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Workers can sue for RICO violations in denial of workers comp benefits: Court

Workers can sue for RICO violations in denial of workers comp benefits: Court

CINCINNATI—A group of Michigan transportation workers can sue their employer for violations of the Racketeer Influenced and Corrupt Organizations Act because they allege the company conspired to deny or withhold workers compensation benefits, the 6th U.S. Circuit Court of Appeals ruled last week.

The 2-1 decision in Brown et al. vs. Cassens Transport Co. et al. overturns a previous U.S. District Court decision, which said the workers could not sue for RICO violations because Michigan's workers comp law provides an exclusive state remedy outside of federal law.

Paul Brown, William Fanaly, Charles Thomas, Robert Orlikowski and Scott Way worked for Cassens Transport Co., which is based in Edwardsville, Ill., and has Michigan locations.

Each plaintiff claimed to have suffered work-related injuries while at Cassens. Mr. Brown initially was denied comp benefits, but Cassens appealed after a magistrate awarded benefits to him. The outcome of that case is unknown, court records show.

The other men settled their claims with Cassens before Michigan's Workers' Compensation Appellate Commission decided their cases, according to records.

The workers allege that Cassens, which is self-insured, and third-party administrator Crawford & Co. “solicited fraudulent medical reports” from doctors, ignored medical evidence that supported their claims, and committed conspiracy by mail or wire to deny their claims or settle them for lower amounts.

The men argue that they suffered “deprivation and devaluation” of their potential workers comp benefits because of the actions of Cassens, Crawford and Dr. Saul Margules, a physician who evaluated and often testified against injured Cassens workers.

The appeals court said in its decision Friday that Michigan's exclusive remedy provisions for workers comp do not bar the workers from alleging that Cassens and Crawford committed federal RICO violations—which are separate from the workers' injury claims.

“A federal civil RICO claim and a state claim for worker's compensation are legally distinct, even though they share factual underpinnings,” the ruling reads.

Though most of the plaintiffs settled their workers comp cases, the appeals court said the RICO case should determine whether the settlement amounts were reached under false pretenses.

Plaintiffs “should be allowed to proceed on their RICO claim and put on evidence that they would have received a better result in the underlying state agency proceedings had the defendants not submitted fraudulent medical reports,” the ruling reads. “The fact that the plaintiffs lost or settled in tainted proceedings is not evidence that the plaintiffs would have lost or settled if the proceedings had been fair.”

In a dissenting opinion, Judge Julia Smith Gibbons said RICO laws shouldn't apply because the workers didn't suffer damages to "business or property," as required by RICO regulations.

Cases “from other circuits support the defendants' arguments that...damages flowing from plaintiffs' work-related injuries constitute personal injuries, not damages to property or business," Judge Gibbons said.

The case was remanded back to district court for further proceedings.