Opinion ID: 626814
Heading Depth: 3
Heading Rank: 2

Heading: Relationship Between RICO and the WDCA

Text: 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. 18 U.S.C. § 1962(c). RICO defines racketeering activity to include any act which is indictable under any of the following provisions of title 18, United States Code: ... section 1341 [18 U.S.C. § 1341] (relating to mail fraud), section 1343 [18 U.S.C. § 1343] (relating to wire fraud). Id. § 1961(1). Brown III, 546 F.3d at 352 (alterations and omissions in original). The WDCA provides that employees who are injured in the course of employment shall be paid compensation. Mich. Comp. Laws § 418.301(1). An injured employee receives payments beginning fourteen days after the employer has notice or knowledge of the disability. Id. § 418.801(1). The WDCA purports to make [t]he right to the recovery of benefits under the WDCA the employee's exclusive remedy against the employer for a personal injury or occupational disease, with the sole exception of intentional tort[s]. Id. § 418.131(1). 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.
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 U.S. Const. art. VI, cl. 2; Roberts v. Roadway Express, Inc., 149 F.3d 1098, 1105 (10th Cir.1998) (If Roadway means to argue that Colorado's Workers' Compensation Act provides the exclusive remedy for all work-related injuries including emotional distress caused by violations of the civil rights laws, that argument is readily disposed of by the Supremacy Clause.); Lopez v. S.B. Thomas, Inc., 831 F.2d 1184, 1190 (2d Cir.1987) (New York's Workers' Compensation Law might bar plaintiff's state common-law claim ... [, but] we do not read the workers' compensation law to deny relief under a federal statute. Were state law to erect such a bar, it would clearly run afoul of the Supremacy Clause....). State law can eliminate federal remedies only when authorized by reverse-preemption clauses, such as the one contained in the McCarran-Ferguson Act, which played a role in this panel's prior decision. Brown III, 546 F.3d at 357. Although the plaintiffs frame their argument in terms of preemption, the Supremacy Clause is relevant in this case only to decide whether Michigan can foreclose[ ] federal RICO claims, as the district court held. Brown IV, 743 F.Supp.2d at 668. Regardless of whether RICO preempts the WDCA, RICO provides a distinct cause of action. 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 42 U.S.C. § 1985 for injuries that stemmed from delayed payments of worker's compensation. The court reasoned that, because [t]he civil rights claims and constitutional claims are all based on the right provided by Florida Compensation Law, [t]he remedy for th[e] wrongful conduct cannot rise above the exclusive remedy provided by the Florida statutes. Id. Similarly, the entitlement to worker's compensation benefits is created by Michigan statutes. By analogy, specifying and limiting the remedy for violations of that entitlement arguably is Michigan's prerogative. More particularly, the defendants cite Connolly and Prine v. Chailland Inc., 402 Fed.Appx. 469, 470-71 (11th Cir.2010) (unpublished opinion), cert. denied, ___ U.S. ___, 131 S.Ct. 2100, 179 L.Ed.2d 892 (2011), for the proposition that this court lacks subject-matter jurisdiction over RICO claimsthat is, the allegations do not state a cognizable RICO claimif the state court would decline to exercise jurisdiction over the plaintiffs' worker's compensation claims. 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 may violate state laws does not exclude it from the proscriptions of the federal mail fraud statute. Parr v. United States, 363 U.S. 370, 389, 80 S.Ct. 1171, 4 L.Ed.2d 1277 (1960). It follows that mail fraud is still criminal even when the existence of fraud varies according to whether a state prohibits conduct or whether it affords entitlements. [2] United States v. Blandford, 33 F.3d 685, 702 (6th Cir.1994) (affirming a mail-fraud conviction by distinguishing a case with identical conduct because one state proscribed the defendant's action while the other state did not), cert. denied, 514 U.S. 1095, 115 S.Ct. 1821, 131 L.Ed.2d 743 (1995). Thus, mail fraud is a sanctionable offense even when it resembles a state tort. For these same reasons, this court has jurisdiction over the federal civil RICO claim even if the Michigan courts would not hear a claim for worker's compensation. A federal civil RICO claim and a state claim for worker's compensation are legally distinct, even though they share factual underpinnings.
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 Congress passed both sets of statutes. In contrast, enabling statutes for state agencies, passed by state legislatures, say nothing about Congress's intent with regard to RICO. Michigan cannot limit the scope of a federal RICO cause of action. 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-rate 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 absent the fraud could a court determine the extent of the damages. Wegoland Ltd., 27 F.3d at 21. Similarly, only by knowing whether the plaintiffs were entitled to worker's compensation could a court determine the extent of the damage produced by the defendants' fraud. Additionally, without the filed-rate doctrine, victorious plaintiffs [in utility rate suits] would wind up paying less than non-suing ratepayers, id., just as victorious plaintiffs in this case would wind up recovering more than injured workers who do not bring a RICO suit. 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 for 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.
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.