Antitrust Law Daily Wrap Up, RICO—5th Cir.: Allegations of conspiracy to hire undocumented workers did not state RICO claim, (Dec 12, 2014)

By Linda O’Brien, J.D., LL.M.

Two former employees failed to adequately plead a Racketeer Influenced and Corrupt Organizations Act (RICO) claim against Hispanic marketing entities based on an alleged conspiracy to hire undocumented workers in order to suppress wages, the U.S. Court of Appeals in New Orleans has ruled. Thus, the district court dismissal was affirmed (Varela v. Gonzales, December 11, 2014, per curiam).

Intelligent Mexican Marketing, Inc. (IMM) and Marketing and Inventory Management (MIM) offered business marketing, advertising, and consulting services for companies in the U.S. Hispanic market. The companies were operated jointly and shared staff and payroll obligations. Former employees, Jaime Varela and Yesica Wiegert, filed a putative class action suit against IMM and MIM, alleging the companies engaged in a hiring scheme that violated RICO. Specifically, the employees alleged that IMM and MIM engaged in a pattern of racketeering activity of hiring and using illegal workers that caused IMM and MIM to pay depressed wages to the employees. The defendants’ motion to dismiss for failure to state a claim was granted by the district court and the plaintiffs appealed.

The district court did not err in in determining that the plaintiffs failed to state a plausible RICO claim. According to the appellate court, the plaintiffs made conclusory assertions that depressed wages were a “direct result” of the defendants’ hiring of illegal workers. Moreover, it was unclear whether the plaintiffs were alleging that the defendants’ hiring of illegal workers depressed wages only with the two companies or within the broader market which included the defendants’ competitors. If the plaintiffs had alleged that the hiring of illegal workers depressed wages only within the two companies, the claim was implausible since the plaintiffs failed to adequately plead that the defendants hired a sufficient number of undocumented workers to affect their wages. An allegation that the hiring of illegal workers within the broader market was also implausible as the plaintiffs failed to define the relevant labor market.

Additionally, the plaintiffs’ allegations were insufficient to establish that they suffered any injury, the appellate court determined. The only facts the plaintiffs alleged to support the conclusion that they suffered depressed wages was comparing their respective salaries to Bureau of Labor Statistics on the average salary for employees in advertising and consulting services. The court noted that it was implausible to infer that employees in the data set were comparable solely on the basis the plaintiffs worked within the broad field of advertising and consulting services.

The case is No. 14-10452.

Attorneys: Colin William Walsh (Rob Wiley, PC) for Jaime Varela. John Bridges Brown (Ogletree, Deakins, Nash, Smoak & Stewart, PC) for David Benitez Gonzales, Intelligent Mexican Marketing, Inc., and Marketing and Inventory Management, LLC.

Companies: Intelligent Mexican Marketing, Inc.; Marketing and Inventory Management, LLC

Cases: RICO LouisianaNews MississippiNews TexasNews