Paul BROWN, William Fanaly, Charles Thomas, Gary Riggs, Robert Orlikowski, Scott Way, Plaintiffs-Appellants, v. CASSENS TRANSPORT COMPANY, Crawford & Company, Saul Margules, Defendants-Appellees.
No. 10-2334.
United States Court of Appeals, Sixth Circuit.
Argued: July 7, 2011. Decided and Filed: April 6, 2012.
675 F.3d 946
Fencorp‘s argument is similar to the arguments used by the Ohio Supreme Court to find medical malpractice statutes of repose unconstitutional. See Groch, 883 N.E.2d at 404 (noting instances in which the Ohio Supreme Court struck down medical malpractice statutes of repose because those statutes “took away an existing, actionable negligence claim before the injured person discovered the injury (when the injury had already occurred) or gave the injured person too little time to file suit.“) However, it does not appear to us “beyond a reasonable doubt” that the securities statute, which had created new rights, is analogous to the common-law rights limited by the medical malpractice statutes of repose. Moreover, although the common law fraud claims are similar to medical malpractice claims, Fencorp attempts a facial challenge to the whole statute and not an as-applied challenge to just the common-law elements governed by the statute, so it must demonstrate that there is “no set of circumstances in which the statute would be valid.” This Fencorp has failed to do. Finally, no Ohio court has declared this statute of repose unconstitutional, and Ohio appeals courts have not been dissuaded by the medical malpractice cases from applying the securities statute of repose to common-law claims subsumed within the larger securities claims. See Helman v. EPL Prolong, Inc., 139 Ohio App.3d 231, 743 N.E.2d 484, 493 (2000). All of these elements combine and lead us to uphold the constitutionality of the securities statute of repose. We therefore affirm the district court.
VI.
For the foregoing reasons, we set aside the verdict on the state common law fraud claim and direct the district court to reinstate the verdict on the federal securities claim. We otherwise affirm the rulings of the district court and remand the case for further proceedings consistent with this opinion.
Before: MOORE, COLE, and GIBBONS, Circuit Judges.
MOORE, J., delivered the opinion of the court, in which COLE, J., joined. GIBBONS, J. (pp. 969-74), delivered a separate dissenting opinion.
OPINION
KAREN NELSON MOORE, Circuit Judge.
The plaintiffs, who were allegedly injured while working for Cassens Transport Company (“Cassens“), sought worker‘s compensation benefits under Michigan‘s Worker‘s Disability Compensation Act,
We hold that the Supremacy Clause prevents the Michigan legislature from preempting a RICO remedy by declaring its worker‘s compensation scheme to be exclusive of federal remedies. An expected entitlement to benefits under the WDCA qualifies as property, as does the claim for such benefits, and the injury to such property creates, under certain circumstances, a RICO violation. We therefore REVERSE the district court‘s judgment and REMAND the case for further proceedings consistent with this opinion.
I. BACKGROUND
Paul Brown, William Fanaly, Charles Thomas, Robert Orlikowski, and Scott Way were injured allegedly while performing work-related tasks for their employer, Cassens.1 Cassens is self-insured and contracts with Crawford, a claims adjudicator, to resolve worker‘s compensation claims brought by Cassens‘s employees. Dr. Saul Margules evaluated all of the plaintiffs except Thomas. According to the complaint, Cassens and Crawford solicited fraudulent medical reports from Dr. Margules and other physicians. Dr. Margules is “not an expert in orthopedic conditions,” which most injuries on the job involve. R. 1
On June 22, 2004, the plaintiffs sued Cassens, Crawford, and Dr. Margules (except that Thomas did not sue Dr. Margules), alleging violations of RICO and intentional infliction of emotional distress. Each plaintiff seeks monetary “damages measured by the amount of benefits improperly withheld ..., plus interest as provided by law, all tripled in accordance with RICO, together with attorney fees and costs as provided by law.” R. 1 (Compl. ¶¶ 21, 29, 46, 65, 74). The district court dismissed the case under
On remand, the district court denied the plaintiffs’ motion to amend their complaint and dismissed their claims under Rules 12(b)(6) and 12(c). Brown v. Cassens Transp. Co. (Brown IV), 743 F.Supp.2d 651 (E.D.Mich.2010). The district court determined that the WDCA provided an exclusive state remedy via the WCAC that foreclosed federal RICO claims; that monetary losses stemming from lost benefits were personal injuries that were not injury to business or property; and that the damages were too speculative to support standing. The plaintiffs have appealed.
