A group of Peruvian shepherds claiming they were victims of a widespread wage-fixing scheme was dealt a decisive blow by a federal appellate court last week.
The shepherds allege that U.S. ranchers, through their trade associations, colluded to depress their wages to the minimum amount allowed by the Department of Labor. But the federal district court in Colorado had dismissed all of their class action antitrust and racketeering claims, and on Tuesday, the 10th Circuit Court of Appeals affirmed each dismissal except for a single Racketeer Influenced and Corrupt Organizations Act, or RICO, claim. The 10th Circuit also upheld the lower court’s decision to block the shepherds from amending their complaint a third time.
According to the 53-page opinion written by Senior Judge Michael Murphy, the plaintiffs failed to plausibly allege an antitrust conspiracy among the ranchers hiring the foreign shepherds, and largely because their actions were coordinated in the context of the agricultural worker visa system.
U.S. District Judge Robert Blackburn had thrown out the RICO claims against each of the trade associations — the Western Range Association and the Mountain Plains Agricultural Service — as well as the individual defendant, Dennis Richins.
Blackburn’s reasoning was that the complaint didn’t satisfy RICO’s “distinctness rule” for those defendants — that is, they weren’t distinct from the purported enterprise that conducted the alleged wage fixing.
The 10th Circuit’s sole reversal was on the claim against Richins. A former executive director, board member and president of WRA, Richins was the only defendant the complaint distinguished from the rest of the alleged enterprise, according to the opinion.
The shepherds’ counsel is Towards Justice, a nonprofit law firm that represents underprivileged plaintiffs in wage and employment cases. David Seligman, Towards Justice’s executive director, said in a statement to Law Week that the panel’s decision was “incorrect,” and the plaintiffs are considering their options.
“Just as it would be illegal for gas stations in Denver to allow an industry association to set prices for them and their competitors, it’s illegal for ranchers to allow an industry group to set wages for their employees and those of their competitors,” Seligman said. “This basic principle of law is no less true for consumers of gas than it is for the shepherds who toil for the lowest wages in the American economy — until recently $2-3 per hour.”
Neither counsel for the WRA nor for Richins responded to requests for comment on the decision.
Rodolfo Llacua and the four other named plaintiffs were hired through the H-2A visa system to work in the U.S. as open range shepherds.
The program allows agricultural companies to hire foreign nationals for jobs they can’t fill with domestic workers. Under DOL rules, the employers can’t offer domestic workers any less in pay, benefits or working conditions than they would offer H-2A workers.
The WRA and MPAS hired a combined 91% of all open range shepherds in the U.S. between 2013 and 2014, the time period at issue in the complaint. They submitted H-2A applications on behalf of ranchers looking to fill those positions.
According to the complaint, the WRA and MPAS filed job orders to the Labor Department offering domestic shepherds the bare minimum wages they could under DOL and state rules, with one order offering as little as $750 a month.
In 2015, the DOL raised the minimum wage for H-2A shepherds to $1,206.31 a month across all states. The H-2A applications filed through the trade associations don’t allow shepherds to “shop” among the prospective employers.
In September 2015, Llacua and the other shepherds sued the trade associations and various named ranchers for antitrust violations, claiming they “conspired and agreed to fix wages offered and paid to shepherds at the minimum DOL wage floor.”
They also alleged RICO violations against the WRA, MPAS and Richins, claiming they falsely certified to the federal government that they were reimbursing the shepherds for transportation and subsistence costs.
Weighing the antitrust claims, the district court used the U.S. Supreme Court’s Twombly rule: as the 10th circuit summarized, “mere allegations of parallel conduct, absent additional contextual facts, fail to state a plausible conspiracy claim.”
The district court found the overlapping facts of the shepherds’ arrangement — like offering them the wage floor — were equally likely to happen if all of the ranchers hired the shepherds independently, since they would all still be subject to the H-2A visa and DOL hiring regulations.
The 10th Circuit agreed: “To be clear, the facts alleged, even taken as true, do not plausibly lead to the conclusion association members gave up control over the wages offered or otherwise entered into an agreement to keep wages low.”
The H-2A program, the opinion said, “explicitly and specifically authorizes associations to coordinate with members” to submit visa applications and act as joint employers, in what amounts to the behavior the shepherds allege is anticompetitive.
On appeal, the plaintiffs contended that the district court shouldn’t have relied on the Twombly standard because there was direct evidence of the conspiracy.
The direct evidence, according to the plaintiffs, was the associations’ filings, and the actions by a trade association amount to concerted action among its members, they argued.
“This argument is not well taken,” according to the opinion. The shepherds didn’t allege any explicit agreement among the associations or their members, or any votes or rules. “Instead, they ask this court to assume that because the Association Defendants assist their members in completing Job Offers and H-2A Applications, they are ‘fixing’ or ‘setting’ wages,” the panel said.
The 10th Circuit reversed one aspect of the district court’s decision, however.
According to the panel, the district court erred in dismissing the RICO claim against Dennis Richins because unlike the other defendants, the complaint alleges he is an individual distinct from an alleged enterprise.
Under RICO, “a defendant corporation, acting through its subsidiaries, agents, or employees cannot typically be both a RICO enterprise and a RICO person,” the opinion said.
The 10th Circuit noted a lack of precedent on RICO’s distinctness requirement, but it said the “requirement is satisfied when a corporate officer, such as Richins in his role as executive director, board member and president of WRA, is sued as the RICO defendant person and the alleged RICO enterprise is the corporation or association (i.e., WRA).”
But the 10th Circuit upheld the RICO dismissals on the two trade associations based on the distinctness requirement. “[T]he Shepherds have not directed this court to a single case holding that an association like WRA and MPAS can be legally distinct from an association-in-fact made up solely of the association and its members,” according to the opinion.
The district court wouldn’t let the plaintiffs go back and revise their complaint a third time, and despite their appeal on that decision, neither would the 10th Circuit.
“The Shepherds’ appellate briefing of this issue can charitably be described as exceedingly limited,” according to the opinion. The district court rejected their motion for leave to file a third amended complaint, the panel noted, because it found the amendments would be futile and would cause undue prejudice to the defendant in stalling the litigation.
“[T]he district court acted well within the bounds of its discretion,” the 10th Circuit said.
— Doug Chartier