Brown v. Cassens Transport Co.

• Decision Date: 10 July 2007
• Docket Number: No. 05-2089.,05-2089.
• Citation: 492 F.3d 640
• Parties: Paul BROWN, William Fanaly, Charles Thomas, Gary Riggs, Robert Orlikowski, and Scott Way, Plaintiffs-Appellants, v. CASSENS TRANSPORT CO., Crawford & Company, and Dr. Saul Margules, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

492 F.3d 640

Paul BROWN, William Fanaly, Charles Thomas, Gary Riggs, Robert Orlikowski, and Scott Way, Plaintiffs-Appellants, v. CASSENS TRANSPORT CO., Crawford & Company, and Dr. Saul Margules, Defendants-Appellees.

No. 05-2089.

United States Court of Appeals, Sixth Circuit.

Argued: July 27, 2006.

Decided and Filed: July 10, 2007.

ARGUED: Marshall D. Lasser, Law Office of Marshall Lasser, Southfield,

Michigan, for Appellants. Janet E. Lanyon, Dean & Fulkerson, Troy, Michigan, Joan N. Pierson, The Williams Firm, Grand Blanc, Michigan, for Appellees. ON BRIEF: Marshall D. Lasser, Law Office of Marshall Lasser, Southfield, Michigan, for Appellants. Janet E. Lanyon, Dean & Fulkerson, Troy, Michigan, Timothy R. Winship, The Williams Firm, Grand Blanc, Michigan, for Appellees.

Before: MOORE and GIBBONS, Circuit Judges; ACKERMAN, District Judge.^*

GIBBONS, J., delivered the opinion of the court. MOORE, J. (pp. 648-51), delivered a separate opinion concurring in part and dissenting in part.

ACKERMAN, D.J. (pp. 651-52), delivered a separate concurring opinion.

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

Plaintiffs-appellants Paul Brown, William Fanaly, Charles Thomas, Gary Riggs, Robert Orlikowski, and Scott Way ("plaintiffs") filed suit in federal district court against defendants-appellees Cassens Transport Company ("Cassens"), Crawford & Company ("Crawford"), and Dr. Saul Margules ("defendants") alleging that defendants employed mail and wire fraud in a scheme to deny them worker's compensation benefits promised under the Michigan Worker's Disability Compensation Act ("WDCA"), Mich. Comp. Laws § 418.301, and raising federal and state law claims. On defendants' motion, the district court dismissed plaintiffs' complaint for failure to state a claim on which relief could be granted. Fed.R.Civ.P. 12(b)(6).

For the reasons below, we affirm.

I.

Plaintiffs are current or former employees of Cassens who submitted worker's compensation claims to Cassens based on injuries they claim to have sustained while performing work-related tasks. It is uncontested that Cassens, which is self-insured for purposes of paying benefits under the WDCA, contracted with Crawford to serve as a claims adjuster for the worker's compensation claims of Cassens's employees. According to plaintiffs, Cassens and Crawford deliberately selected and paid unqualified doctors, including Margules, to give fraudulent medical opinions that would support the denial of worker's compensation benefits. Plaintiffs further assert that Cassens and Crawford ignored other medical evidence demonstrating that plaintiffs' injuries were work related and thus compensable under the WDCA. Plaintiffs accuse defendants of wrongfully denying or ceasing worker's compensation benefits payable to them as a result of their injuries.

On June 22, 2004, plaintiffs filed suit against Cassens, Crawford, and Margules in federal district court, claiming violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961(1)(B), 1962(c), 1964(c). Plaintiffs asserted in their complaint that defendants sent fraudulent communications among themselves and to plaintiffs by mail and wire in violation of 18 U.S.C. §§ 1341, 1343; those allegations of mail and wire fraud constituted the predicate acts for plaintiffs' RICO claims. Plaintiffs also raised a state law claim of intentional infliction of emotional distress. Defendants moved for dismissal pursuant to Fed. R.Civ.P. 12(b)(6), and, on July 15, 2005, the district court granted that motion. Brown v. Cassens Transp. Co., 409 F.Supp.2d 793 (E.D.Mich.2005). On the same day the district court issued its dismissal order, plaintiffs filed a motion for leave to file an amended complaint. The court entered judgment in favor of defendants on July 18, 2005, and denied plaintiffs' motion to file an amended complaint on July 22, 2005.

Plaintiffs filed this timely appeal.

II.

We review de novo a district court's Rule 12(b)(6) dismissal for failure to state a claim upon which relief can be granted. Hill v. Blue Cross & Blue Shield of Mich., 409 F.3d 710, 716 (6th Cir.2005). The plaintiffs' factual allegations are taken as true and the complaint is viewed in the light most favorable to the plaintiffs. Id. We will not affirm the district court's dismissal of a complaint on Rule 12(b)(6) grounds "unless it appears beyond doubt that the plaintiff[s] can prove no set of facts in support of [their] claim[s] which would entitle [them] to relief." Id. (alteration in original) (internal quotation marks omitted).

