Antitrust Law Daily Wrap Up, RICO—N.D. Tex.: Employees unable to state claims against employer over hiring practices, (Oct 21, 2013)

By Jody Coultas, J.D.

Employees of Intelligent Mexican Marketing, Inc. and Marketing and Inventory Management LLC (IMM/MIM) were unable to state RICO claims against IMM/MIM based on its alleged hiring of illegal immigrants, the federal district court in Dallas has held (Varela v. Gonzales, October 17, 2013, Boyle, J.).

IMM/MIM offered business marketing, advertising, and consulting services for companies in the USA Hispanic Market. IMM/MIM hired and used illegal immigrants “as supervisors, sales representatives, and in the warehouse.” The employees alleged that the hiring scheme violated RICO. Specifically, the employees alleged that IMM/MIM engaged in and conspired to engage in a pattern of racketeering activity (illegal worker use and hiring) connected to the conduct of an enterprise that caused IMM/MIM to pay depressed wages to the employees.

To state a RICO claim, a plaintiff must allege: (1) a substantive predicate violation of 18 U.S.C. § 1962; (2) injury to his business or property; and (3) a causal connection between the racketeering activity and the injury. A person who engages in a pattern of racketeering activity connected to the acquisition, establishment, conduct, or control of an enterprise violates § 1962.

RICO enterprise. The employees alleged that the joint organization of IMM/MIM qualified as an “enterprise” under RICO because it forms an association-in-fact. IMM/MIM countered that IMM/MIM was not an association-in-fact enterprise because it had not existed for a sufficient duration. To establish the longevity element of an association-in-fact enterprise, the entity must be one of “sufficient duration to permit an associate to participate in [the enterprise’s] affairs through a pattern of racketeering activity.” The employees submitted evidence that IMM and MIM shared employees, staff, and payroll obligations for several years. “Several years” was sufficient time for IMM and MIM to participate in the pattern of racketeering activity alleged.

Predicate acts. The court held that the employees plausibly pleaded that IMM/MIM knew or recklessly disregarded their workers’ illegal status. To establish the RICO transporting predicate, the employees must show that “(1) an alien entered or remained in the United States in violation of the law, (2) [Defendants] transported the alien within the United States with intent to further the alien’s unlawful presence, and (3) [Defendants] knew or recklessly disregarded the fact that the alien was in the country in violation of the law.” Simply alleging the workers were “illegal aliens” and “illegal workers” was sufficient to establish the first element. The employees’ conclusory allegations that IMM/MIM knew or recklessly disregarded the illegal status of workers were supplemented by more specific allegations that IMM/MIM were directly involved in the hiring and recruiting process, reviewed employment-related documents, failed to check employees’ social security numbers, and accepted Mexican driver licenses as proof of identity.

The factual allegations were sufficient to reasonably infer IMM/MIM violated the RICO harboring predicate, according to the court. The RICO harboring predicate prohibits persons from: knowingly or in recklessly disregarding the fact that an alien has come to, entered, or remains in the United States in violation of law, concealing, harboring, or shielding from detection, or attempting to conceal, harbor, or shield from detection, such alien in any place, including any building or any means of transportation. The allegations that IMM/MIM hired illegal workers and then hired legal workers to drive them around and avoid detection were enough to establish that IMM/MIM harbored illegal workers.

The employees failed to allege sufficient facts to satisfy the RICO encourage/induce predicate pleading standard, according to the court. Hiring an unspecified number of illegal workers does not, without more, suggest any of these unidentified workers would not otherwise be in the country. The court could not infer that a noncitizen was actually encouraged or induced to leave her home to illegally enter and reside in a foreign land.

The employees’ allegations that IMM/MIM violated the RICO hiring predicate were too conclusory to state a claim, according to the court. The “brought into” language of the RICO hiring predicates requires not only that the employer “know that it hired illegal aliens” but also that it know (at least generally) “how they made their way into the United States.” Allegations that IMM/MIM ran background checks and checked other employment-related documents for new hires suggested IMM/MIM were unaware of where the illegal workers came from.

RICO conspiracy. The court held that the employees’ allegations of an agreement, along with its properly pleaded allegations that IMM/MIM committed two predicate acts, were enough at this stage in the proceedings to state a RICO conspiracy claim.

RICO standing. The employees lacked standing because they were unable to show that the alleged RICO violations proximately caused their depressed wages, according to the court. Because the employees only offered vague and conclusory allegations, they could not show that the depressed wages were attributable to the RICO violations rather than any number of unrelated factors. Those conclusory allegations left the court with an intricate and uncertain calculation to sort through. Wages may be less for any number of reasons unrelated to the RICO violations, leaving too many reasonable alternatives for the court to find a plausible connection between the RICO violations and the injury.

The case is No. 3:13-CV-1278-B.

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

Companies: Intelligent Mexican Marketing, Inc.

Cases: RICO TexasNews