Jackson v. Sedgwick Claims Mgmt. Servs., Inc.

• Decision Date: 24 September 2013
• Docket Number: No. 10–1453.,10–1453.
• Citation: 731 F.3d 556
• Parties: Clifton E. JACKSON; Christopher M. Scharnitzke, on behalf of themselves and all other persons similarly situated, Plaintiffs–Appellants, v. SEDGWICK CLAIMS MANAGEMENT SERVICES, INC.; Coca–Cola Enterprises, Inc., foreign corporations; Dr. Paul Drouillard, jointly and severally, Defendants–Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

731 F.3d 556

Clifton E. JACKSON; Christopher M. Scharnitzke, on behalf of themselves and all other persons similarly situated, Plaintiffs–Appellants,

v.SEDGWICK CLAIMS MANAGEMENT SERVICES, INC.; Coca–Cola Enterprises, Inc., foreign corporations; Dr. Paul Drouillard, jointly and severally, Defendants–Appellees.

No. 10–1453.

United States Court of Appeals, Sixth Circuit.

Argued: June 12, 2013.

Decided and Filed: Sept. 24, 2013.

ARGUED:Marshall D. Lasser, Marshall Lasser, P.C., Southfield, Michigan, for Appellants. Kathleen H. Klaus, Maddin Hauser Wartell, Roth & Heller, P.C., Southfield, Michigan, Matthew F. Leitman, Miller, Canfield, Paddock and Stone, P.L.C., Troy, Michigan, Daniel B. Tukel, Butzel Long, Detroit, Michigan, for Appellees. ON BRIEF:Marshall D. Lasser, Marshall Lasser, P.C., Southfield, Michigan, Jeffrey T. Stewart, Seikaly & Stewart, P.C., Farmington Hills, Michigan, for Appellants. Kathleen H. Klaus, Maddin Hauser Wartell, Roth & Heller, P.C., Southfield, Michigan, Matthew F. Leitman, Thomas W. Cranmer, Miller, Canfield, Paddock and Stone, P.L.C., Troy, Michigan, Daniel B. Tukel, Butzel Long, Detroit, Michigan, Michael F. Smith, The Smith Appellate Law Firm, Washington, D.C., for Appellees. Mark F. Horning, Jeffrey M. Theodore, Steptoe & Johnson LLP, Washington, D.C., Allison M. Zieve, Public Citizen Litigation Group, Washington, D.C., Charles A. Rothfeld, Brian J. Wong, Mayer Brown LLP, Washington, D.C., for Amici Curiae.

Before: BATCHELDER, Chief Judge; GUY, BOGGS, MOORE, COLE, CLAY, GIBBONS, ROGERS, SUTTON, COOK, McKEAGUE, GRIFFIN, KETHLEDGE, WHITE, STRANCH, and DONALD, Circuit Judges.^*

GIBBONS, J., delivered the opinion of the court, in which BATCHELDER, C.J., GUY, BOGGS, ROGERS, SUTTON, COOK, McKEAGUE, GRIFFIN, and KETHLEDGE, JJ., joined. CLAY, J. (pp. 570–72), delivered a separate opinion concurring in the judgment only. MOORE, J. (pp. 573–84), delivered a separate dissenting opinion, in which COLE, WHITE, STRANCH, and DONALD, JJ., joined.

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

Clifton Jackson and Christopher Scharnitzke were employees of Coca–Cola Enterprises, Inc. (“Coca–Cola”) who suffered work-related injuries. They applied for workers' compensation benefits from Coca–Cola through Sedgwick Claims Management Services (“Sedgwick”), Coca–Cola's third-party benefit claims administrator. Sedgwick disputed both of their claims and refused to pay benefits. Jackson and Scharnitzke allege that Coca–Cola and Sedgwick “engaged in a fraudulent scheme involving the mail ... to avoid paying benefits to injured employees,” Jackson v. Segwick Claims Mgmt. Servs., 699 F.3d 466, 473 (6th Cir.2012), in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c). Accordingly, they sued Coca–Cola, Sedgwick, and Dr. Paul Drouillard—a so-called “cut-off” doctor who allegedly colluded with Coca–Cola and Sedgwick to discontinue Jackson's benefits—in federal district court pursuant to RICO's civil-remedy provision. See18 U.S.C. § 1964(c).¹

The district court granted the defendants' motions to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). A panel of this court reversed in reliance on Brown v. Cassens Transport Co., 675 F.3d 946 (6th Cir.2012) (Brown II ), which rejected many of the legal arguments the district court relied upon in granting the motion to dismiss. As was true in Brown II, the panel was divided over the proper resolution of the appeal. See Jackson, 699 F.3d at 485–87 (Batchelder, C.J., concurring in the judgment); Brown II, 675 F.3d at 969–74 (Gibbons, J., dissenting). The court granted the defendants' petition to rehear this case en banc. Because the plaintiffs have not pled an injury to their “business or property” that is compensable under § 1964(c), we overrule Brown II and affirm the district court's judgment.

I.

