Petition for Writ of Certiorari — Mohawk Industries, Inc. v. Williams

Supre: “t, US.

F ')

05-465 OCT 7 ~ 2005

No. 05-.

een IES TE CLEP

IN THE

Supreme Court of the United States —

~\ ~~, MOHAWK INDUSTRIES, INC. >

Petitioner,

Vv.

SHIRLEY WILLIAMS, GALE PELFREY,

BONNIE JONES, AND LORA SISSON,

individually and on behalf of a class,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Eleventh Circuit

PETITION FOR A WRIT OF CERTIORARI

CARTER G. PHILLIPS*

JUAN P. MORILLO

STEVEN T. COTTREAU

JULIE A. GURLEY

MATTHEW J. WARREN

SIDLEY AUSTIN BROWN &

WOOD LLP

1501 K STREET, NW

WASHINGTON, DC 20005

(202) 736-8000

Counsel for Petitioner

October 7, 2005 * Counsel of Record

Semen es eC NAS AS

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D. C. 20001

QUESTIONS PRESENTED

1. Whether a defendant corporation and its agents can

constitute an “enterprise” under the Racketeer Influenced and

Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968

(“RICO”), in light of the settled rule that a RICO defendant

must “conduct” or “participate in” the affairs of some larger

enterprise and not just its own affairs.

2. Whether plaintiffs state proximately caused injuries to

business or property by alleging that the hourly wages they

voluntarily accepted were too low.

(i)

il

STATEMENT REQUIRED BY RULE 14.1

Pursuant to Supreme Court Rule 14.1, petitioner states that

all parties to the proceeding in the court whose judgment is

sought to be reviewed are listed in the caption above.

STATEMENT REQUIRED BY RULE 29.6

Pursuant to Supreme Court Rule 29.6, petitioner Mohawk

Industries, Inc. states that there is no parent corporation or

publicly held corporation that owns 10% or more of Mohawk

Industries, Inc.’s stock.

TABLE OF CONTENTS

Page

FRE FD OUED © CNY BP ccrscsesenecicesenaccsnccsenscesesoseoonnes i

STATEMENT REQUIRED BY RULE 14.1 ................6 ii

STATEMENT REQUIRED BY RULE 29.6 ...........000008 ii

TAREE OF ALTRI Fite ccsecsccvcsccescescecsssosccsocsecscensonss iv

OPINIONS eet ee RRR hienensinoenonie l

PEt HUI sicsinnerenininnsosnteniivrniiiecesenpeienstatabuaniietsies l

EFAs Ie CU HITED cicsisncscscsvicinepsonscienesinetasonees 2

STATEMENT OF THE CASE ...............csscsscsssssssessossseees 3

REASONS FOR GRANTING THE PETITION............. 10

I. THIS COURT SHOULD RESOLVE THE

CIRCUIT SPLIT ON WHETHER A DEFEN-

DANT CORPORATION AND ITS AGENTS

ACTING ON ITS BEHALF CAN TOGETHER

CONSTITUTE A DISTINCT RICO ENTER-

I]. THIS COURT SHOULD GRANT CERTIORARI

TO ADDRESS THE REQUIREMENT THAT

RICO PLAINTIFFS ADEQUATELY PLEAD A

PROXIMATELY CAUSED INJURY TO BUS-

PID FU ETRE © vescsonibasctivensqenstcinicscnunccsetoes 18

ae ascriccntnsectnsasocsnivnimitseviaacediineinenensenteomneniii 24

(iii)

iV

TABLE OF AUTHORITIES

CASES Page

Alston v. Parker, 363 F.3d 229 (3d Cir. 2004)........ 22

Baker v. IBP, Inc., 357 F.3d 685 (7th Cir.), cert.

denied, 125 S. Ct. 412 (2004) oe ceeseceeeeeeees passim

Brannon v. Boatmen’s First Nat'l Bank of Okla.,

153 F.3d 1144 (10th Cir. 1998) woes 12,17

Brittingham v. Mobil Corp., 943 F.2d 297 (3d

Cir. 1991), overruled on other grounds, Jaguar

Cars, Inc. v. Royal Oak Motor Car Co., 46 F.3d

Be EF See ititenterncntsiccenineineeeienideiens 13, 14, 16

Cedric Kushner Promotions, Ltd. v. King, 533

Ss Si CPE Pitcicastnnsssorvaptidesninnineinnemiecnemialits 11,12

Commercial Cleaning Servs., LLC v. Colin Serv.

Sys., Inc., 271 F.3d 374 (2d Cir. 2001)................ 9

Danielson v. Burnside-Ott Aviation Training Ctr.,

Inc., 941 F.2d 1220 (D.C. Cir. 1991)... eee 20

Davis v. Mutual Life Ins. Co. of N.Y., 6 F.3d 367

RE GIs Fee resiincinciccnicnsctnesnciipssntisinennipiansicinninn 13

Dickson v. Microsoft Corp., 309 F.3d 193 (4th

Sh Tee crvveccsucesesgienesccunssiemnenineninpinapidiaieiaiaieabion 22

Discon, Inc. v. NYNEX Corp., 93 F.3d 1055 (2d

Cir. 1996), vacated on other grounds, 525 U.S.

BA Ce inccnsensccininiaseciapteniansadansiianiiamianeties 13, 14, 16

Doe v. Roe, 958 F.2d 763 (7th Cir. 1992)............... 4

Dura Pharms., Inc. v. Broudo, 125 S. Ct. 1627

Ea ciciiceicaadinnciiesisacanesiibaiataisviiisinbbidaaiiiantanasiandabiadin 4,22

Fitzgerald v. Chrysler Corp., 116 F.3d 225 (7th

I Fe a ciessecitpsouiiniiasteticiscanibasteapeeinaiiaininia 13, 14,17

Holmes v. Securities Investor Prot. Corp., 503

CA, Bre Ce icicintesssescincnesicvsnasitiitestidataiitele 4,19, 21

Jaguar Cars, Inc. v. Royal Oak Motor Car Co.,

46 F.3d 258 (3d Cir. 1995) ............ccccccsssrsssseverees 16

Kwai Fun Wong v. United States, 373 F.3d 952

I Gk See coctisétiininditicaninbistithiciabasamiaiaiegieiae 22

Vv

TABLE OF AUTHORITIES—continued

Page

Lorenz v. CSX Corp., | F.3d 1406 (3d Cir.

Faia Piicecncispenabtasbninidaiiimindennieniiiasinnnppenmnmensatantdnietinn 12

Mendoza v. Zirkle Fruit Co., 301 F.3d 1163 (9th

Iii chisadbiteaisidiadish shenabaininindienhiitiepemanegniied 9, 19, 21

NYNEX Corp. v. Discon, Inc., 525 U.S. 128

UIE icdisatascainicheaddabeseninnenianabicbagsedenbiemenneeneensncinnesen 16

Old Time Enters., Inc. v. International Coffee

Corp., 862 F.2d 1213 (Sth Cir. 1989) ........0....0.... 12

Price v. Pinnacle Brands, Inc., 138 F.3d 602 (Sth

Sn er eh iredstutiinieiengengeisstinicnenimenmenduaisenineseaees 19, 20

Reves v. Ernst & Young, 507 U.S. 170 (1993)... 3, 11, 17

Riverwoods Chappaqua Corp. v. Marine Midland

Bank, N.A., 30 F.3d 339 (2d Cir. 1994)....... 12, 13, 15

Swierkiewicz v. Sorema, N.A., 534 U.S. 506

Sr icieicecisinsiatinsinsnietasieniiapnseatnmubstneasinneandiasniateneetn 22

Trollinger v. Tyson Foods, Inc., 370 F.3d 602

SEIT STITT titisisetainscsnedeicbinsendcnenstineinacntsnidnentectent 9, 21

United States v. Turkette, 452 U.S. 576 (1981) ...... 11

STATUTES

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Be IIIT sniscbicntcgnenienisceetscahegssene 7

RULE Page

Fed. R. Civ. Proc. 12(b)(6) ...cccccccsecssssesssssecessseeeeseess 5

vi

TABLE OF AUTHORITIES—Continued

OTHER AUTHORITY

Sarah Paoletti & Matt Hayes, Should illegal

aliens be able to sue U.S. employers for labor

racketeering?, Insight on the News, Jan. 6,

SUED vitvidinincniigntipingnintvtaticinistatineiaaniiatanianiaioniiin

PETITION FOR A WRIT OF CERTIORARI

Petitioner Mohawk Industries, Inc. (“Mohawk”) respect-

fully petitions for a writ of certiorari to review the judgment

of the United States Court of Appeals for the Eleventh Circuit

in this case.

OPINIONS BELOW

The opinion of the district court denying in part and

granting in part petitioner’s motion to dismiss was reported at

314 F. Supp. 2d 1333 (N.D. Ga. 2004) and is reproduced in

the appendix (Pet. App.) at 24a-6la. The order of the district

court certifying the case for interlocutory appeal was

unpublished and is reproduced in the appendix at Pet. App.

68a-72a. The order of the Eleventh Circuit granting

Mohawk’s petition for interlocutory appeal was unpublished

and is reproduced in the appendix at Pet. App. 67a. The

opinion of the court of appeals affirming in part and reversing

in part the district court’s order was published at 411 F.3d

1252 (11th Cir. 2005) and is reproduced at Pet. App. la-23a.

The order of the court of appeals denying rehearing en banc

was unpublished and is reproduced at Pet. App. 73a. The

order of the district court staying discovery pending this

Court’s review was unpublished and is reproduced in the

appendix at Pet. App. 62a-66a.

JURISDICTION

The judgment of the court of appeals was entered on June

9, 2005. An order denying petitioner’s petition for rehearing

en banc was entered on August 8, 2005. This Court has

jurisdiction under 28 U.S.C. § 1254(1).

2

STATUTORY PROVISIONS

Section 1961(4) of Title 18 to the United States Code

provides that:

[As used in this chapter,] “enterprise” includes any

individual, partnership, corporation, association, or other

legal entity, and any union or group of individuals

associated in fact although not a legal entity .. . .

Section 1962(c) of Title 18 to the United States Code

provides that:

It shall be unlawful for any person employed by or

associated with any enterprise engaged in, or the

activities of which affect, 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 or collection of

unlawful debt.

Section 1964(c) of Title 18 to the United States Code

provides that:

Any person injured in his business or property by reason

of a violation of section 1962 of this chapter may sue

therefor in any appropriate United States district court

and shall recover threefold the damages he sustains and

the cost of the suit, including a reasonable attorney’s fee,

except that no person may rely upon any conduct that

would have been actionable as fraud in the purchase or

sale of securities to establish a violation of section 1962.

The exception contained in the preceding sentence does

not apply to an action against any person that is

criminally convicted in connection with the fraud, in

which case the statute of limitations shall start to run on

the date on which the conviction becomes final.

3

STATEMENT OF THE CASE

This petition arises out of a suit by a putative class of

current and former hourly employees of Mohawk who allege

that Mohawk hired illegal immigrants and thereby suppressed

the wages that plaintiffs were offered and voluntarily

accepted. The Eleventh Circuit’s decision, which permits this

theory of liability under the Racketeer Influenced and Corrupt

Organizations Act, 18 U.S.C. §§ 1961-1968 (“RICO”) to

proceed, concededly conflicts with those of other circuits and

presents two significant questions concerning the statute.

The first question is whether a defendant corporation can

conduct or participate in the affairs of a distinct RICO

“enterprise” under 18 U.S.C. § 1962(c) where the only

members of the putative “enterprise” are the corporation and

its agents. The Eleventh Circuit’s affirmative answer to this

question exacerbated a sharp split in the courts of appeals

(now two to three) on whether a corporate defendant and its

agents can constitute a RICO enterprise. The Eleventh

Circuit candidly acknowledged that its decision “puts our

circuit in conflict” with the Seventh Circuit’s construction of

the enterprise requirement in a materially indistinguishable

case. Pet. App. 9a. Indeed, the Eleventh Circuit’s decision

also conflicts with the holdings of the Second and Third

Circuits, while being in accord with that of the Sixth.

The Eleventh Circuit’s ruling impermissibly relaxes the

limitations Congress placed on the imposition of RICO’s

harsh penalties. Section 1962(c)’s requirement that a

defendant participate in the operation or management of an

“enterprise” that is different from the defendant alone is a

“critical limitation” on RICO that prevents it from becoming

a routine vehicle for imposing civil liability. Reves v. Ernst

& Young, 507 U.S. 170, 183 (1993). Corporations are

artificial entities that function only through agents working on

their behalf. Yet, the Eleventh Circuit held that a corporation

may be a RICO defendant whenever it uses such persons to

4

perform a corporate function (as all corporations must).

Under the Eleventh Circuit’s reading of the statute, the

requirements that there be a RICO “enterprise” separate from

the RICO defendant and that the defendant conduct the

enterprise's affairs, not merely its own, are no limitations at

all when a corporation is a RICO defendant.

The second question meriting this Court’s review is

whether plaintiffs have properly alleged proximately caused

harm to their “business or property,” as required under 18

U.S.C. § 1964(c). Plaintiffs allege that they voluntarily

accepted the assertedly depressed wages. The Eleventh

Circuit’s acceptance of plaintiffs’ alleged injury to their

“business or property” fails to recognize these terms as

“words of limitation” on the scope of civil RICO actions.

Doe v. Roe, 958 F.2d 763, 767 (7th Cir. 1992). The Eleventh

Circuit’s improper expansion of RICO to permit plaintiffs to

sue for a retroactive wage increase from voluntarily agreed

upon wages is also in direct tension with decisions of both the

Fifth Circuit and the D.C. Circuit.

Furthermore, the Eleventh Circuit’s conclusion that

plaintiffs need not plead the predicate facts to establish

proximately caused injury is in conflict with this Court’s

opinion of last term Dura Pharmaceuticals, Inc. v. Broudo,

125 S. Ct. 1627, 1634 (2005). In that case, this Court held

that conclusory allegations of proximate cause were

insufficient and that plaintiffs must separately allege facts

establishing the causal steps in their theory of injury. Jd.

Furthermore, plaintiffs’ conclusory allegations demonstrated

no direct injury, in contravention of this Court’s opinion in

Holmes v. Securities Investor Protection Corp., 503 U.S. 258

(1992), which forbids those with attenuated injuries from

recovering under RICO.

The Eleventh Circuit’s decision to permit plaintiffs to

proceed despite these manifest defects in their complaint

warrants this Court’s attention. The circuit court’s

construction of RICO’s enterprise requirement—if left

5

intact—will transform routine corporate conduct into conduct

actionable under RICO. Moreover, the circuit court’s

dramatic relaxation of the requirement that plaintiffs plead a

proximately caused injury to their business or property

transforins the RICO private right of action from a narrowly

drawn remedy, focused on providing redress to the direct

victims of crime, into a device that uses in terrorem remedies

to extort windfall recoveries for parties with self-professed

“injuries.”

1. On January 6, 2004, the respondents filed a complaint in

the United States District Court for the Northern District of

Georgia on behalf of a purported class of current and former

hourly employees of petitioner Mohawk. Pet. App. 24a-25a;

Compl. Mohawk was the only named defendant. Mohawk

(and its subsidiaries) is a leading manufacturer of carpet, rugs,

tile, and other floor coverings. Plaintiffs asserted a federal

RICO claim under 18 U.S.C. § 1962(c), two claims under

Georgia’s RICO statute (Ga. Code Ann. § 16-14-4), and a

claim for unjust enrichment. All of these claims stemmed

from plaintiffs’ allegation that Mohawk had knowingly

employed illegal aliens and that this employment of illegal

workers somehow depressed wages for all of Mohawk’s legal

hourly workers throughout the State of Georgia.’ See Pet.

App. 25a-28a; Compl. 4 14-31.

' While the allegations in the Complaint must be taken as true at this

stage, Fed. R. Civ. Proc. 12(b)(6), Mohawk vigorously denies any illegal

conduct.

?The Complaint set forth five alleged RICO predicate acts:

(1) knowingly hiring more than 10 illegal aliens during a 12-month period,

in violation of 8 U.S.C. § 1324(a)(3)(A); (2) harboring illegal aliens, in

violation of 8 U.S.C. § 1324(a)(1)(A)iii); (3) encouraging illegal aliens to

enter the United States, in violation of 8 U.S.C. § 1324(a)(1)(AXiv);

(4) accepting false identification documents, in violation of 18 U S.C.

§ 1546(a); and (5) using false identification documents, in violation of 18

U.S.C. § 1546(b). See 18 U.S.C. § 1961(1)(B), (F) (providing that viola-

tions of 8 U.S.C. § 1324 and 18 U.S.C. § 1546 constitute “racketeering

activity” for RICO purposes).

6

Plaintiffs’ allegations almost exclusively focused upon

Mohawk and its employees—not on an alleged RICO

enterprise. Specifically, plaintiffs alleged: “Mohawk has

accepted for employment ... workers that it knew or had

reason to know were not authorized to work in the United

States”; “Mohawk has knowingly and recklessly accepted”

obviously false documentation for employees; “Mohawk

supervisors have encouraged . . . employees to .. . [illegally]

reapply for work at Mohawk”; “Mohawk employees and/or

supervisors have destroyed eligibility documents” to conceal

Mohawk’s employment of illegal workers; “Mohawk

employees have traveled to the United States border . . . to

recruit undocumented aliens”; and that “Mohawk employees

and supervisors have assisted illegal workers in attempting to

evade detection by law enforcement.” Compl. {J 15-18, 20,

22, 28; see Pet. App. 25a-27a.

In an attempt to satisfy § 1962(c)’s requirement that the

defendant conduct the affairs of an “enterprise” (and not just

its own affairs), plaintiffs alleged in their complaint that

Mohawk had participated in “an association-in-fact enterprise

with third party employment agencies and other recruiters.”

Compl. { 76; Pet. App. 45a. In particular, plaintiffs alleged

that these third-party recruiters supplied illegal workers to

Mohawk and that Mohawk paid the recruiters a fee for each

worker they supplied. See Compl. 4 76; Pet. App. 45a.

Plaintiffs asserted without explanation that Mohawk

participated in the operation and management of the affairs of

this “enterprise,” and claimed that the “common purpose” of

the enterprise was to “obtai[n] illegal workers for

employment by Mohawk.” Compl. {{ 77, 78. Plaintiffs

further asserted that the enterprise “exists for Mohawk’s

benefit.” /d. 978. Plaintiffs did not name any participants in

this supposed “enterprise” other than Mohawk and its

employment recruiters.

