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In the midst of the national immigration debate, some commentators have argued that corporate America is guilty of recruiting the undocumented in order to keep down wages and deplete job opportunities for native workers. This viewpoint has spawned a new class of employment litigation that appears to be backed by anti-immigrant individuals and organizations. The weapon of choice for this new attack is the Racketeer Influenced and Corrupt Organizations Act (RICO), which permits plaintiffs to act as private prosecutors and sue employers for competitive injuries arising out of alleged conspiracies to commit immigration crimes. The battle was launched in 1996, when anti-immigrant groups succeeded in having RICO amended to add alien smuggling, document fraud and the knowing hire of 10 or more undocumented workers per year to the list of predicate crimes that could form the basis of a RICO racketeering charge. Not long afterward, Howard W. Foster of Johnson & Bell in Chicago filed suit on behalf of Commercial Cleaning Services of Hartford, Conn., against Colin Service Systems Inc. The complaint asserted that Colin’s use of undocumented workers put Commercial at a competitive disadvantage in bidding for janitorial contracts. Colin had been the subject of a major civil and criminal investigation under the employer sanctions laws, which was widely reported in the press. The district court dismissed the complaint based on lack of standing, citing Commercial’s failure to demonstrate proximate harm, a requirement set by the U.S. Supreme Court in Holmes v. Securities Investor Protection Corp., 508 U.S. 258 (1992). The 2d U.S. Circuit Court of Appeals reversed, holding that the liberal notice pleading rules of the federal court were satisfied by Commercial’s assertion that Colin’s pattern of illegal hiring of undocumented workers enabled Colin to underbid competing firms like Commercial . Commercial Cleaning Services LLC v. Colin Service Systems Inc., 271 F.3d 374 (2d Cir. 2001). Foster then took the fight to the Eastern District of Tennessee, where he brought a class action on behalf of current and former U.S. employees of Tyson Foods Inc. in April 2002. The suit came while Tyson was defending criminal charges accusing the company and several executives of alien smuggling and document fraud. Although a federal jury exonerated the Tyson defendants of all charges, the civil case continued. In the original complaint, the plaintiffs alleged that Tyson had conspired with a network of recruiters and temporary employment agencies to transport illegal workers to the United States, obtain housing for them and provide them with false identification documents so Tyson could employ them. The plaintiffs alleged that as a result of these practices, their wages were depressed, notwithstanding the fact that the Retail, Wholesale and Department Store Union (RWDSU), a member of the AFL-CIO, had negotiated the wages and working conditions that the plaintiffs alleged to be noncompetitive. Tyson fought back with a preliminary dismissal motion, asserting that the plaintiffs’ claims were pre-empted under a judicially created rule blocking RICO claims that draw their essence from a collective bargaining agreement. The rule teaches that such disputes should be resolved in the first instance by the National Labor Relations Board, which has primary jurisdiction when it comes to labor disputes covered under the National Labor Relations Act. Tyson also argued that the plaintiffs lacked standing to assert injuries to wages and benefits since they were represented by the RWDSU and that, in any event, the injuries were too speculative to proceed beyond the pleading stage. 6th Circuit revives action The district court granted Tyson’s dismissal motion based on an apparent lack of standing and speculative causation, but the 6th Circuit reversed and ultimately rejected all of Tyson’s arguments as either lacking legal merit or premature. Trollinger v. Tyson Foods Inc., 370 F.3d 602 (6th Cir. 2004). Of particular importance to labor specialists, the 6th Circuit ruled that the union’s involvement in bargaining the disputed wages and working conditions was merely collateral to the central issues in the case, and that RICO provides independent federal remedies to U.S. workers who are potentially injured by employers that violate the nation’s immigration laws in recruiting and hiring the undocumented. And while the Supreme Court has made clear the need to establish actual injury in order to prove standing, the 6th Circuit rejected the notion that individual workers could not establish an injury-in-fact notwithstanding the union’s role as collective bargaining representative. Lastly, the 6th Circuit held that the plaintiffs must be given the opportunity to prove the contentions contained in the complaint, e.g., that illegal aliens affected legal employees’ wages; that each additional illegal worker hired into the bargaining unit by Tyson had a measurable impact on the bargained-for wage scale; that the illegal immigrants allegedly brought into the country through Tyson’s efforts allowed Tyson to avoid competing with other businesses for unskilled labor; and that Tyson’s legal workers were compelled to remain with Tyson because of diminished opportunities. On remand, the plaintiffs amended their complaint to add allegations that Tyson and high-ranking executives were associating in a RICO enterprise with immigrant rights groups such as