Williams Mullen Alert: Are Civil RICO Class Actions Based on Alleged Immigration Offenses Dead?

Williams Mullen Alert: Are Civil RICO Class Actions Based on Alleged Immigration Offenses Dead?

By Mary E. Pivec and Reba Mendoza

The Fourth Circuit's recent decision in Walters v. McMahen [enhanced version available to lexis.com subscribers] affirming the trial court's dismissal of a civil RICO class action at the pleading stage is encouraging news for employers in industries beset by unsubstantiated claims that they have violated immigration regulations and hired unauthorized workers. In Walters, plaintiffs alleged that Perdue Farms engaged in a deliberate and illegal scheme to hire unauthorized workers to maintain low labor costs. The plaintiffs claimed that the defendants deliberately completed inaccurate Form I-9s that incorrectly stated that certain foreign nationals were authorized to work in the United States. Historically, these claims have been difficult to eliminate at the pleading stage, and, as a result, targeted employers have incurred extremely high defense costs. With its decision in Walters, the Fourth Circuit joins the growing number of courts that are willing to close the courthouse door to such lawsuits when plaintiffs are unable to plead facts sufficient to establish the prima facie elements of the crimes alleged and further establish that such crimes are the proximate cause of the plaintiffs' injuries.

A Little Background on Civil RICO Actions.

The Racketeer Influenced and Corrupt Organization Act of 1970 ("RICO") makes it unlawful for any person employed by or associated with any enterprise to conduct such enterprise's affairs through a pattern of racketeering activity. In 1996, Congress expanded RICO by adding violations of the Immigration and Nationality Act ("INA") to the list of predicate offenses that can give rise to civil RICO claims. To bring a viable RICO claim, plaintiffs must plead enough facts to establish the existence of a conspiracy, and, more importantly, plaintiffs must also demonstrate that the defendants committed at least two (2) RICO predicate offenses during the course of the conspiracy, and that the commission of these offenses was the proximate cause of the plaintiffs' injuries.

Why the Walters' Complaint Failed.

The felony hiring provision of the INA requires proof that an employer hired at least ten (10) unauthorized workers within a twelve-month period knowing not only that such workers were unauthorized to work at the time of hire, but also that the workers were brought into the United States for the express purpose of engaging in unauthorized employment. In Walters, the Fourth Circuit, agreeing with the trial court, held that the plaintiffs failed to plead any facts to establish that the defendants knew that the undocumented hires were brought to the United States for the purpose of engaging in illegal employment. In doing so, the Court declined to follow the Ninth Circuit, which had previously permitted a similar allegation to pass the pleading stage. The Ninth Circuit's decision predated the Supreme Court's revision of the federal pleading standards in Bell Atlantic Corp. v. Twombly, and therefore was decided under the less stringent "conceivable claim" pleading standard. The Fourth Circuit also rejected plaintiffs' conclusory allegations that defendants' false attestations on Perdue's Forms I-9 caused any reduction in plaintiffs' wages or benefits.

Practical Implications.

The high costs associated with litigating RICO claims, as well as the exorbitant payouts associated with RICO awards, create perverse incentives for employees and potential nightmares for employers. Thus, employers should make every effort to comply with all pertinent immigration regulations, including the completion of timely and accurate Form I-9s for all new hires. However, when confronted with fraudulent civil RICO claims, employers need no longer panic; decisions such as Walters indicate that employers will not be held hostage by thin complaints that fail to meet the rigorous pleading standards established for such complex causes of action.

For more information about this topic, please contact the authors or any member of the Williams Mullen Immigration Enforcement and Defense Team.


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