Plaintiffs also asserted that they had standing to sue under

RICO for a retroactive wage increase because Mohawk’s

7

hiring of illegal workers had depressed plaintiffs’ wages and

thereby “injured [their] business or property.” Compl. {ff 85-

87; 18 U.S.C. § 1964(c). Plaintiffs’ only support for this

claim was a conclusory assertion that Mohawk’s knowing

employment of illegal workers had “substantially and

unlawfully increased the supply of workers” and that this

“unlawful expansion of the labor pool” allowed Mohawk to

depress the wages it paid to other hourly employees

throughout the State of Georgia. Compl. 35. The complaint

offered no explanation for how Mohawk could pay below-

market wages and retain its workforce, nor did it claim that

Mohawk had sufficient market power to depress wages

throughout Georgia. Instead, plaintiffs merely alleged

generally that Mohawk’s employment of “hundreds” of

illegal aliens somehow depressed the wages of the millions of

workers in Georgia. /d. J 61.

2. Mohawk moved to dismiss all four counts of the

complaint, arguing inter alia that respondents had failed to

plead a sufficient RICO enterprise and that they had not

adequately pled proximate cause (a requirement for both

federal and Georgia RICO, see 18 U.S.C. § 1964(c); Ga.

Code Ann. § 16-14-6(c)). The district court denied

Mohawk’s motion to dismiss the federal and Georgia RICO

claims.’ Pet. App. 61a. The district court, however, granted

Mohawk’s motion to certify an interlocutory appeal pursuant

to 28 U.S.C. § 1292(b) and stayed discovery pending

resolution of the appeal. /d. at 72a. The court found that

there was “substantial ground for difference of opinion” both

as to whether plaintiffs had pled an adequate RICO enterprise

and as to whether they had pled sufficient proximate cause,

and concluded that each question merited immediate review.

Id. at 70a. Indeed, the court noted that its opinion conflicted

> The district court partially granted Mohawk’s motion to dismiss the

unjust ennchment claim, dismissing plaintiffs’ claim for unjust

enrichment based on Mohawk’s supposed benefit from workers’

compensation savings. Pet. App. 61a.

8

with the Seventh Circuit’s opinion in Baker v. IBP, Inc., 357

F.3d 685 (7th Cir.), cert. denied, 125 S. Ct. 412 (2004). See

Pet. App. 70a. The Eleventh Circuit then granted Mohawk’s

petition to appeal. /d. at 67a.

3. The Eleventh Circuit affirmed the district court’s denial

of Mohawk’s motion to dismiss the federal and Georgia

RICO claims.* Pet. App. 23a. The Eleventh Circuit held that

a plaintiff could survive a motion to dismiss by alleging an

“enterprise” that consisted of any “loose or informal

association of distinct entities.” /d. at 7a (internal quotation

marks omitted). Because Mohawk and the third-party

recruiters allegedly were “distinct entities . . . engaged in a

conspiracy to bring illegal workers into the country for

Mohawk’s benefit,” the Eleventh Circuit concluded that they

constituted a RICO enterprise. /d. at 7a-8a. The court further

held that the alleged enterprise had a “common purpose”

because all] the participants stood to gain financial benefits,

and that the plaintiffs’ general allegation that “Mohawk

participates in the operation and management of the affairs of

the enterprise” was sufficient to plead operation or

management. /d. at 84 (internal quotation marks omitted).

The Eleventh Circuit expressly acknowledged that its

enterprise holding “puts our circuit in conflict with the

Seventh Circuit’s decision in Baker v. IBP, Inc.” Pet. App.

9a. The Baker plaintiffs made allegations materially identical

to the allegations made by respondents—that a defendant

corporation was violating immigration laws by employing

illegal aliens—and, like plaintiffs here, claimed that the RICO

enterprise consisted of the defendant corporation and third

parties that provided it with employees. See Baker, 357 F.3d

at 686-87; infra at note 16. In an opinion for the court,

*The Eleventh Circuit reversed the district court’s judgment on the

unjust enrichment claims in part, holding that plaintiffs’ unjust enrichment

claim should have been dismissed in its entirety because plaintiffs

contracted for the wages they received. Pet. App. 23a.

9

written by Judge Easterbrook, the Seventh Circuit held that

the Baker plaintiffs had failed to allege that IBP was

operating or managing a separate enterprise (as opposed to

“operat[ing] itself unlawfully”). See Baker, 357 F.3d at 691.

The Eleventh Circuit rejected the Seventh Circuit’s analysis,

claiming that it was “possible” for plaintiffs to establish that

Mohawk operated or managed the supposed “enterprise” of

Mohawk and its recruiters. Pet. App. lla. The Eleventh

Circuit did not explain how this could be “possible” or how

Mohawk’s hiring of its own employees constituted the

operation or management of the affairs of a distinct

enterprise—as opposed to Mohawk’s own affairs. The

Eleventh Circuit also noted that it disagreed with the Seventh

Circuit on the need for all the participants in the enterprise to

have the same “common purpose,” reasoning that “the

‘common purpose’ of the enterprise [need not] be the sole

puspose of each and every member of the enterprise.” /d. at

10a.

The Eleventh Circuit also concluded that plaintiffs’

allegedly depressed wages was a “business” injury that was

adequate for RICO standing. Pet. App. lla-12a. Relying on

*In holding that plaintiffs had alleged an enterprise, the Eleventh

Circuit purported to rely on three circuit court cases that it claimed had

approved “similar” allegations. Pet. App. 9a (citing Trollinger v. Tyson

Foods, Inc., 370 F.3d 602 (6th Cir. 2004), Mendoza v. Zirkle Fruit Co.,

301 F.3d 1163 (9th Cir. 2002), and Commercial Cleaning Servs., LLC v.

Colin Serv. Sys., Inc., 271 F.3d 374 (2d Cir. 2001)). But none of these

cases held that an association between a corporation and those acting on

its behalf could satisfy § 1962(c)’s enterprise requirement. Neither

Commercial Cleaning Services nor Trollinger even addressed the

enterprise requirement. See Trollinger, 370 F.3d at 622 (“[W]e do not

express an opinion as to whether plaintiffs can show that Tyson and its co-

conspirators constituted an ‘enterprise’”); see Commercial Cleaning

Servs., 271 F.3d at 380-85. Mendoza addressed an entirely different

alleged enterprise, one involving multiple defendant corporations that, in

concert, conspired to use an employment agency as a “front company” to

shield the defendants from liability for employing illegal workers. 301

F.3d at 1167 (internal quotation marks omitted).

10

the Ninth Circuit’s analysis in Mendoza, the Eleventh Circuit

held that plaintiffs’ alleged “‘legal entitlement to business

relations unhampered by [the alleged RICO predicate acts]’”

was a business interest that gave the plaintiffs standing under

§ 1964(c). Jd. at 12a (quoting Mendoza, 301 F.3d at 1168

n.4). The court further held that the plaintiffs’ alleged injury

was sufficiently “direct” to give them standing to sue under

RICO and that plaintiffs’ conclusory allegations that

Mohawk’s hiring of illegal workers had increased the labor

supply and depressed wages were “all that is needed” to state

proximate cause. /d. at 14a.

Mohawk filed a petition for rehearing en banc, which was

denied. Pet. App. 73a. The district court has stayed all

proceedings pending this Court’s review. See id. at 65a

(noting that this Court “very well may choose to grant

certiorari” in light of the “substantial ground for difference of

opinion” as to both the RICO enterprise issue and the

proximate cause issue).

REASONS FOR GRANTING THE PETITION

I. THIS COURT SHOULD RESOLVE THE CIRCUIT

SPLIT ON WHETHER A DEFENDANT CORPOR-

ATION AND ITS AGENTS ACTING ON ITS

BEHALF CAN TOGETHER CONSTITUTE A

DISTINCT RICO ENTERPRISE.

This case presents the question whether a corporate

defendant can conduct or participate in the affairs of a RICO

“enterprise” comprised solely of the corporation and its

agents performing corporate tasks for it. See 18 U.S.C.

§ 1962(c). The Eleventh Circuit’s affirmative answer to this

question parallels the holding of the Sixth Circuit. These

decisions, however, are in fundamental conflict with the

conclusions of the Second, Third, and Seventh Circuits.

Indeed, the Eleventh Circuit itself acknowledged that its

decision that a manufacturer and its employment recruiters

1]

could comprise an enterprise “puts our circuit in conflict”

with the Seventh Circuit’s construction of the enterprise

requirement in a materially identical case. Pet. App. 9a. That

is reason enough for this Court to grant certiorari.

Section 1962(c) makes it “unlawful for any person

employed by or associated with any enterprise . . . to conduct

or participate . . . in the conduct of such enterprise’s affairs

through a pattern of racketeering activity.” 18 U.S.C.

§ 1962(c). The statute contemplates “two distinct entities: (1)

a ‘person’; and (2) an ‘enterprise’ that is not simply the same

‘person’ referred to by a different name.” Cedric Kushner

Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001).

Plaintiffs proceeding under § 1962(c), therefore, must plead

and prove an enterprise that is distinct from the defendant.

See id. at 161-62 (“distinctness” requirement is “legally

sound and workable” (citation and internal quotation marks

omitted)); see also United States v. Turkette, 452 U.S. 576,

583 (1981) (existence of an enterprise is a separate element of

a RICO offense). Relatedly, plaintiffs must show that a

defendant “conducted or participated in the conduct of the

‘enterprise's affairs,’ not just [its] own affairs.” Reves v.

Ernst & Young, 507 U.S. 170, 185 (1993).

This Court has previously taken note of this question

presented in a different context, but has not had occasion to

answer it. In Kushner, an individual who was president and

sole shareholder of a closely held corporation was accused of

conducting the affairs of that corporation (the alleged RICO

“enterprise”) through a pattern of racketeering. See 533 U.S.

at 160. The Second Circuit had held that the individual

defendant was not “distinct” from this enterprise because he

was an employee of the corporation who was acting within

the scope of his authority. See id. at 161. This Court

reversed, finding that the defendant, as an individual, was

distinct from the corporation he controlled. See id. at 163.

Indeed, Kushner presented a classic RICO fact pattern—an

12

individual defendant using an organization (the RICO

enterprise) for criminal purposes.

This Court noted that the case presented no need to

examine the converse fact pattern, i.e., a corporate defendant

with a purported “enterprise” comprised of itself and its

employees and agents. Jd. at 164. This Court did, however,

call such an “enterprise” an “oddly constructed entity” and

noted it would present “quite different circumstances” than

the enterprise in Kushner. Id. This case presents the “oddly

constructed entity” noted by the Kushner Court.

Grappling with this issue, the courts of appeals generally

have recognized that a defendant corporation cannot associate

with its divisions or subsidiaries to create a distinct

enterprise.© Similarly, a defendant corporation’s association

with its own employees does not form an enterprise distinct

from the corporation itself.’ The circuits are divided,

however, on whether a distinct RICO enterprise can consist

solely of the corporation and non-employee agents

performing corporate functions.

The Second, Third, and Seventh Circuits have held that

because a corporation necessarily acts through agents, an

“enterprise” consisting of a defendant corporation and agents

acting on its behalf cannot be meaningfully distinguished

from the corporation itself. The Eleventh Circuit in the

decision below and the Sixth Circuit have disagreed,

however, concluding that an enterprise can be pled adequately

so long as the corporation and the agents in the alleged

“enterprise” are “distinct entities,” even if those agents are

merely performing services for the corporation.

® See, e.g., Brannon v. Boatmen’s First Nat'l Bank of Okla., 153 F.3d

1144, 1148-49 (10th Cir. 1998); Lorenz v. CSX Corp., 1 F.3d 1406, 1413

(3d Cir. 1993).

” See, e.g., Riverwoods Chappaqua Corp. v. Marine Midland Bank,

N.A., 30 F.3d 339, 344 (2d Cir. 1994); Old Time Enters., Inc. v.

International Coffee Corp., 862 F.2d 1213, 1217 (Sth Cir. 1989).

13

The “distinct entity” test used by the Eleventh Circuit in the

instant case, see supra at 8, mirrors the Sixth Circuit's test in

Davis v. Mutual Life Insurance Co. of New York, 6 F.3d 367,

377 (6th Cir. 1993). In Davis the plaintiffs brought a RICO

claim against the defendant insurance company (“MONY”).

Plaintiffs alleged that they were damaged by the fraudulent

conduct of Fletcher Insurance Associates (“FIA”), an

insurance agency that sold MONY policies. They claimed

that FIA was an “enterprise” that MONY operated or

managed within the meaning of § 1962(c). See id. at 376-77.

After a jury verdict for the plaintiffs, MONY appealed,

arguing inter alia that it was not liable under § 1962(c)

because the FIA “enterprise” was insufficiently distinct from

MONY. See id. at 372, 377. The Sixth Circuit agreed that

FIA’s employees operated as “sales agents for MONY.” Jd.

at 377. Nevertheless, the Sixth Circuit found that FIA was a

distinct enterprise from MONY because FIA was a “distinct

entity” from MONY with an independent corporate existence.

Id. (“FIA had its own board of directors, its own business

cards, and its own office stationary.”’).

The Second, Third, and Seventh Circuits have disagreed

with this view, holding that a corporation and third parties

performing corporate tasks on its behalf cannot constitute an

enterprise distinct from the corporation itself. See Baker v.

IBP, Inc., 357 F.3d 685, 691-92 (7th Cir.), cert. denied, 125

S. Ct. 412 (2004); Fitzgerald v. Chrysler Corp., 116 F.3d

225, 228 (7th Cir. 1997); Discon, Inc. v. NYNEX Corp., 93

F.3d 1055, 1064 (2d Cir. 1996), vacated on other grounds,

$25 U.S. 128 (1998); Brittingham v. Mobil Corp., 943 F.2d

297, 303 (3d Cir. 1991). These Circuits have based their con-

clusions on two related rationales. First, such an “enterprise”

is not distinct from the corporation itself. Because a

corporation can act only through agents, an “enterprise” of a

defendant and entities acting on its behalf “is in reality no

more than the defendant itself.” Riverwoods Chappaqua

Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d

14

Cir. 1994); see Fitzgerald, 116 F.3d at 228 (Posner, C.J.);

Discon, 93 F.3d at 1064; Brittingham, 943 F.2d at 303.

Second, a corporation accused of conducting an “enterprise”

that consists of the corporation and third parties performing

corporate functions is not conducting or participating in the

conduct of the affairs of some separate enterprise—it +

conducting the corporation’s own affairs. See Baker, 357

F.3d at 691-92.

In a case presenting allegations nearly identical to those

made by respondents here, the Seventh Circuit held that such

allegations failed to establish an enterprise distinct from the

corporation. See Baker, 357 F.3d at 692; compare Pet. App.

9a (recognizing that enterprise holding “puts our circuit in

conflict with the Seventh Circuit’s decision in Baker v. IBP,

Inc.”). The Baker plaintiffs were putative representatives of a

class of employees at a meat-processing plant owned by the

defendant, IBP. See 357 F.3d at 686. The plaintiffs brought a

claim under § 1964(c), alleging that IBP knowingly employed

large numbers of illegal aliens, ignored fraudulent

documentation, and helped unauthorized employees to avoid

detection by immigration authorities. See id. at 686-87. The

plaintiffs further alleged that IBP paid “recruiters” who

provided it with illegal alien employees and that IBP had

“arrangements” with certain immigrant welfare organizations

who referred known illegal aliens to IBP. /d. at 687. The

plaintiffs claimed that IBP’s employment of illegal aliens had

depressed their wages. See id.

The plaintiffs alleged that the RICO enterprise was “IBP

plus the persons and organizations who help it find aliens to

hire.” Jd. at 691. The Baker court held that this allegation

- failed to specify a distinct enterprise. The court noted that an

allegation that “IBP plus its agents and employees”

constituted an enterprise was a “theory that won't fly,”

because such an “association” would be nothing more than

the corporation itself. Jd. Moreover, the court held that IBP

had not operated or managed any separate enterprise; rather,

15

“(t]he nub of the complaint is that IBP operates itself

unlawfully—it is IBP that supposedly hires, harbors, and pays

the unlawful workers.” Jd. Because the supposed enterprise

was not distinct from IBP itself, the Seventh Circuit

concluded that plaintiffs had not alleged a RICO violation.

See id. at 692.

Similarly, in Fitzgerald the Seventh Circuit found that the

defendant Chrysler’s association with its “affiliates and

agents” was not a separate enterprise. 116 F.3d at 226

(Posner, C.J.). The Fitzgerald plaintiffs alleged that Chrysler

had engaged in a scheme fraudulently to deny warranty

protection to consumers, and that it carried out this scheme

through an “association-in-fact” enterprise with Chrysler

dealerships. See id. The Seventh Circuit held that this

supposed enterprise was not distinct from Chrysler itself. See

id. at 228. The court noted that this alleged enterprise was far

afield from the prototypical RICO enterprise, and it

recognized the illogic in applying RICO liability to a

corporation using outside agents when no liability would

attach for the corporation’s use of its own employees in the

same way. See id. at 227. “[W]e cannot imagine .. .

applying RICO to a free-standing corporation such as

Chrysler merely because Chrysler does business through

agents, as virtually every manufacturer does.” /d.

The Second and Third Circuits have reached similar

conclusions. In Riverwoods, the Second Circuit held that “a

RICO enterprise that consists merely of a corporate defendant

associated with its own employees or agents carrying on the

regular affairs of a defendant” is not distinct from the

corporate defendant. 30 F.3d at 344. While Riverwoods

applied that rule in the context of an alleged enterprise

constituting the corporation and its own employees, see id. at

344-45, the Second Circuit later followed the same rule to

hold in Discon that a corporation and third parties working on

its behalf could not form an enterprise. In Discon, the

plaintiffs alleged that the enterprise consisted of several

16

entities within a single corporate structure and their

“attorneys, accountants and other agents.” 93 F.3d at 1064

(internal quotation marks omitted). The Second Circuit

concluded that this enterprise was indistinguishable from the

corporation itself; neither a corporation’s “agents” nor its

“employees” were distinct from the corporation “so long as

those persons act on behalf of the corporation.” /d.*

The Third Circuit likewise has held that an “enterprise”

consisting of a defendant corporation and advertising

agencies acting on its behalf is not distinct from the

corporation itself. See Brittingham, 943 F.2d at 302. In

Brittingham the court explained that a corporate defendant is

differently situated from an individual defendant accused of

manipulating his corporate employer; “when a defendant is

itself a collective entity, it is more likely that the alleged

enterprise is in reality no different from the association of

individuals or entities that constitute the defendant or carry

out its actions.” /d. at 302.’

The stark conflict between the decisions of the Sixth and

Eleventh Circuits and those of the Second, Third, and Seventh

Circuits on whether a corporation and outside entities

performing its corporate functions can together form a RICO

enterprise is an issue of national importance that warrants this

Court’s review. The mechanical “distinct entity” test applied

by the Sixth and Eleventh Circuits would effect a drastic and

unwarranted expansion of RICO liability into an area far

® This Court's decision in NYNEX Corp. v. Discon, Inc., 525 U.S. 128

(1998), reversed the Second Circuit’s decision only as to the plaintiffs’

Sherman Act claims; this Court did not review the Second Circuit's

decision on the RICO claims. /d. at 133.

