Brink v. Continental Ins. Co., 2015 U.S. App. LEXIS 9112 (D.C. Cir. June 2, 2015):

Appellant Daniel Brink, joined by thirty-one other individuals, brought a class action lawsuit stemming from the workers' compensation benefits owed to class members under the Defense Base Act, [*2]  42 U.S.C. § 1651 et seq., for injuries suffered while working for United States government contractors in Iraq and Afghanistan. In connection with their Base Act claims, appellants alleged that several government contractors, insurance companies, and third parties (collectively "contractors") committed torts and violated the Longshore and Harbor Workers' Compensation Act, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and the Americans with Disabilities Act ("ADA"). The district court dismissed all of appellants' claims. We affirm the dismissal of appellants' class-wide tort claims as well their RICO and Longshore Act claims. This dismissal, however, does not preclude any individual appellants from bringing independent claims outside of the Base Act's statutory scheme. With respect to the ADA claims brought by three individual appellants, we remand to the district court to reconsider and explain its denial of leave to amend the complaint.

I.

Members of the plaintiff class suffered severe injuries. They lost limbs in massive explosions, suffered traumatic brain injuries from "concussive blasts, mortars, rockets, and bombs," and developed post-traumatic stress disorder after witnessing "gruesome [*3]  scenes of carnage." Second Am. Compl. ¶¶ 12, 48, Brink, et al. v. Xe Holding, LLC, et al., 910 F. Supp. 2d 242 (D.D.C. 2012) (No. 11-cv-01733) ("SAC"). Because they were injured while working "under contracts or subcontracts" with the United States government in Iraq and Afghanistan, appellants alleged that class members are covered by the Base Act. Id. ¶ 562.

Enacted in 1941, the Defense Base Act, 42 U.S.C. § 1651 et seq., provides relief to employees of government contractors whose death or injuries occurred while accompanying military forces overseas. The Base Act builds upon and incorporates provisions of the Longshore Act, which was enacted to provide workers' compensation coverage to maritime employees. See 42 U.S.C. § 1651(a); 33 U.S.C. § 902(3). As with the Base Act, Congress passed the Longshore Act "to strike a balance between the concerns of [the employees] on the one hand, and their employers on the other." Morrison-Knudsen Constr. Co. v. Dir., Office of Workers' Comp. Programs, 461 U.S. 624, 636 (1983). "Employers relinquished their defenses to tort actions in exchange for limited and predictable liability," and employees accepted "limited recovery because they receive prompt relief without the expense, uncertainty, and delay that tort actions entail." Id. Both the Longshore Act and the Base Act contain exclusivity provisions stating that employer liability under the statutes "shall be exclusive and [*4]  in place of all other liability." 33 U.S.C. § 905(a) (Longshore Act); 42 U.S.C. § 1651(c) (Base Act).

Appellants brought this action on behalf of themselves and an estimated 10,000 similarly situated workers, SAC ¶¶ 560-62, seeking $2 billion in damages as well as declaratory and injunctive relief to require the contractors "to comply with their legal obligations here and around the world, as to all past, present and future individuals who work in support of America's wars," id. ¶ 1. Appellants alleged the contractors "failed or refused to provide medical benefits owed to [them] under the [Base Act];" "cut off medical benefits;" delayed providing benefits; "made false statements and misrepresentations" regarding payment of Base Act benefits "while actually reducing, denying or ignoring [appellants'] medical needs;" failed to comply with orders to pay benefits; "threatened or discouraged workers from making [Base Act] claims;" and terminated appellants' employment "after they were disabled by their [Base Act]-covered injuries." Brink, 910 F. Supp. 2d at 247. Appellants asserted class-wide claims for discrimination and retaliatory discharge under the Longshore Act (Count I); violations of RICO (Count II); bad faith and tortious breach of the covenant [*5]  of good faith (Count III); unconscionable, fraudulent, and deceptive trade practices (Count IV); civil conspiracy (Count V); violations of the ADA (Count VI); outrage (Count VII); and wrongful death (Count VIII). See SAC ¶¶ 564-631. In addition, appellants sought preliminary and permanent injunctive relief (Count IX). Id. ¶¶ 632-39.

The extensive factual allegations in the complaint include some assertions that could be predicates for independent legal claims, falling outside this class action. For example, Ronald Bell alleged that employees from Kellogg Brown & Root "intimidated and threatened" him and that he reported the assault to a local sheriff's department. Id. ¶ 79. Christine Holguin-Luge alleged she was sexually assaulted in Iraq. Id. ¶¶ 321-35. Nicky Pool, the owner of a nursing care company, alleged that CNA Global Insurance "approved numerous medical treatments" but then refused to pay for them, causing her company to lose $200,000. Id. ¶¶ 351, 477-88. We note, however, that the complaint before us includes no separate counts or claims for relief for any of these individuals.