Meanwhile, three similar cases, all brought by one of the attorneys who represents the plaintiffs in this case, have been dismissed by various district judges. Lewis v. Drouillard, 788 F.Supp.2d 567 (E.D.Mich.2011), appeal docketed, No. 11-1325 (6th Cir. Mar. 14, 2011) (held in abeyance by 6th Cir. Apr. 15, 2011, Order pending the resolution of Jackson and this case); (Jay) Brown v. Ajax Paving Indus., Inc., 773 F.Supp.2d 727 (E.D.Mich.2011), appeal docketed, No. 11-1391 (6th Cir. Mar. 28, 2011) (held in abeyance by 6th Cir. June 6, 2011, Order pending resolution of this case); Jackson v. Sedgwick Claims Mgmt. Servs., Inc., No. 09-11529, 2010 WL 931864 (E.D.Mich. Mar. 11, 2010),
II. ANALYSIS
A. Standards of Review
We review de novo dismissals under Rules 12(b)(6) and 12(c). Poplar Creek Dev. Co. v. Chesapeake Appalachia, L.L.C., 636 F.3d 235, 240 (6th Cir. 2011). We construe the complaint in the light most favorable to the plaintiffs, accepting its allegations as true and drawing all reasonable inferences in the plaintiffs’ favor. Id. To avoid dismissal, the plaintiffs must “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Dismissаl “may be granted only if the moving party is ... clearly entitled to judgment,” even after taking as true the allegations of the nonmoving party. Poplar Creek, 636 F.3d at 240.
We also review de novo when a district court denies a motion for leave to amend a complaint on the basis that amendment would be futile. Brown v. Owens Corning Inv. Review Comm., 622 F.3d 564, 569 (6th Cir. 2010).
B. Relationship Between RICO and the WDCA
RICO makes it a crime “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.”
The WDCA provides that employees who are injured in the course of employment “shall be paid compensation.”
The parties argue at length about (a) whether the plaintiffs’ RICO claims fall within the ambit of the WDCA, triggering its exclusive-remedy clause, and (b) whether RICO would impair the WDCA‘s regulatory scheme. We find these debates irrelevant. The plaintiffs brought a federal claim, not a WDCA claim. Although we do not hold that RICO preempts the WDCA, we do find that “the relative importance to the State of its own law is not material” when “a valid federal law” provides a cause of action based on overlapping facts. Ridgway v. Ridgway, 454 U.S. 46, 54, 102 S.Ct. 49, 70 L.Ed.2d 39 (1981) (internal quotation marks and alteration marks omitted). Therefore, the district court erred in finding that the WDCA forecloses the plaintiffs’ RICO claims.
1. Supremacy Clause
Although RICO‘s predicate of mail fraud is similar to the underlying fraud that affects a state-recognized interest, mail fraud is a distinct offense. Due to the Supremacy Clause, Michigan does not have the authority to declare a state remedy exclusive of federal remedies. See
To contest this result, the defendants rely on Connolly v. Maryland Casualty Co., 849 F.2d 525, 528 (11th Cir. 1988), cert. denied, 489 U.S. 1083, 109 S.Ct. 1539, 103 L.Ed.2d 843 (1989). The Eleventh Circuit held in Connolly that a plaintiff could not bring suit for civil rights violations under
The flaw with the defendants’ argument is that the predicate offense for the RICO action is mail fraud, not the denial of worker‘s compensation. “The gravamen of [a] RICO cause of action is not the violation of state law, but rather certain conduct, illegal under state law, which, when combined with an impact on commerce, constitutes a violation of federal law. Therefore, it is not alleged that [the defendants are] subject to ‘liability under’ the [state law]; their liability ... stems from RICO.” Williams v. Stone, 109 F.3d 890, 895 (3d Cir.), cert. denied, 522 U.S. 956, 118 S.Ct. 383, 139 L.Ed.2d 299 (1997). The district court here erred when it stated that this case does not “involve[] a separate and independent tort (theft or conversion or some similar claim)” because the plaintiffs “cannot disentangle their RICO claim from their underlying claim for benefits.” 743 F.Supp.2d at 666, 668. Admittedly, the plaintiffs are entitled to damages for the alleged fraud only if they were actually entitled to worker‘s compensation and were not properly compensated, which is a question of state law. But this fact shows an overlap in sanctioned conduct, not a dependency relationship between state and federal law. It is well established that “[t]he fact that a scheme
2. Federal Administrative Schemes and the Filed-Rate Doctrine
Courts have held RICO inapplicable to claims that should have been raised before federal agencies that had exclusive-remedy clauses in their enabling statutes. E.g., McCulloch v. PNC Bank Inc., 298 F.3d 1217, 1226-27 (11th Cir. 2002) (Higher Education Act); Ayres v. Gen. Motors Corp., 234 F.3d 514, 521-22 (11th Cir. 2000) (National Traffic and Motor Vehicle Safety Act); Bodimetric Health Servs., Inc. v. Aetna Life & Cas., 903 F.2d 480, 486-87 (7th Cir. 1990) (Social Security Act). The district court extended this logic to state agencies. However, enabling statutes for federal agencies shed light on Congress‘s intent with regard to RICO because Con-