* The Third Circuit later overruled a different portion of Brittingham,

that addressing application of § 1962(c) to “officers and employees acting

through a corporate enterprise,” see Jaguar Cars, Inc. v. Royal Oak Motor

Car Co., 46 F.3d 258, 266, 268-69 (3d Cir. 1995). Jaguar did not alter

Brittingham’s holding that a defendant corporation and its third-party

agents could not constitute a RICO enterprise. See id. at 268.

17

afield from the initial purpose of the statute. While it is true

that RICO has been applied in circumstances different from

its initial purpose “to attack the ‘infiltration of organized

crime and racketeering into legitimate organizations,’”

Reves, 507 U.S. at 185 (quoting S. Rep. No. 91-617, at 76

(1969)), RICO was clearly not designed as a general civil

liability remedy with treble damages against corporations.

On the contrary, the requirements of § 1964, including the

enterprise requirement, are “critical limitation{s]” on the

applicability of RICO. /d. at 183.

The Eleventh Circuit’s “distinct entity” rule all but

eliminates the enterprise requirement for the vast majority of

corporate defendants, because it allows plaintiffs to plead an

“enterprise” in any case by alleging the involvement of a third

party corporate agent. Yet every corporation must act

through agents to carry out business—companies hire

advertisers to prepare advertising campaigns, insurance

companies use agents to sell policies, and manufacturers use

employment agencies to find workers. Under the Eleventh

Circuit’s rule, each of these corporations could be held liable

under RICO simply because it hired an outside company to

perform these tasks, rather than using its own employees. The

rule would, in effect, make a broad range of routine corporate

conduct actionable under RICO. This dramatic increase of

corporate RICO liability based on nothing more than the

vagaries of its corporate organization is unwarranted “and

makes little sense from a policy perspective.” Brannon v.

Boatman's First Nat'l Bank of Okla., 153 F.3d 1144, 1147

(10th Cir. 1998). As Judge Posner observed, recognizing the

sort of “enterprise” that the Eleventh Circuit accepted would

create an incentive for corporations to insulate themselves

from RICO liability by vertically integrating functions that

would otherwise be outsourced to other companies. See

Fitzgerald, 116 F.3d at 227. RICO was certainly not intended

to encourage corporate consolidation or any particular

18

business structure.'° Accordingly, this dramatic expansion of

RICO liability warrants review.

Il. THIS COURT SHOULD GRANT CERTIORARI

TO ADDRESS THE REQUIREMENT THAT RICO

PLAINTIFFS ADEQUATELY PLEAD A PROXI-

MATELY CAUSED INJURY TO BUSINESS OR

PROPERTY.

This case presents a second significant question for this

Court’s review—what a plaintiff must plead to establish

standing to bring a civil RICO action. The Eleventh Circuit

held that plaintiffs’ conclusory allegations that Mohawk’s

employment of “hundreds” of illegal aliens somehow

depressed hourly wages throughout Georgia were sufficient to

establish proximately caused harm to plaintiffs’ “business or

property.” Pet. App. 14a. The Eleventh Circuit’s acceptance

of these conclusory allegations of direct injury to “business or

property” runs contrary to decisions in other Circuits and is

sharply out of step with this Court’s own interpretation of

RICO standing.

Civil RICO actions may only be brought by “person{s]

injured in [their] business or property by reason of a violation

of [18 U.S.C. § 1962}.” 18 U.S.C. § 1964(c). Section

1964(c) embodies two substantive limitations on the types of

plaintiffs who may recover civil RICO damages. First,

putative plaintiffs must have suffered an injury to their

“business or property.” Second, the “by reason of” language

of § 1964(c) limits standing to those plaintiffs who can

demonstrate that a RICO violation was the proximate cause of

'° Moreover, the disagreement among the courts of appeals on this

question presents a significant risk of forum shopping. Corporations

targeted by civil RICO actions often do business in several states, and this

circuit split means that the same corporation would be subject to different

liability in different states. While an “enterprise” consisting of a

corporation and its agents would not be sufficient in Illinois or New York,

such an enterprise would be sufficient in Ohio or Florida.

19

their injury. See Holmes v. Securities Investor Prot. Corp.,

503 U.S. 258, 267-68 (1992). Together these two

- requirements reflect Congress’s determination to limit the

class of civil plaintiffs who are permitted to sue under RICO.

See id. at 274.

Here, plaintiffs allege that they suffered an injury to their

“business or property” because wages that they freely agreed

to accept were suppressed. Although recognizing that the

Statutory terms “business or property” are “words of limita-

tion” that require plaintiffs to allege a concrete financial loss,

the Eleventh Circuit found plaintiffs’ allegations a sufficiently

concrete business injury for § 1964(c) standing. Pet. App.

1 1a-12a (internal quotation marks omitted). Specifically, the

Eleventh Circuit concluded that an employee working for an

agreed-upon (but allegedly depressed) wage nevertheless has

§ 1964(c) standing. The court reasoned that the employee

had a “‘legal entitlement to business relations unhampered by

schemes prohibited by the RICO predicate statutes.”” /d. at

12a (quoting Mendoza, 301 F.3d at 1168 n.4).'!

The Eleventh Circuit’s opinion exacerbates the confusion

amongst the circuits as to the types of injury that can

constitute an injury to “business or property.” Significantly,

the Fifth Circuit has recognized that plaintiffs who receive

“precisely what they bargained for” do not suffer an injury to

their business or property under RICO. Price v. Pinnacle

Brands, Inc., 138 F.3d 602, 607 (Sth Cir. 1998) (per curiam).

The Price plaintiffs claimed an injury from their purchase of

'' The Eleventh Circuit reasoned that its conclusion was supported by

the Ninth Circuit’s opinion in Mendoza v. Zirkle Fruit Co., 301 F.3d 1163,

1171 (9th Cir. 2002), but that case included a critical allegation absent

here: an allegation that defendants had “the ability to define wages in [the]

labor market, akin to monopsony or oligopsony power.” /d. These

allegations of the defendants’ “singula{r}” market power to “affect wages

throughout the labor market” were dispositive in the Ninth Circuit’s

analysis. /d. at 1166-67. In the instant case, plaintiffs have not alleged

that Mohawk had the power to define wages throughout Georgia.

20

trading cards that were allegedly marketed in violation of the

gambling laws. See id. at 605. The court held that the

plaintiffs had not suffered an injury to their business or

property, because they did “‘not allege that they received

something different than precisely what they bargained for:

six to twenty cards in a pack with a chance that one of those

cards may be [a valuable collectible card].’” Jd. at 607. It

was irrelevant that the plaintiffs may have had a state law

property interest to recover gambling losses, because such an

“*intangible property interest’ is not sufficient to confer RICO

standing.” Jd.

The Eleventh Circuit’s expansive interpretation of the

“business or property” requirement is also contrary to the

D.C. Circuit’s decision in Danielson v. Burnside-Ott Aviation

Training Center, Inc., 941 F.2d 1220, 1229 (D.C. Cir. 1991).

The Danielson plaintiffs alleged that their employers had

violated RICO by paying wages below the levels required by

the Service Contract Act. See id. at 1226. The D.C. Circuit

questioned whether plaintiffs who had voluntarily accepted

supposedly insufficient wages could suffer an injury to their

“business or property.” /d. at 1229. Even though the

plaintiffs might have been “entitled to higher paying job

classifications,” the D.C. Circuit noted that “each employee in

fact received precisely the compensation bargained for in

return for the agreed work.” /d.

The Eleventh Circuit’s decision that plaintiffs could satisfy

§ 1964(c) by alleging an intangible “business interest” in the

employment relationship with their employer that was

unhampered by alleged RICO violations runs contrary to

Danielson and Price and constitutes an unwarranted

evisceration of the “business or property” limit on RICO

standing. The blunt instrument of treble-damages civil RICO

liability was never intended to be available for every plaintiff

who claimed damage from an alleged RICO violation.

Rather, Congress made a substantive judgment to permit civil

RICO suits only by plaintiffs who had particular types of

21

damage—an injury to their “business” or to their “property.”

By permitting plaintiffs who voluntarily accepted an hourly

wage to sue for an inflated retroactive pay raise, the Eleventh

Circuit effectively has read the “business or property”

limitation out of the statute.’

Indeed, the acceptance of these nebulous injuries

undermines the requirement that a plaintiff must a..ege “some

direct relation between the injury asserted and the injurious

conduct alleged.” Holmes, 503 U.S. at 268. The Eleventh

Circuit’s opinion sharply undercuts Holmes’ direct injury

requirement, finding injury based on plaintiff's allegations

that Mohawk illegally hired other employees. See Pet. App.

18a. Yet the direct victims are either the illegally hired

workers themselves or the legal employees not hired, and

certainly not plaintiffs. Holmes, 503 U.S. at 271 (remedies

for RICO harms should “‘not . . . go beyond the first step.’”’).

The members of the former group are, by the plaintiffs’ own

allegations, those with diminished “bargaining power” who

supposedly “are beholden to Mohawk” and have “no effective

means to complain about the terms of their employment,” and

thus earn depressed wages. /d. 9 33, 36.'°

The Eleventh Circuit placed talismanic reliance on

plaintiffs’ conclusory assertion that they had been injured “by

direct and proximate reason of Mohawk’s illegal conduct.”

'? Indeed, plaintiffs throughout the country have filed at least four class

actions under RICO seeking a retroactive pay raise. See Pet. App. 9a;

Trollinger, 370 F.3d at 606-07; Baker, 357 F.3d at 686-87; Mendoza, 301

F.3d at 1166.

'? In fact, undocumented immigrants have brought at least one RICO

action against an employer for hiring them and allegedly violating labor

laws because they are “unaware of their rights, afraid to complain, 4

thus easily exploited.” See Revised First Am. Compl. at 9 3, Zavala v.

Wal-Mart Stores, Inc., No. 03-Civ.-5309 (D.N.J., filed Oct. 28, 2004); see

also Sarah Paoletti & Matt Hayes, Should illegal aliens be able to sue U.S.

employers for labor racketeering?, Insight on the News, Jan. 6, 2004, at

46.

22

Pet. App. 14a. This ready acceptance of plaintiffs’ con-

clusions runs contrary to this Court’s holding from last term

in Dura Pharmaceuticals, Inc. v. Broudo, that a court may not

simply rubber-stamp a general allegation of proximate cause.

125 S. Ct. 1627, 1634 (2005).'* Instead, plaintiffs can only

survive a motion to dismiss by pleading specific facts that

illustrated a chain of “causal connection” linking the

defendant’s actions and their injury. See id.'°

Similarly, in the present case, plaintiffs have pled, at best,

only the first link in a chain of causation—that Mohawk was

supposedly employing “hundreds” of illegal aliens. Plaintiffs

leap from this allegation to the conclusion that the additional

workers depressed wages throughout Georgia. But “this is far

from inevitably so.” Jd. at 1632. Wages are affected by a

“tangle of factors,” id., none of which is accounted for in

plaintiffs’ conclusory allegation of causation. And plaintiffs

'* The Dura plaintiffs pled that they were harmed by the purchase of

stock at an inflated price. See Dura, 125 S. Ct. at 1630. This Court

recognized that an inflated price “might” lead to a subsequent loss, but

that it was “far from inevitably so.” /d. at 1632 (emphasis omitted).

Instead, price could be affected by a “tangle of factors” completely

unrelated to the defendants’ alleged wrongful conduct. /d.

'S Indeed, this tension over pleading a proximately caused RICO injury

exists within a larger division among the circuits regarding what a plaintiff

must plead in order to survive a motion to dismiss pursuant to Rule

12(b)(6) of the Federal Rules of Civil Procedure. Citing this Court’s

opinion in Swierkiewicz v. Sorema, N.A., 534 U.S. 506 (2002), the Third

__and Ninth Circuits have held that a plaintiff need not plead facts to survive

such a motion to dismiss. See Alston v. Parker, 363 F.3d 229, 233 n.6 (3d

Cir. 2004); Kwai Fun Wong v. United States, 373 F.3d 952, 969-70 (9th

Cir. 2004) (holding plaintiffs’ conclusory allegations of “discriminatory

animus” were sufficient to state a claim). Conversely, the Fourth Circuit

concluded that Swierkiewicz did not “alter the basic pleading requirement

that a plaintiff set forth facts sufficient to allege each element of his

claim.” Dickson v. Microsoft Corp., 309 F.3d 193, 213 (4th Cir. 2002)

(citing /odice v. United States, 289 F.3d 270, 281 (4th Cir. 2002)). The

Eleventh Circuit’s opinion also provides the Court with the opportunity to

clarify this critical issue.

23

failed to plead an essential link in the chain of causation—that

Mohawk had sufficient market power to affect their wages.

See supra at note 11. Without such power, it is common

sense that Mohawk’s supposed payment of below-market

wages would simply cause legal workers to go elsewhere—

not to remain at Mohawk and voluntarily accept supposedly

depressed wages. Rather than examining plaintiffs’ alle-

gations in light of Dura, the Eleventh Circuit instead held that

it was enough for plaintiffs generally to make the conclusory

allegation that Mohawk’s conduct “ha[d] the purpose and

direct result of depressing the wages paid to the plaintiffs.”

Pet. App. 14a.'© The Eleventh Circuit’s lax approach to §

1964(c)’s requirement that plaintiffs | demon-strate

proximately caused harm to “business or property” merits this

Court’s attention.

'€ The Eleventh Circuit’s divergence from this Court’s proximate cause

jurisprudence is in stark contrast with the Seventh Circuit’s rejection of a

similar theory as inherently speculative. See Baker, 357 F.3d at 692.

Although ultimately deciding the case based on plaintiffs’ failure to

adequately plead a distinct enterprise, the Seventh Circuit noted that an

increased supply of labor due to hiring illegal aliens would not have a

localized effect, but would influence “wages throughout the region (if not

the country).” /d. Further, a myriad of factors would influence whether

the defendant’s actions were the proximate cause of plaintiffs’ harm,

including whether certain employees’ decision to move to another

employer who was paying higher wages would have a greater effect on

wages than defendant's actions. /d.

24

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be granted.

Respectfully submitted,

CARTER G. PHILLIPS*

JUAN P. MORILLO

STEVEN T. COTTREAU

JULIE A. GURLEY

MATTHEW J. WARREN

SIDLEY AUSTIN BROWN &

WOOD LLP

1501 K STREET, NW

WASHINGTON, DC 20005

(202) 736-8000

Counsel for Petitioner

October 7, 2005 * Counsel of Record

APPENDICES

la

APPENDIX A

UNITED STATES COURT OF APPEALS

ELEVENTH CIRCUIT

No. 04-13740

SHIRLEY WILLIAMS, GALE PELFREY, BONNIE JONES,

LORA SISSON, individually and on behalf of a class,

Plaintiffs-Appellees,

Be

MOHAWK INDUSTRIES, INC.,

Defendant-Appellant.

June 9, 2005

Appeal from the United States District Court for the

Northern District of Georgia.

Before ANDERSON, HULL and GIBSON’, Circuit

Judges.

PER CURIAM:

In this case, Plaintiffs Shirley Williams, Gale Pelfrey,

Bonnie Jones, and Lora Sisson are current or former hourly

employees of Defendant Mohawk Industries, Inc. The

plaintiffs filed this class-action complaint alleging that

Mohawk’s widespread and knowing employment and

harboring of illegal workers allowed Mohawk to reduce labor

costs by depressing wages for its legal hourly employees and

discourage worker’s-compensation claims, in violation of

federal and state RICO statutes. The plaintiffs also alleged

* Honorable John R. Gibson, United States Circuit Judge for the Eighth

Circuit, sitting by designation.

2a

that Mohawk was unjustly enriched by the lower wages

it paid, as well as the reduced number of worker’s-

compensation claims it paid. The district court denied in part

and granted in part Mohawk’s 12(b)(6) motion, and this

interlocutory appeal followed. After review and oral argu-

ment, we affirm in part and reverse in part.

I. BACKGROUND

Mohawk is the second largest carpet and rug manufacturer

in the United States and has over 30,000 employees. Ac-

cording to the plaintiffs, Mohawk has conspired with recruit-

ing agencies to hire and harbor illegal workers in an effort to

keep labor costs as low as possible.' For example, according

to the plaintiffs’ complaint

Mohawk employees have traveled to the United States

Border, including areas near Brownsville, Texas, to

recruit undocumented aliens that recently have entered

the United States in violation of federal law. These

employees and other persons have transported undocu-

mented aliens from these border towns to North Georgia

so that those aliens may procure employment at Mo-

hawk. Mohawk has made various incentive payments to

employees and other recruiters for locating workers that

Mohawk eventually employs and harbors.

Furthermore, “[vJarious recruiters, including Mohawk em-

ployees, have provided housing to these illegal workers upon

their arrival in North Georgia and have helped them find

' At this point in the litigation, we must assume the facts set forth in the

plaintiffs’ complaint are true. See Marsh v. Butler County, 268 F.3d 1014,

1023 (11th Cir.2001) (en banc) (setting forth the facts in the case by

“[a}]ccepting all well-pleaded factual allegations (with reasonable infer-

ences drawn favorably to Plaintiffs) in the complaint as true”). Because

we must accept the allegations of plaintiffs’ complaint as true, what we set

out in this opinion as “the facts” for Rule 12(b)(6) purposes may not be

the actual facts.

3a

illegal employment with Mohawk.” Additionally, Mohawk

knowingly or recklessly accepts fraudulent documentation

from the illegal aliens.

The plaintiffs further allege that Mohawk has concealed its

efforts to hire and harbor illegal aliens by destroying

documents and assisting illegal workers in evading detection

by law enforcement. According to plaintiffs’ complaint,

Mohawk takes steps to shield those illegal aliens from

detection by, among other things, helping them evade detec-

tion during law enforcement searches and inspections at

Mohawk’s facilities.

According to the complaint, Mohawk’s widespread and

knowing employment and harboring of illegal workers has

permitted Mohawk to reduce labor costs. Mohawk has done

so by reducing the number of legal workers it must hire and,

thereby, increasing the labor pool of legal workers from

which Mohawk hires. This practice permits Mohawk to

depress the wages it pays its legal hourly workers.

Finally, the plaintiffs allege that Mohawk is “able to save

substantial sums of money” by paying its workers reduced

wages. Furthermore, Mohawk knows that illegal workers are

less likely to file worker’s-compensation claims, and, there-

fore, Mohawk is able to save additional monies. According

to the plaintiffs, these benefits constitute unjust enrichment

under state law.

