Moon v. Harrison Piping Supply

• Decision Date: 28 September 2006
• Docket Number: No. 05-1808.,05-1808.
• Citation: 465 F.3d 719
• Parties: Timothy MOON, Plaintiff-Appellant, v. HARRISON PIPING SUPPLY; Michigan Tooling Association Workers Compensation Fund; Asit K. Ray; Michigan Tooling Association Service Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

465 F.3d 719

Timothy MOON, Plaintiff-Appellant, v. HARRISON PIPING SUPPLY; Michigan Tooling Association Workers Compensation Fund; Asit K. Ray; Michigan Tooling Association Service Company, Defendants-Appellees.

No. 05-1808.

United States Court of Appeals, Sixth Circuit.

Argued: June 8, 2006.

Decided and Filed: September 28, 2006.

ARGUED: Marshall D. Lasser, Law Office of Marshall Lasser, Southfield, Michigan, for Appellant. Thomas J. Laginess, Cummings, McClorey, Davis & Acho, P.L.C., Livonia, Michigan, Hal O. Carroll, Vandeveer Garzia, P.C., Troy, Michigan, Dale A. Robinson, Rutledge Manion Rabaut Terry & Thomas P.C., Detroit, Michigan, for Appellees. ON BRIEF: Marshall D. Lasser, Law Office of Marshall Lasser, Southfield, Michigan, for Appellant. Thomas J. Laginess, Ronald Acho, Cummings, McClorey, Davis & Acho, P.L.C., Livonia, Michigan, Hal O. Carroll, Vandeveer Garzia, P.C., Troy, Michigan, Dale A. Robinson, Rutledge Manion Rabaut Terry & Thomas P.C., Detroit, Michigan, C.F. Boyle, Jr., Law Office of C.F. Boyle, Jr., Chicago, Illinois, for Appellees.

Before: MOORE, COLE, and CLAY, Circuit Judges.

OPINION

R. GUY COLE, JR., Circuit Judge.

Timothy Moon filed suit under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, as well as state tort law, alleging that his employer colluded with an insurance provider, an insurance adjuster, and a physician, to deny him workers' compensation benefits. The district court dismissed Moon's suit for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), or, in the alternative, because the suit was "reverse-preempted" under the McCarran-Ferguson Act, 15 U.S.C. § 1012(b). Because Moon failed sufficiently to allege a pattern of racketeering activity for purposes of RICO, we AFFIRM the district court's judgment with respect to Moon's RICO claim. However, because deciding Moon's state-law claim was unnecessary, we REVERSE the district court's exercise of pendent jurisdiction, and REMAND with instructions to dismiss those claims without prejudice.

I. BACKGROUND

According to his First Amended Complaint (the "Complaint"), Timothy Moon was an employee of Harrison Piping Supply ("Harrison"), who was injured at work on October 23, 2000. Although he initially received workers' compensation benefits, Moon alleges that Harrison colluded with the Michigan Tooling Association Workers' Compensation Fund (the "Fund"), the Michigan Tooling Association Service Company (the "Service Company"), and Dr. Asit Ray to terminate those benefits. Moon named as defendants: (1) Harrison, his employer; (2) the Fund, which is Harrison's insurer; (3) the Service Company, which was the Fund's adjuster; and (4) Ray, an independent physician.

Moon alleges that the Defendants collectively formed an "enterprise" for purposes of RICO and engaged in a pattern of racketeering in the form of mail fraud and witness-tampering. Specifically, Moon claims that the Fund sent him a Notice of Dispute (the "Notice") via United States mail on July 24, 2003, which stated that Moon was capable of fully resuming his job responsibilities even though Defendants knew that examining doctors had determined that Moon was still disabled. The Notice terminated Moon's benefits.

After receiving the Notice, Moon brought a workers' compensation claim before the Michigan Workers' Disability Compensation Bureau (the "Bureau"). According to Moon, the Defendants reinstated his benefits on the eve of his hearing before the Bureau. On the same day, March 25, 2004, the Fund and the Service Company sent notice to Moon that he was to be examined by Dr. Ray. According to Moon, the other Defendants gave Dr. Ray express or tacit instructions to issue a "cut-off" report, i.e., a medical report that could form the basis for terminating Moon's benefits. Dr. Ray, who Moon claims has a reputation for rendering medical opinions supporting rejection of claimants' benefits, examined Moon on April 8, 2004, and issued an allegedly fraudulent report opining that Moon was no longer disabled. The report was mailed to various persons and entities, including the Bureau. Finally, on April 16, 2004, the Fund mailed a second Notice of Dispute the ("Second Notice"), which, according to Moon, falsely claimed that he was no longer disabled.¹

Moon filed a RICO claim in district court, as well as a claim for intentional infliction of emotional distress ("IIED") under Michigan common law. The Defendants filed a motion to dismiss for, inter alia, failure to state a claim upon which relief could be granted under Rule 12(b)(6). The district court granted the Defendants' motion in an Amended Opinion and Order, dismissing with prejudice Moon's RICO and IIED claims. This timely appeal followed.

