RICO Relief Denied: Are Employers at a Tipping Point for Brown v. Cassens-Type Lawsuits?

RICO Relief Denied: Are Employers at a Tipping Point for Brown v. Cassens-Type Lawsuits?

Most large employers are well aware of the U.S. Supreme Court's recent denial of a petition that it rehear the 6th Circuit Court's ruling allowing the plaintiffs in Brown v. Cassens Transport Company to proceed with a workers' compensation lawsuit based on alleged violations of the Racketeer Influenced and Corrupt Practices Act (RICO).* The wider issue now is whether we are at a tipping point in the frequency of cases.

  • Will the Supreme Court's action - or inaction - on December 7, 2009 result in large numbers of RICO-based lawsuits that will regularly expose employers to the expense and effort, win or lose, of conducting a defense in the federal court system and the possibility of triple damages?
  • Has the exclusive remedy doctrine been compromised so that the workers' compensation compact itself (no-fault medical care and wage replacement in exchange for exemption from litigation) is at risk?
  • Are there steps employers might take in their workers' compensation programs to reduce the risk of RICO-based lawsuits?

The original Brown v. Cassens decision in October, 2008 involving a Michigan workers' compensation claim stirred lively commentary in business, risk management and employee benefits publications. Attorney blogs and Web sites projected either foreboding or celebration depending on the author's convictions and practice orientation. LexisNexis and other legal resources added entries. Professional firms such as Sedgwick CMS updated their clients. A Hollywood actor even featured Brown v. Cassens in a demonstration clip (Link) on his promotional MySpace site. Clearly the word is out.

The Supreme Court's December, 2009 denial was widely reported in established risk management industry media. Despite the denial's critical importance in enabling Brown v. Cassens to proceed, however, it seems to have generated little fresh commentary in the blogosphere. More significant indicators that additional suits should be expected are:

  • Brown v. Cassens is not alone. Although still rare, other workers' compensation-related lawsuits are being allowed to proceed on the basis of RICO arguments.
  • The target is tempting. RICO provides for treble damages, increasing the potential payoff for a successful plaintiff; and a class action suit would multiply the exposure.
  • The legal profession is tooling up. The American Bar Association's ( ABA ) Labor and Employment Law Section has scheduled a session at its March 4-6, 2010 meeting entitled "Erosion of the Exclusive Remedy Doctrine." The panel includes one of the Brown v. Cassens defense lawyers. The program announcement promises, "If you practice workers' compensation law, employment law, represent injured employees, defend insurance companies, self-insured employers, governmental agencies, adjust claims, or practice medicine you cannot afford to miss this program." (For details see abanet.org/tips.)

As Brown v. Cassens progresses, employers may hear more about the allegations of RICO violations in the delivery of workers' compensation programs. Is there anything that they should be doing now? Sedgwick CMS recommends that they be ready, careful and calm:

  • Ready: Confirm that your internal specialists and critical vendor partners including insurers, TPAs, managed care vendors, medical service providers and attorneys understand the relevance of Brown v. Cassens for their work.
  • Careful: Innocence is not an assured defense, but it is a very good place to start. Employers are encouraged to conduct periodic reviews of patterns of usage of independent medical examiners (IMEs) and other service providers to establish that dependence on a limited number of resources has not created the appearance of collusion or selective utilization. Sedgwick CMS has recently amended its Service Expectations for claims examiners and managed care specialists to highlight similar precautions.
  • Calm: Remember that the plaintiff's attorneys in Brown v. Cassens still have to demonstrate the merits of their case in fact. So far they have only won permission to make a certain type of argument. Although that development is concerning for employers, the plaintiffs must now demonstrate that an offense has actually occurred and that it was committed by the defendants. Sedgwick CMS will be ready to assist any of our clients in defending their liability exposures should they be subjected to a RICO-based legal challenge to the claim administration process. We believe, however, that it is premature to project negative cost trends arising from Brown v. Cassens-type cases. The course for employers at this point is to monitor ongoing developments carefully.

For more information: Sedgwick CMS clients are encouraged to contact their program manager to discuss the implications of Brown v. Cassens for their program. Clients and other E-Bulletin recipients interested in additional information are also invited to contact Sedgwick CMS Workers' Compensation Practice Lead Darrell Brown at 562-981-1708, darrell.brown@sedgwickcms.com.

* For background see Sedgwick CMS Client Bulletin 2008:07, "Brown v. Cassens Transport: Will Sixth Circuit RICO Ruling Move Workers' Compensation into the Federal Court System."

© Copyright 2010 Sedgwick Claims Management Services, Inc. Reprinted with permission. This article originally appeared on the Sedgwick Claims Management Services, Inc. website as Client E-Bulletin 2010:2.