ORDER GRANTING FINAL APPROVAL OF CLASS ACTION SETTLEMENT
DONNA RYU, Magistrate Judge
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs Brandy Hunt and Brian Castillo filed this consolidated class action against Defendant Imperial Merchant Services, Inc., doing business as Check Recovery Systems ("IMS"), for violating the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq. Plaintiffs claimed that IMS' practice of demanding 10% interest, in addition to a statutory service charge for dishonored checks, was not permitted by California law and was unlawful under the FDCPA.
This case has traveled a long and somewhat windy path to resolution. On July 5, 2005, Plaintiff Brandy Hunt wrote a $133.15 check to Pak `n Save, which was returned unpaid due to insufficient funds. Hunt v. Check Recovery Sys., 478 F. Supp. 2d 1157, 1159 (N.D. Cal. 2007). Subsequently, Check Recovery Systems sent Ms. Hunt a letter demanding payment of the check, along with a $35 service charge, and $3.26 in interest. On September 25, 2005, Ms. Hunt filed a Voluntary Petition for Bankruptcy. Nine weeks later, on December 5, 2005, on behalf of California check writers, Ms. Hunt filed a putative class action against "Check Recovery Systems, Inc." contending that it had violated the FDCPA by seeking both a statutory service charge and interest on a dishonored check. Hunt, 478 F. Supp. 2d at 1158. Ms. Hunt contended, consistent with two prior district court decisions, Palmer v. Stassinos, 348 F. Supp. 2d 1070, 1083 (N.D. Cal. 2004), and Irwin v. Mascott, 112 F. Supp. 2d 937, 947 (N.D. Cal. 2000), that a debt collector that sought statutory damages under California Civil Code section 1719 could not also seek interest. Shortly thereafter, IMS initiated an adversary proceeding in the bankruptcy action, challenging the dischargeability of Ms. Hunt's check. Thereafter, the litigation proceeded on two tracks, in the bankruptcy court, where IMS was seeking a ruling that it could lawfully collect interest from Ms. Hunt, and in the FDCPA class action before the district court, where Plaintiffs were seeking a ruling that Defendant had unlawfully collected interest, and was required to compensate the putative class for the unlawful charges.
In the FDCPA class action, Ms. Hunt, along with co-Plaintiff Brian Castillo, succeeded in obtaining certification of a statewide class. On summary judgment, Plaintiffs prevailed on liability on the basis that for dishonored checks, IMS could not lawfully seek both a statutory service charge and prejudgment interest. Hunt, 478 F. Supp. 2d at 1169 (granting in part Plaintiff's motion for summary judgment); Hunt v. Check Recovery Sys., 241 F.R.D. 505 (N.D. Cal. 2007) (granting class certification of certain claims under Fed.R.Civ.Proc. 23(b)(3) ("Damages Class"), and other claims under Fed.R.Civ.Proc. 23(b)(2)).
The Damages Class was defined as follows: "All persons to whom Defendant mailed a collection demand at any time since December 5, 2004, (1) which included a demand for both interest and a statutory service charge on a dishonored check; (2) where the check was written in the State of California for personal, family or household purposes; and (3) whose mail was not returned as undeliverable."
In connection with class certification, the Court ordered Defendant to pay notice costs, since Defendant had been found liable for violating the FDCPA. Defendant pursued an interlocutory appeal of this ruling. The result was an appellate ruling permitting a district court to shift class notice to a defendant where liability was clear. Hunt v. Imperial Merch. Servs., Inc., 560 F.3d 1137, 1144 (9th Cir. 2009). Defendant provided collection records showing that during the class period, it collected $147,623.02 in unlawful interest charges.
In the bankruptcy action, after ten months of litigation, IMS prevailed on its claim that the debt was not dischargeable, but it was not awarded prejudgment interest. The Honorable Dennis Montali, United States Bankruptcy Court Judge, ruled that Check Recovery System was entitled to a judgment for the check amount, and either a service charge pursuant to Section 1719, or prejudgment interest, but not both. IMS first appealed the bankruptcy court decision to the Ninth Circuit Bankruptcy Appellate Panel. Plaintiff Hunt had the appeal transferred to the district court where the FDCPA class action was proceeding. The district court affirmed the Bankruptcy Court judgment, adopting the reasoning of its FDCPA summary judgment ruling.
IMS appealed the district court's affirmance of the bankruptcy court ruling to the Ninth Circuit. On May 12, 2008, terming the instant litigation "of the utmost importance to California creditors, California consumers, and the California economy," the Ninth Circuit certified the state law question, whether a debt collector recovering on a dishonored check may recover both a service charge under California Civil Code section 1719 and prejudgment interest under California Civil Code section 3287, to the California Supreme Court. The California Supreme Court heard the matter and issued a decision fully adopting Ms. Hunt's argument that on a dishonored check, a debt collector could seek either prejudgment interest, or a statutory service charge, but not both. Imperial Merch. Servs., Inc. v. Hunt, 47 Cal.4th 381, 398 (2008). On September 1, 2009, the Ninth Circuit, finding that the California Supreme Court's decision was "self-explanatory and dispositive," affirmed the lower court. Imperial Merch. Servs., Inc. v. Hunt, 580 F.3d 893, 894 (9th Cir. 2009).
IMS claimed that it closed its doors in Fall 2009 and that its assets had little or no net worth. In November 2009, the parties entered into a classwide settlement agreement, which Class Counsel believed to be the best way to assure that class members are compensated for the unlawful fees they paid to IMS.
The Honorable Saundra B. Armstrong granted Preliminary Approval of the Class Settlement and Notice Plan on June 21, 2010. The parties subsequently effectuated the Notice of Class Settlement per the terms of the Settlement Agreement. Among other things, it notified class members of their right to opt out and to file written objections to the class action settlement.
The parties subsequently consented to have the consolidated cases assigned to Magistrate Judge Donna M. Ryu for all purposes.
The Court conducted the hearing for final approval of the Stipulation of Settlement ("Stipulation") and Plan of Distribution, and entry of Final Judgment on September 21, 2010. At the hearing, the Court noted that it had received no written objections, and counsel confirmed that they were not aware of any objections. No objectors or class members attended the hearing. The vendor selected to administer the notice and distribution of the class settlement funds submitted a sworn declaration stating that it had only received one request to opt out of the class.
II. DISCUSSION
The Court read and considered all of the filings submitted in connection with the final approval hearing, including:
1. The Parties' Joint Motion for Preliminary Approval of Class Settlement Pursuant to Fed.R.Civ.P. 23(e), filed January 13, 2010;
2. Stipulation of Settlement, filed January 13, 2010;
3. The Court's Order Granting Motion for Preliminary Approval of Class Settlement Pursuant to Fed.R.Civ.P. 23(e), filed June 21, 2010; and
4. Declaration of Tiffany Ables re: Class Notice Mailing dated September 9, 2010.
The Court finds that notice in this case was adequate. Federal Rule of Civil Procedure 23 requires that the Court direct to class members the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. On June 21, 2010, Judge Armstrong approved the Class Notice as to form and content. Based on the Declaration of Tiffany Ables, the Court finds that the parties have complied with the procedures set forth in Judge Armstrong's Order. The Court also finds that the notice procedure meets the requirements of Rule 23, as it constituted the best notice practicable under the circumstances, and constituted due and sufficient notice to all persons entitled thereto. Notice of the settlement thus was adequately disseminated and clearly apprised any persons inclined to object to file timely objections in accordance with Rule 23.
