Brown v. Cassens Transport Co.

GIBBONS, J., delivered the opinion of the court. MOORE, J. (pp. 648-51), delivered a separate opinion concurring in part and dissenting in part.

ACKERMAN, D.J. (pp. 651-52), delivered a separate concurring opinion.

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

Plaintiffs-appellants Paul Brown, William Fanaly, Charles Thomas, Gary Riggs, Robert Orlikowski, and Scott Way (“plaintiffs”) filed suit in federal district court against defendants-appellees Cassens Transport Company (“Cassens”), Crawford & Company (“Crawford”), and Dr. Saul Margules (“defendants”) alleging that defendants employed mail and wire fraud in a scheme to deny them worker’s compensation benefits promised under the Michigan Worker’s Disability Compensation Act (“WDCA”), Mich. Comp. Laws § 418.301, and raising federal and state law claims. On defendants’ motion, the district court dismissed plaintiffs’ complaint for failure to state a claim on which relief could be granted. Fed.R.Civ.P. 12(b)(6).

For the reasons below, we affirm.

I.

Plaintiffs are current or former employees of Cassens who submitted worker’s compensation claims to Cassens based on injuries they claim to have sustained while performing work-related tasks. It is uncontested that Cassens, which is self-insured for purposes of paying benefits under the WDCA, contracted with Crawford to serve as a claims adjuster for the worker’s compensation claims of Cassens’s employees. According to plaintiffs, Cassens and Crawford deliberately selected and paid unqualified doctors, including Mar-gules, to give fraudulent medical opinions that would support the denial of worker’s compensation benefits. Plaintiffs further assert that Cassens and Crawford ignored other medical evidence demonstrating that plaintiffs’ injuries were work related and thus compensable under the WDCA. Plaintiffs accuse defendants of wrongfully denying or ceasing worker’s compensation benefits payable to them as a result of their injuries.

On June 22, 2004, plaintiffs filed suit against Cassens, Crawford, and Margules in federal district court, claiming violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961(1)(B), 1962(c), 1964(c). Plaintiffs asserted in their complaint that defendants sent fraudulent communications among themselves and to plaintiffs by mail and wire in violation of 18 U.S.C. §§ 1341, 1343; those allegations of mail and wire fraud constituted the predicate acts for plaintiffs’ RICO claims. Plaintiffs also raised a state law claim of intentional infliction of emotional distress. Defendants moved for dismissal pursuant to Fed.R.Civ.P. 12(b)(6), and, on July 15, 2005, the district court granted that motion. Brown v. Cassens Transp. Co., 409 F.Supp.2d 793 (E.D.Mich.2005). On the same day the district court issued its dismissal order, plaintiffs filed a motion for leave to file an amended complaint. The court entered judgment in favor of defendants on July 18, 2005, and denied plaintiffs’ motion to file an amended complaint on July 22, 2005.

Plaintiffs filed this timely appeal.

II.

We review de novo a district court’s Rule 12(b)(6) dismissal for failure to state a claim upon which relief can be granted. Hill v. Blue Cross & Blue Shield of Mich., 409 F.3d 710, 716 (6th Cir.2005). The plaintiffs’ factual allegations are taken- as true and the complaint is viewed in -the light most favorable to the plaintiffs. Id. We will not affirm the district court’s dismissal of a complaint on Rule 12(b)(6) grounds “unless it appears beyond doubt that the plaintifffs] can prove no set of facts in support of [their] elaimfs] which would entitle [them] to relief.” Id. (alteration in original) (internal quotation marks omitted).

III.

Title 18, Section 1962 of the United States Code makes it unlawful for an individual “employed or associated with an enterprise” engaged in activities relating to 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....” 18 U.S.C. § 1962(c). The term “racketeering activity” includes, among other things, any act indictable under the federal mail fraud, 18 U.S.C. § 1341, or wire fraud, 18 U.S.C. § 1343, statutes. 18 U.S.C. § 1961. In addition to providing criminal penalties for certain racketeering activities, RICO provides a private right of action and treble damages for “[a]ny person injured in his business or property by reason of a violation of section 1962.... ” 18 U.S.C. § 1964(c).