Mohawk filed a Rule 12(b)(6) motion to dismiss the plain-

tiffs’ complaint for failure to state a claim. The district court

determined that the plaintiffs had stated a claim under both

federal and state RICO statutes, as well as a claim for unjust

enrichment under state law for paying legal workers lower

wages because of the illegal workers Mohawk employed.

However, the district court dismissed the plaintiffs’ unjust-

enrichment claim insofar as it was based on the reduced

da

number of worker’s-compensation claims Mohawk was

forced to pay.”

II]. FEDERAL RICO CLAIMS

Pursuant to 18 U.S.C. § 1962(c), it is illegal “for any per-

son employed by or associated with any enterprise engaged

in, or the activities of which affect, 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). Thus, in

order to establish a federal civil RICO violation under

§ 1962(c), the plaintiffs “must satisfy four elements of proof:

‘(1) conduct (2) of an enterprise (3) through a pattern (4) of

racketeering activity.”” Jones v. Childers, 18 F.3d 899, 910

(11th Cir.1994) (quoting Sedima, S.P.R.L. v. Imrex Co., 473

U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985)).

These requirements apply whether the RICO claim is civil or

criminal in nature.

In civil cases, however, RICO plaintiffs must also satisfy

the requirements of 18 U.S.C. § 1964(c). Section 1964(c)

states that “[a]ny person injured in his business or property by

reason of’ RICO’s substantive provisions has the right to

“recover threefold the damages he sustains .. . .” 18 U.S.C.

§ 1964(c). Thus, under § 1964(c), civil RICO claimants, such

as the plaintiffs here, must show (1) the requisite injury to

“business or property,” and (2) that such injury was “by

reason of” the substantive RICO violation. We discuss each

of these requirements in turn.

* This Court reviews the denial of a Rule 12(b)(6) motion “de novo,

applying the same standard as the district court did.” Hoffman-Pugh v.

Ramsey, 312 F.3d 1222, 1225 (11th Cir.2002). A complaint should not be

dismissed pursuant to Rule |2(b)(6) “unless it appears beyond doubt that

the plaintiff can prove no set of facts in support of his claim.” Beck v.

Deloitte & Touche, 144 F.3d 732, 735 (11th Cir.1998) (internal quotation

marks and citation omitted).

Sa

A. Pattern of Racketeering Activity

As mentioned above, there are four requirements under

§ 1962(c). Because elements (3) and (4}—a pattern of

racketeering activity—are easily met in this case (at least at

the motion-to-dismiss stage), we address them first.

“A ‘pattern of racketeering activity,’ for purposes of the

RICO Act, ‘requires at least two acts of racketeering activ-

ity.” Cox v. Administrator U.S. Steel & Carnegie, 17 F.3d

1386, 1397 (11th Cir.1994), modified on other grounds by 30

F.3d 1347 (11th Cir.1994). “An act of racketeering is

commonly referred to as a ‘predicate act.’ A ‘pattern’ of

racketeering activity is shown when a racketeer commits at

least two distinct but related predicate acts.” Maiz v. Virani,

253 F.3d 641, 671 (11th Cir.2001) (quotation marks,

citations, and brackets omitted). “If distinct statutory vio-

lations are found, the predicate acts will be considered to be

distinct irrespective of the circumstances under which they

arose.” Cox, 17 F.3d at 1397 (quotation marks, citations, and

emphasis omitted).

According to 18 U.S.C. § 1961(1)(F), “‘racketeering activ-

ity’ means any act which is indictable under the Immigration

and Nationality Act, section 274 (relating to bringing in and

harboring certain aliens), . . . if the act indictable under such

section of such Act was committed for the purpose of

financial gain.” In this case, the plaintiffs have alleged that

the defendant has engaged in an open and ongoing pattern of

violations of section 274 of the Immigration and Nationality

Act. In particular, plaintiffs allege that Mohawk has violated

and continues to violate: (1) 8 U.S.C. § 1324(a)(3)(A), which

makes it a federal crime to “knowingly hire{ ] for em-

ployment at least 10 individuals with actual knowledge that

the individuals are aliens” during a twelve-month period;

(2) 8 U.S.C. § 1324(a)(1)(A)(iii), which makes it a federal

crime to “conceal[ }], harbor[ ], or shield from detection, or

attempt[ ] to conceal, harbor or shield from detection” aliens

6a

that have illegally entered the United States; and (3) 8 U.S.C.

§ 1324(a)(1)(A)(iv), which makes it a federal crime to “en-

courage[ ] or induce[ ] an alien to come to, enter, or reside in

the United States, knowing or in reckless disregard of the fact

that such coming to, entry, or residence is or will be in

violation of law.” According to the plaintiffs’ complaint,

Mohawk has committed hundreds, even thousands, of vio-

lations of federal immigration laws. Consequently, we con-

clude that the plaintiffs have properly alleged a “pattern of

racketeering activity.”

B. Conduct of an Enterprise

With regard to elements (1) and (2) of the four-part test

under § 1962(c), the plaintiffs must establish “conduct of an

enterprise” and that the enterprise had a common goal. See

United States v.. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524,

2528-29, 69 L.Ed.2d 246 (1981) (“The enterprise is an entity,

for present purposes a group of persons associated together

for a common purpose of engaging in a course of conduct.”).

Furthermore, Mohawk “must participate in the operation or

management of the enterprise itself.” Reves v. Ernst & Young,

507 U.S. 170, 185, 113 S.Ct. 1163, 1173, 122 L.Ed.2d

525 (1993). '

An enterprise “includes any individual, partnership, corpo-

ration, association, or other legal entity, and any union or

group of individuals associated in fact although not a legal

entity.” 18 U.S.C. § 1961(4). As stated in United States v.

Goldin Indus., Inc., 219 F.3d 1271, 1275 (11th Cir.2000),

“the existence of an enterprise is proved by evidence of an

> There is no dispute that these predicate acts, if they occurred, are

related. See Pelletier v. Zweifel, 921 F.2d 1465, 1496-97 (11th Cir.1991)

(“Predicate acts are related if they have the same or similar purposes,

results, participants, victims, or methods of commission, or otherwise are

interrelated by distinguishing characteristics and are not isolated events.”

(internal quotation marks and citation omitted)).

Ta

ongoing organization, formal or informal, and by evidence

that the various associates function as a continuing unit.”

(internal quotation marks and citation omitted). Furthermore,

“the definitive factor in determining the existence of a RICO

enterprise is the existence of an association of individual

entities, however loose or informal, that furnishes a vehicle

for the commission of two or more predicate crimes, that is,

the pattern of racketeering activity requisite to the RICO

violation.” Jd.

In this case, the plaintiffs have alleged that Mohawk and

third-party temp agencies/recruiters have conspired to violate

federal immigration laws, destroy documentation, and harbor

illegal workers. Specifically, the plaintiffs allege that

[eJach recruiter is paid a fee for each worker it supplies

to Mohawk, and some of those recruiters work closely

with Mohawk to meet its employment need by offering a

pool of illegal workers who can be dispatched to a

particular Mohawk facility on short notice as the need

arises. Some recruiters find workers in the Brownsville,

Texas area and transport them to Georgia. Others, like

TPS, have relatively formal relationships with the com-

pany in which they employ illegal workers and then loan

or otherwise provide them to Mohawk for a fee. These

recruiters are sometimes assisted by Mohawk employees

who carry a supply of social security cards for use when

a prospective or existing employee needs to assume a

new identity.

Given the Rule 12(b)(6) stage of the litigation, the plaintiffs’

complaint must be taken as true, and it has sufficiently

alleged an “enterprise” under RICO; that is an association-in-

fact between Mohawk and third-party recruiters. This Court

has never required anything other than a “loose or informal”

association of distinct entities. Mohawk and the third-party

recruiters are distinct entities that, at least according to the

complaint, are engaged in a conspiracy to bring illegal

8a

workers into this country for Mohawk’s benefit. As such, the

complaint sufficiently alleges an “enterprise” under RICO.

As for the common purpose, the plaintiffs’ complaint

alleges that “(t]he recruiters and Mohawk share the common

purpose of obtaining illegal workers for employment by

Mohawk.” The complaint further alleges that “(ejach re-

cruiter is paid a fee for each worker it supplies to Mohawk”

and that “Mohawk has made various incentive payments to

employees and other recruiters for locating workers that

Mohawk eventually employs and harbors.” Furthermore,

“(t]he acts of racketeering activity committed by Mohawk

have the same or similar objective: : the reduction of wages

paid to Mohawk’s hourly workforce.” What is clear from the

complaint is that each member of the enterprise is allegedly

reaping a large economic benefit from Mohawk’s employ-

ment of illegal workers.

In United Sta.es v. Church, 955 F.2d 688, 698 (11th Cir.

1992), this Court concluded that the common purpose of

making money was sufficient under RICO. Because the

complaint clearly alleges that the members of the enterprise

stand to gain sufficient financial benefits from Mohawk’s

widespread employment and harboring of illegal workers, the

plaintiffs have properly alleged a “common purpose” for the

purposes of RICO.

Furthermore, Mohawk “must participate in the operation or

management of the enterprise itself.” Reves, 507 U.S. at 185,

113 S.Ct. at 1173. That is, Mohawk “must have some part in

directing” the affairs of the enterprise. /d. at 179, 113 S.Ct. at

1170. However, the Supreme Court has cautioned that

“RICO liability is not limited to those with primary re-

sponsibility for the enterprise’s affairs ....” Jd. In their

complaint, the plaintiffs allege that “Mohawk participates in

the operation and management of the affairs of the enter-

prise ... ,” which includes some direction over the recruiters.

Whatever difficulties the plaintiffs may have in proving such

9a

an allegation, they have sufficiently alleged that Mohawk is

engaged in the operation or management of the enterprise.

Again, at this stage in the litigation, we simply cannot say

whether the plaintiffs will be able to establish that Mohawk

had “some part in directing” the affairs of the enterprise.

However, they have alleged sufficient acts to survive a Rule

12(b)(6) motion.

Accordingly, we conclude that the plaintiffs’ complaint

states a claim that is cognizable under § 1962(c). In so doing,

we note that the allegations in this case are similar to those in

cases recently decided by the Second, Sixth, and Ninth

Circuits. See Trollinger v. Tyson Foods, 370 F.3d 602 (6th

Cir.2004) (former employees alleging employer used illegal

immigrants in order to depress wages); Mendoza v. Zirkle

Fruit Co., 301 F.3d 1163 (9th Cir.2002) (legally documented

workers alleging that employers leveraged hiring of undoc-

umented workers in order to depress wages); Commercial

Cleaning Servs., L.L.C. v. Colin Service Sys., Inc., 271 F.3d

374 (2d Cir.2001) (company alleging competitor hired un-

documented workers in order to underbid competing firms).

In each of these decisions, the circuit court determined that,

at the Rule 12(b)(6) stage, the plaintiffs had alleged

sufficient damages to be permitted to pursue their RICO

claims. Although none of the opinions specifically addressed

§ 1962(c)’s requirements, each of these cases has essentially

the same factual basis for RICO liability as the complaint

before this Court.

We recognize that the above conclusion puts our circuit in

conflict with the Seventh Circuit’s decision in Baker v. /BP.

Inc., 357 F.3d 685 (7th Cir.2004), cert. denied, — U.S. —,

125 S.Ct. 412, 160 L.Ed.2d 318 (2004). In Baker, an

employees’ class-action lawsuit alleged that a meat-proc-

essing facility conspired with recruiters (and a Chinese aid

group), and violated RICO by employing undocumented,

illegal workers in an effort to drive down employee wages.

10a

The Seventh Circuit concluded that the employees’ union was

a necessary party to the lawsuit. /d. at 690-91.

However, the Seventh Circuit in Baker also concluded that

there was “another fatal problem” with the complaint. /d. at

691. Although stating that an “enterprise” arguably existed,

the Seventh Circuit determined that there was not a common

purpose among the entities in the enterprise. /d. Specifically,

the Seventh Circuit stated that the employer “wants to pay

lower wages; the recruiters want to be paid more for services

rendered (though [the employer] would like to pay them less);

the Chinese Mutual Aid Association wants to assist members

of its ethnic group. These are divergent goals.” /d.

In our circuit, however, there has never been any require-

ment that the “common purpose” of the enterprise be the sole

purpose of each and every member of the enterprise. In fact,

it may often be the case that different members of a RICO

enterprise will enjoy different benefits from the commission

of predicate acts. This fact, however, is insufficient to defeat

a civil RICO claim. Rather, all that is required is that the

enterprise have a common purpose. In this case, the com-

plaint alleges that Mohawk and the recruiters, under Mo-

hawk’s direction, worked together to recruit illegal workers to

come to Georgia and that they had the common purpose of

providing illegal workers to Mohawk so that Mohawk could

reduce its labor costs and the recruiters could get paid. This

commonality is all that this circuit’s case law requires. See

Church, 955 F.2d at 698. Again, while the plaintiffs may be

unable to prove such allegations at trial, we cannot say at this

12(b)(6) stage of the litigation that they have failed to

properly allege a common purpose.

We recognize that the Baker Court also concluded that

there was no way to establish that the employer “operate[d] or

manage[d] th[e] enterprise through a pattern of racketeering

activity.” Baker, 357 F.3d at 691 (emphasis omitted). How-

ever, as this Court has noted, “the Supreme Court has yet to

lla

delineate the exact boundaries of the operation or manage-

ment test.” United States v. Starrett, 55 F.3d 1525, 1546

(11th Cir.1995). Although the exact boundaries have not

been established, it is possible that the plaintiffs will be able

to establish that Mohawk played some part in directing the

affairs of the enterprise. Whether the plaintiffs ultimately

establish sufficient evidence to meet the boundaries of the

operation-or-management test is a question best answered at

the summary-judgment stage or at trial. Accordingly, we

conclude that the plaintiffs have sufficiently alleged conduct

that may potentially satisfy the operation-or-management test.

As such, the plaintiffs are entitled to continue with their

claims at this juncture.

Having reviewed the four elements of § 1962(c), we turn to

§ 1964(c).

C. Injury to “Business or Property” Interest Under RICO

As indicated above, RICO’s civil-suit provision states that

“{a]ny person injured in his business or property by reason

of’ RICO’s substantive provisions has the right to “recover

threefold the damages he sustains... .” 18 U.S.C. § 1964(c).

“The terms ‘business or property’ are, of course, words of

limitation which preclude [certain forms of] recovery.” Doe v.

Roe, 958 F.2d 763, 767 (7th Cir.1992). However, RICO is to

be “liberally construed.” Sedima, 473 U.S. at 497-98, 105

S.Ct. at 3285-86. Accordingly, we must determine whether

the plaintiffs have a “business or property” interest that could

be injured under RICO. We need not reach whether plaintiffs

have a property interest because plaintiffs clearly have

alleged a business interest affected by Mohawk’s alleged

RICO violations.

Indeed, this case is similar to the Ninth Circuit’s Mendoza

decision, where legally documented agricultural workers sued

fruit growers under RICO alleging that the growers depressed

wages by hiring illegal workers. In Mendoza, the defendant

12a

claimed that the employees would have to show a “‘property

right’ in the lost wages[ ] by showing that they were promised

or contracted for higher wages.” Mendoza, 301 F.3d at 1168

n. 4. The Ninth Circuit concluded that this argument was

misplaced, pointing out that the plaintiffs’ claim did not

implicate procedural due process. /d. Rather, the Ninth Cir-

cuit concluded that “what is required is precisely what the

employees allege here: a legal entitlement to business

relations unhampered by schemes prohibited by the RICO

predicate statutes.” /d. (citations omitted). Given that a rela-

tionship clearly exists between plaintiff workers and their em-

ployer, Mohawk, we conclude that a simiiar business interest

exists in this case, and that the employees’ alleged injury to

their business interests satisfies the business-interest require-

ment. Consequently, the plaintiffs have alleged a sufficient

injury to a business interest to pursue their RICO claims.

D. “By Reason Of” the Substantive RICO Violations

We now turn to the “by reason of” requirement contained

in § 1964(c). The “by reason of” requirement implicates two

concepts: (1) a sufficiently direct injury so that a plaintiff has

standing to sue; and (2) proximate cause, whereby the

wrongful conduct is shown to be a substantial cause of the

alleged injury and the causal connection is foreseeable and

not speculative. See Trollinger, 370 F.3d at 612 (“RICO’s

civil-suit provision imposes two distinct but overlapping

limitations on claimants—standing and proximate cause.”);

Green Leaf Nursery v. E.1. DuPont De Nemours and Co., 341

F.3d 1292, 1307 (11th Cir.2003), cert. denied, 541 U.S. 1037,

124 S.Ct. 2094, 158 L.Ed.2d 723 (2004) (“[O]ne or more of

the predicate acts [in a RICO claim] must not only be the ‘but

for’ cause of the injury, but the proximate cause as well.”

(citations omitted)); Mendoza, 301 F.3d at 1168-72 (con-

cluding that the plaintiffs had satisfied both “statutory” and

“constitutional” standing requirements of RICO); see also

Holmes v. Securities Investor Protection Corp., 503 U.S. 258,

13a

268-69, 112 S.Ct. 1311, 1318, 117 L.Ed.2d 532 (1992) (stat-

ing in a RICO case that “a plaintiff who complain[s] of harm

flowing merely from the misfortunes visited upon a third

person by the defendant’s acts was generally said to stand at

too remote a distance to recover” (citations omitted)). De-

spite some significant overlap, we address the proximate

cause and standing concepts separately.

(i) Proximate Cause

“It is well-established that RICO plaintiffs must prove

proximate causation in order to recover.” Cox, 17 F.3d at

1399 (citations omitted). “A proximate cause is not, however,

the same thing as a sole cause. Instead, a factor is a

proximate cause if it is a substantial factor in the sequence of

responsible causation.” /d. (internal quotation marks and

citation omitted).

* As the Sixth Circuit aptly explained,

the two concepts overlap and that is particularly true in the context

of civil RICO claims. As a general matter, they overlap because a

plaintiff who lacks standing to vindicate a derivative injury also will

be unable to show proximate cause. And as a matter of RICO law,

the two concepts overlap because they both grow out of the “by

reason of” limitation in RICO—namely, the requirement that

claimants establish that their injury was “by reason of” a RICO

predicate act violation. The “by reason of” limitation, in other

words, bundles together a variety of “judicial tools,” some of which

are traditionally employed to decide causation questions and some

of which are employed to decide standing questions. Holmes, 503

U.S. at 268, 112 S.Ct. [at 1318] (“Here we use ‘proximate cause’ to

label generically the judicial tools used to limit a person's

responsibility for the consequences of that person’s own acts. At

bottom, the notion of proximate cause reflects ideas of what justice

demands, or of what is administratively possible and convenient.”)

(quotation omitted)... .

Trollinger, 370 F.3d at 613.

l4a

In this case, the plaintiffs have alleged sufficient proximate

cause to withstand defendant Mohawk’s motion to dismiss.

