Disability Law

Sixth Circuit Court of Appeals: RICO Claims Against Employer, Servicing Agent, and Treating Physician May Proceed

By David A. McCranie, Esq.

I wrote here about Brown, et al. v. Cassens Transport, Inc., a decision from the Sixth Circuit Court of Appeals which was originally issued on 7/10/2007.  Brown and his co-plaintiffs had brought a claim against Cassens Transport, Inc. (the self-insured employer), Crawford & Co. (its workers' compensation servicing agent), and Dr. Saul Margules (the plaintiffs' authorized treating physician) in which they alleged that the defendants had engaged in a pattern of racketeering that denied their workers' compensation claims in violation of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"). 

Specifically, the plaintiffs alleged that Cassens and Crawford deliberately selected and paid unqualified doctors, including Margules, to give fraudulent medical opinions that would support the denial of workers' compensation benefits and that defendants ignored other medical evidence in denying them benefits.  The plaintiffs also claimed that the defendants made fraudulent communications among themselves and to the plaintiffs via mail and wire in violation of the mail and wire fraud statutes, serving as the "predicate acts" for their RICO claims.  You can view the full complaint here.

The federal district court for the Eastern District of Michigan dismissed the complaint, however, concluding (1) that the plaintiffs failed to allege that they had relied to their detriment upon the defendants' allegedly fraudulent communications and (2) that the complaint was "reverse preempted" by the McCarran-Ferguson Act, 15 U.S.C. §1012.  (McCarran-Ferguson generally prohibits Congress from legislating in the area of insurance law).  You can view the district court's order dismissing the complaint here.  In its original opinion, the Sixth Circuit agreed with the district court on the detrimental reliance issue and therefore affirmed the dismissal.  Because it affirmed the district court on this ground, it did not address the McCarran-Ferguson reverse preemption issue.

After the Sixth Circuit issued its original opinion, the plaintiffs filed a petition for writ of certiorari to the U.S. Supreme Court.  While that petition was pending the Supreme Court issued its decision in Bridge v. Phoenix Bond & Indemnity Co., __ U.S. __ (2008), in which the Court concluded that detrimental reliance is not an essential element in a civil RICO claim.  Therefore, the Court granted certiorari and remanded the case to the Sixth Circuit for reconsideration in light of its decision in Bridge.

On remand, the Sixth Circuit has now concluded that the complaint does in fact state a cause of action for a civil RICO claim and that the claim is not barred by McCarran-Ferguson.  You can view the court's 10/23/2008 opinion here.  I'll continue to follow this case as it develops in the federal district court. 

Full post as published by Florida Workers’ Compensation Law Blog on October 28, 2008 (boomark / email).