CIVIL RICO CLAIMS BROUGHT BY ILLEGAL ALIENS:

UNCHARTERED TERRITORY

By George N. Davies
Nakamura, Quinn & Walls LLP
2204 Lakeshore Drive, Suite 130
Birmingham, AL 35209
(205)870-9989
davies@nqwlaw.com
 CIVIL RICO CLAIMS BROUGHT BY ILLEGAL ALIENS:
UNCHARTERED TERRITORY

By George N. Davies
Nakamura, Quinn & Walls LLP

Illegal Immigration and the Employment of Illegal Aliens

The issue of illegal immigration and the employment of undocumented aliens by

employers in the United States is an issue that has been around for some time and has been

the subject of increased regulation and controversy. Recently, both legal workers and

undocumented alien workers have begun to use civil RICO as a means to remedy exploitation

of illegal aliens by employers.1

In 1986, Congress enacted the Immigration Reform and Control Act (AIRCA@), 8

U.S.C. '1324a, Aa comprehensive scheme prohibiting the employment of illegal aliens in the

United States.@ Hoffman Plastic Compounds, Inc., v. National Labor Relations Board, 535

U.S. 137, 147 (2002). Congress in enacting IRCA, Amade combating the employment of

illegal aliens central to >[t]he policy of immigration law.=@ Id. (citing INS v. National Center

1
My colleague on this panel, Mark Carter, has submitted an excellent paper on the use of
civil RICO by legal workers to remedy alleged RICO violations based on the hiring of illegal
aliens by their employers. See, e.g., Trollinger v. Tyson Foods, Inc., 370 F.3d 602 (6th Cir.
2004). This paper explores the opposite and still developing but related issue, that is the use of
civil RICO by illegal aliens to remedy their exploitation by their employers.

1
for Immigrants= Rights, Inc., 502 U.S. 183, 194, n.8 (1991)). Employers who violate IRCA

by recruiting and employing illegal aliens can be punished by civil fines, 8 U.S.C.

'1324a(e)(4)(A) and may be subject to criminal prosecution. 8 U.S.C. '1324(a)(f)(1).

Employers, particularly those in low wage, labor intensive industries, are perceived to

make use of illegal alien workers as a way to both fill their ranks and keep wage costs low so

as to increase their profit margins. Homicz, Private Enforcement of Immigration Law:

Expanded Definitions Under RICO and the Immigration and Nationality Act, 38 Suffolk U.L.

Rev. 621, 624 (2005). AIn general, employers of immigrant labor benefit from increased

profits resulting from a rise in production and a decrease in employee wages.@ Id. at 624-

625.2 This problem has not gone unnoticed by Congress.

1996 Amendments to RICO

2
A reason employers may violate '1324(a) is Ato take advantage of [undocumented
immigrants] diminished bargaining position, so as to employ a cheaper labor force and
compete unfairly on the basis of lower labor costs.@ Commercial Cleaning Serv. Inc.. v.
Colin Serv. Sys. Inc., 274 F.3d 274, 283 (2nd Cir. 2001).

2
 In 1996, Congress added violations of the Immigration and Nationality Act, to RICO=s

list of predicate offenses. See, 18 U.S.C. '1961(1)(F) (making Aany act which is indictable

under . . . section 274 (relating to bringing in and harboring certain aliens)@ a RICO predicate

act Aif the act indictable under such section of such Act was committed for the purpose of

financial gain@.3 Thus, ACongress contemplated the enforcement of immigration laws

through [civil RICO actions.]@. Mendoza v. Zirkle Fruit Co., 301 F.3d 1163, 1170 (9th Cir.

2002). With these amendments, plaintiffs, including undocumented workers, now have in

their arsenal the potential of a civil RICO suit, characterized by one court as Aan unusually

potent weaponBthe litigation equivalent of a thermonuclear device.@ Miranda v. Ponce

Federal Bank, 948 F.2d 41, 44 (1st Cir. 1991).

Employers Caught in the Web

The issue of the exploitation of illegal aliens by employers while not necessarily a new

issue, has been brought to the public=s awareness by several high profile cases. In one, Tyson

Foods and several individuals (including some of its managers) were criminally prosecuted

for conspiring to smuggle illegal aliens into the United States and employing them at its

processing plants in nine different states. Trollinger, 370 F.3d at 606. Tyson was eventually

acquitted. See, Jury Clears Tyson Foods in Use of Illegal Immigrants, New York Times,

March 27, 2003.

3
This amendment to RICO=s list of predicate offenses was part of Congress= passage of
the Antiterrorism and Effective Death Penalty Act of 1996, Pub. L. No. 104-132, '133, 110 Stat.
214.

