek recovery of benefits for workplace injuries, do not constitute injury to business or property under RICO and are based upon a presumption of a legal entitlement and are therefore too speculative to confer standing under RICO. The Court concludes upon careful review that Plaintiffs' proposed amendments would not defeat the instant motions to dismiss. Therefore, Plaintiffs' motion for leave to file the proposed amended complaint is denied on the grounds of futility. See Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir.2000) ("A proposed amendment is futile if the amendment could not withstand a Rule 12(b)(6) motion to dismiss.").
For the foregoing reasons, the Court:
IT IS SO ORDERED.
