Brown v. Cassens Transp. Co.

675 F.3d 946

Paul BROWN, William Fanaly, Charles Thomas, Gary Riggs, Robert Orlikowski, Scott Way, Plaintiffs–Appellants,

v.CASSENS TRANSPORT COMPANY, Crawford & Company, Saul Margules, Defendants–Appellees.

No. 10–2334.

United States Court of Appeals, Sixth Circuit.

Argued: July 7, 2011.Decided and Filed: April 6, 2012.

ARGUED: Jeffrey T. Stewart, Seikaly & Stewart, P.C., Farmington Hills, Michigan, for Appellants. Janet E. Lanyon, Dean & Fulkerson, P.C., Troy, Michigan, Timothy R. Winship, The Williams Firm, P.C., Grand Blanc, Michigan, for Appellees. ON BRIEF: Jeffrey T. Stewart, Seikaly & Stewart, P.C., Farmington Hills, Michigan, Marshall Lasser, Marshall Lasser, P.C., Southfield, Michigan, for Appellants. Janet E. Lanyon, Dean & Fulkerson, P.C., Troy, Michigan, Timothy R. Winship, The Williams Firm, P.C., Grand Blanc, Michigan, Jeffrey C. Gerish, Crawford & Company, Bloomfield Hills, Michigan, for Appellees. Mark F. Horning, Steptoe & Johnson, Washington, D.C., for Amicus Curiae.

Before: MOORE, COLE, and GIBBONS, Circuit Judges.

MOORE, J., delivered the opinion of the court, in which COLE, J., joined. GIBBONS, J. (pp. 969–74), delivered a separate dissenting opinion.

OPINION

KAREN NELSON MOORE, Circuit Judge.

The plaintiffs, who were allegedly injured while working for Cassens Transport Company (“Cassens”), sought worker's compensation benefits under Michigan's Worker's Disability Compensation Act, Mich. Comp. Laws § 418.301 (“WDCA”). Crawford & Company, Cassens's third-party administrator, denied each plaintiff's benefits. In response, the plaintiffs filed a complaint in the United States District Court for the Eastern District of Michigan, alleging that the denials were fraudulent and violated the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961(1)(B), 1962(c), and 1964(c) (“RICO”). The district court dismissed the lawsuit.

We hold that the Supremacy Clause prevents the Michigan legislature from preempting a RICO remedy by declaring its worker's compensation scheme to be exclusive of federal remedies. An expected entitlement to benefits under the WDCA qualifies as property, as does the claim for such benefits, and the injury to such property creates, under certain circumstances, a RICO violation. We therefore REVERSE the district court's judgment and REMAND the case for further proceedings consistent with this opinion.

I. BACKGROUND

Paul Brown, William Fanaly, Charles Thomas, Robert Orlikowski, and Scott Way were injured allegedly while performing work-related tasks for their employer, Cassens.¹ Cassens is self-insured and contracts with Crawford, a claims adjudicator, to resolve worker's compensation claims brought by Cassens's employees. Dr. Saul Margules evaluated all of the plaintiffs except Thomas. According to the complaint, Cassens and Crawford solicited fraudulent medical reports from Dr. Margules and other physicians. Dr. Margules is “not an expert in orthopedic conditions,” which most injuries on the job involve. R. 1 (Compl. ¶ 37). He was also alleged to be “biased due to the amount of money defendants paid him over the years to examine Cassens workers and to testify against them.” Id. The plaintiffs assert that Cassens and Crawford ignored other medical evidence that supported the plaintiffs' claims. The plaintiffs allege that the conspiracy was orchestrated by mail or by wire. The claims of each plaintiff except Brown were “resolved by settlement” before the Worker's Compensation Appellate Commission (“WCAC”) rendered a final determination. Reply Br. at 23. Cassens denied Brown's claim, a magistrate granted Brown full benefits, and Cassens appealed. Brown's claim was decided on its merits by the WCAC. R. 1 (Compl. ¶ 39). Neither the briefs nor the complaint state how the WCAC resolved his claim.

On June 22, 2004, the plaintiffs sued Cassens, Crawford, and Dr. Margules (except that Thomas did not sue Dr. Margules), alleging violations of RICO and intentional infliction of emotional distress. Each plaintiff seeks monetary “damages measured by the amount of benefits improperly withheld ..., plus interest as provided by law, all tripled in accordance with RICO, together with attorney fees and costs as provided by law.” R. 1 (Compl. ¶¶ 21, 29, 46, 65, 74). The district court dismissed the case under Federal Rule of Civil Procedure 12(b)(6) for failure to allege reliance on the defendants' fraudulent misrepresentations. Brown v. Cassens Transp. Co. (Brown I), 409 F.Supp.2d 793 (E.D.Mich.2005). A divided panel of this court affirmed. Brown v. Cassens Transp. Co. (Brown II), 492 F.3d 640 (6th Cir.2007). The Supreme Court vacated our judgment and remanded the case in light of Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008), which held that civil RICO plaintiffs do not need to demonstrate reliance on defendants' fraudulent representations. Brown v. Cassens Transp. Co., 554 U.S. 901, 128 S.Ct. 2936, 171 L.Ed.2d 862 (2008). On remand, we held that the plaintiffs had pleaded a “pattern” of unlawful activity. We also held that the McCarran–Ferguson Act, 15 U.S.C. § 1012, did not reverse preempt RICO claims because the WDCA was not enacted to regulate the business of insurance and, in any event, RICO would not “invalidate, impair, or supersede” the WDCA. Brown v. Cassens Transp. Co. (Brown III), 546 F.3d 347, 363 (6th Cir.2008), cert. denied, ––– U.S. ––––, 130 S.Ct. 795, 175 L.Ed.2d 575 (2009).

