Opinion ID: 2982087
Heading Depth: 3
Heading Rank: 4

Heading: Property Interest Under RICO

Text: Because Michigan has created a property interest in the continued receipt of worker’s compensation benefits, as well as in the expectancy of those benefits, I will now turn to whether these statutory entitlements constitute an injury to property within the meaning of RICO. The majority concludes that even if these were statutory entitlements under Michigan law, they are not cognizable for the purposes of RICO, relying on a misplaced belief that neither Jackson nor Scharnitzke can recover under RICO because the property interest they seek to vindicate relates in some manner to a personal injury. I use the phrase “relate in some manner to” because the majority has failed to provide us with a standard on this point. Rather, it employs eight different 5 I would also note that Michigan has recognized a property interest in a party’s cause of action before the WDCA. Michigan law describes a cause of action for worker’s compensation as a “species of property”—for both the plaintiff and the defendant. Williams, 424 N.W.2d at 282, 283 & n.16 (citing Logan, 455 U.S. at 428). Specifically, Michigan has explained that a party has a property interest in a worker’s compensation cause of action such that a failure to afford a party adequate process in such a proceeding injured its property. A claim based on deception before the WCAC that deprived a party of the ability to assert his or her claim for benefits under the statute in a fair forum would therefore constitute an injury to property under RICO. And as discussed throughout, I 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. No. 10-1453 Jackson, et al. v. Sedgwick, et al. Page 32 formulations to describe the relationship between the personal injury and the injury to property, including “flow from,” “arising directly out of,” and “associated with,” without specifying which it considers to be the standard. Maj. Op. at 13–15. Given that many of these phrases have distinct meanings under our precedent, this ambiguity will likely cause confusion in the future. Relatedly, I find it troubling that the majority assumes for the sake of its opinion that the employees have alleged legitimate statutory entitlements, yet does not even define the type of interest that this creates under Michigan law. It seems impossible to assert that RICO does not include an interest if one has not even attempted to define or categorize the interest at issue. I thus find the majority’s position—that RICO, which specifically protects against injuries to property, does not protect against an assumed undefined injury to property because it relates in some undefined manner to a personal injury—to be unsatisfactory. Although the law is quite clear that a plaintiff cannot bring a RICO action where the injury alleged is a personal injury, no court has ever held that a plaintiff cannot bring a RICO action where the injury alleged is an injury to property because that plaintiff has also suffered a personal injury upon which the plaintiff has made no legal claim. That the majority fails to see this distinction renders its analysis unpersuasive. For the reasons articulated below, I would hold that injury to the statutory entitlements alleged by the employees in this case is an injury to property within the meaning of RICO. Congress provided in 18 U.S.C. § 1964(c) that “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court.” The statute offers no further guidance on the meaning of “business or property.” When faced with interpreting similar language in the context of the Clayton Act, the Supreme Court acknowledged that the inclusion of the word “business” works to narrow the definition of “property” from its otherwise naturally broad meaning. Reiter v. Sonotone Corp., 442 U.S. 330, 338 (1979). “Congress must have intended to exclude some class of injuries by the phrase ‘business or property.’” Id. at 339. This construction is equally applicable to the No. 10-1453 Jackson, et al. v. Sedgwick, et al. Page 33 language in RICO. For example, money is a species of property under state law, but to hold that all monetary losses are covered by RICO would render the word “business” superfluous. Therefore, whereas damage to a building is an obvious property injury, purely pecuniary losses are sometimes indicative of property injury and sometimes not, depending on whether the pecuniary loss is to a legal entitlement—i.e., property. See id. at 340 (“[T]he fact that petitioner [] was deprived of only money, albeit a modest amount, is no reason to conclude that she did not sustain a ‘property’ injury.”). Against this backdrop, we have 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 (1990); see also Drake v. B.F. Goodrich Co., 782 F.2d 638, 644 (6th Cir. 1986); Evans, 434 F.3d at 930–31; Grogan v. Platt, 835 F.2d 844, 847 (11th Cir. 1988), cert. denied, 488 U.S. 981 (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. 