II. STANDARD OF REVIEW

In assessing a motion to dismiss for failure to state a claim under Rule 12(b)(6), we "treat[] all well-pleaded allegations in the complaint as true." Kostrzewa v. City of Troy, 247 F.3d 633, 638 (6th Cir.2001). "Dismissal is proper only `if it appears beyond doubt that the plaintiff can prove no set of facts in support of [his] claims that would entitle [him] to relief.'" Id. (quoting Performance Contracting, Inc. v. Seaboard Sur. Co., 163 F.3d 366, 369 (6th Cir.1998)). Moreover, we construe the complaint in the light most favorable to the non-moving party. Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir.1995). A complaint will survive a motion to dismiss if it "contain[s] either direct or inferential allegations with respect to all material elements necessary to sustain a recovery under some viable legal theory." Performance Contracting, Inc., 163 F.3d at 369; see also Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984) (Rule 12(b)(6) dismissal improper unless "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations"). We review a district court's Rule 12(b)(6) dismissal de novo. Gao v. Jenifer, 185 F.3d 548, 552 (6th Cir.1999).

III. DISCUSSION

A. Moon's RICO Claims

Moon asserts a claim under RICO, a federal statute that affords a civil remedy to an individual who is injured by virtue of certain types of unlawful activity. RICO provides in relevant part:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, 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 or collection of unlawful debt.

18 U.S.C. § 1962(c). Thus, to state a RICO claim, Moon must plead the following elements: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). Because we conclude that the Complaint lacks facts establishing a "pattern of racketeering activity," and thus fails to state a RICO claim, we do not address any of the other RICO elements.

1. Moon Has Failed To Allege Adequately A "Pattern Of Racketeering Activity"

(a) Predicate Acts

To establish a RICO violation under § 1962(c), a plaintiff must allege that the RICO enterprise engaged in a "pattern of racketeering activity" consisting of at least two predicate acts of racketeering activity occurring within a ten-year period. 18 U.S.C. § 1961(5). The alleged predicate acts may consist of offenses "which are indictable" under any of a number of federal statutes, including the mail (18 U.S.C. § 1341) and wire fraud statutes (18 U.S.C. § 1343). 18 U.S.C. § 1961(1).

Here, the district court concluded that Moon pleaded five predicate acts of racketeering activity with the requisite particularity. See Bender v. Southland Corp., 749 F.2d 1205, 1216 (consistent with Rule 9(b), RICO plaintiffs must allege "the time, place and contents of the misrepresentations"). These alleged acts include: (1) the Fund's July 24, 2003 mailing to Moon of the Notice terminating his benefits on the fraudulent grounds that Moon was capable of resuming his job responsibilities; (2) the Fund's March 25, 2004 mailing of a Notice of Examination to be performed by Dr. Ray, which examination was part of Defendants' scheme to fraudulently deprive Moon of his benefits; (3) Dr. Ray's mailing, between April 8, 2004 and April 26, 2004, of his medical report, which fraudulently opined that Moon was no longer disabled; (4) Defendants' agent's (attorney Felker) April 26, 2004 mailing of Dr. Ray's fraudulent medical report to Moon's counsel; and (5) the Fund's April 16, 2004 mailing to Moon of the Second Notice terminating Moon's benefits, which again fraudulently stated that Moon was not disabled.

The district court correctly concluded that Moon adequately pleaded a minimum of two predicate acts.² Although necessary to sustain a RICO claim, the pleading of two predicate acts may not be sufficient because § 1961(5) "assumes that there is something to a RICO pattern beyond the number of predicate acts involved." H.J., Inc. v. Northwestern Bell Tele. Co., 492 U.S. 229, 238, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989). In H.J., the Supreme Court held that "the term pattern itself requires the showing of a relationship between the predicates and of the threat of continuing activity. It is this factor of continuity plus relationship which combines to produce a pattern." Id. at 239, 109 S.Ct. 2893 (internal citations omitted). "Continuity and relationship constitute two analytically distinct prongs of the pattern requirement." Vild v. Visconsi, 956 F.2d 560, 566 (6th Cir.1992), cert. denied, 506 U.S. 832, 113 S.Ct. 99, 121 L.Ed.2d 59 (1992).

(b) Relatedness

Moon has satisfied the "relatedness" requirement because he has alleged predicate acts that have "the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing...