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Injured worker's RICO lawsuit against ex-employer dismissed

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A federal appeals court has dismissed an injured worker’s lawsuit alleging that his employer violated the Racketeer Influenced and Corrupt Organizations Act when it argued that his injury wasn’t work-related.

In Jay Brown v. Ajax Paving Industries Inc. et al., Mr. Brown injured his shoulder in July 2005 while working for Ajax, court records show. He filed for workers compensation benefits, but Ajax considered the injury to be non-work-related and denied his claim.

Mr. Brown contested the denial and was awarded workers comp medical and wage loss benefits by the Michigan Workers’ Compensation Agency in October 2006, records show. Troy, Michigan-based Ajax appealed, but the company and Mr. Brown agreed to settle the case in September 2009 for $70,000 and a stipulation that Mr. Brown leave his job at Ajax.

In January 2010, Mr. Brown sued Ajax for violations of the RICO Act, records show. He argued that the company and its insurers had introduced false medical testimony in his case to deny or diminish his workers comp benefits, and alleged Ajax had done the same thing to other employees.

Mr. Brown’s claim was dismissed Monday by a three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati, which based the decision on its previous dismissal of a similar RICO lawsuit last year.

In Clifton Jackson et al. v. Sedgwick Claims Management Services Inc., the court majority ruled that a denial or reduction of comp benefits did not constitute an injury to “business or property,” which serves as the basis for RICO claims.

Mr. Brown had argued in part that the Jackson decision immunizes “any insurer, claim adjuster or medical examiner who fraudulently denied or conspired to deny” workers comp benefits to an employee. But the appeals court called that an “overstatement,” saying states have the power to sanction employers or employees that defraud the workers comp system.

“Our decision does not ‘immunize’ anyone from these exercises of state power,” the ruling reads. “Our decision means only that federal judges may not use the (RICO) Act to seize this power for themselves. That of course was the whole point of Jackson.”