the League of United Latin American Citizens (LULAC) and the National Council of La Raza (NCLR) through contributions intended for the improper purpose of recruiting illegal workers from within these organizations. The Tyson defendants objected that this new theory was reckless and offensive, but the district court permitted the plaintiffs to depose representatives of LULAC and NCLR, as well as four senior Tyson executives responsible for directing the company’s federal and community relations policies, to pursue evidence of the alleged scheme. In October 2005, asserting that the foregoing claims were baseless and frivolous and that extensive discovery had yielded no evidence of any wrongdoing, Tyson moved for Rule 11 sanctions against the plaintiffs’ counsel. Although the court declined to grant the motion prior to the close of discovery, the court reserved the right to revisit possible sanctions at the summary judgment stage. Trial is scheduled for next November. Mohawk tries different tack After the 6th Circuit revived the civil RICO action against Tyson Foods, Mohawk Industries Inc. became the target of a similar class action filed by Foster and his legal team. As in Tyson Foods, the class plaintiffs alleged that the company had conspired with recruiters and temporary help agencies to locate and transport large numbers of undocumented workers-in this case from the Brownsville, Texas, area to Mohawk’s plants in Georgia-for the purpose of driving down the wages of its U.S. workers. The complaint recited violations of various immigration crimes taking place over a five-year period, including knowingly hiring more than 10 illegal workers in 12-month increments, harboring said workers through employment and shielding them from detection by federal authorities, and accepting fraudulent documents to satisfy I-9 requirements. Mohawk publicly denied these allegations and responded with a preliminary dismissal motion. Therein, Mohawk’s legal team argued that the plaintiffs had failed to plead facts sufficient to demonstrate the existence of a cognizable “association-in-fact” RICO enterprise-one in which the co-conspirators pursued an objective that was separate and distinct from the normal business affairs of Mohawk Industries. Mohawk reasoned that since employee recruitment and hiring are routine corporate functions, an enterprise formed for the purpose of carrying out such functions could never form the basis of a RICO claim-regardless of whether predicate crimes were alleged to have been committed. The 7th Circuit had dismissed similar RICO claims in a 2004 decision ending a RICO action brought by U.S. workers against IBP Inc., holding that the objectives of the recruiters and the corporation were too diverse to satisfy the “common purpose” element of a racketeering case. Baker v. IBP Inc., 357 F.3d 685 (7th Cir.), cert. denied, 125 S. Ct. 412 (2004). Unfortunately for Mohawk, the district court in Georgia denied its motion. However, Mohawk did succeed in convincing the court to stay proceedings and approve the company’s request for interlocutory review based upon the different views expressed in the 7th Circuit’s decision in IBP. The 11th Circuit agreed to hear the appeal, but ultimately rejected Mohawk’s argument. Williams v. Mohawk Indus. Inc., 411 F.3d 1252 (11th Cir.), cert. granted, 126 S. Ct. 830 (2005). Siding with the 2d and 9th circuits in Commercial Cleaning, and Mendoza v. Zirkle Fruit Co., 301 F.3d 1163 (9th Cir. 2002), the 11th Circuit held that in the context of a civil RICO case based upon immigration crimes in the workplace, factual allegations of a “loose or informal association of distinct entities,” formed to supply an employer with undocumented workers constituted a cognizable enterprise for RICO purposes when the defendant employer is alleged to have played some role in carrying out the purpose of the enterprise. Mohawk petitioned for certiorari from the order of the 11th Circuit, asking the Supreme Court to determine a slightly broader question than the one raised below, namely whether it is settled law that a corporate defendant must “conduct” or “participate” in the affairs of some larger separate enterprise in order to be susceptible to RICO liability. The Supreme Court agreed to accept the case and to decide whether a corporate defendant, in combination with nonemployee recruiters and temporary help agencies, may constitute a RICO enterprise if formed to locate and place undocumented aliens for employment with Mohawk. The U.S. Chamber of Commerce, the National Federation of Independent Business Legal Foundation, the Society for Human Resource Management, the National Association of Manufacturers, Associated Builders and Contractors Inc., the Carpet and Rug Institute and the American Staffing Association have signed on to amici curiae briefs supporting Mohawk’s appeal. ‘Enterprise’ definition in dispute In their respective briefs, Mohawk and the business community argued for a strict construction of the statutory definition of “enterprise” found in the RICO statute, asserting that Congress intentionally excluded corporations from the exclusive list of “individuals” that could enter into a de facto racketeering arrangement known as an “association-in-fact.” Mohawk did not argue this point in the courts below, and the 11th Circuit never addressed it-a fact highlighted by Mohawk’s opponents on brief, and picked up on by justices Antonin Scalia and Ruth Bader Ginsberg at oral argument. Scalia also questioned whether