Anticipating this critique, the defendants collect cases in which courts prevented plaintiffs from bringing RICO claims that would have interfered with state administrative agencies. The defendants fail to mention that most of these cases apply the filed-ratе doctrine. The filed-rate doctrine insulates from judicial attack utility rates that have been filed with a state or federal regulatory agency, even when the plaintiffs allege that the rates are unreasonable due to “fraud upon the regulatory agency.” Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 20 (2d Cir. 1994); see also Keogh v. Chi. & Nw. Ry. Co., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922); Wah Chang v. Duke Energy Trading & Mktg. LLC, 507 F.3d 1222, 1225-26 n. 4 (9th Cir. 2007); Tex. Commercial Energy v. TXU Energy, Inc., 413 F.3d 503 (5th Cir. 2005), cert. denied, 546 U.S. 1091, 126 S.Ct. 1033, 163 L.Ed.2d 855 (2006); Sun City Taxpayers’ Ass‘n v. Citizens Utils. Co., 45 F.3d 58 (2d Cir.), cert. denied, 514 U.S. 1064, 115 S.Ct. 1693, 131 L.Ed.2d 557 (1995); H.J. Inc. v. Nw. Bell Tel. Co., 954 F.2d 485 (8th Cir.), cert. denied, 504 U.S. 957, 112 S.Ct. 2306, 119 L.Ed.2d 228 (1992); Taffet v. So. Co., 967 F.2d 1483 (11th Cir.) (en banc), cert. denied, 506 U.S. 1021, 113 S.Ct. 657, 121 L.Ed.2d 583 (1992). Asking this court to apply the doctrine to the context of worker‘s compensation, the defendants identify a common policy concern: “only by determining what would be a reasonable rate
The filed-rate doctrine, however, has not been extended to any other context. To the contrary, some cases have criticized its continuing validity even within the field of utility rates. Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 760 F.2d 1347, 1352-55 (2d Cir. 1985) (Friendly, J.), aff‘d, 476 U.S. 409, 106 S.Ct. 1922, 90 L.Ed.2d 413 (1986). Crucially, a key justification for the filed-rate doctrine is the need fоr knowledgeable regulatory agencies to police “generally monopolistic and oligopolistic industries” to ensure reasonable rates, rather than leaving a rate-reasonableness calculation in the hands of the less knowledgeable courts. Wegoland, 27 F.3d at 21. This concern is less present in the field of worker‘s compensation where courts are regularly tasked with calculating the value of such injuries. In addition, the filed-rate doctrine protects a legislative-type determination by a regulatory agency, whereas the Michigan exclusivity provision insulates an adjudicatory determination. Agency expertise, while often justifying some measure of deference, never justifies a prohibition on our review—direct, much less indirect—of agency adjudications. For these reasons, we decline to extend the filed-rate doctrine.
3. Burford Abstention
Had the complaint survived the motions to dismiss, the district court stated that it “would [have] stay[ed] Plaintiffs’ RICO claims ... based upon the Burford abstention doctrine.” Brown IV, 743 F.Supp.2d at 676 n. 17. Burford abstention is a method by which federal courts may defer to the pending decision of a state agency when “the State‘s interests are paramount and ... [the] dispute would best be adjudicated in a state forum.” Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 728, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996). When a complaint seeks only monetary damages, Burford abstention may justify a stay, though not a dismissal of the claims. Id. at 730, 116 S.Ct. 1712. The decision whether to invoke Burford abstention is committed to the discretion of the court. Id. at 724-25, 116 S.Ct. 1712. Here, none of the parties’ current briefs even mention Burford abstention.3 We therefore decline to exercise our discretion to stay the case.
All told, Michigan cannot preempt a federal RICO claim, and the resemblance of the federal RICO claim to the claim for a state entitlement does not undermine the RICO claim.
C. Injury to Property
The district court also rejected the plaintiffs’ claims because it held that they failed to allege an injury to property, as required by RICO. The district court viewed the plaintiffs’ alleged injuries as “wholly derivative of their personal injuries,” and as such they could not be injury
1. Background
Title
2. Prior Panel Decision and Waiver
At the district court, the plaintiffs’ only argument about the nature of their injury was that Brown III held that they had alleged loss of property. Brown IV, 743 F.Supp.2d at 671 n. 15 (quoting Plaintiffs’ Response to Cassens Mot. to Dismiss). The plaintiffs are incorrect. Brown III stated:
Each of the plaintiffs has also sufficiently pleaded that they were injured by the defendants’ “pattern of racketeering activity” under
18 U.S.C. § 1964(c) because the defendants’ fraud deprived the plaintiffs of worker‘s compensation benefits and caused them to incur attorney fees and medical care expenses.
