Alleged scheme to deny workers' comp doesn't give rise to RICO liability

A violation of the administrative duties of the Workers' Disability Compensation Act, even when fraudulent, does not amount to mail or wire fraud sufficient to give rise to RICO liability.

Case name: Jackson v. Sedgwick Claims Management Services, Inc., No. 09-11529 (E.D. Mich. 03/11/10).

Ruling: The U.S. District Court, Eastern District of Michigan granted the defendants' motions to dismiss and denied the plaintiffs' requests to amend their complaint. Because the misconduct the defendants allegedly agreed to commit did not amount to a violation of the federal Racketeer Influenced and Corrupt Organizations Act, the plaintiffs' conspiracy claim failed as a matter of law.

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What it means: RICO does not provide a remedy for the fraudulent denial of benefits because an injured worker may not use RICO as an "end run" around the exclusive procedures and remedies prescribed by the Workers' Disability Compensation Act. Alternatively, a violation of the administrative duties created by statute under the WDCA, even when fraudulent, does not amount to mail or wire fraud sufficient to give rise to RICO liability.

Summary: The plaintiffs, who represented a class of similarly situated individuals, alleged injuries related to an improper denial of workers' compensation benefits under a scheme to defraud by the self-insured employer, its claims administrator, and an orthopedic surgeon who provided independent medical examinations for the claims administrator. They claimed that the defendants, in setting up fraudulent IMEs and in denying workers' compensation benefits to eligible claimants, fraudulently schemed and illegally conspired to deny them of, or cut them off from, the benefits to which they were entitled -- for reasons known to be false -- breaching duties owed under state law in violation of the RICO Act. The court dismissed the action and denied the plaintiffs' request to amend the complaint.

The court explained that RICO does not provide a remedy for the fraudulent denial of benefits because an injured worker may not use RICO as an "end run" around the exclusive procedures and remedies prescribed by the WDCA.

Alternatively, a violation of the administrative duties created by statute under the WDCA, even when fraudulent, does not amount to mail or wire fraud sufficient to give rise to RICO liability.

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June 7, 2010

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