According to their complaint, Mohawk has hired illegal

workers “[i]n an effort to keep labor costs as low as possible.”

Furthermore, “Mohawk’s employment and harboring of large

numbers of illegal workers has enabled Mohawk to depress

wages and thereby pay all of its hourly employees, including

legally employed workers who are members of the class,

wages that are lower than they would be if Mohawk did not

engage in this illegal conduct.” Again, the complaint alleges

that “Mohawk’s widespread employment and harboring of

illegal workers has substantially and unlawfully increased the

supply of workers from which Mohawk makes up its hourly

workforce. This unlawful expansion of the labor pool has

permitted Mohawk to depress the wages that it pays all its

hourly employees ....” The plaintiffs also allege that “[o]ne

purpose and intended effect of Mohawk’s widespread

employment and harboring of illegal workers is to deprive

Mohawk’s hourly workforce of any individual or collective

bargaining power” and that they “were injured by direct and

proximate reason of Mohawk’s illegal conduct.”

Given these allegations, which we must assume are true at

this Rule 12(b)(6) stage of the litigation, it is clear that the

plaintiffs have properly alleged proximate cause. According

to the complaint, Mohawk’s widespread scheme of hiring and

harboring of illegal workers has the purpose and direct result

of depressing the wages paid to the plaintiffs. This is all that

is needed to establish proximate cause.

Our conclusion is consistent with the two other circuits to

have addressed this proximate cause issue in RICO decisions

involving schemes to depress wages of legal workers by

widespread hiring of illegal workers. See Trollinger, 370

F.3d at 619; Mendoza, 301 F.3d at 1171-72.

In Trollinger, the Sixth Circuit considered a situation in

which former Tyson employees at a poultry processing plant

15a

sued their former employer under RICO, alleging that the use

of illegal workers permitted the employer to lower wages via

the collective-bargaining agreement with the union repre-

senting the employees. The Sixth Circuit, reviewing the

district court’s dismissal of the employees’ complaint under

Rule 12(b)(6), determined that “at this preliminary stage in

the proceedings” it could not conclude that there was no

likelihood of success on the merits. Trollinger, 370 F.3d at

619. The Sixth Circuit explained that it remained possible

that the legal-worker plaintiffs might prove the following

allegations in their complaint:

(1) that Tyson hired sufficient numbers of illegal aliens

to impact the legal employees’ wages; (2) that each

additional illegal worker hired into the bargaining unit

by Tyson has a measurable impact on the bargained-for

wage-scale; (3) that the illegal immigrants allegedly

brought into this country through Tyson’s efforts al-

lowed Tyson not to compete with other businesses for

unskilled labor; and (4) that Tyson’s legal workers did

not “choose” to remain at Tyson for less money than

other businesses offered, but had no choice in the matter

given the hiring needs of the other businesses in the area

and the influx of illegal immigrants at Tyson’s facilities.

While Tyson’s proximate-cause argument may well

carry the day at the summary-judgment stage, it requires

more assistance than the complaint alone provides.

One other circuit has reached the same result on some-

what similar facts ... Mendoza....

Id

> As noted earlier, in Mendoza, the Ninth Circuit was faced with a

similar suit in which legally documented agricultural workers sued fruit

growers under RICO alleging that the growers depressed wages by hiring

illegal-immigrant workers. 301 F.3d at 1166. Under almost the exact

same legal theory as advanced in this case, the Mendoza Court concluded

l6a

Although the plaintiffs in this case may not ultimately

satisfy the proximate-cause requirement, we conclude it

remains possible that plaintiffs may prove their allegations,

and we cannot say at this Rule 12(b)(6) stage that there is no

possibility of such proof. Consequently, we join the Sixth

and Ninth Circuits in concluding that employees such as the

ones in this case have alleged sufficient proximate cause to

proceed with their RICO claims.

(ii) Statutory Standing

Lastly, we address RICO’s statutory standing limitation

that also grows out of the “by reason of” limitation in

§ 1964(c). “[T]he test for RICO standing is whether the al-

leged injury was directly caused by the RICO violation, not

whether such harm was reasonably foreseeable.” Bivens

Gardens Office Bldg., Inc. v. Barnett Banks of Fla., Inc., 140

F.3d 898, 908 (11th Cir.1998); see Sedima, 473 U.S. at 496-

97, 105 S.Ct. at 3285 (“[T]he plaintiff only has standing if,

and can only recover to the extent that, he has been injured in

his business or property by the conduct constituting the viola-

tion” and the plaintiff's damages must “flow from the com-

mission of the predicate acts.”); Green Leaf Nursery, 341

F.3d at 1307 (stating that plaintiffs must show a “direct

relation between the injury asserted and the injurious

conduct” and that we ask “whether the alleged conduct was

‘aimed primarily’ at a third party” (quotation marks and

citations omitted)); Bivens, 140 F.3d at 906 (concluding that a

party whose alleged injuries result from “the misfortunes

visited upon a third person by the defendant’s acts lacks

standing to pursue a claim under RICO” (quotation marks and

citation omitted)); Pelletier v. Zweifel, 921 F.2d 1465, 1497

(11th Cir.1991) (stating that the plaintiff has RICO standing if

he shows “a causal connection between his injury and a

that the plaintiffs’ “causation allegations are sufficient at this stage.” /d.

at 1172.

17a

predicate act”).° Thus, we must evaluate whether the plain-

tiffs’ injury is sufficiently direct to give plaintiffs standing to

sue for Mohawk’s alleged RICO violations.

Both the Sixth and Ninth Circuits have expressly con-

cluded that legal workers have sufficiently direct injuries for

RICO standing in similar cases. Trollinger, 370 F.3d at

615-618; Mendoza, 301 F.3d at 1170. The Ninth Circuit’s

Mendoza decision is particularly well-reasoned and instruc-

tive on the statutory standing issue.

As mentioned earlier, the Mendoza plaintiffs were legal

workers who claimed that the purpose and result of the

defendants’ scheme of hiring undocumented immigrants was

to depress the wages of legally documented employees. The

Ninth Circuit concluded that the plaintiffs had statutory

standing because “we are unable to discern a more direct

victim of the illegal conduct.” Mendoza, 301 F.3d at 1170.

The Ninth Circuit explained:

The documented employees here do not complain of a

passed-on harm. They allege that the scheme had the

purpose and direct result of depressing the wages paid to

them by the growers. Thus, as the district court correctly

determined, “plaintiffs have stated a claim that they are

the direct victims of the illegal hiring scheme.”

We also note that the undocumented workers cannot

“be counted on to bring suit for the law’s vindication.”

As the district court noted, the fact that RICO spe-

cifically provides that illegal hiring is a predicate offense

® This Court has more often evaluated the “by reason of” requirement

primarily as part of its proximate-cause analysis, as opposed to the dis-

tinct concept of standing. However, despite significant overlap, we must

also examine whether the plaintiffs’ injury is sufficiently direct to per-

mit standing.

18a -

indicates that Congress contemplated the enforcement of

the immigration laws through lawsuits like this one.

Id. (internal citations omitted). The Ninth Circuit further

stated that

the workers must be allowed to make their case through

presentation of evidence, including experts who will

testify about the labor market, the geographic market,

and the effects of the illegal scheme. Questions re-

garding the relevant labor market and the growers’

power within that market are exceedingly complex and

best addressed by economic experts and other evidence

at a later stage in the proceedings.

Id. at 1171.

Plaintiffs’ complaint clearly alleges that Mohawk has en-

gaged in widespread and knowing hiring and harboring of

illegal aliens with the express purpose and direct result of

lowering the wages of legal workers. For example, the

complaint alleges that “[o]ne purpose and intended effect of

Mohawk’s widespread employment and harboring of illegal

workers is to deprive Mohawk’s hourly workforce of any

individual or collective bargaining power.” The plaintiffs

also allege that “[t]he acts of racketeering activity committed

by Mohawk have the same or similar objective: the reduction

of wages paid to Mohawk’s hourly workforce.” Furthermore,

the plaintiffs “were injured by direct and proximate reason of

Mohawk’s illegal conduct.” Given this stage of the litigation,

we conclude that the plaintiffs have sufficiently alleged that

Mohawk’s illegal conduct was aimed primarily at them.

Consequently, the district court correctly denied Mohawk’s

12(b)(6) motion as it relates to the plaintiffs’ federal civil

RICO claim.

19a

lll. STATE LAW RICO

Under the Georgia RICO statute, “[i]t is unlawful for any

person, through a pattern of racketeering activity or proceeds

derived therefrom, to acquire or maintain, directly or indi-

rectly, any interest in or control of any enterprise, real property,

or personal property of any nature, including money.”

0.C.G.A. 16-14-4(a). Unlike federal civil RICO, the Georgia

RICO statute does not require proof of an “enterprise.” Cobb

County v. Jones Group, P.L.C., 218 Ga.App. 149, 460 S.E.2d

516, 520-21 (1995). Rather, under Georgia RICO, the

plaintiffs need only establish racketeering activity; that is, “a

plaintiff must show that the defendant committed predicate

offenses (set forth in O.C.G.A. § 16-14-3(9)) at least twice.”

Id. at 521 (quotation marks and citation omitted).

With regard to their state-law RICO claim, the plaintiffs

rely on 18 U.S.C. § 1546 (relating to the fraud and misuse of

visas, permits, and other documents) for their predicate

offenses. ’ Despite being limited to § 1546, the plaintiffs have

alleged sufficiently numerous violations to satisfy the

racketeering activity requirement under Georgia state law. In

fact, according to the complaint, “Mohawk has committed

hundreds, probably thousands, of violations of . . . 18 U.S.C.

§ 1546 as part of its pattern of racketeering activity.”

There are, however, two issues under the Georgia RICO

statute that warrant further discussion: (1) whether, under the

Georgia RICO statute, a corporation may be sued; and (2)

” According to O.C.G.A. § 16-14-3(9)(A)(xxix), “racketeering activity”

is defined as “conduct defined as ‘racketeering activity’ under 18 U.S.C.

Section 1961(1)(A), (B), (C), and (D).” The only “racketeering activity”

contained in 18 U.S.C. § 1961(1)(A), (B), (C), or (D) on which the

plaintiffs rely is 18 U.S.C. § 1546. To the extent the plaintiffs attempt to

rely on 8 U.S.C. § 1324, as they do with their federal civil RICO claims,

such a claim is barred under the Georgia RICO statute because 8 U.S.C.

§ 1324 is listed as a “racketeering offense” in 18 U.S.C. § 1961(1)(F), and

not in subsections (A), (B), (C), or (D).

20a

whether the plaintiffs have sufficiently alleged proximate

cause to have standing to bring a Georgia RICO suit.

A. Whether Corporations May be Sued Under Georgia RICO

“Although this is a civil suit, RICO predicate acts are

criminal offenses.” Cobb County, 460 S.E.2d at 521 (quo-

tation marks omitted). Therefore, in order to determine

whether a corporation may be held liable under RICO,

Georgia courts look to O.C.G.A. § 16-2-22. See Cobb

County, 460 S.E.2d at 521.

There are two means by which a corporation may be held

liable: (1) directly (under O.C.G.A. § 16-2-22(a)(1)); and (2)

through its agents and employees under certain situations

(under O.C.G.A. § 16-2-22(a)(2)). The Georgia Supreme

Court already has concluded that corporations may not be

sued directly under RICO. Clark v. Security Life Ins. Co. of

America, 270 Ga. 165, 509 S.E.2d 602, 604 n. 11 (1998)

(“A corporation may also face prosecution under O.C.G.A.

§ 16-2-22(a)(1) for a crime if the statute defining the crime

clearly indicates a legislative purpose to impose liability on a

corporation. RICO, however, is not such a statute... .”).

Although a corporation cannot be prosecuted directly under

RICO, a corporation will be liable under Georgia RICO “if the

‘crime is authorized, requested, commanded, performed, or

recklessly tolerated by the board of directors or by a managerial

official who is acting within the scope of his employ-

ment.’” Clark, 509 S.E.2d at 604 (quoting § 16-2-22(a)(2)).

Whether the acts were performed at the request, command, or

authorization of the board of directors or other managers is a

question of proof at trial, not a sufficiency-of-the-pleading issue.

See State v. Military Circle Pet Center No. 94, Inc., 257 Ga.

388, 360 S.E.2d 248, 249 (1987) (“Although the state must

prove the applicable provisions of [§ 16-2-22(a)(2)] at tnal

against a criminal defendant, it is not necessary that the state

allege these provisions in the accusation.”’).

2la

In this case, the plaintiffs’ complaint alleges that “Mohawk

supervisors have encouraged these [illegal-immigrant] em-

ployees to return to the United States and reapply for work at

Mohawk in violation of United States law.” Furthermore,

“Mohawk also has knowingly and recklessly accepted proof

of eligibility for employment documents that reflect suc-

cessive different names for a single person.” The plaintiffs’

complaint is rife with allegations that supervisors and

managers at Mohawk were either aware of, or in reckless

disregard of, the misuse of various work-related documents.

Consequently, the plaintiffs have alleged sufficient conduct

that, if proven, would allow them to hold Mohawk liable

under state law.

B. Standing to Pursue State-Law RICO Claims

As with Federal RICO claims, under Georgia’s RICO

statute, “[a]ny person who is injured by reason of any

violation of’ Georgia’s RICO statute “shall have a cause of

action for three times the actual damages sustained... .”

O0.C.G.A. § 16-14-6(c). “[{B]ecause the state RICO act is

modeled upon and closely analogous to the federal RICO

statute,” Georgia courts “look to federal authority” in

determining RICO standing. Maddox v. So. Engineering Co.,

231 Ga.App. 802, 500 S.E.2d 591, 594 (1998) (quotation

marks and citation omitted). We already have concluded that

the plaintiffs have alleged sufficient injury to pursue their

federal RICO claims, and accordingly, we conclude that they

have alleged a sufficient injury to pursue their state RICO

claims as well. Although under Georgia law the plaintiffs are

limited to predicate acts arising out of 18 U.S.C. § 1546, we

conclude that the plaintiffs’ allegations are neither too remote

nor too indirect to satisfy Georgia’s proximate-cause require-

ment under state-law RICO. See Maddox, 500 S.E.2d at 594

(“In short, the language ‘by reason of imposes a proximate

causation requirement on the plaintiff.” (citation omitted)); id.

22a

(A plaintiff “must show a causal connection between his

injury and a predicate act.” (citation omitted)).

IV. UNJUST ENRICHMENT

The plaintiffs’ complaint claims that Mohawk’s illegal

conduct permits it “to reap substantial wage savings” because

Mohawk pays plaintiffs lower wages than it would otherwise

be forced to pay. Therefore, according to the plaintiffs’

complaint, Mohawk has been unjustly enriched under state

law. Plaintiffs also claim that Mohawk has been unjustly

enriched because the hiring of illegal aliens has led to a

reduced number of worker’s-compensation claims. Both of

plaintiffs’ state-law unjust-enrichment claims fail.

Here, the plaintiffs were all paid an agreed-upon wage. In

essence, the plaintiffs have a contract to work for the

defendant and were paid the agreed-upon wage. In Georgia,

“(ujnjust enrichment is an equitable concept and applies when

as a matter of fact there is no legal contract... .” St. Paul

Mercury Ins. Co. v. Meeks, 270 Ga. 136, 508 S.E.2d 646, 648

(1998) (quotation marks and citation omitted); see Bonem v.

Golf Club of Georgia, Inc., 264 Ga.App. 573, 591 S.E.2d

462, 467-68 (2003). In this case, there was a legal contract as

a matter of fact (i.e., if the plaintiffs were not paid, they could

sue for breach of the employment contract). See, e.g.,

SurgiJet, Inc. v. Hicks, 236 Ga.App. 80, 511 S.E.2d 194, 195

(1999); Brazzeal v. Commercial Cas. Ins. Co., 51 Ga.App.

471, 180 S.E. 853, 853 (1935). Therefore, there can be

no unjust enrichment. Consequently, the plaintiffs’ unjust-

enrichment claim as it related to Mohawk’s purported savings

from lower wages should have been dismissed.

As for plaintiffs’ claims that hiring illegal workers resulted

in fewer worker’s-compensation claims, there is no reason-

able allegation that this fact, even if true, is connected to the

plaintiffs receiving lower wages. To put it another way, the

fact that Mohawk may have increased profits by lowering the

23a

number of worker’s-compensation claims it paid is not related

to what wages Mohawk paid the plaintiffs. Consequently, the

district court correctly determined that the plaintiffs did not

have standing to assert this claim.

V. CONCLUSION

For all the above reasons, we conclude that the district

court properly denied Mohawk’s Rule 12(b)(6) motion as it

related to both the plaintiffs’ federal and state RICO claims.

Furthermore, the district court properly dismissed the plain-

tiffs’ unjust-enrichment claim as it related to worker’s com-

pensation. However, the district court should have also

dismissed the plaintiffs’ unjust-enrichment claim as it related

to the agreed-upon wages that plaintiffs received.

AFFIRMED IN PART, REVERSED IN PART, AND

REMANDED FOR FURTHER PROCEEDINGS.

24a

APPENDIX B

UNITED STATES DISTRICT COURT

N.D. GEORGIA

ROME DIVISION

No. CIV.A.4:04-CV-0003-H

SHIRLEY WILLIAMS, GALE PELFREY, BONNIE JONES, and

LORA SISSON, individually and on behalf of a class,

Plaintiffs,

Vv.

MOHAWK INDUSTRIES, INC.,

Defendant.

April 12, 2004

ORDER

MURPHY, District Judge.

This is a class action alleging violations of the federal and

Georgia Racketeer Influenced and Corrupt Organizations

Acts (“RICO”). The case is before the Court on Defendant’s

Motion to Dismiss [25].

I. Background

A. The Parties

Plaintiffs are current and former hourly employees of

Defendant who claim that Defendant’s alleged employment

and harboring of illegal aliens has depressed their wages.

(Compl.§ 1.) Plaintiffs Gale Pelfrey, Shirley Williams, Bonnie

Jones, and Lora Sisson are citizens of Georgia and reside in the

Northern District of Georgia. (/d. J 5-8.) Plaintiffs Pelfrey,

Williams, and Sisson are former hourly employees of De-

fendant. (Compl. 5, 6, 8.) Plaintiff Jones is currently an

25a

hourly employee of Defendant. (/d. 4 7.) Plaintiffs Pelfrey,

Williams, Sisson, and Jones are eligible to be employed in the

United States. (/d. 99 5-8.) Plaintiffs seek certification of a

class consisting of all current and former employees of

Defendant legally authorized to be employed in the United

States who are or have been employed in hourly wage

positions at any time since January 5, 1999, to the present (the

“Class”).' (Id. 439.)