On remand, the district court denied the plaintiffs' motion to amend their complaint and dismissed their claims under Rules 12(b)(6) and 12(c). Brown v. Cassens Transp. Co. (Brown IV), 743 F.Supp.2d 651 (E.D.Mich.2010). The district court determined that the WDCA provided an exclusive state remedy via the WCAC that foreclosed federal RICO claims; that monetary losses stemming from lost benefits were personal injuries that were not injury to business or property; and that the damages were too speculative to support standing. The plaintiffs have appealed.

Meanwhile, three similar cases, all brought by one of the attorneys who represents the plaintiffs in this case, have been dismissed by various district judges. Lewis v. Drouillard, 788 F.Supp.2d 567 (E.D.Mich.2011), appeal docketed, No. 11–1325 (6th Cir. Mar. 14, 2011) (held in abeyance by 6th Cir. Apr. 15, 2011, Order pending the resolution of Jackson and this case); (Jay) Brown v. Ajax Paving Indus., Inc., 773 F.Supp.2d 727 (E.D.Mich.2011), appeal docketed, No. 11–1391 (6th Cir. Mar. 28, 2011) (held in abeyance by 6th Cir. June 6, 2011, Order pending resolution of this case); Jackson v. Sedgwick Claims Mgmt. Servs., Inc., No. 09–11529, 2010 WL 931864 (E.D.Mich. Mar. 11, 2010), appeal docketed, No. 10–1453 (6th Cir. Apr. 4, 2010).

II. ANALYSIS

A. Standards of Review

We review de novo dismissals under Rules 12(b)(6) and 12(c). Poplar Creek Dev. Co. v. Chesapeake Appalachia, L.L.C., 636 F.3d 235, 240 (6th Cir.2011). We construe the complaint in the light most favorable to the plaintiffs, accepting its allegations as true and drawing all reasonable inferences in the plaintiffs' favor. Id. To avoid dismissal, the plaintiffs must “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Dismissal “may be granted only if the moving party is ... clearly entitled to judgment,” even after taking as true the allegations of the nonmoving party. Poplar Creek, 636 F.3d at 240.

We also review de novo when a district court denies a motion for leave to amend a complaint on the basis that amendment would be futile. Brown v. Owens Corning Inv. Review Comm., 622 F.3d 564, 569 (6th Cir.2010).

B. Relationship Between RICO and the WDCA

RICO makes it a crime “for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.” 18 U.S.C. § 1962(c). RICO defines “racketeering activity” to include “any act which is indictable under any of the following provisions of title 18, United States Code: ... section 1341 [18 U.S.C. § 1341] (relating to mail fraud), section 1343 [18 U.S.C. § 1343] (relating to wire fraud).” Id. § 1961(1).Brown III, 546 F.3d at 352 (alterations and omissions in original).

The WDCA provides that employees who are injured in the course of employment “shall be paid compensation.” Mich. Comp. Laws § 418.301(1). An injured employee receives payments beginning fourteen days “after the employer has notice or knowledge of the disability.” Id. § 418.801(1). The WDCA purports to make “[t]he right to the recovery of benefits” under the WDCA “the employee's exclusive remedy against the employer for a personal injury or occupational disease,” with the sole exception of “intentional tort[s].” Id. § 418.131(1).

The parties argue at length about (a) whether the plaintiffs' RICO claims fall within the ambit of the WDCA, triggering its exclusive-remedy clause, and (b) whether RICO would impair the WDCA's regulatory scheme. We find these debates irrelevant. The plaintiffs brought a federal claim, not a WDCA claim. Although we do not hold that RICO preempts the WDCA, we do find that “the relative importance to the State of its own law is not material” when “a valid federal law” provides a cause of action based on overlapping facts. Ridgway v. Ridgway, 454 U.S. 46, 54, 102 S.Ct. 49, 70 L.Ed.2d 39 (1981) (internal quotation marks and alteration marks omitted). Therefore, the district court erred in finding that the WDCA forecloses the plaintiffs' RICO claims.

1. Supremacy Clause

Although RICO's predicate of mail fraud is similar to the underlying fraud that affects a state-recognized interest, mail fraud is a distinct offense. Due to the Supremacy Clause, Michigan does not have...