3
 In the most recent high profile case, Wal-Mart Stores, Inc., has been the target of

federal criminal investigations related to the use of illegal aliens by its contractors who

provide janitorial services for its stores. See, Wal-Mart Raids by U.S. Aimed At Illegal

Aliens, New York Times, October 24, 2003. These investigations and subsequent raids on

Wal-Mart facilities around the country have led to a class action civil RICO suit filed by

illegal aliens who worked as janitors in Wal-Mart stores. See, Zavala, et al., v. Wal-Mart

Stores, Inc., Civil Action No. 03-Civ.-5309 (JAG) (D.N.J.).4

The Use of Civil RICO to Remedy the Exploitation of Illegal Aliens

There have been few reported cases in which illegal aliens have attempted to use civil

RICO as means to redress their exploitation at the hands of unscrupulous employers. At the

heart of these cases is the allegation that the defendants engaged in a criminal enterprise, the

common goal of which was to systematically violate immigration and protective federal and

state labor and employment laws for their own profit and benefit at the expense of the

undocumented workers. Most of the schemes alleged by the plaintiffs in these cases involve

the alleged importation and harboring of illegal aliens to facilitate the employer=s failure to

comply with minimum wage and hour laws.

The allegations in these complaints are egregious and what is often alleged in these

cases, are at best very damaging to a company=s public image. For instance in Zavala, supra,
4
The Zavala, et al., v. Wal-Mart case is currently pending on a motion to dismiss by Wal-
Mart.

4
the Plaintiffs describe the alleged scheme as follows:

AAs outlined in the complaint and affidavits of law enforcement officers

referenced in the pleadings, Wal-Mart, using ostensibly independent
maintenance contractors as cover, exploits immigrants drawn from the four
corners of the earth to clean its thousands of stores. The janitors work well in
excess of 40 hours a week, most seven nights a week almost every day of the
year, without overtime and (in some cases) with little or no pay at all. The
scheme revealed in the complaint is a 21st century version of a 19th century
sweatshop of the sort targeted by prophylactic labor legislation: a central
enterprise subcontracts an integral part of its operation to an intermediary who
>sweats= a profit from the employees doing the work. Wal-Mart and its
subcontractors each benefitted from criminal immigration violations because
the irregular legal status of the janitors was a necessary precondition to Wal-
Mart=s ability to obtain labor under conditions far below the standards
mandated by law.@ Plaintiffs= Memorandum of Law in Opposition to Wal-
Mart=s Motion to Dismiss, p.1.5

5
The plaintiffs in Zavala also allege, inter alia, that they were denied medical treatment
when injured on the job, were locked in the stores at night so they couldn=t leave until the Wal-
Mart manager came to work in the morning to unlock the doors, had their paychecks bounce and
were not paid for work performed. First Amended Complaint, &&7-27.

5
In another case, the plaintiffs alleged that the Adefendants fraudulently induced them to come

to the United States from India on false promises that they would be provided an education

and employment opportunities, but then forced them to work long hours under arduous

conditions for pay far below minimum wage and in violation of overtime laws, and sexually

abused and physically beat them.@ Jane Doe I, et al., v. Reddy, et al., 2003 WL 23893010

(N.D. Cal. 2003).6

Unlike the Commercial Cleaning, Mendoza, Baker, Trollinger and Mohawk line of

6
In Vega, et al., v. Contract Cleaning Maintenance, Inc., et al., 2004 WL 2358274 *2
(N.D.Ill. 2004), the plaintiffs alleged that the defendants through a web of interrelated family
janitorial companies and entities had Aengaged in a fraudulent scheme at UPS=s facilities and
other work sites to evade their obligations under the FLSA, other federal and state employment
and tax laws and the common law.@ In Vega, the defendants were alleged to have Asystematically
misclassified their non-managerial janitors and maintenance workers as independent contractors
in order to evade their legal obligations to pay employees@ according to federal and state
minimum wage laws and to have falsified those records of janitors it properly classified as
employees to give the appearance that they never worked more than 40 hours a week when they
routinely did so. Id. at *3. While Vega does not involve the importation and harboring of illegal
aliens, its underlying theory is the same, that is the illegal exploitation of immigrants who have
little or no power to protect themselves from the actions of their employers.

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cases where there has been five Circuit Court of Appeal decisions on various issues, these

AWal-Mart@ type cases are still in their nascent stages. Even so, several interesting issues

have begun to emerge with respect to the RICO allegations.7

Injury to Business or Property

In order to maintain a civil RICO action, a plaintiff must establish standing to sue.

Section 1964(c) provides a cause of action for a Aperson injured in his business or property by

reason of a violation of Section 1962.@ 18 U.S.C. '1964(c); Sedima, S.P.R.L. v. Imrex Co.,

Inc., 473 U.S. 479, 496-97 (1985) (plaintiff must plead a cognizable injury resulting from the

RICO predicate acts). In addition, to establish standing, the plaintiff must demonstrate that

the defendant=s RICO violation was both: (1) a Abut for@ cause of the injury; and (2) the direct

and proximate cause of the injury. Holmes v. Securities Investor Protection Corp., 503 U.S.

258, 265-270 (1992).

7
The issues addressed in the next section are not exhaustive of the issues raised in these
exploitation of illegal alien cases but are only a select few chosen by the author.