III.

Title 18, Section 1962 of the United States Code makes it unlawful for an individual "employed or associated with an enterprise" engaged in activities relating to 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. . . ." 18 U.S.C. § 1962(c). The term "racketeering activity" includes, among other things, any act indictable under the federal mail fraud, 18 U.S.C. § 1341, or wire fraud, 18 U.S.C. § 1343, statutes. 18 U.S.C. § 1961. In addition to providing criminal penalties for certain racketeering activities, RICO provides a private right of action and treble damages for "[a]ny person injured in his business or property by reason of a violation of section 1962. . . ." 18 U.S.C. § 1964(c).

On appeal, plaintiffs challenge the district court's decision to dismiss their RICO claims on the ground that they failed to plead detrimental reliance on the defendants' alleged misrepresentations concerning the cause of their injuries. As plaintiffs acknowledge, the well-established precedent of this circuit requires that a civil RICO plaintiff alleging mail or wire fraud plead reliance, that is, that a defendant made fraudulent representations to the plaintiff on which the plaintiff relied. See, e.g., VanDenBroeck v. CommonPoint Mortgage Co., 210 F.3d 696, 701 (6th Cir. 2000); Cent. Distribs. of Beer, Inc. v. Conn, 5 F.3d 181, 184 (6th Cir.1993); Blount Fin. Servs., Inc. v. Walter E. Heller & Co., 819 F.2d 151, 152 (6th Cir.1987); Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir.1984). Plaintiffs urge us to depart from these prior holdings and reverse the district court, proposing an alternative rule that eliminates the reliance requirement and permits a successful RICO claim based on mail or wire fraud where a plaintiff alleges that a defendant made a misrepresentation to a third person that was the proximate cause of an injury to the plaintiff. Because our precedent expressly requires a showing of reliance and thus forecloses the rule plaintiffs propose, we must affirm the district court's judgment.

In their effort to persuade us to discard the reliance requirement in our RICO jurisprudence, plaintiffs point to both Supreme Court precedent and the caselaw of our sister circuits. Neither source compels the result plaintiffs urge, however. We begin with the two decisions of the Supreme Court on which plaintiffs rely: Neder v. United States, 527 U.S. 1, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999), and Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). Plaintiffs cite the Court's decision Neder as support for the proposition that reliance is an inappropriate element in civil RICO actions based upon mail or wire fraud. In so doing, plaintiffs rely exclusively upon a single statement in the Court's extensive Neder opinion, namely, the Court's observation that the common law's requirement of justifiable reliance "plainly ha[s] no place in the federal fraud statutes." 527 U.S. at 24-25, 119 S.Ct. 1827. Although plaintiffs place great emphasis on this one statement, we deem this remark insufficient to warrant a reversal of Sixth Circuit precedent. Neder is a criminal case that speaks to the elements of criminal bank, mail, and wire fraud under 18 U.S.C. §§ 1344, 1341, and 1343, the predicate acts for the criminal RICO charges there. Id. at 6, 119 S.Ct. 1827. The opinion reiterates a common understanding of the elements of these federal criminal statutes over a long period of time. Indeed, the Court's passing comment reflects the law in our circuit since at least 1930, see, e.g., Hyney v. United States, 44 F.2d 134, 136 (6th Cir.1930), and we are aware of no court taking a contrary position.¹ Neder provides us with little insight, however, into the proof necessary for a successful civil RICO claim. While one could reasonably conclude that the absence of reliance as an element of criminal mail and wire fraud might suggest that reliance should not be required to establish a civil RICO claim when the predicate acts alleged are mail or wire fraud, our circuit has concluded otherwise. Although we may quarrel with the soundness of that conclusion, we must acknowledge that precedent from the criminal context and Neder in particular do not preclude the inclusion of an additional element for a plaintiff's civil claim.

Neder's irrelevance to the matter before us becomes clear upon closer review of the reliance requirement's place within the larger civil RICO jurisprudential framework. The law is clear that once a civil RICO plaintiff has made the necessary showing of a RICO violation under 18 U.S.C. § 1962, he must still meet those particular requirements imposed on private parties pursuing remedies under § 1964, including demonstrating RICO standing by showing causation. Holmes v. Secs. Investor Prot. Corp., 503 U.S. 258, 268-69, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992) (noting that proximate causation is required to demonstrate harm "by reason of" wrongful actions); see also Cent. Distribs. of Beer, 5 F.3d at 184 (assuming arguendo that plaintiffs pled the acts of mail and wire fraud with particularity but finding summary judgment appropriate because of the absence of evidence that defendant made representations to the victim and that victim "relied on any statement or omission to...