Brown III, 546 F.3d at 355-56. This sentence does not specifically state that the plaintiffs alleged an injury to property, an issue that was not before the panel in Brown III.
Nevertheless, this issue “presents an appropriate circumstance for exercising our discretion to reach an issue not raised below.” Lockhart v. Napolitano, 573 F.3d 251, 261 (6th Cir. 2009). “Ordinarily, an issue that is not raised in the district court is not considered on appeal unless the question is presented with sufficient clarity and completeness for us to resolve the matter without further development of the record.” United States v. Lucas, 640 F.3d 168, 173 (6th Cir. 2011). This issue is presented with clarity and completeness. The district court relegated waiver to a footnote and analyzed the merits of the issue for four pages. All of the parties have briefed the issue at length, and it is “purely a question of law.” Lockhart, 573 F.3d at 261. We therefore consider whether the plaintiffs have alleged an injury to property.
3. State or Federal Law
Whether a person has a “property” interest is traditionally a question of state law. Logan v. Zimmerman Brush Co., 455 U.S. 422, 430, 102 S.Ct. 1148, 71 L.Ed.2d 265 (1982) (“The hallmark of property ... is an individual entitlement grounded in state law.“). For that reason, “‘[i]njury to property’ for RICO purposes is generally determined by state law.” Isaak v. Trumbull Sav. & Loan Co., 169 F.3d 390, 397 (6th Cir. 1999) (citing DeMauro v. DeMauro, 115 F.3d 94, 96 (1st Cir. 1997)). The Sixth Circuit has never fleshed out thе circumstances in which state law is not determinative of whether someone has a property interest at stake, but DeMauro suggests that federal law can constrict state definitions of property, and we agree with that approach. “[O]ne might expect federal law to decide whether a given interest, recognized by state law, rises to the level of ‘business or property,” a question that “depends on federal statutory purpose.” DeMauro, 115 F.3d at 96; see also Evans v. City of Chicago, 434 F.3d 916, 930 n. 25 (7th Cir. 2006) (“[W]e need not adopt a state law definition of ‘business or property’ which is so broad that it contravenes Congress’ intent in enacting the RICO law.“); Price v. Pinnacle Brands, Inc., 138 F.3d 602, 607 (5th Cir. 1998) (“[E]ven though courts may look to state law to determine, for RICO purposes, whether a property interest exists, it does not follow that any injury for which a plaintiff might assert a state law claim is necessarily sufficient to establish a claim under RICO.“); cf. Town of Castle Rock v. Gonzales, 545 U.S. 748, 757, 125 S.Ct. 2796, 162 L.Ed.2d 658 (2005) (invoking the same rule when deciding whether property is protected under the Due Process Clause). We therefore must ask both whether Michigan defines the interest at stake as property and whether such a definition is consistent with the concept of “property” that Congress protected in enacting RICO.
4. Devaluation of a Statutory Expectancy as Injury to Property
The complaint identifies the plaintiffs’ injuries as including the deprivation and devaluation of worker‘s compensation benefits. R. 1 (Compl. ¶ 17). The district court held that the fraudulent deprivation or diminution of worker‘s compensation benefits did not amount to an injury in property because such injury is merely another form of pecuniary loss stemming from a physical injury. Brown IV, 743 F.Supp.2d at 674. Because statutory entitlements are property, the injury to which causes harm, we see no reason under RICO to distinguish between property entitlements that accrue as a result of a personal injury from those that do not. Although none of the remaining plaintiffs in this case had started receiving their statutory benefits at the time of the fraud, Michigan‘s nondiscretionary worker‘s compensation scheme creates a property interest in the expectancy of statutory benefits following notice to the employer of injury. Finally, even if Michigan law does not create a property interest in such an expectancy, we hold that the plaintiffs’ claim for benefits is an independent property interest, the devaluation of which also creates an injury to prоperty within the meaning of RICO.