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.6 The defendants and the district court focus on language in these cases rejecting pecuniary losses “flowing from” personal injuries to argue that any pecuniary losses downstream from a personal injury are categorically personal in nature and unrecoverable under RICO. See, e.g., Evans, 434 F.3d at 926. The majority seems to reject the use of the term “flowing from,” yet does not offer a definitive replacement. In any event, by focusing on the personal-injury aspect of this case, in whichever capacity they have chosen, the defendants, the district court, and the majority skip over 6 However, there is some inconsistency among courts when the injury claimed as a result of the RICO violation includes lost wages, but this is in part because some states do recognize a legal entitlement to employment opportunities. Compare Diaz v. Gates, 420 F.3d 897, 900 (9th Cir. 2005) (en banc) (lost wages from wrongful death caused by RICO violation may be properly pleaded as a property interest given California law), with Evans, 434 F.3d at 930–31 (lost wages from wrongful incarceration caused by RICO violation not property interest given Illinois law). No. 10-1453 Jackson, et al. v. Sedgwick, et al. Page 34 the first and most fundamental question at issue—has any legal entitlement been harmed. They are correct that “but for” the personal injury, the employees would have had no interest in any benefits. But there is nothing in the text of RICO or the cases they point to that provides for ignoring damage to an intervening legal entitlement because it arose following a personal injury. In fact, the majority opinion makes the Sixth Circuit the first to read RICO as preventing recovery for injuries to property “by reason of” a RICO violation solely because the property interest itself would not have existed but for a personal injury. This is incorrect for three reasons. 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. Recognizing statutory entitlements as property under RICO does not render any term of the act superfluous. See Reiter, 442 U.S. at 338–39. Nor does the text reject recovery for certain legal entitlements because they accrued following a personal injury. Congress’s only other express limitation is that the injury to property must be “by reason” of a § 1962 violation; the text narrows recovery based on the origin of the injury, not the origin of the property. Based on the plain language of § 1964, I see no reason to exclude statutory entitlements to worker’s compensation benefits—which are recognized as property under state law—from the category protected by RICO. 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. at 1521. 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 (rejecting argument that Clayton Act requires injury to commercial property interests); No. 10-1453 Jackson, et al. v. Sedgwick, et al. Page 35 Sedima, S.P.R.L., 473 U.S. at 497 (rejecting argument that RICO applies only to organized crime). The majority 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, I 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 majority does not argue statutory entitlements or claims to benefits generally are not property under RICO, but rather that such interests constitute property only when the underlying wrong to be vindicated is an injury to business or property. Such an approach means that a plaintiff could recover under RICO for the fraudulent devaluation of welfare benefits, which do not arise following a personal injury, but not for the fraudulent devaluation of worker’s compensation benefits, solely because the latter do. A plaintiff could recover for the loss of a cause of action for wrongful termination, but not for the loss of a cause of action for wrongful death. Nothing in the text of RICO evinces an intent by Congress to draw such arbitrary distinctions among property interests, nor do we find any support for the exclusion of these claims from the protections of RICO. Such an approach is incompatible with RICO because it qualifies the term “property” without a basis to do so in the RICO statute. See Reiter, 442 U.S. at 338–39 (rejecting interpretation of “business or property” as “business or business property”). Classifying property injuries according to their origins creates untenable distinctions. Moreover, to the extent the majority relies on the “flowing from” standard, it 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, 835 F.2d at 847. Neither of these cases involved an injury to an intervening legal entitlement. 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 No. 10-1453 Jackson, et al. v. Sedgwick, et al. Page 36 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). I 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. 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”7 in some way 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. For these reasons, I would conclude that the devaluation or loss of a statutory entitlement is an injury to property within the meaning of RICO. Because Jackson alleged that he had started receiving worker’s compensation benefits under Michigan law prior to the defendants’ decision to terminate those benefits, it is undeniable that he has a statutory entitlement to these benefits. The majority is incorrect to distinguish this statutory entitlement from all others on the faulty reasoning that all injuries related to a personal injury are outside the scope of RICO. Likewise, Scharnitzke has alleged that he was denied fraudulently the nondiscretionary worker’s compensation benefits that he was due under Michigan law. That he could not have incurred these benefits but for a personal injury suffered at work does not change their legal status. Under longstanding principles, Jackson and Scharnitzke have each alleged that they have suffered an injury to property. 7 Additionally, I am concerned that the language “flowing from” is vague. It certainly cannot require dismissal of any civil RICO claim that can be traced to a personal injury, as even Grogan concedes: “Without ruling on hypothetical cases, we can conceive of injuries resulting from murder for which recovery would be possible that do not involve issues such as loss of earnings and loss of support that are part of many personal injury claims.” 835 F.2d at 848. No. 10-1453 Jackson, et al. v. Sedgwick, et al. Page 37