Defendant is the second largest carpet and rug manu-

facturer in the United States. (Compl. 2.) Defendant em-

ploys approximately 31,780 persons, most of whom are

employed in Northwest Georgia. (/d.) Defendant owns or

leases at least twenty-six facilities in Georgia. (/d.) De-

fendant is a Delaware corporation with its principal place of

business in Calhoun, Georgia. (/d. 4 9.)

B. Plaintiffs’ Allegations

Plaintiffs allege that Defendant has engaged in illegal

hiring of persons who are not eligible for employment in the

United States in an effort to keep costs of labor as low as

possible. (Compl.§ 14.) According to Plaintiffs, Defendant

has accepted for employment and continues to employ work-

ers that it knew or had reason to know were not authorized to

work in the United States. (/d. § 15.) Plaintiffs allege that

Defendant has knowingly and recklessly accepted false

documents or documents that do not match the identity of the

person presenting the documents as proof of eligibility for

employment. (/d. § 16.) Additionally, Plaintiffs claim that

Defendant has knowingly and recklessly accepted proof of

eligibility for employment documents reflecting successive

different names for a single person. (/d. 99 17, 19.) Indeed,

' Plaintiffs’ Complaint also sets forth a number of allegations relating

to the certification of a class of Defendant’s former and current hourly

employees. (See Compl. {| 39-53.) Those allegations are not relevant to

the instant Motion.

26a

Plaintiffs allege that when some illegal workers have

informed Defendant that they would return to their countries

of origin, supervisors employed by Defendant have en-

couraged those employees to return to the United States and

illegally reapply for work at Defendant. (/d. 4 18.)

Plaintiffs claim that in an effort to conceal Defendant’s

employment and harboring of illegal workers, Defendant’s

employees have destroyed eligibility documents indicating

that workers have employed different names and identifi-

cation papers. (Compl.§ 20.) Furthermore, according to

Plaintiffs, Defendant’s employees and supervisors have stated

that they are aware that illegal workers can easily obtain false

identification and work authorization documents. (/d. 4 21.)

Plaintiffs claim that Defendant’s employees have traveled

to the United States border to recruit illegal aliens. (Compl.

4] 22.) According to Plaintiffs, those employees and other

persons then transported the illegal aliens to North Georgia

for employment at Defendant’s facilities. (/d.) Plaintiffs

allege that Defendant has provided incentive to its employees

and other recruiters by paying for locating illegal workers that

Defendant eventually employs and harbors. (/d.) Plaintiffs

contend that Defendant’s employees and recruiters have pro-

vided housing for illegal workers when the workers arrived in

North Georgia, and have aided those illegal workers in

finding employment with Defendant. (/d. § 23.)

Occasionally, Defendant audits its workforce and discovers

illegal workers are employed with Defendant. (Compl.§ 24.)

According to Plaintiffs, Defendant has not increased the

frequency of such audits despite the fact that the audits reveal

that a large number of illegal workers are employed at

Defendant. (/d.) Furthermore, Plaintiffs allege that when

Defendant terminates an illegal worker after discovering that

the illegal worker is not authorized to work in the United

States, the worker frequently returns to work under a different

name. (/d. ¥ 25.) Plaintiffs claim that this practice, termed

27a

“recycling,” is widespread at Defendant. (/d. | 26.) Accord-

ing to Plaintiffs, Defendant has been further put on notice of

illegal workers because many illegal workers artificially

inflate their claimed exemptions, thus avoiding paying federal

income tax. (/d. § 32.)

Plaintiffs allege that law enforcement authorities have

raided Defendant’s facilities in search of illegal workers.

(Compl.§ 27.) Plaintiffs claim that when such raids have

occurred, illegal workers have hidden in barrels or other

containers or have fled. (/d.) According to Plaintiffs, the

number of illegal workers who run or hide has put Defendant

on notice that it employs a large number of illegal workers.

(/d.) Moreover, Plaintiffs contend that Defendant’s employ-

ees and supervisors have assisted illegal workers in evading

the law enforcement authorities. (/d. J 28.)

Plaintiffs state that law enforcement authorities have

arrested some illegal workers at Defendant’s facilities.

(Compl1.4 29.) Plaintiffs further allege that law enforcement

authorities have discovered undocumented aliens in pos-

session of paychecks issued by Defendant or identification

badges and fraudulent identification documents. (/d. ¥ 30.)

According to Plaintiffs, Defendant’s supervisors have

stated that illegal workers are preferable because those

workers are more tolerant of working conditions and do not

submit claims for workers’ compensation. (Compl.§ 31.)

Plaintiffs contend that because many of Defendant’s workers

are undocumented aliens, Defendant knows that those work-

ers are beholden to Defendant, and thus are unlikely to

complain about working conditions or file workers compen-

sation claims. (/d. 9] 36-37.) Consequently, Plaintiffs be-

lieve that Defendant saves a considerable amount of money

by employing undocumented aliens. (/d. § 37.)

According to Plaintiffs, Defendant’s practice of employing

and harboring large numbers of illegal workers has allowed

28a

Defendant to depress wages; consequently, the wages paid to

hourly employees, including the legally employed hourly

employees who are members of the Class, are lower than

those wages would be if Defendant did not employ and

harbor illegal workers. (Compl. 33.) Plaintiffs allege that

Defendant employs tens of thousands of hourly workers in

North Georgia (id. 9 34), and Defendant’s widespread em-

ployment and harboring of illegal workers has substantially

increased the supply of workers from which Defendant hires

its hourly workers (id. 4 35). Plaintiffs contend that because

of the increased size of the labor pool, Defendant has

depressed the wages it pays to all of its hourly employees,

including members of the Class. (J/d.) In other words,

Plaintiffs claim that Defendant had only hired persons legally

authorized to work in the United States, Defendant would

have had to pay higher wages to Plaintiffs and the members

of the Class. (/d.) Thus, according to Plaintiffs, as a direct

and proximate result of Defendant’s employment and

harboring of illegal workers, the wages that Plaintiffs and the

members of the Class have earned have been depressed.

C. Plaintiffs’ RICO Claims

1. Pattern of Racketeering Activity

Plaintiffs first allege that Defendant is engaged in an

ongoing pattern of racketeering activity as defined by 18

U.S.C.A. § 1961(5) & (8). (Compl.4f] 54, 56.) According to

Plaintiffs, Defendant has engaged in racketeering activity,

namely, an open and ongoing pattern of violations of Section

274 of the Immigration and Nationality Act, 8 U.S.C.A.

§ 1324(a), more than twice, and the most recent occurrence

took place within ten years after the commission of a prior act

of racketeering activity. (/d. 9 55, 57, 58.) In particular,

Plaintiffs allege that Defendant has violated and continues to

violate: (1) 8 U.S.C.A. § 1324(a)(3)(A), which makes it a

federal crime to “knowingly hire[{ ] for employment at least

10 individuals with actual knowledge that the individuals are

29a

aliens” during a twelve month period (id. 4 59); (2) 8

U.S.C.A. § 1324(a)(1 (A)iii), which makes it a federal crime

to “conceal{ ], harbor{ ] or shield from detection, or at-

tempt[ ] to conceal, harbor or shield from detection” aliens

that have illegally entered the United States (id. 4 60); and (3)

8 U.S.C.A. § 1324(a)(1)(A)(iv), which makes it a federal

crime to “encourage[ ] or induce[ ] an alien to come to, enter,

or reside in the United States, knowing or in reckless

disregard of the fact that such coming to, entry, or residence

is or will be in violation of law” (id. 9 61). Plaintiffs con-

tend that each violation of 8 U.S.C.A. § 1324 constitutes an

act of “racketeering activity” as defined by 18 U.S.C.A.

§ 1961(1)(F). (Ud. § 62.)

According to Plaintiffs, the “racketeering activity” also

includes Defendant’s open and ongoing violations of 18

U.S.C.A. § 1546(a) by knowingly accepting various false

identification documents and other false documents indicating

authorization for legal employment, and Defendant’s con-

tinued violations of 18 U.S.C.A. § 1546(b) by using such

documents to fill out I-9 forms. (Compl.4] 63-64.) Plaintiffs

allege that each violation of 18 U.S.C.A. § 1546 constitutes

an act of “racketeering activity” as defined by 18 U.S.C.A.

§ 1961(1)(B) as well as O.C.G.A. § 16-14-3(9)(A)(xxix). (/d.

49] 65-66.)

Plaintiffs claim that the acts of Defendant’s racketeering

activity have the same or similar methods of commission in

that those acts involve the knowing employment of illegal

workers, the concealment, harboring, and shielding from

detection of illegal workers, and the acceptance or use of

fraudulent documents in connection with the hiring of illegal

workers. (Compl.4 67.) According to Plaintiffs, the acts of

racketeering activity have the same or similar objective—i.e.

the reduction of wages paid to Defendant’s workforce. (/d.

4 68.) Plaintiffs allege that the victims of those acts of

racketeering activity are the same or similar. (/d. 4 69.)

30a

Plaintiffs also contend that the distinguishing characteristics

of the acts of racketeering activity include the involvement of

Defendant, illegal workers, and other third parties who assist

in the recruitment and transportation of undocumented aliens.

(Id. {| 70, 76-84.)

According to Plaintiffs, those acts of racketeering activ-

ity have occurred over a long period of time, and have

become a part of Defendant’s regular way of doing business.

(Compl. 71-73.) Plaintiffs assert that Defendant has com-

mitted hundreds, and perhaps thousands, of violations of

8 U.S.C.A. § 1324 and 18 U.S.C.A. § 1546 as part of its

racketeering activity. (/d. 9 74.) Indeed, Plaintiffs claim

that Defendant’s racketeering activity has been so perva-

sive that illegal workers currently constitute a majority of the

workforce in many of Defendant’s facilities in North Georgia.

(Id. § 75.) |

2. Enterprise

Plaintiffs also allege that Defendant has engaged in its

pattern of racketeering activity through its participation in

an association-in-fact enterprise, as defined by 18 U.S.C.A.

§ 1961(4), with third party employment agencies and other

recruiters who supply Defendant with illegal workers.

(Compl.{§ 76, 79.) Plaintiffs claim that one such recruiter is

Temporary Placement Services (“TPS”), which has a formal

relationship with Defendant in that TPS employs illegal

workers and then loans those workers to Defendant for a fee.

(/d.) According to Plaintiffs, other recruiters simply find

workers in an area surrounding Brownsville, Texas, and then

transport those workers to Georgia. (/d.) Plaintiffs contend

that TPS and other recruiters also occasionally assist current

and prospective illegal workers in assuming new identities.

(/d.) Plaintiffs allege that those recruiters share the common

purpose of obtaining illegal workers for employment with

Defendant. (/d. § 77.) Additionally, Plaintiffs contend that

Defendant participates in the operation and management of

3la

the affairs of the enterprise, which exists for Defendant’s

benefit. (/d. § 78.)

Plaintiffs allege that the enterprise affects interstate com-

merce in that the illegal workers employed by Defendant

travel in international and interstate commerce to reach

Defendant’s facilities in North Georgia. (Compl.f§j 80, 81.)

According to Plaintiffs, the enterprise also affects interstate

commerce in that the wages of legal workers employed with

Defendant are depressed. (/d. § 82.) Furthermore, Plaintiffs

state that because Defendant is a member of the enterprise

and is directly engaged in the production, distribution, and

acquisition of goods and services in interstate commerce, the

enterprise affects interstate commerce. (/d. 83.)

According to Plaintiffs, Defendant, by accepting and re-

taining the benefits of the racketeering activity, ratified the

conduct of Defendant’s managers, employees, and the mem-

bers of the enterprise who assisted Defendant in committing

those acts of racketeering activity. (/d. | 84.)

3. Causation

Plaintiffs next allege that Defendant’s violations of federal

and Georgia RICO proximately caused the wages of Plaintiffs

and the members of the Class to be lower than their wages

otherwise would have been had the labor pool consisted

solely of legally employed workers. (Compl.§ 85.) Thus,

Plaintiffs and the Class claim that they have suffered an

injury to their business or property. (/d. J 86.) As a result,

Plaintiffs contend that Defendant has earned or retained

significant funds to which it is not entitled. (/d. | 87.)

D. Procedural Background

On January 6, 2004, Plaintiffs filed this lawsuit. Plaintiffs

assert the following claims: (1) a claim that Defendant’s

conduct violates 18 U.S.C.A. § 1962(c) (Compl. 4 88-92);

(2) a claim that Defendant’s conduct violates O.C.G.A.

32a

§ 16-14-4(a) (id. 93-98); (3) a claim that Defendant’s conduct

violates O.C.G.A. § 16-14-4(c) (id. 99-105); and a claim for

unjust enrichment arising under Georgia law (id. ¥ 106-110).

Plaintiffs also seek certification of a class pursuant to Federal

Rule of Civil Procedure 23. (/d. ¥ 46.)

On February 9, 2004, Defendant filed its Motion to Dis-

miss pursuant to Federal Rules of Civil Procedure (12)(b)(6)

and (12)(b)(1),” in which Defendant requests that the Court

dismiss Plaintiffs’ federal and state RICO claims. Defendant

also requests that the Court decline to exercise its pendent

jurisdiction over Plaintiffs’ state law claims.

II. Standard Governing Motions to Dismiss

The standard for a court to dismiss a claim is whether “it

appears beyond doubt that the plaintiff can prove no set of

facts to support his claim.” GSW, Inc. v. Long County, 999

F.2d 1508, 1510 (11th Cir.1993) (citing Conley v. Gibson,

355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). When

considering a motion to dismiss, the Court “must accept the

allegations in the complaint as true, construing them in the

light most favorable to the plaintiffs.” White v. Lemacks, 183

F.3d 1253, 1255 (11th Cir.1999). However, “[a]s a general

rule, conclusory allegations and unwarranted deductions of

fact are not admitted as true in a motion to dismiss.” S. Fla.

? Defendant moves to dismiss pursuant to Rules 12(b)(1) and 12(b)(6)

only with respect to the elements of 18 U.S.C.A. § 1964(c), which

provides the requirements for a plaintiff to have standing to pursue a civil

private right of action under RICO. Apparently, some question exists as to

whether a motion to dismiss under § 1964(c) is properly characterized as a

12(b)(6) motion (i.e. failure to state a claim upon which relief can be

granted) or a 12(b)(1) motion (i.e. lack of jurisdiction over the subject

matter). See Moore v. PaineWebber, Inc., 189 F.3d 165, 169 n. 3 (2d

Cir.1999) (applying 12(b)(6), but expressing belief that 12(b)(1) was more

appropriate ground for dismissal). The Court appreciates the distinction

between 12(b)(1) and 12(b)(6), but concludes that for the purposes of the

instant Motion, an analysis under |2(b)(6) suffices.

33a

Water Mgmt. Dist. v. Montalvo, 84 F.3d 402, 408 n. 10 (11th

Cir. 1996).

Ill. Discussion

A. Plaintiffs’ Federal RICO Claim

18 U.S.C.A. § 1962(c) provides: “It shall be unlawful for

any person employed by or associated with any enterprise

engaged in, or the activities of which affect, 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 or collection of unlawful

debt.” 18 U.S.C.A. § 1962(c). RICO establishes both civil

remedies and criminal penalties for violations of § 1962. See

18 U.S.C.A. §§ 1963-1964. In particular, § 1964(c) provides

that “[a]ny person injured in his business or property by

reason of a violation of section 1962 of this chapter may sue

therefor in any appropriate United States district court and

shall recover threefold the damages he sustains and the cost

of the suit, including a reasonable attorney’s fee... .” 18

U.S.C.A. § 1964(c). Thus, for a plaintiff to have standing to

pursue a private civil cause of action under RICO, the

plaintiff must prove the following elements: (1) that the

defendant violated § 1962; (2) that the plaintiff sustained an

injury to his business or property; and (3) that the violation of

§ 1962 caused the injury. Avirgan v. Hull, 932 F.2d 1572,

1577 (11th Cir.1991) (citing O'Malley v. O'Neill, 887 F.2d

1557, 1560-61 (11th Cir.1989)). Likewise, to prevail on a

civil RICO claim under § 1962(c), the plaintiff must show:

(1) the existence of an enterprise; (2) that the enterprise

affected interstate commerce; (3) that the defendant was

employed by or associated with the enterprise; (4) that the

defendant participated, either directly or indirectly, in the

conduct of the affairs of the enterprise; and (5) that the de-

fendant participated through a pattern of racketeering activity.

United States v. Starrett, 55 F.3d 1525, 1541 (11th Cir.1995).

34a

18 U.S.C.A. § 1961 provides definitions for some of the

terms used in § 1962(c). “Racketeering activity” includes a

number of “predicate acts” that the racketeer must commit for

a violation of RICO. 18 U.S.C.A. § 1961(1). Notably,

violations of 8 U.S.C.A. § 1324 and 18 U.S.C.A. § 1546, the

predicate acts that Plaintiffs allege Defendant committed, are

among those predicate acts listed in § 1961(1). 18 U.S.C.A.

§ 1961(1)(B) & (F). A “pattern of racketeering activity” is

defined as at least two acts of racketeering activity that

occurred within ten years after the commission of a prior act

of racketeering activity. 18 U.S.C.A. § 1961(5); see Pelletier

v. Zweifel, 921 F.2d 1465, 1496 (11th Cir.1991) (“A ‘pattern’

of racketeering activity is shown when a racketeer commits at

least two distinct but unrelated predicate acts.”). Section

1961 also provides that an “‘enterprise’ includes any indi-

vidual, partnership, corporation, association, or other legal

entity, and any union or group of individuals associated in

fact although not a legal entity.” 18 U.S.C.A. § 1961(4).

Likewise, a “person” liable under § 1962(c) is defined as “any

individual or entity capable of holding a legal or beneficial

interest in property.” 18 U.S.C.A. § 1961(3).

Defendant contends that the Court should dismiss Plain-

tiffs’ Complaint because: (1) the Complaint does not suf-

ficiently allege the elements of the RICO predicate action;

(2) the Complaint fails to identify a legally sufficient RICO

enterprise; and (3) Plaintiffs lack standing to assert their

RICO claims. The Court addresses each of those arguments

in turn.

1. Sufficiency of Pleadings

a. Whether Plaintiffs Failed to Plead Predicate Acts with

Particularity

As a threshold matter, the Court addresses Defendant’s

contention that Plaintiffs’ Complaint fails to meet the height-

ened pleading requirements of Federal Rule of Civil Proce-

35a

dure 9(b). When pleading a RICO action, it is well-settled

that where the predicate act sounds in fraud (e.g. mail fraud,

wire fraud, or securities fraud), the plaintiff must plead that

predicate act with particularity as required by Federal Rule of

Civil Procedure 9(b). Byrne v. Nezhat, 261 F.3d 1075, 1109-

10 (11th Cir.2001) (mail fraud); Republic of Panama v. BCCI

Holdings (Lux.), 119 F.3d 935, 949 (11th Cir.1997) (wire

fraud); Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116

F.3d 1364, 1380-82 (11th Cir.1997) (mail fraud and wire

fraud); Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505, 1511-

12 (11th Cir.1988) (securities fraud); see also 5 Charles Alan

Wright & Arthur R. Miller, Federal Practice and Procedure

§ 1251.1 n. 13 (citing cases finding that fraud claims brought

under RICO must comply with pleading requirements of

Rule 9(b)).