In assessing the fairness, reasonableness and adequacy of the settlement, the Court has evaluated, considered and balanced the following non-exclusive factors: (1) the strength of Plaintiffs' case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the benefits of the settlement; (4) the extent of discovery completed and the stage of the proceedings; (5) the experience and views of counsel; and (6) the reaction of the class members to the proposed settlement.
It is clear from the history of the case and the papers that have been filed in this action that Defendant has vigorously disputed the class claims, and that although Plaintiffs' Counsel obtained significant favorable rulings before the Ninth Circuit and the California Supreme Court, the class faced substantial risks in continuing the litigation due to IMS's insolvency. This risk would increase with the passage of time; moreover, class members would be increasingly difficult to locate over time, and thus would be less likely to share in any recovery. In its papers and at the hearing, Plaintiffs' Counsel estimated that under the class settlement distribution plan, class members are likely to receive between 70% and 100% of the value of their claims. The results of the settlement are therefore of substantial benefit to the class.
It is clear that the parties were represented by experienced counsel, that the parties engaged in substantial discovery and investigation, and that the settlement was the result of the extensive and arms' length negotiation between the parties conducted during the settlement conference held by Magistrate Judge Zimmerman.
Finally, the fact that no class members objected and only one class member opted out indicates a favorable reaction of the class to the proposed settlement.
After careful consideration of all matters raised at the hearing and all papers filed by all parties, and all other pleadings, papers and documents on file in this action, and good cause appearing therefore, the Court now approves the Stipulation of Settlement and Plan of Distribution, and enters the Final Judgment which constitutes a final adjudication of the claims asserted by the named Plaintiffs and the Class Members against Imperial Merchant Services, Inc., doing business as Check Recovery Systems ("IMS"), defendant in this action.
ACCORDINGLY, IT IS ORDERED, ADJUDGED, AND DECREED AS FOLLOWS:
1. This Court has jurisdiction over the subject matter of the Action and over all parties to the Action, including all Class Members.
2. The Stipulation of Settlement ("Stipulation") and Plan of Distribution filed in this action are incorporated by reference as though set forth in full.
3. The Court finally approves the settlement set forth in the Stipulation of Settlement and approves the Plan of Distribution proposed by Plaintiffs, and finds that the Stipulation of Settlement and Plan of Distribution are, in all respects, fair, reasonable and adequate to the Class.
4. This action against IMS is dismissed on the merits and with prejudice.
5. IMS is released and discharged with respect to all claims that were asserted or that could have been asserted in this Action, whether known or unknown, arising out of the facts and circumstances surrounding IMS's actions in seeking to collect interest on the checks at issue, as set forth in the Stipulation of Settlement.
6. The notice of the settlement given to those members of the Class entitled to notice was the best notice practicable under the circumstances, including individual notice to all members of the Class entitled to notice who could be identified through reasonable efforts. The notice provided due and adequate notice of those proceedings and of the matters set forth in the proposed settlement set forth in the Stipulation and Plan of Distribution to all persons entitled to notice. The notice fully satisfied the requirements of Rule 23(e) of the Federal Rules of Civil Procedure and the requirements of due process.
7. Without affecting in any way the finality of the Final Judgment to be entered, this Court shall retain jurisdiction over: (a) implementation and enforcement of the settlement and Plan of Distribution; (b) disposition of the Settlement Fund to Damages Class Members; (c) hearing and determining Plaintiffs' Counsel's application for attorneys' fees, costs, interest and expenses; and, (d) the Action until the final judgment contemplated in this order has become effective and each and every act agreed to be performed by the parties shall have been performed pursuant to the Stipulation of Settlement and Plan of Distribution.
IT IS SO ORDERED.
Dated: September 27, 2010
age-number dilatory handling of plaintiffs' claim constitutes `bad faith' justifying imposition of the statutory penalties set forth above, but for which this Court has held no separate cause of action can lie."
Lisecki, 150 Mich. App. at 754 (quoting
Roberts v. Auto-Owners Ins. Co., 422 Mich. 594, 607-608 (1985) (discussing bad faith handling of claims in the context of the denial of no-fault benefits)).
As the court noted in Wright, claims for tortious denial of benefits seeking to recover as damages the workers compensation benefits denied, the claims Plaintiffs make in the instant case, are to be distinguished from claims for recovery of damages for intentional infliction of emotional distress, which Michigan courts have allowed to proceed only in extreme cases. Wright, 220 F. Supp. 2d at 845 n. 9. The Sixth Circuit has twice affirmed this Court's prior holding that Plaintiffs cannot state such a claim on the facts of this case. Brown II, 492 F.3d at 647; Brown III, 546 F.3d at 364.
This same reasoning has been employed by courts interpreting the provisions of the Longshore and Harbor Workers' Compensation Act ("LHWCA") which, though a federal statute, contains similar exclusivity and penalty provisions to those in the WDCA. In Atkinson v. Gates, McDonald Co., 838 F.2d 808 (5th Cir. 1988), the court examined plaintiff's claims, essentially sounding in intentional infliction of emotional distress, that her employer's insurance carrier had wrongfully and fraudulently terminated her disability compensation benefits without notice or explanation. Id. at 809. Plaintiff filed a claim to have her benefits reinstated, following the procedures of the LHWCA and ultimately was awarded benefits. Her employer, who had not timely disputed the claim before terminating benefits, was assessed a penalty. Plaintiff then filed suit, claiming that the termination of benefits had been wilful and in bad faith and claimed damages for mental and emotional distress. Affirming the district court's dismissal of plaintiff's claims based upon the exclusivity provision of the LHWCA, the court observed:
Under the scheme established in [the LHWCA], the employer has the unfettered right to controvert a claim for compensation and, if the employer does so, no compensation is due until an award is made. There can be no
wrongful failure to pay
compensation when no compensation is due. If as in this case, there has been no timely controversion, then the penalty for pre-award failure to pay compensation is that fixed by section 14(e), and no other penalty is provided for, except that if an award is entered attorneys' fees may also be ordered under section 28. As the district court aptly observed:
Since the Act itself provides not only for payment of benefits, but also for redress in the event of nonpayment of benefits, and further does not distinguish between good faith and bad faith nonpayment of benefits, the apparent intent of the Act is that the penalty provisions provide the exclusive remedy for late payment or nonpayment of benefits.