On appeal, plaintiffs challenge the district court’s decision to dismiss their RICO claims on the ground that they failed to plead detrimental reliance on the defendants’ alleged misrepresentations concerning the cause of their injuries. As plaintiffs acknowledge, the well-established precedent of this circuit requires that a civil RICO plaintiff alleging mail or wire fraud plead reliance, that is, that a defendant made fraudulent representations to the plaintiff on which the plaintiff relied. See, e.g., VanDenBroeck v. CommonPoint Mortgage Co., 210 F.3d 696, 701 (6th Cir.2000); Cent. Distribs. of Beer, Inc. v. Conn, 5 F.3d 181, 184 (6th Cir.1993); Blount Fin. Servs., Inc. v. Walter E. Heller & Co., 819 F.2d 151, 152 (6th Cir.1987); Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir.1984). Plaintiffs urge us to depart from these prior holdings and reverse the district court, proposing an alternative rule that eliminates the reliance requirement and permits a successful RICO claim based on mail or wire fraud where a plaintiff alleges that a defendant made a misrepresentation to a third person that was the proximate cause of an injury to the plaintiff. Because our precedent expressly requires a showing of reliance and thus forecloses the rule plaintiffs propose, we must affirm the district court’s judgment.

In their effort to persuade us to discard the reliance requirement in our RICO jurisprudence, plaintiffs point to both Supreme Court precedent and the caselaw of our sister circuits. Neither source compels the result plaintiffs urge, however. We begin with the two decisions of the Supreme Court on which plaintiffs rely: Neder v. United States, 527 U.S. 1, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999), and Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). Plaintiffs cite the Court’s decision Neder as support for the proposition that reliance is an inappropriate element in civil RICO actions based upon mail or wire fraud. In so doing, plaintiffs rely exclusively upon a single statement in the Court’s extensive Neder opinion, namely, the Court’s observation that the common law’s requirement of justifiable reliance “plainly ha[s] no place in the federal fraud statutes.” 527 U.S. at 24-25, 119 S.Ct. 1827. Although plaintiffs place great emphasis on this one statement, we deem this remark insufficient to warrant a reversal of Sixth Circuit precedent. Neder is a criminal case that speaks to the elements of criminal bank, mail, and wire fraud under 18 U.S.C. §§ 1344, 1341, and 1343, the predicate acts for the criminal RICO charges there. Id. at 6, 119 S.Ct. 1827. The opinion reiterates a common understanding of the elements of these federal criminal statutes over a long period of time. Indeed, the Court’s passing comment reflects the law in our circuit since at least 1930, see, e.g., Hyney v. United States, 44 F.2d 134, 136 (6th Cir.1930), and we are aware of no court taking a contrary position.¹ Neder provides us with little insight, however, into the proof necessary for a successful civil RICO claim. While one could reasonably conclude that the absence of reliance as an element of criminal mail and wire fraud might suggest that reliance should not be required to establish a civil RICO claim when the predicate acts alleged are mail or wire fraud, our circuit has concluded otherwise. Although we may quarrel with the soundness of that conclusion, we must acknowledge that precedent from the criminal context and Neder in particular do not preclude the inclusion of an additional element for a plaintiffs civil claim.