As the United States Court of Appeals for the Eleventh

Circuit has not yet addressed whether the heightened pleading

requirement of Rule 9(b) applies to RICO causes of action

premised on non-fraud predicate acts, some ambiguity exists

as to whether the particularized pleading requirements of

Rule 9(b) apply in al/ RICO actions. Compare Taylor v. Bear

Stearns & Co., 572 F.Supp. 667, 682 (N.D.Ga.1983) (Forres-

ter, J.) (“It seems, however, to this court at least that there are

many sound reasons for requiring that, like fraud, [RICO]

must be pled with particularity.”) and Helicopter Support

Sys., Inc. v. Hughes Helicopters, Inc., No. 83-1450-Civ.-T-15,

1984 WL 3238, at *1 (M.D.Fla. June 22, 1984) (same) with

Planned Parenthood of Columbia/Willamette, Inc. v. Am.

Coalition of Life Activists, 945 F.Supp. 1355, 1380 n. 25

(D.Or.1996) (finding Rule 9(b) inapplicable where predicate

acts are extortion and coercion); and United States v. Int'l

Bhd. of Teamsters, 708 F.Supp. 1388, 1395-96 (S.D.N.Y.

1989) (“This court is not persuaded by the reasoning of the

courts that have applied Rule 9(b) to RICO actions not

sounding in fraud, and adopts the reasoning of courts that

limit the application of Rule 9(b) to fraud based RICO

36a

claims.”); and United States v. Bonanno Organized Crime

Family of LaCosa Nostra, 683 F.Supp. 1411, 1426-27

(E.D.N.Y.1988) (finding “no basis for extending the reach of

Rule 9(b) to all RICO cases”). Those courts holding that

Rule 9(b) applies in all RICO actions reason such heightened

pleading is appropriate in light of the in terrorem effect of

pleading RICO and in order to put the RICO defendant on

notice of the claim against him. See Taylor, 572 F.Supp. at

682 (“First, the mere invocation of the statute has such an in

terrorem effect that it would be unconscionable to allow it to

linger in a suit and generate suspicion and unfavorable opin-

ion of the putative defendant unless there is some articulable

factual basis which, if true, would warrant recovery under

the statute. Second, the concepts within the statute are so

nebulous that if the cause of action were only generally pled,

a defendant would have no effective notice of a claim

showing that the pleader is entitled to relief.”’)

Plaintiffs urge the Court to find that the appropriate

pleading standard for non-fraud RICO predicate activities is

the standard provided in Rule 8({e)(1). See Fed. R. Civ. Proc.

8(e)(1) (“Each averment of a pleading shall be simple,

concise, and direct. No technical forms of pleading or

motions are required.”). Specifically, Plaintiffs contend that

the reasoning underlying Taylor is inapplicable in light of

Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275,

87 L.Ed.2d 346 (1985). In Sedima, the United States

Supreme Court held that a plaintiff in a RICO action need not

allege and prove that the defendant had previously been

convicted under RICO. 473 U.S. at 492, 105 S.Ct. 3275. In

reaching that conclusion, the Supreme Court dismissed the

argument that a RICO conviction should be required to

pursue a civil RICO action, stating, “[a]s for stigma, a civil

RICO proceeding leaves no greater stain than do a number of

other civil proceedings.” Jd. Plaintiffs urge the Court to

conclude that in light of the foregoing language from Sedima,

Rule 9(b) is limited to cases that actually involve fraud or

37a

mistake, and does not apply in every case where the de-

fendant claims it is stigmatized.

The Court finds Plaintiffs’ reasoning persuasive, and finds

that the better approach, and certainly the majority approach,

is to apply the liberal pleading standards of Rule 8 to RICO

actions involving non-fraud predicate activities. Addi-

tionally, the Court notes Taylor and Helicopter Support Sys.

are distinguishable because the predicate activities in those

cases were mail fraud and wire fraud, rather than a non-fraud

predicate act.’ Accordingly, the Court finds that where a

predicate act does not sound in fraud, the plaintiff asserting a

RICO claim need only comply with the general pleading

requirements of Rule 8(e){1), rather than the heightened

pleading requirements of Rule 9(b).*

Having determined that Rule 9(b) is inapplicable in cases

involving non-fraud RICO actions, the Court next addresses

Defendant’s argument that the predicate acts enumerated in

Plaintiffs’ Complaint sound in fraud, and must therefore be

pled with particularity. In support of its position, Defendant

cites to a string of criminal cases where courts referred to the

predicate acts alleged in the instant lawsuit as “acts of fraud.”

* In Helicopter Support Sys., the plaintiff also asserted a claim for

commercial bribery. Helicopter Support Sys. at *1. The court found that

the plaintiff failed to show that commercial bribery was a predicate

offense under § 1961(1); thus, it was unnecessary to address whether that

offense required heightened pleading under Rule 9(b). /d.

* Defendant’s reliance on Club Car, Inc. v. Club Car Import, Inc. 276

F.Supp.2d 1276 (S.D.Ga.2003), is misplaced. In that case, the plaintiff

was required to plead predicate acts of extortion and mail fraud with

particularity simply because Local Rule 9.1 for the United States District

Court for the Southern District of Georgia requires such specificity. See

L.R.S.D. Ga. 9.1 (“All pleadings which allege violations of . . . , RICO,

and other similar statutes, whether federal or state, shall specifically state

each alleged violation.”) This Court, however, has no such provision in

its Local Rules. Consequently, the Court does not find Club Car

applicable in this case.

38a

See, e.g., United States v. Rodriguez-Suazo, 346 F.3d 637 (6th

Cir.2003); United States v. Thiongo, 344 F.3d 55, 58 (Ist

Cir.2003); United States v. Hendricks, No. 99-4562, 2000 WL

341914, at *2 (4th Cir. Apr.3, 2000); United States v. Yum,

776 F.2d 490, 491 (4th Cir.1985). Those cases, however, do

not require a finding that the predicate acts based on

violations of 8 U.S.C.A. § 1324(a) and 18 U.S.C.A. § 1546

sound in fraud. The cases relied upon by Defendant involve

defendants who were charged with making false represen-

tations, or conspiring to make false representations, to the

federal government. By contrast, Plaintiffs do not allege that

Defendant made false representations to Plaintiffs or the

government; rather, Plaintiffs allege that Defendant has

employed and harbored illegal workers. The predicate acts in

this case consequently do not sound in fraud. Because the

predicate acts in this case do not sound in fraud, the Court

finds that Rule 9(b) is inapplicable to this case. Instead,

Plaintiffs need only satisfy the requirements of Federal Rule

of Civil Procedure 8.

The Court further notes that it has evaluated the Complaint,

and finds that it satisfies the requirements set forth in Rule 8.

Accordingly, the Court cannot dismiss the Complaint on the

ground that Plaintiffs failed to plead the predicate acts

adequately.

b. Whether Plaintiffs Failed to Allege Al the Elements

Required to Plead a Violation of 8 U.S.C.A.

§ 1324(a)(3)

Defendant also contends that Plaintiffs have failed to plead

sufficiently the violation of 8 U.S.C.A. § 1324({a)(3), one of

the predicate acts alleged in the Complaint. Specifically,

Defendant claims that the Complaint fails to allege all the

required elements of § 1324(a)(3), which provides:

(A) Any person who, during any 12-month period,

knowingly hires for employment at least 10 individuals

with actual knowledge that the individuals are aliens

39a

described in subparagraph (B) shall be fined under Title

18 or imprisoned for not more than 5 years, or both.

(B) An alien described in this subparagraph is an alien

who—

(i) is an unauthorized alien (as defined in section

1324a(h)(3) of this title), and

(ii) has been brought into the United States in vio-

lation of [8 U.S.C.A. § 1324(a)].

8 U.S.C.A. § 1324(a)(3). Defendant contends that to plead a

violation of § 1324(a)(3) adequately, Plaintiffs must allege

that Defendant knowingly hired ten or more aliens and that

Defendant itself brought those aliens into the United States.

In support of its position, Defendant relies on System

Management, Inc. v. Loiselle, 91 F.Supp.2d 401 (D.Mass.

2000). The Court, however, does not agree that the holding

of Loiselle is as limited as Defendant insists. In Loiselle, the

defendant owner and chief executive officer of a janitorial

and custodial services company was sued by two competitor

corporations and four former employees. Loiselle, 91

F.Supp.2d at 404. The plaintiffs alleged that the defendant

had violated RICO by engaging in racketeering activity

including “knowingly hiring at least ten individuals with

knowledge that they were ‘aliens’ as described in 8 U.S.C.

§ 1324(a)(3)(A).” Jd. at 408. The defendant argued, and the

court agreed, that the RICO claim premised on § 1324(a)(3)

should be dismissed because the plaintiffs failed to allege

“how the aliens entered the country or whether [the de-

fendant] had knowledge of the purpose for which they

entered.” /d. The court reasoned that the language of

§ 1324(a)(3)(B)ii) “seems to require, in order for liability to

attach, that the aliens have been brought into the country by

an employer for the purpose of illegal employment.” /d. In

other words, “the Plaintiffs must allege that [the defendant]

had knowledge of how the aliens had been brought into the

40a

United States and that they were brought into the United

States in violation of this employment provision.” Jd. Thus,

Loiselle holds that simple allegations that the defendant

knowingly hired undocumented aliens are insufficient to state

a claim under § 1324(a)(3); rather, a plaintiff must addi-

tionally allege that the defendant knew that the aliens were

brought into the United States for the purpose of illegal

employment. Loiselle, however, did not hold that the em-

ployer itself must have brought the aliens into the United

States for a claim to arise under § 1324(a)(3). Accordingly,

the Court concludes that for a plaintiff to plead a violation of

§ 1324(a)(3) adequately, the plaintiff must simply allege that

the aliens were brought into the United States in violation of

subsection (a), but there is no requirement that the employer

must have brought the aliens into this country.

Turning to the Complaint, the Court concludes that Plain-

tiffs have pleaded adequately the elements of § 1324(a)(3).

Specifically, Plaintiffs have alleged that Defendant has hired

illegal workers knowing that those workers were “smuggled

or otherwise brought” into the United States illegally.

(Compl.4 59.) See Mendoza v. Zirkle Fruit Co., No. CS-00-

3024-FVS, 2000 WL 33225470, at *4 (E.D.Wash. Sept. 27,

2000) (finding “the plaintiffs have adequately pled a predicate

act... by alleging that the defendants knew that some of their

workers were unlawfully brought into the United States”).

Accordingly, the Court denies Defendant’s Motion to Dismiss

as to this ground.

2. Enterprise

The Court next determines whether the Complaint ade-

quately alleges the existence of a RICO enterprise. Defen-

dant contends that Plaintiffs’ Complaint fails as a matter of

law to allege that a RICO enterprise existed and that the Court

thus must dismiss Plaintiffs’ Complaint. Specifically, De-

fendant claims: (1) that Plaintiffs have not and cannot allege

that Defendant participated in the affairs of a RICO enter-

4la

prise, rather than its own affairs, through the alleged im-

migration law violations; (2) that Plaintiffs have failed to

allege a RICO enterprise distinct from Defendant; and (3) that

Plaintiffs have failed to allege the existence of a common

purpose and unified structure.

As explained supra Part IILA., a RICO “‘enterprise’

includes any individual, partnership, corporation, association,

or other legal entity, and any union or group of individuals

associated in fact although not a legal entity,” 18 U.S.C.A.

§ 1961(4), and a RICO “person” is “any individual or entity

capable of holding a legal or beneficial interest in property,”

18 U.S.C.A. § 1961(3). “For the purposes of [§ 1962(c)], the

indictment [or complaint] must name a RICO person distinct

from the RICO enterprise. The plain language of the statute

requires that [those] entities be distinct.” United States v.

Goldin Indus., Inc., 219 F.3d 1268, 1271 (11th Cir.2000)

(hereinafter “Goldin I’). The Eleventh Circuit does not

require a strict, formal association of participants; rather, “the

existence of an enterprise ‘is proved by evidence of an

ongoing organization, formal or informal, and by evidence

that the various associates function as a continuing unit.’”

United States v. Goldin Indus., Inc., 219 F.3d 1271, 1275

(11th Cir.2000) (hereinafter “Goldin II’) (quoting United

States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69

L.Ed.2d 246 (1981)). “{T]}he definitive factor in determining

the existence of a RICO enterprise is the existence of an

association of individual entities, however loose or informal,

that furnishes a vehicle for the commission of two or more

predicate crimes, that is, the pattern of racketeering activity

requisite to the RICO violation.” /d.; United States v. Elliott,

571 F.2d 880, 897-98 (Sth Cir.1978);° see also United States

* Opinions of the Fifth Circuit issued prior to October 1, 1981, the date

marking the creation of the Eleventh Circuit, are binding precedent on this

Court. See Bonner v. City of Prichard, 661 F.2d 1206, 1209-11 (lith

Cir.1981) (en banc).

42a

v. Hawes, 529 F.2d 472, 479 (Sth Cir.1976) (recognizing that

Congress gave the term “enterprise” a very broad meaning).

Indeed, “a RICO enterprise may be an ‘amoeba-like’ structure

or a loose informal association.” Avirgan v. Hull, 932 F.2d

1572, 1578 (11th Cir.1991) (citing United States v. Cagnina,

697 F.2d 915, 921 (11th Cir. 1983)).

Notably, the existence of an enterprise is a separate ele-

ment that the plaintiff must prove—i.e. although a pattern of

racketeering activity must be shown by pointing to evidence

of the requisite number of racketeering acts by participants in

the enterprise, such evidence does not necessarily establish

the existence of an enterprise. Turkette, 452 U.S. at 583, 101

S.Ct. 2524. Indeed, “[t]he ‘enterprise’ is not the ‘pattern of

racketeering activity’; it is an entity separate and apart form

the pattern of activity in which it engages.” /d. Nevertheless,

the Eleventh Circuit recognizes that “under our case law, a

RICO enterprise need not possess an ‘ascertainable structure’

distinct from the associations necessary to conduct the pattern

of racketeering activity.” Goldin II, 219 F.3d at 1274-75

(quoting United States v. Weinstein, 762 F.2d 1522, 1537

n. 13 (11th Cir.1985)).

In support of its position that the Complaint fails to allege

the existence of an enterprise adequately, Defendant relies

heavily on a similar opinion issued by the Seventh Circuit,

Baker v. IBP, Inc., 357 F.3d 685 (7th Cir.2004). In Baker,

unionized current and former employees of one of the

defendant’s meat-processing plants filed a class action lawsuit

on behalf of all current and former hourly employees at that

plant who were authorized to work in the United States.

Baker, 357 F.3d at 686. Specifically, the complaint in Baker

alleged that nearly half of the employees at the defendant’s

plant were aliens who were unauthorized to work legally in

the United States. /d. The plaintiffs claimed that the defen-

dant turned a blind eye to bogus identification documents,

alerted its illegal workers when immigration officials were

43a

about to conduct inspections, and paid recruiters to smuggle

captured illegal workers back into the United States for re-

employment under pseudonyms. /d. at 687. The complaint

further alleged that the defendant had arrangements with im-

migrant welfare organizations, who referred known undocu-

mented aliens to the defendant for employment. /d. Plaintiffs

alleged that as a result of that activity, wages at the

defendant’s plant were depressed compared with what the

defendant would have had to pay if the labor pool consisted

only of persons legally authorized to work in the United

States. Id.

In affirming the district court’s dismissal of the complaint,

the Seventh Circuit first concluded that the union representing

the plaintiffs was the proper representative with respect to the

wages issue rather than the employees individually. The

court also concluded that “there [was] another fatal problem

in [the] complaint: specification of the ‘enterprise.’” Baker,

357 F.3d at 691. The complaint alleged that the “enterprise”

was the defendant plus the persons and organizations who

assisted the defendant in recruitment of illegal workers. The

court first noted that the complaint came “perilously close to

alleging that [the defendant] plus its agents and employees is

the ‘enterprise,’ a theory that won’t fly.” /d. (citing Bucklew

v. Hawkins, Ash, Baptie & Co., 329 F.3d 923, 934 (7th

Cir.2003)).

The court also found that the complaint was flawed for

failure to identify a common purpose: “it is not altogether

clear how this ‘association in fact’ has a common purpose, an

essential ingredient.” /d. (citing Turkette, 452 U.S. at 583,

101 S.Ct. 2524). The court took a conservative reading as to

whether the members of the “association in fact,” had a

common purpose concluding that their goals were divergent

because the defendant wanted to pay lower wages, the re-

cruiters wanted to be paid for their recruitment services, and

the immigrant welfare organizations wanted to assist mem-

44a

bers of the ethnic group. /d. Consequently, the court found

that no common purpose existed. /d.

Finally, the Baker court found that the plaintiffs failed to

allege that the defendant operated or managed the purported

enterprise through a pattern of racketeering. Baker, 357 F.3d

at 692. The court explained that the complaint was insuf-

ficient because “[t]he nub of the complaint [was] that [the

defendant] operate[d] itself unlawfully—it is [the defendant]

that supposedly hires, harbors, and pays the unlawful work-

ers, for the purpose of reducing its payroll.” Jd. at 361.

Specifically, the court stated that “[the defendant] does not

manage or operate some other enterprise by violating [8

U.S.C.A. § 1324]; the complaint does not allege—and on

appeal plaintiffs do not seek an opportunity to show—that

[the defendant] ha{d] infiltrated, taken over, manipulated,

disrupted, or suborned a distinct entity or even a distinct

association in fact.” Jd. The Court therefore found that the

plaintiffs failed to allege that the defendant operated an

enterprise through a pattern of racketeering activity. /d.

Turning to the instant case, the Court first considers

Defendant’s argument that Plaintiffs have failed to allege that

Defendant operated or participated in the affairs of an enter-

prise through a pattern of racketeering activity. Specifically,

Defendant contends that Plaintiffs have failed to allege that

Defendant, through its allegedly illegal conduct, operated or

participated in the affairs of an “association in fact” as

opposed to Defendant’s own affairs. In support of its posi-

tion, Defendant points to various paragraphs in the Complaint

that allege that Defendant, as opposed to the purported

enterprise, harbored and employed illegal workers in order to

reduce the cost of its workforce. (See Compl. J 3, 14, 16-18,

59-61; 63-64, 67.)