838 F.2d at 808 (internal quotation marks and citation omitted) (emphasis in original). The court affirmed the district court's ruling that plaintiffs' sole avenue of relief was the exclusive administrative process set forth in the LHWCA. Rejecting the notion that the LHWCA penalty provisions did not fully compensate Plaintiff, the court observed: "`[A]lthough the penalties may in some instances be inadequate, this does not, within the overall nature of the compensation concept, make them invalid. At most, it may be cause to apply to the legislature for a more suitable penalty level.'"
838 F.2d at 814 (quoting 2A Larson,
Workmen's Compensation Law § 68.34(c) (1987) at 13-145-146
now at 6-104 Larson's Workers' Compensation Law § 104.05[3] (2010)).
Some courts have allowed departures from exclusive workers' compensation schemes in rare instances where the defendant's behavior has been found to be particularly heinous and where plaintiffs sought damages not for their lost benefits and related expenses but for emotional and mental distress separate and apart from the underlying claim for benefits. Reserving departure
Michigan courts have recognized a claim for intentional infliction of emotional distress in connection with an insurer's outrageous wrongful termination or denial of workers' compensation benefits. In Broaddus v. Ferndale Fastner Division, 84 Mich. App. 593 (1978), the court construed plaintiff's claim, which sought damages only for emotional and mental injury and not compensation for the benefits denied, and Atkinson v. Farley, 171 Mich. App. 784 (1988), the courts found that defendants' conduct was the type of "extreme and outrageous" behavior necessary to state a claim of intentional infliction. In Wright, the court distinguished both Broaddus and Atkinson on this very basis and concluded that these decisions did not justify a departure from the exclusive administrative scheme in a case of bad faith claim denial that did not meet this high threshold of offensive conduct. These cases involved facts simply not alleged in the instant case, such as an employer's acute awareness of a particular employee's precarious financial situation and termination of benefits knowing and intending that cutting off or denying benefits would cause the employee severe emotional distress. The Sixth Circuit has twice affirmed this Court's holding that Plaintiffs' in the instant case have not stated a claim for intentional infliction of emotional distress. See Brown II, 492 F.3d at 647 and Brown III, 546 F.3d at 364.
from the exclusive administrative scheme only in such extreme cases comports with the most fundamental precepts of the workers' compensation scheme, as recognized by Professor Larson in his classic treatise on workmen's compensation law:
It seems clear that a compensation claimant cannot transform a simple delay in payments into an actionable tort by merely invoking the magic words "fraudulent, deceitful and intentional" or "intentional infliction of emotional distress" or "outrageous" conduct in his complaint. The temptation to shatter the exclusiveness principle by reaching for the tort weapon whenever there is a delay in payments or a termination of treatment is all too obvious, and awareness of this possibility has undoubtedly been one reason for the reluctance of courts to recognize this tort except in cases of egregious cruelty or venality.
6-104 Larson's Workers' Compensation Law § 104.05[3] (2010). Quoting this passage from Professor Larson's treatise in Sample v. Johnson, 771 F.2d 1335 (9th Cir. 1985), another case interpreting the parallel provisions of the LHWCA, the court distinguished intentional infliction claims, which are "conspicuously contemptible," from all other denials or terminations of benefits:
The bulk of authority in cases involving ordinary refusals to pay is
contra. One reason is that most worker's compensation statutes, like the LHWCA, have penalty provisions for wrongful failure to pay. . . . While it may be that the penalty provisions are inadequate to fully compensate a worker who has been harmed by an employer's refusal to pay when due, the problem requires a political solution.
771 F.2d at 1347. As this Court previously held, and as the Sixth Circuit twice confirmed, this case simply does not present allegations of such "cruel" or "venal" conduct.
Moreover, claims for intentional infliction of emotional distress are based upon separate tortious conduct of the defendant which in no way involves a determination of the plaintiff's underlying entitlement to benefits. In Broaddus, where the court permitted plaintiffs' claim for intentional infliction of emotional distress to stand, the court recognized this "subtle yet crucial distinction:"
While it is true that plaintiffs must prevail on a showing that the physical injuries were compensable prior to showing that defendants acted in collusion to deny those benefits, a subtle yet crucial distinction must be made clear. Plaintiffs are not seeking as damages in this lawsuit the compensation benefits they alleged were required to be paid from July 2, 1973, to December 17, 1973. They are seeking, in part, separate damages for emotional distress caused by the alleged intentional and wrongful denial of these compensation benefits. It is the emotional and mental injuries which are the subject of the lawsuit, and which are claimed by plaintiffs to be not compensable under the Act and thus actionable in a common-law tort suit.
84 Mich. App. at 599. Plaintiff in
Broaddus was already receiving workers' compensation benefits pursuant to a settlement, and was seeking damages for a separate and independent tort, intentional infliction of emotional distress, that did not in any way involve a determination of her entitlement to benefits.
It appears, based upon the allegations of Plaintiffs' Complaint, that Plaintiff Brown was awarded benefits through the appeal process but it is not clear (1) whether that claim has been finally determined or (2) if it has been finally determined, and Plaintiff is in fact receiving benefits, the nature of Plaintiffs' damages, which are stated in the Complaint to be the same as those of the other Plaintiffs who never appealed their denials and are not receiving benefits. Regardless of the finality of Plaintiff Brown's claim for benefits, his claim fails, along with all other Plaintiffs, for the separate and independent reason that he failed to allege an injury to business or property as discussed in section IIIB, infra.
The court in Gates commented on this same "subtle" distinction. Rejecting plaintiffs' argument that the exclusivity rationale inevitably would bar even the most egregious behaviors of an insurer or employer, the court distinguished scenarios which involved separate tortious conduct (for example where an insurer gained illegal entry into a claimant's home in the course of an investigation), the proof of which was independent of the underlying claim for benefits:
But the obvious difference between the examples posed by Atkinson and Larson (see note
7, supra) in this connection, and the case of bad faith refusal to pay compensation benefits, is that in the former class of case plaintiff's entitlement to recover in the tort action is in no way dependent on his having been entitled to compensation benefits or to the defendant's having violated the compensation statute. By contrast, in order to recover for bad faith or malicious failure to pay compensation benefits there must have been an entitlement to such benefits or a violation of the compensation statute in the failure to pay them.
838 F.2d at 814-815.
At the hearing on this matter, in response to Defendants' argument regarding the underlying nature of the injury Plaintiffs are claiming in the instant case which is addressed more fully infra in section IIIB, Plaintiffs' counsel posed the following hypothetical to the Court: what if the RICO scheme involved the theft of Plaintiffs' benefit checks before Plaintiffs received them, would the injury still be derivative of Plaintiffs' personal injuries and thus not compensable under RICO? This hypothetical is inapt and crystallizes the fundamental flaw in Plaintiffs' claim — this scenario involves a separate and independent tort (theft or conversion or some similar claim) which is in no way dependent upon proof of Plaintiffs' underlying entitlement to their workers' compensation benefits. Plaintiffs in the instant case have made clear that they are not seeking damages for emotional distress (likely because such damages are clearly not recoverable under RICO), and that they are seeking to recover the workers' compensation benefits that they allege they were wrongly denied, along with medical expenses and attorneys fees which are wholly derivative of their claim that they are entitled to benefits.