a. Property Interest in Worker‘s Compensation Benefits
As an initial matter, both Michigan law and federal law recognize that the recipient of a statutory entitlement “has a statutorily created property interest in the continued receipt of those benefits.” Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 60, 119 S.Ct. 977, 143 L.Ed.2d 130 (1999) (citing Goldberg v. Kelly, 397 U.S. 254, 262 & n. 8, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970)); Perry v. Sindermann, 408 U.S. 593, 601, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972); Logan, 455 U.S. at 428, 102 S.Ct. 1148; Mathews v. Eldridge, 424 U.S. 319, 332, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976); see also Williams v. Hofley Mfg. Co., 430 Mich. 603, 424 N.W.2d 278, 282, 283 n. 16 (1988) (relying on federal due process law articulated in Logan, 455 U.S. at 428, 102 S.Ct. 1148). A recipient of Michigan worker‘s compensation benefits undoubtedly has a property interest under state law in the continued receipt of those benefits. We hold today that injury to
Congress provided in
Against this backdrop, the Sixth Circuit has held that “[r]ecovery for physical injury or mental suffering is not allowed under civil RICO because it is not an injury to business or property.” Fleischhauer v. Feltner, 879 F.2d 1290, 1300 (6th Cir. 1989), cert. denied, 493 U.S. 1074, 110 S.Ct. 1122, 107 L.Ed.2d 1029 (1990); see also Drake v. B.F. Goodrich Co., 782 F.2d 638, 644 (6th Cir. 1986); Evans v. City of Chicago, 434 F.3d 916, 930-31 (7th Cir. 2006); Grogan v. Platt, 835 F.2d 844, 847 (11th Cir.), cert. denied, 488 U.S. 981, 109 S.Ct. 531, 102 L.Ed.2d 562 (1988). The Supreme Court similarly excluded recovery for purely personal injuries under the Clayton Act, as such injuries are not inherently injury to any entitlement we would deem property. Reiter, 442 U.S. at 339, 99 S.Ct. 2326. Any pecuniary losses proximately resulting from a personal injury caused by a RICO violation, e.g. attorney fees, lost wages, and medical expenses, are also not recoverable because they, too, do not implicate harm to any legal entitlement.5
The defendants, the district court, and the dissent all focus on language in these cases rejecting pecuniary losses “flowing from” personal injuries to argue that any pecuniary losses downstream from a per-
First, a plain reading of the text of RICO provides no support for excluding certain categories of property interests based on how the interest itself originated. Rеcognizing statutory entitlements as property under RICO does not render any term of the act superfluous. See Reiter, 442 U.S. at 338-39, 99 S.Ct. 2326. Nor does the text reject recovery for certain legal entitlements because they accrued following a personal injury wholly unrelated to the RICO offense at issue. Congress‘s only other express limitation is that the injury to property must be “by reason of” a
Second, focusing on the predicate injury that gave rise to the property interest
ignores the Supreme Court‘s instruction to interpret RICO broadly. Section 1964 places “no restrictions ... on the words ‘injured in his property.’ The statute does not limit standing to those ‘directly injured in his property,’ or ‘injured only in his property.‘” Comment, Patrick Wackerly, Personal Versus Property Harm and Civil RICO Standing, 73 U. Chi. L. Rev. 1513, 1520-21 (2006). “To the contrary, the language reads that ‘any’ injured party has standing to sue.” Id. The Supreme Court has repeatedly refused to graft additional requirements onto the plain language of both this statute and the identical language in the Clayton Act when doing so would defeat Congress‘s intent that the statute have broad and inclusive application. See Reiter, 442 U.S. at 339, 99 S.Ct. 2326 (rejecting argument that Clayton Act requires injury to commercial property interests); Sedima, S.P.R.L., 473 U.S. at 497, 105 S.Ct. 3275 (rejecting argument that RICO applies only to organized crime). The dissent urges a narrow reading of the word “property,” but points to nothing in the text of RICO or statements of Congress to justify that approach. Because Congress intended us to interpret RICO broadly, Sedima, S.P.R.L., 473 U.S. at 497, 105 S.Ct. 3275, we see no reason to preclude RICO suits that are based on injury to property, not the predicate physical injury that gave rise to the property interest in the first place.
Third, such an approach would yield inconsistent results. The defendants do not argue statutory entitlements or claims to benefits generally are not property under RICO, but they argue such interests “may be RICO ‘property’ only when the wrong to be vindicated by the cause of action is an injury to business or property.” Appellee Cassens Br. at 26 (capitalization omitted).6 Such an approach would have us hold thаt a plaintiff could recover under RICO for the fraudulent devaluation of
The dissent makes the same mistake that the district court did by misconstruing the meaning of language from our sister circuits that “pecuniary losses flowing from [personal] injuries” are insufficient to establish injury to property. Evans, 434 F.3d at 930 (emphasis added); see also Grogan v. Platt, 835 F.2d 844, 847 (11th Cir.), cert. denied, 488 U.S. 981, 109 S.Ct. 531, 102 L.Ed.2d 562 (1988). Neither of these cases involved an injury to an intervening legal еntitlement. Both addressed whether various damages that were the proximate result of a personal injury caused by a RICO violation, albeit some more indirectly than others, could be deemed property interests on their own. Evans, 434 F.3d at 930 (lost wages from wrongful incarceration caused by alleged RICO violation not property); Grogan, 835 F.2d at 846-47 (economic losses from wrongful death caused by alleged RICO violation not property). We take no issue with their holdings that they could not. Evans even left open the possibility that a plaintiff might be able to “recover under RICO for loss of an employment opportunity” if “an employee is able to establish that he has been unlawfully deprived of a property right in promised or contracted-for wages.” 434 F.3d at 928. The Evans court did not say it would permit recovery for such a property deprivation “only if the promise of wages did not arise following a physical injury at work.”7 Such a scenario involving harm to an intervening legal entitlement, separating the physical injury from the downstream pecuniary losses, would be more factually analogous to this case than the actual facts of Evans are. Focusing on whether pecuniary losses “flowed” in some wаy from a personal injury does not make sense in cases involving the devaluation of an actual legal entitlement as the result of an independent RICO fraud.