In response, Plaintiffs argue that the Complaint alleges that

Defendant “participates in the affairs of an enterprise that

transcends [Defendant] itself and that consists of [Defendant]

45a

and various other persons and entities.” (Def. Br. Resp. at 7

(emphasis deleted).) Specifically, Plaintiffs point to the fol-

lowing language in the Complaint:

Mohawk has engaged in an open and ongoing pattern

of violations of 8 U.S.C. § 1324 and 18 U.S.C. § 1546

during the last five years through its participation in an

association-in-fact enterprise with third party employ-

ment agencies and other recruiters, including Temporary

Placement Services (“TPS”), that supply Mohawk with

illegal workers. Each recruiter is paid a fee for each

worker it supplies to Mohawk, and some of those re-

cruiters work closely with Mohawk to meet its employ-

ment needs by offering a pool of illegal workers who can

be dispatched to a particular Mohawk facility on short

notice as the need arises. Some recruiters find workers

in the Brownsville, Texas area and transport them to

Georgia. Others, like TPS, have relatively formal rela-

tionships with the company in which they employ illegal

workers and then loan or otherwise provide them to

Mohawk for a fee. These recruiters are sometimes

assisted by Mohawk employees who carry a supply of

social security cards for use when a prospective or

existing employee needs to assume a new identity.

(Compl.4 76.) Plaintiffs maintain that given the nature of an

association-in-fact enterprise, it is to be expected that the

defendant will be engaged in the management of its own

affairs—what is most important, however, is that the defen-

dant also participates in the affairs of an enterprise.

Defendant correctly asserts that “liability “depends on

showing that the defendants conducted or participated in

the conduct of the enterprises’s affairs, not just their own

affairs.”” Cedric Kushner Promotions, Ltd. v. King, 533 U.S.

158, 163, 121 S.Ct. 2087, 150 L.Ed.2d 198 (2001) (quoting

Reves v. Ernst & Young, 507 U.S. 170, 185, 113 S.Ct. 1163,

122 L.Ed.2d 525 (1993)) (internal quotation omitted) (em-

46a

phasis deleted). The Eleventh Circuit has nevertheless

recognized that “the definitive factor in determining the

existence of a RICO enterprise is the existence of an

association of individual entities, however loose or informal,

that furnishes a vehicle for the commission of two or more

predicate acts.” Goldin II, 219 F.3d at 1275; Weinstein, 762

F.2d at 1537. Here, the Complaint alleges that Defendant

participated in the conduct of an enterprise’s affairs by paying

recruiters for illegal workers and by maintaining a formal re-

lationship with TPS, and that those parties, as an association-

in-fact, provided the means for the commission of a number

of immigration law violations. Consequently, the Court finds

that Plaintiffs’ Complaint sufficiently alleges that Defendant

operated or participated in the affairs of an enterprise through

a pattern of racketeering activity.

The Court next addresses whether Plaintiffs have failed to

allege an enterprise distinct from Defendant itself. Although

the Complaint clearly alleges that the other members of the

alleged enterprise are independent third parties rather than

employees or agents of Defendant (Compl.§ 76.), Defendant

urges the Court to follow Baker, and to find that the Com-

plaint fails to allege the existence of an enterprise.

At this stage in the litigation, however, the Court need only

determine whether the Complaint sufficiently alleges the

existence of an enterprise separate from Defendant. After

consideration of the allegations in the Complaint, the Court

concludes that for the purposes of this Motion to Dismiss,

Plaintiffs have adequately alleged that the recruiters are

separate and independent entities from Defendant. Whether

the third party recruiters are in fact agents of Defendant is a

factual issue, but for the purposes of the instant Motion

Plaintiffs have met their burden to allege that the association-

in-fact enterprise consisted of Defendant and separate entities.

See Cedric Kushner Promotions, 533 U.S. at 164, 121 S.Ct.

2087 (citing Riverwoods Chappaqua Corp. v. Marine Mid-

47a

land Bank, N.A., 30 F.3d 339, 344 (2d Cir.1994)); In

re Managed Care Litig., 298 F.Supp.2d 1259, 1276-77

(S.D.Fla.2003) (finding complaint sufficiently alleged control

and participation in association-in-fact enterprise). Cf Fitz-

gerald v. Chrysler Corp., 116 F.3d 225, 228 (7th Cir.1997)

(“[W]here a large, reputable manufacturer deals with its

dealers and other agents in the ordinary way, so that their role

in the manufacturer’s illegal acts is entirely incidental,

differing not at all from what it would be if these agents were

the employees of a totally integrated enterprise, the manu-

facturer plus its dealers and other agents . . . do not constitute

an enterprise within the meaning of [RICO].”). Accordingly,

the Court cannot conclude that Plaintiffs have failed to allege

the existence of an enterprise district from Defendant itself.

Defendant next argues that Plaintiffs have failed to allege

the existence of an enterprise because the Complaint does not

adequately allege the existence of a common purpose among

the members of the association-in-fact. Specifically, Defen-

dant claims that rather than alleging a common purpose

between Defendant and the recruiters, Plaintiffs’ Complaint

indicates that the members of the purported enterprise had

divergent goals and purposes. (See Compl. § 22 (“Mohawk

has made various incentive payments to employees and other

recruiters for locating workers that Mohawk eventually

employs and harbors.”).) Defendant therefore contends that

as a matter of law, no enterprise exists. Defendant cites to the

following language in Baker in support of its argument: “(the

employer] wants to pay lower wages; the recruiters want to be

paid more for services rendered (though [the employer]

would like to pay them less); and the [immigrant welfare

organizations] want [ ] to assist members of [their] ethnic

group.” Baker 357 F.3d at 691. Thus, because the members

of the enterprise have divergent goals, Defendant concludes

that no association-in-fact enterprise exists.

48a

Plaintiffs respond that in this case, the members of the

enterprise indeed share a common purpose namely, “the

common purpose of obtaining illegal workers for employment

by Mohawk.” (Compl.§ 77.) Moreover, Plaintiffs maintain

that no authority exists in the Eleventh Circuit for the

proposition that divergent individual goals of persons in a

purported association-in-fact enterprise precludes the exist-

ence of such enterprise as a matter of law.

The Eleventh Circuit takes a broad approach as to what

qualifies as an enterprise. See United States v. Hewes, 729

F.2d 1302, 1310-12 (11th Cir.1984) (upholding jury deter-

mination that “‘informal, de facto association’ existed among

the defendants that united them in the common purpose of

making money from repeated criminal activity”) (quoting

Elliott, 571 F.2d at 898); Cagnina, 697 F.2d at 921-922

(finding evidence sufficient to support jury’s finding of

enterprise where common purpose of making money existed).

Because the Complaint in this case explicitly alleges that

a common purpose exists—obtaining illegal workers for

employment by Defendants—the Court cannot agree with

Defendant that Plaintiffs’ Complaint is deficient.

In sum, the Court finds that the Complaint adequately sets

forth allegations concerning the existence of an enterprise.

Specifically, Plaintiffs have sufficiently alleged that Defen-

dant participated in the affairs of a RICO enterprise as

opposed to its own affairs, that a RICO enterprise exists

distinct from Defendant, and that a common purpose and

vnified structure exists among the participants in the pur-

ported enterprise. Consequently, the Court denies Defen-

dant’s Motion to Dismiss on the ground that the Complaint

fails to allege the existence of an enterprise.

3. Standing Under RICO

Defendant also argues that Plaintiffs do not have standing

to sue because (1) Plaintiffs failed to allege injury to a con-

49a

crete interest in business or property; and (2) Plaintiffs can

not show that Defendant’s alleged violations of 8 U.S.C.A.

§ 1324 proximately caused Plaintiffs’ injuries. The Court dis-

cusses each of those arguments in turn.

a. Whether Plaintiffs Have Alleged Injury to their “Busi-

ness or Property”

The Court turns first to whether Plaintiffs have alleged an

injury to their business or property. Defendant argues that

each Plaintiff accepted employment with Defendant at an

agreed-upon wage rate, and that Plaintiffs cannot allege an

injury to their business or property because Defendant paid

each Plaintiff in accordance with those wage rates. In other

words, Defendant claims that because it compensated Plain-

tiffs as the parties agreed, no injury has occurred, and Plain-

tiffs thus lack standing to pursue this action.

The Court cannot agree that as a matter of law Plaintiffs

have failed to allege an injury to their business or property.

The premise of Defendant’s argument is that Defendant and

Plaintiffs were able to bargain freely on a fair wage rate;

however, assuming that Plaintiffs have been injured by reason

of Defendant’s alleged racketeering activities, the presence of

illegal workers in the labor pool adversely has affected

Plaintiffs’ ability to command higher wage rates. In other

words, if Plaintiffs are correct regarding issues of causation,

Plaintiffs had no power to command higher wage rates due to

the influx of illegal workers. Consequently, Plaintiffs’ ac-

ceptance of lower wages could not act as a waiver of their

alleged injuries. See Mendoza, 301 F.3d at 1168 n. 4.

(“{W]hat is required is precisely what the employees allege

' here: a legal entitlement to business relations unhampered by

schemes prohibited by the RICO predicate statutes.”). Thus,

the Court cannot agree with Defendant that Plaintiffs have

failed, as a matter of law, to allege an injury to Plaintiffs’

business or property. The Court therefore cannot find that

Plaintiffs lack standing based on this argument.

50a

b. Whether Plaintiffs Have Alleged Injury “By Reason of”

a Violation of § 1962(c)

Defendant further argues that Plaintiffs have not alleged an

injury “by reason of” a violation of § 1962(c) and that Plain-

tiffs consequently cannot show that Defendant’s alleged vio-

lations caused Plaintiffs’ injuries. Section 1964(c) requires a

plaintiff to show that he sustained injury “by reason of” the

defendant’s violation of § 1962. The Supreme Court, in

Holmes v. Securities Investor Protection Corp., 503 U.S. 258,

112 S.Ct. 1311, 117 L.Ed.2d 532 (1992), held that the “by

reason of” language of § 1964(c) requires a showing of both

direct and proximate causation. 503 U.S. at 268-69, 112 S.Ct.

1311. “In order for a pattern of racketeering activity to be a

cognizable cause of civil RICO injury to a private plaintiff,

one or more of the predicate acts must not only be the ‘but

for’ cause of the injury, but the proximate cause as well.”

Green Leaf Nursery v. E.I. DuPont De Nemours & Co., 341

F.3d 1292, 1307 (11th Cir.2003) (citing Holmes, 503 U.S. at

268, 112 S.Ct. 1311). Thus, for a plaintiff to have standing

under RICO, he must allege and prove that “‘his injury

flowed directly from the commission of the predicate acts.””

Bivens Gardens Office Bldg., Inc. v. Barnett Banks of Fla.,

Inc., 140 F.3d 898, 906 (11th Cir.1998) (quoting Pelletier,

921 F.2d at 1499).

In analyzing whether a plaintiff has adequately alleged an

injury “by reason of” a violation of § 1962(c), the Supreme

Court in Holmes recognized that “‘the infinite variety of

claims that may arise make it virtually impossible to an-

nounce a black-letter rule that will dictate the result in every

case."” Holmes, 503 U.S. at 272 n. 20, 112 S.Ct. 1311

(quoting Associated Gen. Contractors of Cal., Inc. v. Cal.

State Council of Carpenters, 459 U.S. 519, 536, 103 S.Ct.

897, 74 L.Ed.2d 723 (1983) (footnote omitted)). Thus, “use

of the term ‘direct’ should merely be understood as a

reference to the proximate-cause enquiry that is informed by

Sla

the [policy] considerations set out in the text [of the Holmes

opinion].” /d. In conducting proximate cause analysis under

RICO, a court must therefore consider the following policy

considerations on a case-by-case basis: (1) whether other

parties are in a more suitable position to vindicate the law—

i.e. whether the plaintiff is the direct victim of the alleged

illegal conduct; (2) whether the court can identify a method to

apportion possible recoveries; and (3) whether the damages

alleged by the plaintiff are too speculative, that is, whether

the court has the ability to identify what portion of the

plaintiff's damages arose from the defendant’s alleged RICO

violations as opposed to other independent conditions. /d. at

273, 112 S.Ct. 1311.

In its Motion to Dismiss, Defendant first contends that

Plaintiffs cannot show, and thus cannot allege, that Plaintiffs

are the direct victims of Defendant’s alleged wrongdoing, and

that Plaintiffs consequently are not the best-suited persons to

maintain this action. Defendant next contends that Plaintiffs’

theory of damages is simply too speculative to support a

finding that Defendant’s conduct proximately caused Plain-

tiffs’ injuries.° The Court addresses each of those arguments

in turn.

° Defendant does not contend that other parties are better-situated to

vindic: .e the aims of RICO. Because the Court concludes that Plaintiffs’

injuries, as alleged, are not derivative of injury to a third party, the Court

sees no reason why a party other than Plaintiffs should instead pursue

this action.

” As an initial matter, the Court addresses Defendant's argument that

Plaintiffs have standing as to pursue their federal RICO action only as to

the predicate act of employing illegal workers. Specifically, Defendant

claims that because Plaintiffs cannot show that the predicate acts of

harboring and transporting illegal aliens and the use and acceptance of

fraudulent documents caused injury to Plaintiffs, Plaintiffs lack standing

with respect to those predicate acts.

The Eleventh Circuit has stated that “[i]f no injury flowed from a

particular predicate act, no recovery lies for the commission of that act.”

52a

i. Direct Injury

In the instant action, Defendant first claims Plaintiffs lack

standing because the legally authorized hourly workers

constituting the putative class are not the direct victims of

Defendant’s alleged pattern of racketeering activity—i.e.

Plaintiffs are not the best persons to vindicate RICO.

Defendant relies primarily on Holmes for the proposition that

where a plaintiffs injury is derived from a direct injury to a

third party, that plaintiff lacks standing to bring an action

pursuant to RICO for such “passed-on” injury. Defendant

argues that Plaintiffs are not the “first victims” of Defendant’s

alleged immigration law violations; rather, the direct victims

are the undocumented aliens who, because of their status,

cannot command equal wages or enjoy equal benefits, such as

workers’ compensation.

Plaintiffs cite Mendoza v. Zirkle Fruit Co., 301 F.3d 1163

(9th Cir.2002), in which the Ninth Circuit found that a

putative class of legal hourly workers had standing to bring a

RICO action against two agricultural companies that had

Pelletier, 921 F.2d at 1497-98 (finding no standing as to predicate act of

bankruptcy fraud where predicate act actually benefitted plaintiff).

However, “a wrongful act ‘is a proximate cause if it is a substantial factor

in the sequence of reasonable causation.’”” Maiz v. Virani, 253 F.3d 641,

675 (11th Cir.2001) (quoting Cox v. Adm'r U.S. Steel & Carnegie, 17

F.3d 1386, 1399 (11th Cir.1994)) (internal quotation marks omitted).

Thus, while a predicate act may not be a “but for” cause of a plaintiff's

injuries, the plaintiff may nevertheless have standing to pursue a RICO

claim where that predicate act was a substantial factor “in perpetuating

[the racketeer’s] scheme and in causing significant injury to [the

plaintiff].” /d.

With respect to the predicate acts of harboring and inducing illegal

aliens and the use and acceptance of bogus identification documents, the

Court cannot conclude at this point that those predicate acts do not

constitute substantial factors in causing injury to Plaintiffs. Accordingly,

the Court concludes that Plaintiffs do not lack standing to claim that those

predicate acts proximately caused their injuries.

53a

allegedly hired illegal workers, thereby depressing the wages

paid to documented workers. 301 F.3d at 1166. Like

Defendant in the instant matter, the defendants in Mendoza

urged the court to find that the plaintiffs were not the “first

victims” of the alleged illegal conduct. The court in Mendoza

concluded that because the defendants engaged in illegal

conduct to gain “disproportionate bargaining power in em-

ployment contracts” with their workers, the legal, docu-

mented employees were the direct victims of the defendants’

illegal conduct. Because “the [illegal conduct] had the

purpose and direct result of depressing the wages paid to [the

documented employees] by the growers,” the court could not

“discern a more direct victim of the illegal conduct.” /d. at

1170. The court further explained: “Neither the government

nor the undocumented workers are an intervening third party

in this scheme, despite the [defendants’] arguments to the

contrary.” /d.

Plaintiffs also rely on Commercial Cleaning Services, LLC

v. Colin Service Systems, Inc., 27\ F.3d 374 (2d Cir.2001), in

which the Second Circuit held that the plaintiffs, who were

competitors of the defendant, adequately stated a direct

proximate relationship between their injuries and the de-

fendant’s alleged illegal conduct. 271 F.3d at 381. In that

case, a Cleaning service brought a RICO class action, alleging

that the defendant, also a cleaning service, hired undocu-

mented aliens in violation of 8 U.S.C.A. § 1324, thereby

driving down the defendant’s cost of employment. /d. at 378.

The plaintiff claimed that the defendant’s illegal conduct

allowed the defendant to charge lower prices for its services,

thereby undercutting its competition. /d.

The Commercial Cleaning court applied the Holmes policy

considerations, and found that the plaintiffs had suffered

direct injury due to the defendant’s alleged racketeering

activity. Commercial Cleaning, 271 F.3d at 385. Specifically,

the Second Circuit reasoned that no class of persons would

S4a

“have a greater incentive to ensure that a RICO violation does

not go undetected or unremedied, and whose recovery would

cure the loss suffered by there plaintiffs.” /d.

The Court finds Mendoza persuasive, and applies the

Mendoza court’s reasoning to this case. Here, Plaintiffs

clearly allege that their injury is the result of Defendant’s

attempt to gain a commercial advantage over the employment

of its workforce, which directly causes harm to Plaintiffs.

Accordingly, the Court finds that the Complaint alleges a

direct injury to Plaintiffs. Plaintiffs therefore do not lack

standing based on the failure to allege a direct injury.

ii. Speculative Nature of Damages

The Court next considers whether the damages theory

alleged in Plainiiffs’ Complaint is too speculative to permit

Plaintiffs to have standing to pursue their claims. Defendant

sets forth a number of arguments in support of its position

that the calculation of damages is exceedingly tenuous and

speculative. Specifically, Defendant claims that there are

numerous other factors that could affect Plaintiffs’ wages,

such as the demand for labor in the relevant market, the

supply of qualified workers, the overall profitability of the _

industry, and the status of the local, state, national, and

international economies.

Defendant also submits that Plaintiffs have failed to allege

that Defendant employs a sufficient number of illegal workers

or has such a large presence in the labor market to support a

conclusion that any pay discrepancies can be attributed to

Defendant’s allegedly illegal conduct. In particular, Defen-

dant contends that Plaintiffs’ allegation that Defendant has

assisted “hundreds” of illegal workers is insufficient as a

matter of economic sense to cause depressed wages. (See

Compl. 9 61.) Defendant further submits that if it were

paying depressed wages

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