Regardless of how they package their RICO claim, Plaintiffs are asking this Court to decide whether they were entitled to receive workers' compensation benefits and, secondarily, if they were so entitled, whether Defendants' initial denial of those benefits was fraudulent. They seek to impugn the character and credibility of Dr. Margules and to show that the injuries they sustained were in fact work related or sufficiently disabling to entitle them to workers' compensation benefits. The gravamen of their claims is that the physician chosen by their employer was unfairly influenced by their employer's interests and conducted an unfair, even fraudulent, medical exam which they claim resulted in the denial of their benefits. Plaintiffs' Complaint is replete with allegations of conflicting medical opinions as to each Plaintiff's injury, asserting that one doctor's pedigree and opinion trumps that of Dr. Margules or another doctor. This is precisely the fact finding process that the Michigan legislature placed squarely and exclusively within the special competence of the WCDB and the WCAC, with the possibility of limited judicial review following an administrative determination. As the court observed in Feld v. Robert Charles Beauty Salon, 435 Mich. 352 (1990), the unfairness of which these Plaintiffs' complain is best addressed through the WDCA procedures:
[T]he plaintiff argues that medical examinations conducted pursuant to § 385 are inherently unfair because "[t]he physicians selected by the carriers for the employers are often the same physicians time after time and are well versed with the Workers' Compensation laws and procedures." However, given the current scheme of the WDCA, we suggest that the appropriate remedy for this concern would be to impeach the credibility of the physician selected by the carrier through cross-examination. Additionally, an attorney would have "ample opportunity to challenge the use made of the information obtained by the examination when the findings are presented as evidence in court." Barbet, Compulsory medical examinations under the federal rules, 41 Valor 1059, 1074 (1955).
435 Mich, at 365-366. This perceived unfairness is inherent the scheme and is part of the delicate balance struck by the legislature in deciding to impose what is in essence a no-fault system on employers for workplace injuries sustained by their employees.
As recognized by the courts in Feld, Warner and Couture, and by the courts in Sample and Gates interpreting the parallel provisions of the LHWCA, the procedures and remedies set forth in these workers' compensation schemes are Plaintiffs' exclusive avenue for redressing their claims of even allegedly bad faith denials of workers compensation benefits. To allow actions for allegedly bad faith claim denials to proceed in tandem, or in lieu of, this system would subvert the clear intent of the legislature to vest these factual determinations in the workers compensation boards created to decide them and would create an intolerable potential for inconsistent results. As the court noted in Gates, discussing the provisions of the LHWCA:
[W]here entitlement to the compensation benefits would be a necessary element of plaintiff's right to recover in a tort suit, to allow the separate tort action opens the possibility of inconsistent results between the resolution of the compensation
claim itself and the resolution of the separate tort claim, as the two claims would be adjudicated by different bodies. This consideration is clearly applicable in the LHWCA context where the compensation rulings are made in a federal administrative framework, with provision for appeal to an administrative review board and then to a regional federal court of appeals, while the tort action would likely be determined by a jury in a state or federal trial court. In the second place, the LHWCA, in common with many other compensation statutes, expressly addresses the matter of when payments thereunder are to be made and provides penalties for failing to timely make the required payments. By contrast, neither the LHWCA nor the typical compensation statute addresses in any analogous manner the methods which the employer or insurance carrier may or may not utilize in investigating the claim.
Gates, 838 F.2d at 815.
Regardless of how Plaintiffs' characterize the alleged "fraud" in this case, they cannot disentangle their RICO claim from their underlying claim for benefits, the resolution of which lies within the exclusive jurisdiction of the WDCA. As noted by the courts in so many of the cases discussed above, if Plaintiffs' feel that the penalty provisions of the statute fail their essential purpose, this is an issue best addressed by the legislature.
2. The existence of this exclusive, comprehensive administrative scheme forecloses Plaintiffs' RICO claims.
Plaintiffs' attempt to convert their dispute over entitlement to workers compensation benefits into a RICO claim is foreclosed by the extensive administrative scheme which has been specifically enacted as an exclusive remedy to address the wrongful denial of those benefits. Several courts have addressed this issue in other contexts and have held that where there exists a comprehensive statutory scheme, that does not provide for a private right of action, a plaintiff cannot create a RICO claim out of a matter that would otherwise be exclusively addressed by that administrative scheme. In Jackson, Judge Edmunds conducted this inquiry specifically with respect to the WDCA, on facts materially indistinguishable from the present case, and concluded that Plaintiffs' sole remedies were those set forth under the WDCA and rejected Plaintiffs' attempt to avoid those procedures and exclusive remedies "simply by characterizing a denial of benefits as `fraudulent.'" 2010 WL 931864 at * 18.
As noted by the court in Jackson, several cases compel this conclusion. For example, in Danielsen v. Burnside-Ott Aviation Training Center, Inc., 941 F.2d 1220 (D.C. Cir. 1991), employees of various Navy aircraft maintenance contractors brought a RICO claim against their employers alleging that the employers had misclassified the workers as "technicians" when they should have been classified as "aircraft workers." Classifying the workers as "aircraft workers" would have entitled them to earn a higher wage. Id. at 1225-26. The employees claimed that the predicate acts were mail and wire fraud which consisted of entering into the contracts and using the mails and wires in furtherance of the contracts. Id. at 1226. The court found that the employee's claims were cognizable under the Service Contract Act, 41 U.S.C. § 351 (the "SCA") which specifically addressed wage and other issues under federal or federally assisted contracts. Id. at 1223. The statutory scheme involved multiple levels of administrative review of claims and numerous regulations relating to the methodology by which wage classification determinations were to be made. Id. The court concluded that the SCA did not give to a private right of action and went
on to hold that the exclusive remedy embodied in the SCA scheme also did not allow for a civil action under RICO:
[W]hat plaintiff will pursue his administrative remedies under the Act where more direct and expeditious relief is available in a private suit? How much more the case where plaintiffs couch their complaint in terms of RICO to give them, not a remedy equal to that provided under the SCA, but three times that remedy? How much more still where their attorneys would be extracting their fees not from their clients but from the other side? Thus, the ingenious pleading of the action in RICO terms rather than in straight SCA language cuts against the implication of the right of action rather than in its favor.
941 F.2d at 1228 (citing
Miscellaneous Service Workers, etc. v. Philco-Ford Corp., 661 F.2d 776 (9th Cir. 1981)).
