Is a Fraudulent Denial of Workers' Compensation Benefits Grounds for a RICO Suit?
Here's an interesting case from the Sixth Circuit U.S. Court of Appeals, decided on 7/10/2007. The plaintiffs there were injured workers who alleged that, in order to deprive them of benefits under the Michigan Workers' Disability Compensation Act, their self-insured employer, its workers' compensation servicing agent, and the authorized treating physician had sent fraudulent communications among themselves and to the plaintiffs by mail and by wire in violation of federal law, and that these violations constituted the "predicate acts" necessary to state a civil cause of action against them for violation of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO").
In a 2-1 decision, the Sixth Circuit affimed the federal district court's dismissal of the complaint for failure to state a cause of action - but not because the plaintiffs' allegations of mail and wire fraud were insufficient. Under the law prevailing in the Sixth Circuit (covering Kentucky, Michigan, Ohio, and Tennessee), a plaintiff alleging a RICO violation must allege and prove that he relied upon the defendants' alleged fraudulent acts. [RICO provides a private right of action and treble damages for "any person injured in his business or property by reason of a violation" of the act]. Because allegations of detrimental reliance were absent from the plaintiffs' complaint, the appellate court agreed that the complaint failed to state a cause of action. Nevertheless, two of the three judges argued that the issue should be considered by the entire Court sitting en banc.
Thanks to How Appealing for the heads up on this case.
