Sixth Circuit Overrules Prior Precedent Re: Injury to “Business or Property” Under RICO

In Jackson V. Sedgwick, the Sixth Circuit, en banc, addressed the issue of whether plaintiffs who filed a class action claiming violations of civil RICO based on diminution of workers’ compensation benefits because of a fraudulent scheme were “injured in [their] business or property,” as was required to state a claim for civil RICO damages action.

The court first discussed that although RICO is to given an expansive reach, its breadth is not boundless as the text of the statute imposes genuine limitations. The court stated, “Congress must have intended to exclude some class of injuries by the phrase ‘business or property’ ” when it enacted RICO. A personal injury — that is, an injury “to a person, such as a broken bone, a cut, or a bruise” or a “bodily injury” — is different in kind from an injury to “business or property,” in the sense that those terms are commonly understood.

The court thus stated that circuits that have construed the phrase “business or property” have uniformly recognized that “the ordinary meaning of the phrase ‘injured in his business or property’ excludes personal injuries, including the pecuniary losses therefrom.” The court stated that courts interpreting RICO have remained faithful to this distinction by excluding damages “arising directly out of” a personal injury, even though personal injuries often lead to monetary damages that would be sufficient to establish standing if the plaintiff alleged a non-personal injury. The reason why these expenses do not constitute an injury to property is because a personal injury does not lead to “a proprietary type of damage.”

The court stated that in this case, the plaintiffs claimed that they were legally entitled to receive certain benefits mandated by statute as a consequence of their personal injuries, and that they received less than they were entitled to under that system because of the defendants’ racketeering conduct. But the losses they alleged were simply a shortcoming in the compensation they believed they were entitled to receive for a personal injury. They are not different from the losses the plaintiffs would experience if they had to bring a civil action to redress their personal injuries and did not obtain the compensation from that action they expected to receive. Michigan’s decision to create a workers’ compensation system does not transform a disappointing outcome in personal injury litigation into damages that can support a RICO civil action, even if Michigan law characterizes the benefits awarded under this system as a legal entitlement.

Accordingly, the court concluded that racketeering activity leading to a loss or diminution of benefits the plaintiff expects to receive under a workers’ compensation scheme does not constitute an injury to “business or property” under RICO.

Our attorneys have the experience to not allege civil RICO claims unless there is truly injury to “business or property,” and not merely personal injury, as well as defeat RICO claims based on fraud stemming from personal injury losses.