In McCulloch v. PNC Bank Inc., 298 F.3d 1217 (11th Cir. 2002) the court came to the same conclusion analyzing claims cognizable under the Higher Education Act ("HEA"). Parents of college-bound students brought claims under HEA and RICO against lenders and marketers of student loans who allegedly failed to disclose that there were alternative lending arrangements available to students whose parents did not qualify for federal parent loans. The court held that there was no private right of action under HEA and concluded that plaintiffs' RICO claims were similarly foreclosed:
Plaintiffs' mail and wire fraud claims are nothing more than purported HEA violations pled in RICO terms. Thus, since Congress did not intend for Plaintiffs to have a private right of action against lenders for the failure to disclose Stafford Loan information, and instead provided administrative remedies, it follows that Congress could not have intended for that same failure to disclose to constitute a violation of the mail and wire fraud statute.
298 F.3d at 1226-27. The court relied in part on the Eleventh Circuit opinion in
Ayres v. General Motors Corp., 234 F.3d 514 (11th Cir. 2000), where the court found that violations of the National Traffic and Motor Vehicle Safety Act could not serve as the basis for the predicate acts for a RICO
claim. Citing the court's decision in
Danielsen, the
McCulloch court held: "[I]n light of the HEA's enforcement scheme, granting the Secretary of Education exclusive authority to remedy violations of the HEA, and the fact that the HEA does not confer a private right of action, the Court finds that the failure to disclose Stafford Loan information, even if in violation of the HEA, cannot form the basis for a civil RICO claim seeking treble damages and injunctive relief."
298 F.3d at 1227.
See also Bodimetrics Health Servs., Inc. v. Aetna Life Casualty,
903 F.2d 480, 486-487 (7th Cir. 1990) (holding that RICO claims were foreclosed by the exclusive benefits determination process of the Social Security Act);
Norman v. Niagara Mohawk Power Corp., 873 F.2d 634, 637 (2d Cir. 1989) (relying on
Danielsen to hold that the Energy Reorganization Act provides the exclusive remedy for violations of its proscriptions and dismissing plaintiffs' RICO claim, cautioning that "artful invocation of controversial civil RICO, particularly when inadequately pleaded, cannot conceal the reality that the gravamen of the complaint herein is section 210 harassment.");
Bridges v. Blue Cross and Blue Shield Assoc., 935 F. Supp 37, 41-43 (D.D.C. 1996) (holding that the comprehensive administrative remedy scheme embodied in the Federal Employee Health Benefits Act ("FEHBA") left no room for a remedy under RICO: "the broad enforcement and oversight powers of the OPM established in
the statute indicate that the exclusive remedy for an action cognizable under the FEHBA lies under the FEHBA, not under another federal statute.");
Livingston v. Shore Slurry Seal, Inc., 98 F. Supp. 2d 594, 600-601 (D.N.J. 2000) (relying on the reasoning of
Danielsen, finding that the Davis-Bacon Act contained a detailed administrative scheme which was the exclusive remedy for alleged underpayment of wages claims for work performed on federal construction projects, and dismissing plaintiffs' RICO claims based on alleged violations of the statute).
In this Court's prior Opinion in Gifford v. Meda, No. 09-cv-13486, 2010 WL 1875096 (E.D. Mich. May 10, 2010), the Court discussed these same cases and this same theory of exclusive administrative regulatory jurisdiction in a different context and borrows here from its discussion in that Opinion.
Plaintiffs claim that they were injured by Defendants' alleged RICO violations in that they were deprived of workers' compensation benefits, and incurred attorneys' fees, medical care expenses and mileage to and from medical care. (Compl. ¶¶ 17, 25, 38, 42, 61, 70.) As to each Plaintiff's RICO claim, the ad damnum clauses is identical: "[P]laintiff demands judgment against defendants [or against Cassens and Crawford only in the case of Plaintiffs Thomas and Riggs, who were not examined by Margules] for damages measured by the amount of benefits improperly withheld from him, plus interest as provided by law, all tripled in accordance with RICO, together with attorney fees and costs as provided by law." (Compl. pp. 8, 10-11, 16, 18-19, 22-23, 26.) Plaintiffs' characterization of the denial of benefits as "fraudulent" does not change the essence of the claim, which is for deprivation of benefits to which Plaintiffs claim they are entitled under the WDCA. See, e.g. Butchers Union Local No. 498 v. SDC Inv., Inc., 631 F. Supp. 1001, 1011 (E.D. Cal. 1986) ("Bluntly put, no matter how you cut the complaint, the only conceivable `fraud' is the deprivation of plaintiffs' rights under the labor law. Since defendants' liability, under the mail and wire fraud statutes, if any, is wholly dependent on the labor laws, judgment of the defendants' conduct . . . lies exclusively with the [NLRB]."). See also Danielsen, 941 F.2d at 1229 ("To frame the action for [an award of statutory benefits] in terms of RICO fraud adds nothing.")
As discussed extensively above, Plaintiffs' claims in the instant case are wholly dependent upon a determination of the WDCA that they are entitled to the benefits which their employer disputes.
This Court agrees with Judge Edmunds conclusion in Jackson that:
RICO was never intended to create a path into courts for litigants who would otherwise be limited to exclusive administrative remedies and procedures, and subject to strict damages limitations. The Court finds that Plaintiffs may not use their RICO claims to reform Michigan's workers' compensation law — allowing them
to do so would be an unwarranted intrusion into Michigan state law and procedure. Because Plaintiffs' sole remedies are those set forth under the WDCA, Plaintiffs' RICO claims are dismissed.
Jackson, 2010 WL 931864 at * 18.
Plaintiffs argue that this result is foreclosed by the Sixth Circuit's opinion in Brown III, where, in dicta in its analysis of the issue of preemption under McCarran-Ferguson, that court stated that "the WDCA provision regarding sanctions for failure to pay benefits does not appear to contemplate the fraudulent denial of worker's compensation benefits." 546 F.3d at 363 (emphasis in original). The Sixth Circuit stated that this Court's finding, again made in the context of analyzing reverse preemption under McCarran-Ferguson, that a RICO suit would impair the Michigan legislature's goal of limited liability for employers, "relie[d] on the faulty premise that the state has a policy of limited liability for employers even when they fraudulently deny worker's compensation benefits." Id. (emphasis in original). The Sixth Circuit stated that "no authority supports this proposition," but did not discuss the holdings of the Michigan Court of Appeals in Couture, Warren and Lisceki where such a policy is expressed. See Jackson, 2010 WL 931864 at * 17 (rejecting plaintiffs' argument that Brown III foreclosed this result, noting that "there is no indication that the Sixth Circuit considered [Couture and Warner] which held that the WDCA strictly limits an employer's liability for disputing a workers' compensation claim — even those made in bad faith.") Nor did the Sixth Circuit specifically address the host of cases holding that exclusive statutory administrative schemes cannot be avoided by pleading as RICO violations claims which fall expressly under those procedures.