b. Property Interest in Expectation of Worker‘s Compensation Benefits
Having determined that the devaluation or loss of a statutory entitlement is an injury to property, we must next decide
Michigan has not directly addressed at what point an injured employee has a property interest in the benefits provided by the WDCA. In construing other statutes, Michigan courts have held that “a unilateral expectation of [a statutory] benefit” before the benefit is awarded is not property because the claimant must “have a legitimate claim of entitlement to the funds.” City of St. Louis v. Mich. Underground Storage Tank Fin. Assuranсe Policy Bd., 215 Mich.App. 69, 544 N.W.2d 705, 708-09 (1996) (citing Williams, 424 N.W.2d 278). However, that principle originates in federal due process law. Town of Castle Rock v. Gonzales, 545 U.S. 748, 756, 125 S.Ct. 2796, 162 L.Ed.2d 658 (2005) (quoting Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972)). And when interpreting federal due process law, “[e]very regional circuit to address the question,” including the Sixth Circuit, “has concluded that applicants for benefits, no less than benefits recipients, may possess a property interest in the receipt of public welfare entitlements,” Cushman v. Shinseki, 576 F.3d 1290, 1297 (Fed.Cir.2009), so long as “a statute mandates the payment of benefits to eligible applicants based on objective, particularized criteria,” Mallette v. Arlington Cnty. Emps.’ Supplemental Ret. Sys. II, 91 F.3d 630, 639-40 (4th Cir. 1996); see also Hamby v. Neel, 368 F.3d 549, 559 (6th Cir. 2004); Flatford v. Chater, 93 F.3d 1296, 1305 (6th Cir. 1996).9
Federal due process law therefore recognizes a property interest in benefits that have not yet been awarded if the party asserting the property entitlement can “point to some policy, law, or mutually explicit understanding that both confers the benefits and limits the discretion of the [other party] to rescind the benefit.” R.S.W.W., Inc. v. City of Keego Harbor, 397 F.3d 427, 435 (6th Cir. 2005) (internal quotation marks omitted); see also Castle Rock, 545 U.S. at 756, 125 S.Ct. 2796 (“[A] benefit is not a protected entitlement if government officials may grant or deny it in their discretion.“). Michigan law is consistent with this approach. For example, the Michigan Supreme Court has held that a bar owner with a liquor license has a property interest in his expectancy of receiving a renewal license, independent of his interest in his existing license, despite having had no property interest in his expectancy of an initial license in the first place. Bundo v. City of Walled Lake, 395 Mich. 679, 238 N.W.2d 154, 160 (1976). The Michigan Supreme Court focused en-
Applying this principle to the present context, we look to the statutory procedures for obtaining worker‘s compensation in Michigan and conclude that applicants for worker‘s compensation benefits have a property interest in those benefits at the time that their employer beсomes aware of the injury. The WDCA‘s mandatory language deprives the WCAC of discretion about whether to award benefits. The statute says that employees injured in the course of employment “shall be paid compensation,” which is calculated according to a rigid schedule.
ently mandatory ... statutes.” Castle Rock, 545 U.S. at 760, 125 S.Ct. 2796. In fact, no adjudication is required: an employee receives worker‘s compensation benefits fourteen days “after the employer has notice or knowledge of the disability.”
The dissent argues that the employer‘s statutory ability to dispute the payment of benefits negates any claim of legal entitlement to bеnefits prior to a decision to award them.10 As an initial matter, both the dissent and the district court misread
The absence of a specific statutory provision authorizing an employer not to pay compensation during a dispute also distinguishes this case from Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 58-61, 119 S.Ct. 977, 143 L.Ed.2d 130 (1999). In American Manufacturers, the Supreme Court held that claimants of worker‘s compensation benefits in Pennsylvania did not have a property interest in the payment of benefits prior to an adjudication that the medical treatments for which they sought compensation were “reasonable and necessary.” Id. at 61, 119 S.Ct. 977. In 1993, Pennsylvania had amended its worker‘s compensation laws to insert a procedure by which an employer could require a review of the necessity of an employee‘s treatments “before a medical bill must be paid.” Id. at 45, 119 S.Ct. 977. The Supreme Court held that under the new regime, it was no longer enough that the plaintiffs demonstrated their “initial eligibility for medical treatment” because they had not overcome the second statutory hurdle of showing “that the particular medical treatment they received was reasonable and neces-
Here, the underlying Michigan state law does not require injured employees to make such an initial showing before they receive benefits, as Pennsylvania‘s law did. In contrast, Michigan law resembles the old Pennsylvania regime, stating simply that “[a]n employee[] who receives a personal injury arising out of and in the course of employment by an employer ... shall be paid compensation as provided in this act.”
