Jackson v. Sedgwick Claims Management Services, Inc.

The Sixth Circuit Court of Appeals recently issued a decision in the case of Jackson v. Sedgwick Claims Management Services, Inc.  This decision is the latest in the line of RICO cases that have been filed in various jurisdictions over the past several years.

In Jackson, the District Court initially granted the defendant’s Motion to Dismiss on the basis that RICO did not allow for a recovery as pleaded by the plaintiff.  Relying on another decision issued in the companion case of Brown v. Cassens Transport Company, however, the Court of Appeals was divided on how to resolve the plaintiffs appeal following the initial decision.  The majority holding in Brown determined under a similar factual scenario that the plaintiff had properly alleged a claim under RICO, and therefore should survive the defendant’s motion to dismiss.  Specifically, in arriving at this determination, Brown concluded that the plaintiff had a “property interest” in the receipt of workers’ compensation benefits, and that the conspiracy alleged by the plaintiff in preventing the continued receipt of those benefits could potentially be a compensable deprivation under the federal RICO statute.

In general, a plaintiff must allege a “proprietary type of damage” in order to establish a RICO claim.

The latest majority decision by the Sixth Circuit in Jackson addressed general concerns about the scope of the RICO statute extending into the “personal injury” realm beyond the initial intent of the legislature.  It also addressed the fact that workers’ compensation is traditionally an area where the state statutes prevail, and there were some concerns about applying a federal statute such as RICO in order to circumvent the state’s exclusive remedy provision in determining eligibility to workers’ compensation benefits.  Ultimately, the Sixth Circuit decided that the alleged entitlement to workers’ compensation benefits did not constitute an injury to “business or property” that would be compensable under RICO.  Therefore, they overruled Brown and affirmed the initial decision from the District Court which granted the defendant’s Motion to Dismiss.

Although we anticipate that the plaintiff will again appeal this decision, the majority opinion in Jackson appears relatively straightforward and is likely to be left undisturbed.  The majority summarizes its determination rather succinctly, in  that “Michigan’s decision to create a workers’ compensation system does not transform a disappointing outcome in personal injury litigation into damages that can support a RICO civil action.”

Additionally, the Sixth Circuit mentions that the plaintiff has an alternative remedy in the state’s workers’ compensation forum to “have their day in court” if they believe that fraud is taking place.  On page 17 of the Opinion, the majority states, “the workers’ compensation scheme Michigan has established provides ample mechanisms by which the employee can contest these actions.”  By using the phrase “these actions,” the majority is referring back to situations where the injured employee may believe that an employer has taken either a meritless position or procured fraudulent evidence in order to support a meritless position.

The prevailing theme, however, is that the proper venue to pursue these type of claims is in the state’s workers’ compensation court and not in the federal courts under RICO.