Clifton E. JACKSON; Christopher M. Scharnitzke, on behalf of themselves and all other persons similarly situated, Plaintiffs-Appellants,
SEDGWICK CLAIMS MANAGEMENT SERVICES, INC.; Coca-Cola Enterprises, Inc., foreign corporations; Dr. Paul Drouillard, jointly and severally, Defendants-Appellees.
Argued: June 12, 2013.
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.
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.
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. See 18 U.S.C. § 1964(c).
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.
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 also Mich. 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 rights to compensation" ). This fact-finding authority extends to credibility determinations. Alexander v. Covel Mfg. Co., 336 Mich. 140, 57 N.W.2d 324, 326 (1953) (" The credit to be given the testimony of the witnesses, and especially medical testimony when there is a conflict, is solely for the commission's determination." (emphasis added)).
Second, the review process provides numerous opportunities for the applicant to demonstrate that an employer denied his claim through fraud. We have already noted an employee's ability to introduce evidence supporting his claim and refuting contrary evidence advanced by the employer. After the magistrate issues an order awarding or denying benefits, the employee and employer may appeal to the WCAC, which considers whether the magistrate's initial decision was " supported by competent, material, and substantial evidence on the whole record," Mich. Comp. Laws § 418.861a(3), " includ[ing] both a qualitative and quantitative analysis of that evidence in order to ensure a full,
thorough, and fair review," id. § 418.861a(13). While the Michigan Court of Appeals and Michigan Supreme Court have a more limited ability to review the facts underlying a disability determination, they may nonetheless review factual findings for fraud. Id. § 418.861a(14) (" The findings of fact made by the commission acting within its powers, in the absence of fraud, shall be conclusive." (emphasis added)). Even when the parties agree to settle a claim via a redemption of the employer's outstanding liability for benefits, id. § 418.835(1), the redemption must be approved by a magistrate who assesses whether the settlement is " just and proper under the circumstances, and is in the best interests of the injured employee," id. § 418.836(1)(a). See also Solo v. Chrysler Corp., 406 Mich. 240, 277 N.W.2d 629, 629-30 (1979) (recognizing that an employee can bring an action to set aside a redemption if she discovers that the employer procured the redemption by fraud). The process for disputing benefits therefore contains multiple tiers of review that are designed to prevent benefits decisions from being tainted by fraud.
With this background in mind, we now turn to the plaintiffs' allegations. The panel opinion provides a detailed overview of the operative complaint, which we summarize briefly below. See Jackson, 699 F.3d at 473-75. Because this case arises from the grant of a motion to dismiss, the court must accept the complaint's well-pled facts as true. Erie Cnty. v. Morton Salt, Inc., 702 F.3d 860, 867 (6th Cir.2012).
Jackson injured his back while working for Coca-Cola in 2007 and began receiving workers' compensation benefits. Both his treating physician and another physician who examined Jackson twice in 2008 at Sedgwick's request found that Jackson was disabled due to a work-related back injury. Despite these reports, Sedgwick asked Jackson on January 6, 2009 to submit to another " independent" examination by Drouillard. The plaintiffs assert that Drouillard was a " cut-off" doctor— that is, a doctor " who could be relied upon to lie for defendants and write a report stating a claimant did not have a work related disability regardless of the true facts" — whom Sedgwick retained to examine patients in an effort to deny compensation to deserving claimants. After examining Jackson, Drouillard prepared a medical report for Sedgwick dated January 14, 2009, in which he claimed Jackson was not disabled. Jackson alleges that the report's conclusion rests on numerous false assertions. Sedgwick stopped Jackson's benefits in reliance on the report.
Jackson filed a petition for benefits with the Board of Magistrates. Jackson, 699 F.3d at 474. After the district court entered its order dismissing his complaint in this case, but before the workers' compensation magistrate ruled on the dispute between Jackson and Sedgwick, Jackson settled his claim with Sedgwick. Id.
Scharnitzke was a delivery driver for Coca-Cola. He began experiencing pain in his left shoulder in 2004 that he claims was related to his work. Between July 2007 and February 2008, he took a leave of absence from work that he claims was injury-related, although he did not seek workers' compensation while he was away. An orthopedic surgeon Scharnitzke visited in August 2007 diagnosed this work-related pain as " acromioclavicular arthritis." On March 4, 2008, Scharnitzke injured his left shoulder while lifting products up a flight of stairs. Coca-Cola's company clinic
determined that Scharnitzke had a " minor work aggravation" that qualified him for workers' compensation and sent its records to Sedgwick. Instead of paying benefits, Sedgwick disputed Scharnitzke's claim in a notice sent to the Board of Magistrates on March 18, 2008. Sedgwick claimed Scharnitzke's " acromioclavicular arthritis" was not work-related and maintained this position after Scharnitzke sent information from his orthopedic surgeon which supported his position that his disability was work-related. Scharnitzke alleges that Sedgwick had no genuine factual basis for this position and only took it in a bad-faith effort to deny him benefits.
On May 13, 2010, a workers' compensation magistrate awarded Scharnitzke benefits from March 5, 2008 through July 6, 2009, but rejected his application for benefits related to the time he took off between July 2007 and February 2008. Scharnitzke v. Coca-Cola Enters., Inc. (May 13, 2010), available at http:// www. dleg. state. mi. us/ WCA/ PDFS/ Opinions_ 051409/ 2010/ scharnitzke. christopher. 5. 13. 10. pdf. Scharnitzke and Coca-Cola both appealed to the WCAC. The WCAC affirmed the Board in part by only awarding Scharnitzke benefits through January 5, 2009. Scharnitzke v. Coca-Cola Enters., Inc., No. 10-0061 (May 11, 2011), available at http:// www. dleg. state. mi. us/ ham/ wcac/ 11pdfa/ 07400061.pdf. It also dismissed Scharnitzke's appeal of the denial of benefits for the earlier time period. Id. Scharnitzke appealed the WCAC's ruling to the Michigan Court of Appeals, which affirmed the modification of the award and reversed the WCAC's dismissal of Scharnitzke's appeal. Scharnitzke v. Coca-Cola Enters., No. 304515, 2012 WL 5193200 (Mich.Ct.App. Oct. 18, 2012). Both parties appealed to the Michigan Supreme Court. The Supreme Court reinstated the WCAC's dismissal of Scharnitzke's appeal and otherwise declined review of the case on March 27, 2013. Scharnitzke v. Coca-Cola Enters., 493 Mich. 947, 828 N.W.2d 19 (2013).
This court reviews the district court's order granting the defendants' motion to dismiss de novo. Ohio Police & Fire Pension Fund v. Standard & Poor's Fin. Servs. LLC, 700 F.3d 829, 835 (6th Cir.2012). We must " construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir.2007). The plaintiffs must " plead[ ] factual content that allows the court to draw the reasonable inference that the defendant[s are] liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). If the plaintiffs do " not nudge[ ] their claims across the line from conceivable to plausible, their complaint must be dismissed." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
The district court and the defendants put forward " several grounds on which the plaintiffs' case could be dismissed, and in order to affirm the decision of the district court," we only need to recognize one of them. Brown II, 675 F.3d at 969 (Gibbons, J., dissenting). For the reasons below, the plaintiffs have failed to allege that they were " injured in [their] business or property," as is required to state a claim for a civil RICO damages action.18 U.S.C. § 1964(c). As a result,
we decline to reach the defendants' other arguments in support of the ...