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Aggressive plaintiff attorneys have tried for years to up the ante in workers’ compensation claims in various ways, including attempts at filing RICO cases against employers, carriers and claims professionals. Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act or simply RICO, is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. But, a new appellate case in the 6th Circuit rules out a RICO case based upon a workers’ compensation claim. at least in that Circuit (Kentucky, Michigan, Ohio, and Tennessee).

Jay Brown claimed that he injured his shoulder while paving a road for his employer Ajax Paving, and sought workers’ compensation in Michigan. Ajax introduced medical testimony suggesting that the injury occurred outside of work. While the case remained pending before the Michigan administrative agency, Brown and Ajax settled. Brown, however, thought that Ajax had introduced false medical testimony and that it had done the same to other employees, and sued Ajax and its insurers, claims administrators and the doctor, under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1964(c).

The district court dismissed. The Sixth Circuit affirmed the dismissal. Under the Act, Brown must show that illegal racketeering activities have “injured [him] in his business or property.” The Sixth Circuit has held that “loss or diminution of benefits the plaintiff expects to receive under a workers’ compensation scheme does not constitute an injury to ‘business or property’ under RICO.” The case is Brown v. Ajax Paving Industries, Inc., No. 11-1391 (6th Cir. May 19, 2014)

The Sixth Circuit pointed out that, in Jackson v. Sedgwick Claims Management Services,731 F.3d 556 (6th Cir. 2013) (en banc), it had rejected a lawsuit challenging a scheme to introduce false testimony at workers’ compensation hearings, holding that “loss or diminution of benefits the plaintiff expects to receive under a workers’ compensation scheme does not constitute an injury to ‘business or property’ under RICO.” There, the circuit court continued, it gave two key reasons for its holding: One was that workers’ compensation compensated for personal injury, while RICO, with its spotlight on “business or property,” did not cover losses that flowed from personal injuries. Second, it reasoned, a contrary rule would allow RICO to police fraud in the workers’ compensation system, “planting the national banner on land traditionally patrolled by the States.” In the circuit court’s opinion, RICO did not speak with enough clarity to authorize such an intrusion.

In concluding, the circuit court added that Jackson applied not only to disputes between employer and employee, but also to an employee’s claims against insurers, claims administrators, and doctors – “all of the defendants.” RICO’s applicability “turns on the nature of the injury – that the plaintiff was ‘injured in his business or property.’… It does not turn on the nature of the defendant.”

The Sixth Circuit was the first federal appellate court to rule on the issue, but similar cases are pending across the country. A case was filed recently against York Risk Services Group in Arizona on behalf of injured firefighters. The case is Laurie Miller et al. v. York Risk Services Group. U.S District Court Judge John Sedwick denied York’s requests to dismiss the employees’ claims last December. Judge Sedwick found that the employees “possess a property right in their workers compensation benefits under Arizona law,” which allows them to have a property interest under RICO law, the opposite of the finding in Brown.

Arizona is in the United States Court of Appeals for the Ninth Circuit, (as is California) and the 9th Circuit is not bound by cases in the 6th Circuit. Nonetheless the opinion in Brown will be persuasive if not controlling law. Should the 9th Circuit differ when the York case ultimately reaches the appellate tribunals, it would be an invitation for the U.S. Supreme Court to weigh in, perhaps resolving the issue of the application RICO to workers’ compensation cases nationwide .But, an adverse ruling at the 9th Circuit would open the floodgates for RICO litigation in California unless the U.S. Supreme Court intervened. The 9th Circuit is generally viewed as the most liberal venue in the nation. Thus the York case needs to be carefully followed.