The contractors moved to dismiss appellants' second amended complaint in its entirety, and the district [*6]  court granted the contractors' motions pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Relying on "this Circuit's binding precedent" in Hall v. C&P Telephone Company, 809 F.2d 924 (D.C. Cir. 1987) (per curiam), the district court concluded that appellants' "state law causes of action all arise out of their underlying claims to [Base Act] benefits and thus are barred by the exclusive scheme set forth in the [Base Act] and [Longshore Act]." Brink, 910 F. Supp. 2d at 249-50, 252 (dismissing Counts III, IV, V, VII, and VIII). The district court similarly held that the comprehensive statutory scheme barred appellants' RICO claims as well as their discrimination and retaliatory discharge claims arising under the Longshore Act, 33 U.S.C. § 948a. Id. at 254-56 (dismissing Counts I and II).

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II.

On appeal, appellants raise three issues: (1) whether the statutory scheme bars appellants' tort claims; (2) whether the district court erred in dismissing appellants' federal claims; and (3) whether the district court abused its discretion when it denied the motion for leave to allow some of the appellants to amend their ADA claims. For the reasons discussed below, we conclude that the statutory scheme bars appellants' class-wide tort claims; the district court did not err in dismissing appellants' RICO and Longshore Act claims; and the district court abused its discretion by denying without explanation the motion for leave to allow some of the appellants to amend their ADA claims.

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B. Federal Claims

1. RICO Claims

Because the statutory scheme of the Base Act and Longshore Act contains exclusive remedies, it "leaves no room" for appellants' RICO claims. Danielsen v. Burnside-Ott Aviation Training Ctr., Inc., 941 F.2d 1220, 1226 (D.C. Cir. 1991). Appellants alleged the contractors violated RICO by conspiring "to misrepresent" information related to Base Act claims "to injured parties and the [Department of Labor]," and "by denying claims using fraud." SAC ¶ 573. The Base Act, however, already provides a remedy for the alleged misconduct. Titled "Penalty for misrepresentation," § 931 of the Longshore Act (which the Base Act incorporates) provides an exclusive remedy [*15]  for false statements made by "an employer, his duly authorized agent, or an employee of an insurance carrier who knowingly and willfully makes a false statement or representation for the purpose of reducing, denying, or terminating benefits to an injured employee, or his dependents." 33 U.S.C. § 931(c). The violator "shall be punished by a fine not to exceed $10,000, by imprisonment not to exceed five years, or by both." Id. These exclusive remedies leave no room for appellants' RICO claims.

Appellants further alleged the contractors violated RICO by conspiring to "delay payments to providers or to claimants" and to "stop payments on checks." SAC ¶ 573. However, § 914 of the Longshore Act, as incorporated by the Base Act, already provides a penalty for employers who do not make on-time payments. See § 914(e)--(f) (increasing the amount due by 10 and 20 percent). Thus, there is no room for a RICO claim based on delayed or stopped compensation payments.

Even if the statutory scheme left room for appellants' RICO claims, the district court stated another ground for dismissing these claims: Appellants "fail[ed] to state a cause of action under RICO." Brink, 910 F. Supp. at 255 n.12. We agree. To state a RICO claim, appellants needed to allege four elements: "(1) [*16]  conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." W. Assocs. Ltd. P'ship v. Mkt. Square Assocs., 235 F.3d 629, 633 (D.C. Cir. 2001) (citations and internal quotation marks omitted). Appellants' claims fail on the second element because they alleged an indeterminate "RICO enterprise of individuals" broadly consisting of "insurance companies, attorneys, adjusters, third party medical providers, third party case administrators, third party investigators and contractors." SAC ¶ 576 (emphasis omitted). Appellants did not allege any facts establishing required elements of a RICO enterprise: "(1) a common purpose among the participants, (2) organization, and (3) continuity." United States v. Richardson, 167 F.3d 621, 625 (D.C. Cir. 1999). Thus, they failed to allege a RICO enterprise.

Appellants also failed to plead predicate acts with particularity to satisfy Federal Rule of Civil Procedure 9(b). See Danielson, 941 F.2d at 1229. Neither appellants' mail nor wire fraud claims contain any reference to "specific fraudulent statements, who made the statements, what was said, when or where these statements were made, and how or why the alleged statements were fraudulent." Brink, 910 F. Supp. 2d at 255 n.12. Appellants' "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" for Rule 12(b)(6), let alone Rule 9(b). Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Accordingly, we affirm the dismissal of appellants' RICO [*17]  claims.