Neder's irrelevance to the matter before us becomes clear upon closer review of the reliance requirement’s place within the larger civil RICO jurisprudential framework. The law is clear that once a civil RICO plaintiff has made the necessary showing of a RICO violation under 18 U.S.C. § 1962, he must still meet those particular requirements imposed on private parties pursuing remedies under § 1964, including demonstrating RICO standing by showing causation. Holmes v. Secs. Investor Prot. Corp., 503 U.S. 258, 268-69, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992) (noting that proximate causation is required to demonstrate harm “by reason of’ wrongful actions); see also Cent. Dis-tribs. of Beer, 5 F.3d at 184 (assuming arguendo that plaintiffs pled the acts of mail and wire fraud with particularity but finding summary judgment appropriate because of the absence of evidence that defendant made representations to the victim and that victim “relied on any statement or omission to its detriment”). As this court explained in Chaz Constr., LLC v. Codell, our cases have determined that part of RICO standing is the ability to demonstrate reliance on any alleged wrongful conduct. 137 Fed.Appx. 735, 738 (6th Cir.2005) (citing Cent. Distribs., 5 F.3d at 184).

Nor do we find a basis for eliminating the reliance requirement in the Supreme Court’s decision in Sedima, a case addressing a separate issue in RICO doctrine. There, the Court directed that “RICO is to be read broadly,” noting Congress’s “self-consciously expansive language and overall approach” and its direction that RICO “be liberally construed to effectuate its remedial purpose.” Id. at 498, 105 S.Ct. 3275. Plaintiffs insist that this general language compels a disposal of the reliance requirement in our RICO jurisprudence. We disagree. Although we recognize that the Court’s statement in Sedima endorses a generous reading of RICO’s provisions, we find no mandate for reversal of our existing precedent.

Plaintiffs also seek to rely on Procter & Gamble Co. v. Amway Corp., 242 F.3d 589 (5th Cir.2001), and Mid Atlantic Telecom, Inc. v. Long Distance Services, Inc., 18 F.3d 260 (4th Cir.1994), cases in which corporate plaintiffs sought relief under RICO for fraud directed by a competitor at the plaintiffs’ customers. Although the courts in both cases adopted a more expansive view of causation, permitting a RICO claim based upon mail or wire fraud directed at a third party to form the basis for a plaintiffs claim, see 242 F.3d at 565 and 18 F.3d at 263,² neither case holds, as plaintiffs suggest, that a plaintiff seeking a remedy under RICO’s civil provisions is not bound to prove reliance upon any alleged fraudulent representation. Indeed, both courts seem to have maintained the necessity of proving reliance, even while allowing reliance by a third party to satisfy the requirement. See Mid Atlantic, 18 F.3d at 264 (deferring resolution of the reliance issue until completion of discovery); Procter & Gamble, 242 F.3d at 565 (“[I]f P & G’s customers relied on the fraudulent rumor in making decisions to boycott P & G products, this reliance suffices to show proximate causation.”); see also Sandwich Chef of Tx, Inc. v. Reliance Nat’l Indem. Ins. Co., 319 F.3d 205, 222 (5th Cir.2003) (observing that in Procter & Gamble, the court held that “even though Procter & Gamble had not relied on the fraud, if its customers had done so in deciding to boycott its products, this reb-anee could fall within the narrow exception carved out in Summit [Props., Inc. v. Hoechst Celanese Corp., 214 F.3d 556 (5th Cir.2000) ] and would suffice to show proximate cause”). We think it noteworthy that both the Fourth and Fifth Circuits have since expressly reaffirmed the necessity of a showing of rebanee. See Am. Chiropractic Ass’n v. Trigon Healthcare, Inc. 367 F.3d 212, 233 (4th Cir.2004); Sandwich Chef, 319 F.3d at 219; see also, Bank of China, N.Y. Branch v. NBM LLC, 359 F.3d 171, 176 (2d Cir.2004), cert. granted in part, 545 U.S. 1138, 125 S.Ct. 2956, 162 L.Ed.2d 886 (2005), cert. dismissed, 546 U.S. 1026, 126 S.Ct. 675, 163 L.Ed.2d 545 (2005) (“It is well established in this Circuit that where mail fraud is the predicate act for a civil RICO claim, the proximate cause element articulated in Holmes requires the plaintiff to show reasonable reliance.”) (internal quotation marks omitted).³

