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Workers denied comp benefits can sue for RICO violations

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Workers denied comp benefits can sue for RICO violations

CINCINNATI—An appeals court ruling that allows injured workers to sue their former employer for alleged racketeering could have a chilling effect on how employers and third-party administrators decide workers compensation claims, observers say.

A panel of the 6th U.S. Circuit Court of Appeals ruled 2-1 in Paul Brown et al. vs. Cassens Transport Co. et al. that several Michigan transportation workers can sue Edwardsville, Ill.-based Cassens Transport Co. and Atlanta-based third-party administrator Crawford & Co. for allegedly violating the Racketeer Influenced and Corrupt Organizations Act after their workers comp claims were denied or settled.

However, an attorney for the auto transportation company and the TPA said the defendants will seek a rehearing of the ruling by the full 6th Circuit.

The workers allege that Cassens, which is self-insured, conspired with the TPA and Dr. Saul Margules, a Michigan physician who evaluated and often testified against injured Cassens workers.

The plaintiffs allege that the defendants' communications among themselves constituted mail and wire fraud under RICO and furthered the conspiracy that included using “fraudulent medical reports” and ignoring medical evidence to deny or limit benefits.

In its April 6 decision, the appeals court said Michigan's exclusive remedy workers comp provisions do not bar the workers from alleging that Cassens and Crawford committed RICO violations—which are separate from the workers' injury claims.

“A federal civil RICO claim and a state claim for workers compensation are legally distinct, even though they share factual underpinnings,” the majority ruled.

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

Marshall Lasser, a Southfield, Mich.-based attorney who represents the former Cassens workers and is litigating other similar cases, said such suits will help injured workers receive benefits that were unjustly denied.

“I've alleged that these employers and the insurance companies or the third-party administrators know that these doctors lie,” Mr. Lasser said.

In another suit he filed alleging RICO violations in Michigan workers comp decisions, Christine Jackson et al. vs. Sedgwick Claims Management Services Inc. et al., former employees of Atlanta-based Coca-Cola Enterprises Inc. allege that the company and TPA conspired with Dr. Paul Drouillard to deny or terminate their claims. Argued last summer in the 6th Circuit, the case still is awaiting a decision.

Cases such as those filed by Mr. Lasser could undermine insurers' and employers' ability to effectively manage medical treatment and benefit payments for injured workers, said Bruce Wood, Washington-based associate general counsel and director of workers compensation for the American Insurance Assn.

“What the cases essentially do is use the cover of RICO—a federal civil and criminal statute—to undermine and to subvert a state's workers compensation system,” Mr. Wood said.

Denis Juge, an insurance defense attorney in Metairie, La., contends that RICO litigation in workers comp cases could result in a flood of such suits and hurt employers' ability to defend themselves against disputed claims, because doctors could fear being named in RICO suits.

“If you allow the suits in the other states, you're going to find it very difficult as a defense attorney to get a physician willing to give a second medical opinion,” said Mr. Juge, a director at law firm Juge, Napolitano, Guilbeau, Ruli, Frieman & Whiteley L.L.C.

Janet Lanyon, an attorney for Cassens and Crawford, said her clients later this month plan to seek an en banc rehearing of the Brown ruling. Cassens, Crawford and Dr. Margules deny the workers' claims, said Ms. Lanyon, a shareholder with Troy, Mich.-based Dean & Fulkerson P.C.

Brown vs. Cassens has been in the courts for years. The 6th Circuit initially affirmed a federal judge's 2005 dismissal of the plaintiffs' RICO claims. But the U.S. Supreme Court vacated the 6th Circuit's ruling in 2008 and remanded the case, citing precedent in a separate RICO lawsuit.

The 6th Circuit allowed the workers' RICO claims to move forward in a subsequent 2008 decision, but the U.S. District Court for the Eastern District of Michigan dismissed it again in 2010 citing the state's exclusive remedy provisions concerning workers comp.

“I believe that the case presents novel issues of law,” Ms. Lanyon said. “So I think anytime a court is presented with something where there isn't a lot of precedent, the possibility of having differing views is greater.”

RICO lawsuits in workers comp could open the door for more litigation and delay injured workers receiving benefits, said Larry Holt, executive director of the National Council of Self-Insurers in New Providence, N.J. The organization filed a joint amicus brief in Brown with the AIA and the U.S. Chamber of Commerce.

“Employees who say they're injured at work will be able to prosecute RICO actions in state and federal courts, as well as workers compensation actions,” Mr. Holt said.

While there have been a handful of RICO-related workers comp lawsuits in other federal courts, the AIA's Mr. Wood said those cases were resolved without a decision on whether RICO law can trump the exclusive remedy of state workers comp laws.

With the 6th Circuit set to determine legal precedent in Brown and Jackson, Mr. Wood said industry observers will watch the cases closely.

“It's a significant challenge, because it's undermining state law,” he said.