Where, as here, the receipt of the benefit is nondiscretionary and statutorily occurs as a matter of course, we firmly believe that the Michigan courts would recognize a property interest in an injured employee‘s expectancy of worker‘s compensation. And, as already discussed, because a property interest in the form of entitlement to benefits is consistent with “property” as defined by
c. Property Interest in Claim for Worker‘s Compensation Benefits
Independently of our analysis thus far, we alsо hold that the plaintiffs in this case have a property interest in their claim for benefits. Therefore, even if Michigan courts would not recognize an expectancy of benefits under the WDCA as property, the plaintiffs in this case may proceed by alleging injury to property in that their claim to benefits under the worker‘s compensation scheme was damaged by the defendants’ actions. American Manufacturers specifically reserved judgment on whether an applicant has “a property interest in ... claims for payment, as distinct from the payments themselves.” Am. Mfrs., 526 U.S. at 61 n. 13, 119 S.Ct. 977 (emphasis added). The holding was limited to the expectation of payment of worker‘s compensation (i.e., mailing a particular check), not the claim for payment (i.e., entitlement to present a claim). Had the defendants in American Manufacturers barred the plaintiffs from following the statutory procedures for presenting a claim at all, the result would very likely have been different.
Michigan law describes a cause of action for worker‘s compensation as a “species of property“—for both the plaintiff and the defendant. Williams, 430 Mich. 603, 424 N.W.2d 278, 282, 283 & n. 16 (1988) (citing Logan, 455 U.S. at 428, 102 S.Ct. 1148). Although the dissent is correct that the plaintiff in Williams had already been awarded worker‘s compensation, unlike here, the relеvant interest at
issue was not the employee‘s expectancy in benefits but whether an employer had a property interest in a worker‘s compensation cause of action such that a failure to afford the employer adequate process in such a proceeding injured his property. The court held that it was property. Here, the plaintiffs’ claim is not necessarily about particular payments themselves, but also about the defendants’ deception before the WDCA that deprived the plaintiffs of the ability to assert their claim for benefits under the statute in a fair forum.13 We hold that Michigan would recognize a claim for worker‘s compensation benefits as a species of property independently of whether the employee had obtained an interest yet in the underlying benefits themselves. And as discussed throughout, we see no reason to exclude injuries to causes of action, which are indisputably injuries to property, from the category identified by Congress as “property” in RICO.
Finally, the defendants are correct that worker‘s compensation is “a substitute for the tort system.” Brown III, 546 F.3d at 359. That does not mean, however, that claims for worker‘s compensation sound in tort. When a plaintiff‘s personal injury is filtered through the WDCA, it is converted into a property right.
d. Effect of Settlement and Unfavorable Adjudication
Attacking the plaintiffs from another angle, the defendants claim that the plaintiffs “were not deprived of their causes of action” because the plaintiffs pursued the claims to resolution, be it by settlement or by final adjudication. Appellee Cassens Br. at 28. This argument mischaracterizes
Of course, the plaintiffs’ RICO action can succeed only by proving that the plaintiffs suffered an ascertainable injury from the defendants’ fraud. To do that, they must show that their claims to benefits had value, i.e., the claims had some likelihood of success had they been able to present them in a fair proceeding. This is similar to legal malpractice cases, where the plaintiffs also allege injury to an underlying claim, and Michigan requires plaintiffs to prove a “suit within a suit“—in other words, that they could have prevailed or obtained a better outcome in the original lawsuit. Coleman v. Gurwin, 443 Mich. 59, 503 N.W.2d 435, 437 (1993) (internal quotation marks omitted). This requirement “insure[s] that the damages claimed to result from the attorney‘s negligence are more than mere speculation.” Id. Losing or settling the original lawsuit does not, on its own, render the injury speculative. To the contrary, damages are generally quantified counterfactually. See, e.g., Chronister Oil Co. v. Unocal Ref. & Mktg. (Union Oil Co. of Cal.), 34 F.3d 462, 464 (7th Cir. 1994) (Posner, J.) (“The point of an award of damages, whether it is for a breach of contract or for a tort, is, so far as possible, to put the victim where he would have been had the breach or tort not taken place.” (emphasis added)).
The same logic is true here; losing or settling a case due to fraudulent medical reports does not extinguish the plaintiffs’ property interest in bringing a claim free of fraud. It would be nonsensical to allow a plaintiff to sue her attorney for malpractice only if she had won the suit in which the malpractice occurred, even though she must still put on evidence that she would have won absent her attor-
Raising an argument that goes to the merits of the adjudication, the defendants dispute whether the plaintiffs were injured on the job. Cf.