Mohawk had waived the issue below by conceding the contrary position in argument before the 11th Circuit. Counsel for Mohawk defended the right to raise the issue for the first time on appeal based upon the federal statute governing interlocutory review-which he claimed authorized a petitioner to raise any rationale basis for reversing the order below, particularly when the law in the circuits so clearly contravenes a plain reading of the statute at issue and poses liability upon a corporation not intended by Congress. Counsel dismissed the seeming admission below as a mere acknowledgement of the state of the law in the 11th Circuit and nine other circuits-but not a concession that this interpretation of the term “individual” is legally correct. Mohawk’s alternative defense derives from the Supreme Court’s 1993 decision in Reves v. Ernst & Young, 507 U.S. 170 (1993). Therein, the court held that a RICO conspirator must have a separate and distinct identity from the RICO enterprise in which it is alleged to have participated, regardless of the alleged criminal wrongdoing. Mohawk repeated the argument raised below that the actions at the heart of the complaint concern the recruitment and hiring of employees-a core function of Mohawk’s manufacturing business, and therefore not a separate and distinct enterprise for RICO purposes. Absent allegations in the complaint of conspiratorial acts directed at achieving goals that are outside the scope of Mohawk’s routine business activity, the complaint must be dismissed for failure to state a claim. The plaintiffs’ cause attracted a number of formidable allies. Mohawk’s attempt to limit the scope of corporate RICO liability clearly attracted the concern of the U.S. Department of Justice, which has used RICO to prosecute corporate defendants for alleged participation in a broad range of criminal conspiracies. The National Association of Shareholder and Consumer Attorneys also filed an amicus brief attempting to dispel the notion that corporations cannot be held individually liable for security and consumer frauds. Plaintiffs have also attracted support from interest groups opposed to liberalizing the country’s immigration laws and insistent upon using RICO to enforce the employer sanctions laws. These include the Immigration Political Action Committee U.S. Inc., the Federation for American Immigration Reform, the Center for American Unity, the American Unity Legal Defense Fund, Negative Population Growth Inc., and the U.S. Immigration Reform Political Action Committee. Plaintiffs and these amici argued that Congress must have intended to hold corporations liable for workplace immigration crimes because of a 1996 RICO amendment adding to the list of predicate acts the crime of hiring 10 or more illegal workers in a 12-month period. Further, they argued that because the government has failed to enforce employer sanctions, immunization of corporate employers from RICO liability for immigration crimes leaves U.S. workers-whom the law is designed to protect-with no remedies for unlawful competition from undocumented workers. For these advocates, corporate hiring of the undocumented is not “a routine business function,” but one that involves a serious crime against American workers within the legitimate scope of civil RICO prosecution. By the close of oral argument, it appeared that at least five justices were in agreement with Mohawk’s position that Congress never intended to include corporations under the definition of the term “individual” for purposes of a RICO association-in-fact case. As Justice Stephen G. Breyer cleverly put it to counsel for the United States, Congress never intended to “RICO-ize” ordinary commercial activity in the corporate setting. Should Mohawk prevail on this preliminary argument, it would be entitled to dismissal of the plaintiffs’ complaint without need of further analysis. If Mohawk does not prevail on its first argument, success on the second is more problematic. At oral argument, Justice David H. Souter strongly suggested that Mohawk’s participation in the alleged immigration crimes, as set forth in the complaint, including the alleged acceptance of phony Social Security cards for I-9 verification purposes, were not actions undertaken in the normal course of Mohawk’s business. Recruitment and hiring may be normal activities, but the alleged repeated and long-term practice of directing the recruitment and hiring of undocumented workers is not. Scalia was also troubled about establishing a rule of decision requiring the lower federal courts to determine what is or is not part of the business of a corporate defendant for RICO purposes because it would result in confusion and inconsistency for years to come. A decision is expected by the close of term in late June. In light of the public’s heightened awareness of the immigration issue as the result of the reform debate in Congress, a victory for plaintiffs could signal the start of many more cases. Indeed, should Homeland Security Secretary Michael Chertoff make good on his promise to aggressively pursue employer violators of the nation’s immigration laws, plaintiffs could simply follow the evidence trail developed by the government in order to support their civil class action claims for treble damages and attorney fees. Mary E. Pivec is a partner in the labor and employment practice group in the Washington office of Sheppard, Mullin, Richter & Hampton of Los Angeles.

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