This Court concludes that Plaintiffs' remedy for recovery of their workers compensation benefits lies exclusively within the administrative scheme contained in the WDCA which forecloses any claim under RICO and for that reason their RICO claims are dismissed.
B. Plaintiffs' Lack Standing to Sue Under RICO Because Their Claims For Medical Expenses and Related Pecuniary Loss Sustained as Result of Their Workplace Injuries Do Not Constitute Injury to Business or Property Under RICO and Are Too Speculative to Confer Standing Under RICO
The Court notes that Plaintiffs' only response to Defendants' legal argument regarding the requisite "injury to business or property" necessary for standing to assert a claim under RICO is the statement that the Sixth Circuit in Brown III "specifically held plaintiffs plead damages." (PLS.' Resp. to Cassens Mot. to Dismiss, Dkt. No. 92, p. 3.) The Court agrees with Defendants that the Sixth Circuit did not address Plaintiffs' standing to assert a RICO claim and did not analyze or decide whether Plaintiffs have alleged a cognizable RICO "injury to business or property."
1. Plaintiffs' damages derive from their workplace injuries and do not constitute injury to business or property under RICO.
The RICO statute does not permit recovery of damages for personal injuries. See 18 U.S.C. § 1964(c). By its express terms, RICO provides for recovery only for "any person injured in his business or property." 18 U.S.C. § 1964(c). See Drake v. B.F. Goodrich Co., 782 F.2d 638, 644 (6th Cir. 1986) (holding that the phrase "business or property" excludes personal injuries suffered, rejecting plaintiffs' RICO claims, based on personal injury and wrongful death, alleging pecuniary loss as a result of exposure to toxic chemicals) (citing Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979)). See also Genty v. Resolution Trust Corp., 937 F.2d 899, 918-19 (3d Cir. 1991) ("RICO plaintiffs may recover damages for harm to business and property only, not physical and emotional injuries due to harmful exposure to toxic waste.").
Not only do personal injuries themselves not provide standing in civil RICO cases, "but also [] pecuniary losses flowing from those personal injures are insufficient to confer standing under § 1964(c)." Evans v. City of Chicago, 434 F.3d 916, 926 (7th Cir. 2006). Recognizing that most personal injuries produce some sort of financial loss, courts have rejected the notion that such injuries confer standing under civil RICO:
In our view, the ordinary meaning of the phrase "injured in his business or property" excludes personal injuries, including the pecuniary losses therefrom. . . . [T]he pecuniary and non-pecuniary aspects of personal injury claims are not so separated as the appellants would have us accept; rather, loss of earnings, loss of consortium, loss of guidance, mental anguish, and pain and suffering are to be found, intertwined, in the same claim for relief. We agree that "[h]ad Congress intended to create a federal treble damages remedy for cases involving bodily injury, injury to reputation, mental or emotional anguish, or the like,
all of which will cause some financial loss, it could have enacted a statute referring to injury generally, without any restrictive language."
Grogan v. Platt, 835 F.2d 844, 847 (11th Cir. 1988) (quoting
Morrison v. Syntex Laboratories, 101 F.R.D. 743, 744 (D.D.C. 1984) (emphasis in original).
See also Doe v. Roe, 958 F.2d 763, 770 (7th Cir. 1992) (holding that miscellaneous expenses, including attorneys' fees and loss of earnings, which were totally derivative of plaintiff's alleged personal injuries, were not recoverable under RICO).
A court reached a similar conclusion in Fisher v. Haliburton, No. 06-1168, 2009 WL 5170280 (S.D. Tex. Dec. 17, 2009) which involved an attack by Iraqi insurgents on a group of civilian contractors driving fuel convoys in Iraq. Id. at * 1. Plaintiff contractors, who suffered physical injuries in the attack, alleged that Haliburton fraudulently failed to disclose the true risks of working in Iraq and sought in part, under RICO, damages in the amount of continued compensation they allegedly lost due to the injuries they sustained in Iraq as well as the difference in pay they would have received had the true risks of the work been disclosed. Id. at * 4. Rejecting plaintiffs' argument that their loss of compensation was caused not by personal injuries but by Haliburton's alleged predicate acts of mail and wire fraud in failing to inform them of the danger of the job, the court found that plaintiffs' alleged pecuniary injuries were a direct result of their personal injuries suffered in Iraq. Id. "The injuries that plaintiffs suffered in Iraq caused their alleged loss of compensation, and that loss is intimately related to plaintiffs' personal injuries. Consequently, because personal injuries and their resulting pecuniary consequences are not an "injury to business or property" under section 1964(c), plaintiffs' "continued compensation" injury does not confer standing to bring a RICO claim." Id. at * 5. See also Allman v. Philip Morris, Inc., 865 F. Supp. 665, 668-669 (S.D. Cal. 1994) (finding that "federal courts that have addressed [the] question have all held that Congress intended the `business or property' language to exclude civil RICO actions seeking recovery of expenses resulting from personal injury," and holding that medical expenses incurred as a result of personal injury (the expense of medical treatment and nicotine patches incurred by smokers who had become addicted to tobacco, allegedly through defendant's fraudulent acts) were the economic consequence of the underlying personal injury and not compensable under RICO); Morrison v. Syntex Laboratories, Inc., 101 F.R.D. 743, 746 (D.C. 1984) ("Thus, injury in one's property under the RICO provision would not include damages for the money lost as a result of the costs of medical attention and treatment incurred from the injuries allegedly sustained . . . from consumption of the alleged chloride deficient.")
In Vavro v. Albers, No. 05-cv-321, 2006 WL 2547350 (W.D. Pa. Aug. 31, 2006), a case involving the alleged fraudulent deprivation of workers' compensation benefits, parallels to the instant case are apparent and the court's reasoning instructive. Plaintiff suffered a workplace injury and filed a claim for workers' compensation benefits. His claim for benefits was denied and plaintiff brought suit under RICO, along with several other claims, to recover damages for various "personal and financial injuries" seeking damages "treble the equivalent amount of [Workers Compensation Benefits] and disability benefits he was entitled to receive, plus the costs of continuing health care over his lifetime." Id. at * 3-4. Plaintiff claimed that, in addition to wrongfully denying plaintiff workmens compensation and disability benefits, defendants conducted fraudulent defensive medical exams ("DMEs") and used plaintiff's personal medical information ("PMI") derived from those exams to justify similar claim denials. The court noted at the outset: "It appears that the present lawsuit is nothing more than an attempt by plaintiff to relitigate his failed claims for WCOD and disability benefits, albeit under the guise of state common law tort and civil RICO claims." Id. at * 5. Rejecting plaintiff's claims on numerous other grounds, the court concluded that plaintiff's claim was barred "for a more primal reason in that he lacks standing under Section 1962(c) to bring a civil RICO claim." Citing many of the cases discussed above, the court thoroughly summarized:
[A]ll of the injuries Plaintiff claims to have suffered constitute either personal injuries (intentionally inflicted distress, physical pain and mental distress, a diminished capacity to enjoy life, intentional infliction of emotional distress, denial of medical treatment and care), or financial injuries that derive from the alleged personal injuries (i.e., incurred medical bills for treatment and care, loss of income, diminished earning capacity, and other substantial economic losses), none of which are deemed compensable under RICO. As the Court of Appeals noted in
Genty v. Resolution Trust Corp., "[i]n ordinary usage, `injury to business or property' does not denote physical or emotional harm to a person. Indeed, the Supreme Court has declared that Congress's limitation of recovery to business or property injury `retains restrictive significance. It would for example exclude personal injuries suffered."
