The Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act or simply RICO, is federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. In order to prevail in a RICO action, a plaintiff must prove a “predicate offense” one of which is fraud. In addition to the predicate offense, a plaintiff must also prove a “pattern of racketeering activity.”
The plaintiffs bar has sought to apply RICO laws as a penalty in workers’ compensation claims for at least a decade with poor results. Conceptually they allege that an employer, carrier or third party administrator concocts a fraudulent scheme that is used over and over to prevent workers from obtaining just benefits.
Plaintiff efforts to succeed at RICO in the federal 6th Circuit (Kentucky, Michigan, Ohio, and Tennessee) ultimately ended in failure. In one the the last tries, a Michigan claimant alleged that employer/carrier defrauded him with “false” medical testimony, and filed federal Racketeer Influenced and Corrupt Organizations Act RICO case, In that case, Brown v. Ajax Paving Industries, 752 F.3d 656 (2014), the United States Court of Appeals for the Sixth Circuit followed the prior ruling in Jackson v. Sedgwick Claims Management Services, a carbon copy of this case, 731 F.3d 556, 558 (6th Cir.2013) (en banc).
Essentially in the 6th Circuit, RICO cannot be based on an underlying workers’ compensation claim because the court 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 effort to win comp related RICO cases then moved to the 9th Circuit (nine western states including California and Arizona) arguably the most liberal Circuit in the federal system. In Laurie Miller et al. v. York Risk Services Group, nine plaintiffs worked as firefighters or engineers for the Phoenix fire department, and York adjusted the department’s workers comp claims. The plaintiffs alleged, in part, that York worked with the City of Phoenix to wrongfully deny or delay their workers comp benefits in violation of the federal RICO Act. Before the case went to trial, it was settled at the end of 2015. Thus the concept was not tested in the 9th Circuit Court of Appeals.
Now they have lost another RICO case this time filed in California.
John Black, and a group of police officers and fire fighters assert a RICO claim involving the City of Rialto and the City of Stockton, CorVel Enterprises, York Risk Services Group and others. These plaintiffs allege “York, CorVel, and Rialto engaged in a pattern of fraudulently denying and delaying legitimate claims in order to lower the liability of the city, while at the same time maximizing the TPA’s revenues (and allowing the TPA to maintain and obtain contracts with other public entities based on their ‘outstanding’ financial performance at the expense of public servants)”
In 2016 the federal trial judge reviewed the 4th amended complaint and dismissed the case without leave to amend. The decision was based in part upon a determination that a workers’ compensation benefit is not a property right subject to RICO, a ruling consistent with the 6th Circuit.
The 9th Circuit Court of Appeals just affirmed the dismissal in the unpublished case of Black v CorVel Enterprises Comp Inc. The 9th Circuit Court of Appeals ruled that “Appellants fail to establish any property interest in their workers’ compensation benefits prior to a final award of benefits” citing Angelotti, 791 F.3d at 1081. “Therefore, the district court properly dismissed Appellants’ 42 U.S.C. §1983 claims.”
Additionally they said “we find the exclusive remedy provision of the WCA preempts Appellants’ IIED and UCL claims. Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund, 14 P. 3d 234, 244-45 (Cal. 2001). Appellants’ alleged injury is ‘a normal part of the [workers’ compensation] claims process.’ Id. at 250 (citing Marsh & McLennan, Inc. v. Superior Court, 774 P.2d 762, 767 (Cal. 1989)). Therefore, the district court properly dismissed Appellants’ state law claims pursuant to the exclusive remedy provision of the WCA.”