We conclude, accordingly, that we must respect our court’s precedent requiring a civil RICO plaintiff to plead his reliance upon any alleged misrepresentation when the predicate acts are mail or wire fraud. Even if we accept plaintiffs’ view that our RICO jurisprudence has gone astray in imposing a reliance requirement on plaintiffs pursuing private actions under § 1964(c), our mere belief that a prior case was wrongly decided is insufficient to permit reversal of the decision of a previous panel. See Darrah v. City of Oak Park, 255 F.3d 301, 309 (6th Cir.2001). Absent a clear directive from the Supreme Court or a decision of this court sitting en banc, we are not at liberty to reverse this court’s precedent. Id.

Based on the foregoing, we conclude that the district court’s dismissal of plaintiffs’ RICO claims was appropriate. Plaintiffs’ complaint contains no allegations of reliance by them on misrepresentations by defendants,⁴ and, under the law of this circuit, this omission is fatal to plaintiffs’ RICO claims. We accordingly affirm the district court’s grant of defendants’ motion to dismiss plaintiffs’ RICO claims.⁵

IV.

Plaintiffs also challenge the dismissal of their state law intentional inflection of emotional distress claims. In reviewing this matter, the parties agree, we look to the law of Michigan. See Meridian Mut. Ins. Co. v. Kellman, 197 F.3d 1178, 1181 (6th Cir.1999). Under Michigan law, a plaintiff must show the following elements to establish an intentional infliction of emotional distress claim: “(1) extreme and outrageous conduct, (2) intent or recklessness, (3) causation, and (4) severe emotional distress.” Roberts v. Auto-Owners Ins. Co., 422 Mich. 594, 374 N.W.2d 905, 908 (1985) (internal quotation marks omitted). The Michigan Supreme Court has described “extreme and outrageous conduct” as follows:

It has not been enough that the defendant has acted with an intent which is tortious or even criminal, or that he has intended to inflict emotional distress, or even that his conduct has been characterized by “malice”, or a degree of aggravation which would entitle the plaintiff to punitive damages for another tort. Liability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community. Generally, the case is one in which the recitation of the facts to an average member of the community would arouse his resentment against the actor, and lead him to exclaim, “Outrageous!”

Id. at 908-09 (internal quotation marks omitted).

In Roberts, the Michigan Supreme Court held that a no-fault insurer’s “failure ... to facilitate the filing of a replacement services claim, a delay of at most six months in responding to the claim as filed, and the denial of benefits owed” was insufficient to meet the standard for outrageous conduct. Id. at 911. In arriving at this conclusion, the court noted that “[t]here is no indication that [the insurer] set out to harass these plaintiffs, nor does the evidence disclose, a course of conduct that may fairly be characterized as so outrageous in character ... as to go beyond all possible bounds of decency....” Id. (internal quotation marks omitted).

We conclude here that the plaintiffs’ allegations of defendants’ fraudulent denial of worker’s compensation benefits are not “so outrageous in character ... as to go beyond all possible bounds of decency.” Id. Decisions of the Michigan Court of Appeals confirm this conclusion. That court has explained that the “wrongful, bad faith termination of benefits, by itself, is not sufficiently outrageous to support a claim for intentional infliction of emotional distress.” Atkinson v. Farley, 171 Mich.App. 784, 431 N.W.2d 95, 97 (1988). Even the wrongful denial of worker’s compensation benefits “to further some ulterior motive of the defendants,” as the plaintiffs here allege, is insufficiently outrageous to support an intentional infliction of emotional distress claim under Michigan law. Lisecki v. Taco Bell Rests., Inc., 150 Mich.App. 749, 389 N.W.2d 173, 175 (1986). For these reasons, dismissal of the plaintiffs’ intentional infliction of emotional distress claims was proper.

V.

For the reasons set forth above, we affirm the judgment of the district court.