We hold that the plaintiffs have a property interest in their claims for worker‘s compensation benefits, and the favorable or unfavorable adjudication or settlement of those claims in a proceeding tainted by fraud does not extinguish their property interest in those benefits. The plaintiffs, then, have alleged an injury to property.
5. Damages
Under
In the context of the Clayton Act, “a consumer ... is injured in ‘property’ when the price of those goods or services is artificially inflated by reason of the anticompetitive conduct complained of.” Reiter, 442 U.S. at 339, 99 S.Ct. 2326. By analogy, a person is injured in “property” under RICO when the value of the statutory benefits that she receives is artificially decreased by reason of the fraud complained of. “[T]he compensable injury necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern.” Sedima, S.P.R.L., 473 U.S. at 497, 105 S.Ct. 3275. Calculating such differences is rarely an exact science, but the plaintiffs should bе able to put on proof of how much compensation they would have received under the WDCA‘s rigid schedule of compensation but for the defendants’ allegedly fraudulent medical testimony. The difference between that amount and the amount they received in settlement is neither speculative nor too difficult to surmise.
The WDCA calculates a compensatory award using detailed instructions and tables set forth in
Because the plaintiffs have alleged a specific, ascertainable injury to property within the meaning of RICO, they are entitled to pursue these damages.
D. Adequacy of the Pleadings
The plaintiffs have plausibly alleged an “enterprise” and Dr. Margules‘s role in its “operation or management.” For purposes of RICO, “an enterprise includes any union or group of individuals associated in fact,” elsewhere described as “a group of persons associated together for a common purpose of engaging in a course of conduct.” Boyle v. United States, 556 U.S. 938, 944, 129 S.Ct. 2237, 2243, 173 L.Ed.2d 1265 (2009) (internal quotation marks omitted). Such an association must have “a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise‘s purpose.” Id. at 2244. The requirements are interpreted flexibly. For example, members do not need to hold fixed roles, and a chain of command is not required. Id. at 2245.
1. Allegations of “Enterprise”
“[A] corporation cannot be both the ‘enterprise’ and the ‘person’ conducting or participating in the affairs of that enterprise.... [A] corporation may not be liable under
The alleged enterprise consists of Cassens and Crawford, or Cassens, Crawford, and Dr. Margules. R. 1 (Compl. ¶ 20). Crawford and Cassens can comprise an enterprise on their own because Crawford “act[ed] as an agent for, or in concert with, Cassens.” R. 1 (Compl. ¶ 18) (emphasis added). Moreover, the plaintiffs’ allegations suggest that Dr. Margules is a distinct actor with whom the other defendants have “a long-standing business relationship.” Id. ¶ 11; see also Appellee Margules Br. at 29 (“[The complaint] establishes that Dr. Margules was in practice for himself.“). Therefore, the allegations satisfy the distinctness requirement.
Moreover, the complaint meets Twombly‘s plausibility standard. The complaint alleges that the “Defendants expressly or implied[ly] communicated to Dr. Margules that [they] wanted him to write reports stating plaintiff was not disabled due to work-related injuries, regardless of the true circumstances.” R. 1 (Compl. ¶ 12). Thus, the plaintiffs have plausibly pleaded the existence of an “enterprise.”
2. Dr. Margules‘s Role
The plaintiffs have adequately alleged Dr. Margules‘s involvement in the operation or management of the enterprise. Reves v. Ernst & Young, 507 U.S. 170, 185, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993). The defendants in Reves were not part of the operation of the enterprise because they simply prepared standard financial statements “based on information from management‘s accounting system.” Id. at 186, 113 S.Ct. 1163. Dr. Margules, on the other hand, allegedly did more than participate in his “own affairs” of evaluating medical conditions. Id. at 184-85, 113 S.Ct. 1163. According to the complaint, Dr. Margules‘s evaluations were not objective medical reports. Dr. Margules was a “‘cut off’ doctor ... upon whom Crawford and Cassens could rely for opinions which they could cite as grounds for cutting off or denying benefits.” R. 1 (Compl. ¶ 6B). He allegedly fraudulently slanted his medical evaluations to serve the purposes of the enterprise, with “the express or implied promise of future payment of money.” Id. Therefore, the complaint adequately alleges that Dr. Margules was part of the operation or management of the enterprise.
E. Leave to File an Amended Complaint
Courts should “freely give leave [to amend a complaint] when justice so requires.”
We REVERSE the district court‘s judgment and REMAND the case for further proceedings consistent with this opinion.
JULIA SMITH GIBBONS
UNITED STATES CIRCUIT JUDGE