We begin by providing some background about Michigan's workers' compensation system. “When Michigan adopted the [Workers' Disability Compensation Act (“WDCA”) ], it essentially created a ‘no-fault’ system under which a worker no longer has to establish negligence on the part of the employer but the employer is liable for certain expenses related to an injury suffered on the job without regard to fault.” Brown v. Cassens Transp. Co., 743 F.Supp.2d 651, 661–62 (E.D.Mich.2010) (Brown I ), rev'd,675 F.3d 946 (6th Cir.2012). This design ensures recovery for injured employees while creating greater certainty for employers. Hesse v. Ashland Oil, Inc., 466 Mich. 21, 642 N.W.2d 330, 334 (2002). The system achieves this goal, in part, because “[t]he right to the recovery of benefits [under the WDCA is] the employee's exclusive remedy against the employer for a personal injury or occupational disease. The only exception to this exclusive remedy is an intentional tort.” Mich. Comp. Laws § 418.131. If this were not the case, injured employees could circumvent the restrictions the WDCA places on the benefits an injured employee is entitled to receive. See id. §§ 418.301 (wage loss benefits), 418.315 (medical expenses), 418.319 (rehabilitation services).

In exchange for the employer's promise to pay certain types of benefits and the employee's promise to forsake other remedies, the workers' compensation system ensures efficient benefit payments and dispute resolution. “An employee, who receives a personal injury arising out of and in the course of employment by an employer who is subject to this act at the time of the injury, shall be paid” workers compensation benefits according to the statutory scheme once he provides notice of a work-related injury to an employer. Id. § 418.301(1) (emphasis added). Benefits to an injured employee “become due and payable on the fourteenth day after the employer has notice or knowledge of the disability.” Id. § 418.801(1). Failure to pay benefits when owed can lead to the imposition of fines on the employer. Id. § 418.801(2).

If an employer believes an employee is not entitled to benefits, it may dispute the claim. An employer is not obligated to pay benefits or fines when there is an “ongoing dispute” over an employee's claim, regardless of the merits of the dispute. Id.; see also Warner v. Collavino Bros., 133 Mich.App. 230, 347 N.W.2d 787, 790 (1984) (“On its face [the statute] merely requires an ‘ongoing dispute’ and does not distinguish good faith disputes from bad faith or unreasonable disputes.”). If the employee is later found to be entitled to benefits, the employer is liable for statutory interest for the period during which it withheld benefits. Mich. Comp. Laws § 418.801(6) ( “When weekly compensation is paid pursuant to an award of a worker's compensation magistrate, an arbitrator, the board, the appellate commission, or a court, interest on the compensation shall be paid....”); McCaslin v. GM Corp., 133 Mich.App. 782, 349 N.W.2d 544, 546 (1984) (observing that interest “is imposed because the employer benefits from the use of the money determined to be due to the employee and because the employee had to do without its use”).

Because the workers' compensation system is typically the only remedy available to employees who suffer a work-related injury in Michigan, the state has created a comprehensive administrative system for resolving disputes between employers and employees over benefits:

A disputed claim for benefits is first reviewed by a mediator, or at a hearing before a workers compensation magistrate [from the Worker's Compensation Agency Board of Magistrates]. Mich. Comp. Laws § 418.847. The statute provides that the parties may seek review of the magistrate's decision by the Workers Compensation Appellate Commission [ (“WCAC”) ]. Mich. Comp. Laws § 418.859(a). Finally, the decision of the WCAC is subject to judicial review [in the Michigan Court of Appeals and Michigan Supreme Court]. Mich. Comp. Laws § 418.861(a)....

The WDCA contains its own procedures for policing abuses of the obligations imposed to timely pay benefits. First, under Mich. Comp. Laws § 418.631(2), a self-insurer ... can lose its privilege to self-insure if it “repeatedly or unreasonably fails to pay promptly claims for compensation for which it shall become liable.” Also, under section 418.861b, the WCAC may dismiss a claim submitted for review, and assess costs and take other disciplinary action if it determines that the claim is proceeding vexatiously or was taken without a reasonable basis for believing that the claim had merit. Further, “[t]he bureau may appoint a duly qualified impartial physician to examine the injured employee and to report.” Mich. Comp. Laws § 418.865.

Brown I, 743 F.Supp.2d at 662–63.

We add a few observations to the general outline of the dispute resolution system that the district court provided in Brown I. First, employers and employees both have the ability to introduce evidence and develop a record at the initial hearing before the workers' compensation magistrate. During the hearing, the employee has the burden of proving an “entitlement to compensation and benefits ... by a preponderance of the evidence.” Mich. Comp. Laws § 418.851. The magistrate is authorized to “administer oaths, subpoena witnesses, and examine such parts of the books and records of the parties to a proceeding as relate to questions in dispute.” Id. § 418.853; see alsoMich. Admin. Code § 418.55 (explaining procedures for admitting and contesting evidence at a hearing); Stokes v. Chrysler LLC, 481 Mich. 266, 750 N.W.2d 129, 139–40 (2008) (noting that “the employer has a right to discovery ... [if] necessary for the employer to sustain its burden and present a meaningful defense,” such as an interview with the claimant by a retained vocational expert); Boggetta v. Burroughs Corp., 368 Mich. 600, 118 N.W.2d 980, 981 (1962) (holding that an employer can be required to answer interrogatories necessary for the employee to “inquire into the facts which might or might not establish her...