937 F.2d at 918 (quoting
Reiter v. Sonotone Corp., 442 U.S. 330, 339,
99 S.Ct. 2326,
60 L.Ed.2d 931 (1979)); see also
Zimmerman, 834 F.2d at 1169 (alleged injury of mental distress did not constitute an injury in business or property for RICO standing);
Fried, 900 F.Supp. at 762-63 (declining to find plaintiff's claim for hazard pay constituted an "injury" for RICO standing where hazard pay would have allegedly been paid to induce workers to work in an environment contaminated by dangerous asbestos fibers; in reality hazard pay constituted compensation for fear of catching a disease which is a type of emotional distress not covered by RICO). Moreover, to the extent a RICO plaintiff attempts to claim financial losses that derive from the personal injuries, the courts have refused to find a cognizable injury to property for RICO standing purposes. See
Thomas, 2005 U.S.App. LEXIS 7888, at *7-8 (affirming district court's rejection of civil RICO claim where alleged injury from RICO violations consisted of lost earning capacity due to depression which was found to be a non-cognizable injury under RICO);
Fried, 900 F.Supp. at 762
(quoting Grogan v. Platt, 835 F.2d 844, 847 (11th Cir. 1988)
(recognizing that although "`recovery for personal injury has pecuniary aspects' . . . it is important to distinguish between the pecuniary harm that arises from personal injuries and the pecuniary harm that arises from injury to business or property.")
2006 WL 2547350 at *21. The court held that plaintiffs' claims for "out-of-pocket medical expenses, lost income, diminished earning capacity, although capable of valuation, all derive from his [underlying medical condition] and the denial of his workers' compensation claim . . . Therefore, Plaintiff's alleged injuries are not the type of "injury" that creates RICO standing."
In the instant case, Plaintiffs claim that they were deprived of workers' compensation benefits, and incurred attorneys' fees, medical care expenses and mileage to and from medical care and claim damages "measured by the amount of benefits improperly withheld from [them], plus interest as provided by law, all tripled in accordance with RICO, together with attorney fees and costs as provided by law." These damages unquestionably were incurred as a direct result of Plaintiffs' on-the-job injuries. But for their workplace injuries, Plaintiffs would have no claim at all. The fact that the WDCA allows these Plaintiffs to bypass the legal proofs of negligence and causation normally associated with a personal injury claim does not change the nature of their claims — they seek to recover for injuries they allege that they suffered while working for Cassens and they seek medical benefits and related expenses. Regardless of how Plaintiffs characterize the wrong, their medical expenses, workers' compensation benefits, medical mileage and attorneys fees are damages which are indisputably wholly derivative of their personal injuries and as such are not injuries to "business or property" under RICO. Plaintiffs' seek damages in the amount of benefits they were denied and related medical expenses, i.e. they seek reimbursement for the pecuniary loss they suffered as a result of their workplace injuries, damages not recoverable under RICO, and therefore lack standing to bring their RICO claims.
2. Plaintiffs' damages, which are based upon a presumption of a legal entitlement to workers' compensation benefits, are too speculative to confer standing to bring their RICO claims.
Speculative damages are not recoverable under RICO. "The effective means of punishing a defendant in the civil RICO context is to apply the treble multiplier to damages established by competent proof, not based upon mere speculation and surmise." Fleischauer v. Feltner, 879 F.2d 1290, 1299 (6th Cir. 1989). "`Injury to mere expectancy interests or to an `intangible property interest' is not sufficient to confer RICO standing.'" Haliburton, 2009 WL 5170280 at * 5 (quoting Price v. Pinnacle Brands, Inc., 138 F.3d 602, 607 (5th Cir. 1998)). In Haliburton, the court discussed this requirement in analyzing plaintiffs' claims for damages measured by the amount they would have received in compensation had they been fully informed of the risks of working in Iraq (i.e. had defendants not committed the alleged predicate acts of failing to inform them of the risks of working in Iraq). The court concluded:
Whether plaintiffs would have been able to secure additional payment for their service in Iraq if any alleged undisclosed risks had been fully disclosed is speculative and does not confer standing under section 1964(c). See
Price, 138 F.3d at 607;
In re Taxable Mun. Bond Secs. Litig., 51 F.3d at 523;
Oscar, 965 F.2d at 785. The alleged compensation loss claimed by the plaintiffs is
not a "concrete financial loss," but rather is a theoretical claim that is more in line with an "injury to a[n] . . . intangible property interest."
Oscar, 965 F.2d at 783 ("[A] showing of `injury' requires proof of concrete financial loss, and not mere injury to a valuable intangible property interest."). Thus, according to controlling precedent, the theoretical compensation loss claimed by plaintiffs is too speculative to confer standing for a civil RICO cause of action under section 1964(c).
2009 WL 5170280 at * 5.
Thus, standing to bring a RICO claim must derive from something more than a speculative, intangible property interest. "While federal law governs most issues under RICO, whether a particular interest amounts to property is quintessentially a question of state law. See Logan v. Zimmerman Brush Co., 455 U.S. 422, 430, 102 S.Ct. 1148, 1154, 71 L.Ed.2d 265 (1982) ("The hallmark of property . . . is an individual entitlement grounded in state law. . . ."); Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972) (property interests "are created and their dimensions are defined by" sources "such as state law.")." Doe, 958 F.2d at 768. As discussed at length above, "plaintiffs must prevail on a showing that their physical injuries were compensable prior to showing that defendants acted in collusion to deny those benefits. . . ." Broaddus, 84 Mich. App. at 599. Until Plaintiffs can establish a legal entitlement to the benefits they claim to have been wrongfully denied, they cannot demonstrate a present property interest that would support of their claimed RICO injury.
In Jackson, Judge Edmunds came to a similar conclusion based on the legal principle of ripeness: "[T]he injury Plaintiffs may suffer in the denial of workers' compensation benefits — that have not been established — cannot yet be determined. Only when Plaintiffs are able to establish an injury (i.e., after their eligibility for benefits has been determined) will their claims be ripe for suit. Thus, Plaintiffs' RICO claims are dismissed." 2010 WL 931864 at * 21-22.