1 . Epstein v. United States, 174 F.2d 754, 765-66 (6th Cir.1949), does contain language suggesting that criminal mail fraud requires that someone actually have been defrauded. However, Epstein is simply wrong and contrary to our prior precedent. Subsequent panels were thus under no obligation to follow it. See Habich v. City of Dearborn, 331 F.3d 524, 530 n. 2 (6th Cir.2003). The dissent contends that because Bender relied upon Epstein, a case we agree was in error, we may disregard all subsequent cases espousing the principle articulated in Bender. We disagree. Although Epstein may have provided a citation for the initial case outlining the reliance requirement for civil RICO claims, various panels of our court have reaffirmed the requirement. Those panels were free to impose a reliance requirement upon civil RICO plaintiffs even absent Bender and were doubtless aware that reliance is not required for federal criminal mail or wire fraud. The dissent’s position requires us to assume that the repeated articulation of a reliance requirement in our civil RICO caselaw was the work of a court unaware of the basic principle that reliance is not an element of criminal mail and wire fraud. We are unable to embrace this assumption.

2 . Our court has explicitly rejected this approach, requiring that a plaintiff be the target of any alleged fraud. See, e.g., Cent. Distribs., 5 F.3d at 184 ("[T]he defendant must make a false statement or omission of fact to the plaintiff to support a claim of wire fraud or mail fraud as a predicate act for a RICO claim.... [T]he fraud connected with mail or wire fraud must involve misrepresentations or omissions flowing from the defendant to the plaintiff.”). Even if our caselaw were otherwise, it would not alter the result in this case. Plaintiffs concede that their original complaint contained no allegations of reliance by a third party. On appeal, they seek to challenge the district court's July 22, 2005, denial of their motion for leave to file an amended complaint. They insist that the amended filing would have contained sufficient allegations of third-party reliance. However, plaintiffs' notice of appeal is limited to a challenge to the district court’s July 15, 2005, order granting defendants' motion to dismiss. It contains no mention of the district court’s July 22, 2005, order denying them leave to amend. Because plaintiffs did not properly appeal the July 22 order, we do not address the propriety of the district court's actions. Fed. R.App. P. 3(c)(1)(B) (noting that notice of appeal must “designate the judgment, order, or part thereof being appealed....”); United States v. Universal Mgmt. Servs., Inc., Corp., 191 F.3d 750, 756 (6th Cir.1999) (noting the “general rule” that "[i]f an appellant ... chooses to designate specific determinations in his notice of appeal-rather than simply appealing from the entire judgment-only the specified issues may be raised on appeal”) (internal quotation marks omitted and brackets in original).

3 .As to the First Circuit’s decision in Systems Management, Inc. v. Loiselle, 303 F.3d 100 (1st Cir.2002), another case on which plaintiffs rely, we acknowledge that the First Circuit has taken a different approach to civil RICO liability, concluding that RICO’s terms “does not require 'reliance' by anyone,” id. at 104, and holding that “under a literal reading of RICO—the presumptive choice in interpretation—nothing more than the criminal violation and resulting harm is required,” id. While we believe the First Circuit’s position is legitimate, as a subsequent panel applying the law of this circuit, we are not empowered to disregard our own precedent in favor of the views of other circuits.

4 . Plaintiffs' complaint does contain allegations that they relied on defendants’ communications "to the extent [they] suffered the financial loss of having to pay attorney fees, medical care and medical mileage.” This formulation defines plaintiffs’ reliance by reference to their injury and does not constitute a claim of detrimental reliance on defendants’ alleged misstatements.

5 . We need not address the alternative grounds cited by the district court as appropriate bases for dismissal, including certain plaintiffs’ failure to plead fraud with the requisite particularity required under Rule 9 of the Federal Rules of Civil Procedure and the reverse preemption doctrine under the McCarran-Ferguson Act, 15 U.S.C. § 1011— 15. See Williams v. Anderson, 460 F.3d 789, 800 (6th Cir.2006) ("[T]his Court may affirm the district court on any ground supported by the record.”).