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Tuesday, May 27, 2014

US 6th Circuit Holds Loss Of Employee Benefits Not Actionable Under RICO

Pursuant to Sixth Circuit I.O.P. 32.1(b)

JAY BROWN, Plaintiff-Appellant,

No. 11-1391

Appeal from the United States District Court for the Eastern District of Michigan at Detroit
No. 2:10-cv-10137—Gerald E. Rosen, Chief District Judge. Decided and Filed: May 19, 2014
BEFORE: SUTTON and COOK, Circuit Judges; MARBLEY, District Judge.*

ON BRIEF: Marshall Lasser, MARSHALL LASSER, P.C., Southfield, Michigan, for 
Appellant. James J. Urban, Paul M. Mersino, BUTZEL LONG, Lansing, Michigan for Appellee 
Ajax Paving. Joseph A. Fink, Jeffery V. Stuckey, D. Lee Khachaturian, DICKINSON WRIGHT 
PLLC, Lansing, Michigan, for Appellees American Contractors, Ward North, VeriClaim and 
NovaPro. Daniel B. Tukel, BUTZEL LONG, Detroit, Michigan, Michael F. Smith, THE 
SMITH APPELLATE LAW FIRM, Washington, D.C., for Appellee Drouillard. 
The Honorable Algenon L. Marbley, United States District Judge for the Southern District of Ohio, sitting 
by designation. 

SUTTON, Circuit Judge. This case began as a dispute over who should pay for Jay 
Brown’s shoulder injury. Brown claimed that he suffered the injury while paving a road for his 
employer Ajax Paving, and that the company as a result owed him workers’ compensation. At 
the workers’ compensation hearing, however, Ajax introduced medical testimony suggesting that 
the injury occurred outside of work. While the case remained pending before the Michigan 
administrative agency, Brown and Ajax settled. 

Unlike most settlements, this one did not end the controversy. Brown thought that Ajax 
had introduced false medical testimony in order to deny or at least diminish his benefits and that 
it had done the same thing to other employees. As a result, he sued Ajax and its alleged 
accomplices—insurers, claims administrators and the doctor—under the Racketeer Influenced 
and Corrupt Organizations Act. The district court dismissed the complaint. 

In order to sue under the Act, Brown must show that illegal racketeering activities have 
“injured [him] in his business or property.” 18 U.S.C. § 1964(c); see also id. § 1962. Brown 
attempts to meet this requirement by arguing that his employer’s use of false testimony prompted 
him to accept a small settlement, and so cost him some of the workers’ compensation benefits he 
otherwise deserved. Not long ago this theory of injury might have worked. This circuit used to 
treat “expected [workers’ compensation] benefits” as “property” under the Act. Brown v. 
Cassens Transp. Co., 675 F.3d 946, 951 (6th Cir. 2012). 

But last year, while the appeal in this case lay pending, the court reversed course while 
sitting en banc. In Jackson v. Sedgwick Claims Management Services, a carbon copy of this 
case, we turned back a lawsuit challenging a scheme to introduce false testimony at workers’ 
compensation hearings. 731 F.3d 556, 558 (6th Cir. 2013) (en banc). We held that “loss or 
diminution of benefits the plaintiff expects to receive under a workers’ compensation scheme 
does not constitute an injury to ‘business or property’ under RICO.” Id. at 566. We gave two 
key reasons for our holding. One was that workers’ compensation compensates for personal 
injury. The Act, which puts its spotlight on “business or property,” does not cover losses that 
flow from personal injuries. Id. at 565–66. The other was that a contrary rule would allow the 
Act to police fraud in the workers’ compensation system, planting the national banner on land 
traditionally patrolled by the States. The Act does not speak with enough clarity, we reasoned, to 
authorize such an intrusion. Id. at 566–69. 

Unfortunately for Brown, Jackson resolves this appeal. Brown’s alleged injury consists 
of getting less workers’ compensation than he deserved. Because “loss or diminution” of 
expected workers’ compensation “does not constitute an injury to ‘business or property,’” id. at 
566, Brown’s claims must fail. 

In response to all of this, Brown makes a partial but not a complete retreat. He submits 
that Jackson applies only to disputes between employer and employee, leaving in place his 
claims against the insurers, the claims administrators and the doctor. Yet this argument 
overlooks what happened in Jackson itself. The defendants in that case included not only an 
employer, but also a claims administrator and a doctor (in fact the same doctor sued in this case). 
The court rejected the claims against all of the defendants. See id. at 558–59. To limit Jackson 
to lawsuits against employers is to rewrite history. 

This argument not only slights Jackson’s outcome, but it also disrespects its reasoning. 
Jackson explained that expected workers’ compensation benefits stand outside the Act’s 
perimeter because they flow from personal injuries. It added that extending the Act to expected 
workers’ compensation benefits would clash with the States’ customary control of their workers’ 
compensation systems. Each argument applies with equal force whether an employee sues his 
employer or somebody else. Changing the defendant neither weakens the link between the 
benefits and personal injury nor dims the respect owed to the States’ authority over workers’ 

Last but not least, Brown’s attempted distinction between employers and others collides 
with the statute Congress enacted. The Act’s applicability turns on the nature of the injury—that 
the plaintiff was “injured in his business or property.” 18 U.S.C. § 1964(c). It does not turn on 
the nature of the defendant. We do not see how the same harm, loss of expected workers’ 
compensation benefits, could count as an injury to business or property against some defendants 
but not against other defendants. 

Brown complains that our decision “immunize[s] any insurer, claim adjuster or medical 
examiner who fraudulently denied or conspired to deny” workers their benefits. Reply Br. at 5. 
That is an overstatement. States can and do impose liability upon people—employers as well as 
others—who defraud the workers’ compensation system. Brown’s own brief tells us that 
Michigan’s courts would entertain claims that “an insurer, claim adjuster or medical examiner 
tortiously interfered with an employee’s receipt of . . . benefits.” Id. at 3. And the commission 
that heads the Michigan workers’ compensation system punishes abuses of the workers’ 
compensation process. See Mich. Comp. Laws Ann. § 418.861b. Our decision does not 
“immunize” anyone from these exercises of state power. Our decision means only that federal 
judges may not use the Act to seize this power for themselves. That of course was the whole 
point of Jackson. 

The defendants’ alleged actions in short did not injure Brown “in his business or 
property.” 18 U.S.C. § 1964(c). Because this flaw undoes all of Brown’s claims, we need not 
decide whether Brown’s settlement with Ajax covers this case. Nor need we consider whether 
Brown has satisfied other requirements imposed by the Act. 
For these reasons, we affirm.