At the hearing on this matter, Plaintiffs' counsel argued to the Court that Plaintiffs are not seeking damages for their physical injuries but rather seek damages flowing from Defendants' "thwarting" the system, which is the conduct Plaintiffs claim caused their injuries. In other words, they argue, they are not seeking to recover the expenses incurred as a result of their physical injuries (although admittedly their damages are measured by those expenses) but rather for their employer's wrongful failure to pay those expenses. This "spin" on Plaintiffs' claim, which appears to be a semantic distinction without a difference, presumes that Plaintiffs' have an entitlement, a protected property interest, in the claimed benefits. Plaintiffs' claim to reimbursement for medical payments and other expenses incurred as a result of their denial of workers' compensation benefits is based on pure speculation as to their entitlement to those benefits. They have not established a present property right in those benefits and cannot establish such a right, as discussed above, other than by a final determination of entitlement to benefits through the exclusive administrative procedures set forth in the WDCA. Accordingly, Plaintiffs' speculative alleged injuries, based upon the expectancy of a legal entitlement, do not confer standing to bring a claim under RICO and Plaintiffs claims are dismissed for this separate and independent reason.
To establish standing to sue under 18 U.S.C. § 1964(c), Plaintiffs must establish "injury to their business or property." Drake, 782 F.2d at 644. The phrase "business or property" excludes damages for personal injuries and the pecuniary losses flowing therefrom and excludes damages which are speculative and based upon mere expectancy interests. The damages which Plaintiffs claim to have suffered are both too intimately tied to their personal injury claims and too speculative to constitute "injury to business or property" under RICO. As a result, Plaintiffs lack standing to bring those claims and their RICO claims are dismissed.
As this Court discussed at length in Brown I, even if Plaintiffs' claims survived the instant motions, the Court would stay Plaintiffs' RICO claims, which allege entitlement to workers' compensation benefits, based upon the Burford abstention doctrine. Brown I, 409 F. Supp. 2d at 801-803. In accord Jackson, 2010 WL 931864 at * 14 (finding this Court's reasoning and analysis persuasive and holding that if plaintiffs' claims survived the pending motions to dismiss, the court would stay the RICO claims pending final determinations of eligibility for workers compensation benefits under the WDCA). This Court agrees with Judge Edmunds that the Sixth Circuit did not address the Burford abstention issue in Brown III.
C. Plaintiffs' Motion for Leave to Amend
On September 9, 2010, one week before the hearing on this matter and more than two months after the last responsive pleading was filed on the instant motions, Plaintiffs filed a motion for leave to amend their Complaint, adding three new plaintiffs, a new defendant and additional factual allegations as to existing claims. This is Plaintiffs' third proposed amended complaint. Plaintiffs previously filed a motion to amend to their Complaint, on January 14, 2005. (Dkt. No. 32). Similar to the timing of the filing of the present third proposed amended Complaint, this first proposed amendment was filed shortly after the Defendants filed their original motions to dismiss. Without explanation, Plaintiffs' withdrew their first motion to amend on February 7, 2005. (Dkt. No. 36.) On July 15, 2005, after the Court held a hearing on the Defendants' original motions to dismiss, and just days before the Court issued its Opinion and Order dismissing Plaintiffs' Complaint, Plaintiffs filed their second motion for leave to amend their Complaint. (Dkt. No. 41.) The Court denied Plaintiffs' second motion for leave to amend in its Opinion and Order dated entered July 22, 2005. (Dkt. No. 42.) The Court notes that this "practice of `testing' the strength of their claims in the face of Defendants' motions to dismiss" appears to be a technique which Plaintiffs' counsel also employed in the Jackson case. Jackson, 2010 WL 931864 at * 6, 9 n. 17 ("The Court does recognize, however, the merit in Defendants' argument that Plaintiffs appear to be using Defendants' motions to dismiss as an opportunity to test the strength of their claims at Defendants' expense — suggesting that the motions to amend are made in bad faith.")
The Court has reviewed the instant proposed amended complaint and rejects Plaintiffs' third attempt to hone their claims in response to the flaws in their pleadings made manifest by Defendants' motions to dismiss. This third proposed amended complaint purports to add three new plaintiffs whose claims, like those of the Plaintiffs presently before the Court, seek damages measured by the amount of workmens compensation benefits they claim to have been wrongly denied. There is nothing new or different in the claims of the proposed new plaintiffs, or in the added factual content with regard to Dr. Margules, which changes the nature of the claims or the damages sought. A review of the proposed amendments, which are replete with detailed allegations regarding the employees' injuries and the conflicting medical opinions assessing those injuries, strengthens this Court's resolve in concluding that Plaintiffs' claims must be determined in the first instance by the administrative scheme embodied in the WDCA.
The third proposed amended complaint purports to add a damage component, in addition to "the amount of benefits improperly withheld," measured by "the time delay in receipt of hose benefits." (See e.g. Proposed Amended Complaint, Dkt. No. 117, 33.) It is not clear whether this proposed amendment to the ad damnum clause is a claim for monetary or emotional damages but in either case, as discussed above, such damages flow directly from the injuries suffered by these workers and are of a type not compensable under RICO's requirement that a plaintiff plead injury to business or property. Additionally, such damages are based upon a presumption of a legal entitlement and are therefore too speculative to confer standing under RICO.
The Court concludes that resolution of the claims set forth in the third proposed amended complaint, which ask this Court to decide whether these workers were entitled to the workers compensation benefits that they claim they were fraudulently denied, has been committed by statute to a determination by the WCDB and the WCAC under the exclusive administrative scheme embodied in the WDCA. Additionally, the damages sought in the proposed amended complaint, which seek recovery of benefits for workplace injuries, do not constitute injury to business or property under RICO and are based upon a presumption of a legal entitlement and are therefore too speculative to confer standing under RICO. The Court concludes upon careful review that Plaintiffs' proposed amendments would not defeat the instant motions to dismiss. Therefore, Plaintiffs' motion for leave to file the proposed amended complaint is denied on the grounds of futility. See Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir. 2000) ("A proposed amendment is futile if the amendment could not withstand a Rule 12(b)(6) motion to dismiss.").
IV. CONCLUSION
Because the Court is dismissing Plaintiffs' RICO claims on the grounds addressed in this Opinion and Order, it need not reach the merits of Defendants' arguments that (1) that Plaintiffs' claims are preempted by the LMRA; (2) that Plaintiffs have failed to plead and prove the existence of a RICO enterprise; and (3) that Plaintiffs have failed to adequately plead Dr. Margules' participation in the conduct of the affairs of the enterprise.
For the foregoing reasons, the Court:
(1)
GRANTS Defendant Cassens' motion to dismiss and for partial summary judgment and supplemental motion to dismiss, in which Defendant Crawford joins (Dkt. Nos. 83 and 95);
(2)
GRANTS Defendant Marugles' motion to dismiss (Dkt. No. 106);
(3)
DENIES as moot Defendant Cassens' renewed motion for summary judgment (Dkt. No. 82); and
(4)
DENIES Plaintiffs' motion for leave to amend (Dkt. No. 117).
IT IS SO ORDERED.