7
 In Jane Doe I, supra, the defendants argued that the plaintiffs had failed to alleged an

injury to their business or property but instead had alleged emotional distress and other

personal injury or civil rights claims. 2003 WL 23893010 *2. The Court rejected that notion

and relying on Mendoza, supra, found that the plaintiffs had sufficiently alleged injury to

business or property in that they had alleged that the defendants had forced them to work

long hours without pay. Id.8 The Court also held that the fact that the plaintiffs also alleged

personal injury as a result of the defendants= racketeering activity did not extinguish

plaintiffs= standing based on their alleged economic loss. Id.

In Zavala, supra, Wal-Mart has argued among other things in its motion to dismiss

that the plaintiffs have failed to allege Wal-Mart directly or substantially caused any RICO

injury. First, Wal-Mart argues that the plaintiffs were complicit and benefitted from the

illegal immigration offenses alleged and that these acts allowed them to unlawfully obtain

jobs and better pay in the United States. Second, Wal-Mart contends that the claimed

economic injuries do not arise from any of the alleged immigration offenses but rather from

the contractors= and/or Wal-Mart=s alleged failure to pay them minimum wages and overtime.

Wal-Mart Memorandum in Support of its Motion to Dismiss, p.6.

8
In Mendoza, 301 F.3d at 1168 n.4, the Ninth Circuit held that in order to adequately
plead injury to business or property, Awhat is required is precisely what the employees allege
here: a legal entitlement to business relations unhampered by schemes prohibited by the RICO
predicate statutes.@

8
 The plaintiffs in Zavala counter that they were directly harmed by the immigration

predicates because they were not paid wages in accordance with the FLSA as a result of the

violation of the immigration predicates and Wal-Mart was able to Aobtain janitorial labor at

rates far below legally mandated levels only because it exploited the irregular immigration

status of the janitors.@ Plaintiffs= Memorandum in Opposition to Wal-Mart=s Motion to

Dismiss, pp. 23-25. According to the plaintiffs in Zavala, AWal-Mart and its contractors

violated the immigration laws to gain access to a vulnerable labor pool.@ Id. at 25. The

plaintiffs in Zavala argue that they have suffered a more direct injury than the plaintiffs in the

Mendoza, Baker, Trollinger, et al., line of cases.

The District Court in Jane Doe I, supra, addressed a similar Acomplicity@ argument

raised by Wal-Mart. In Jane Doe I, the defendants argued that since the plaintiffs were

complicit in the immigrations violations they could not collect racketeering damages under

RICO under the doctrine of in pari delicto meaning Aequally at fault@. 2003 WL 23893010

*6. The District Court rejected that defense and held that it could not say as a matter of law

at the motion to dismiss stage of the litigation that the plaintiffs who according to the

complaint Awere vulnerable and powerless@ were equally at fault for the immigration

violations. Id. The Court=s opinion did leave open the possibility that on a more fully

developed record this defense might prevail.

The District Court=s treatment of the standing issue in Jane Doe I, was somewhat

superficial and does not provide much guidance here. The Court=s decision in the Wal-Mart

9
case on this issue will hopefully elaborate more on this issue and provide guidance to parties

and their counsel that find themselves entangled in litigation of this kind.

Defendant-Enterprise Distinction

In order to bring a RICO claim under '1962(c), the plaintiff must allege and prove: (1)

conduct or participation, directly or indirectly, (2) of an enterprise affairs, (3) through a

pattern, (4) of racketeering activity. The Supreme Court has ruled that the defendant and the

enterprise must be distinct to state a claim under '1962(c). Cedric Kushner Promotions,

Ltd. v. King, 533 U.S. 158 (2001). The Supreme Court in Kushner approved the

Anonidentity@ requirement of the person and the enterprise for claims under '1962(c). In

Kushner, the Court held that the distinctiveness requirement is met Awhen a corporate

employee unlawfully conducts the affairs of the corporation of which he is the sole

ownerBwhether he conducts those affairs within the scope, or beyond the scope, of corporate

authority.@ Id. at 166. The Court concluded that it was sufficient to satisfy the distinctness

requirement because the Acorporate owner/employee, a natural person, is distinct from the

corporation itself, a legally different entity with different rights and responsibilities due to its

different legal status.@ Id. at 163.

In Zavala, supra, the plaintiffs pled an association-in-fact enterprise of Wal-Mart and

the contractors it uses to clean its stores. See, First Amended Complaint, &&36-37.9 Wal-

9
To plead an association-in-fact enterprise under 18 U.S.C. '1961(4), the plaintiff must
allege an ongoing organization, whether formal or informal, that exists Aseparate and apart from
the pattern of racketeering activities@ it conducts. United States v. Turkette, 452 U.S. 576, 582-

10
Mart contends that the plaintiffs have failed to allege an adequate distinction between the

person, in this case Wal-Mart and the enterprise which consists of Wal-Mart and these

outside contractors acting as its agents, for the purpose of securing janitorial labor. Wal-Mart

Memorandum in Support of its Motion to Dismiss, pp.22-23. Relying on Baker v. IBP. Inc.,

357 F.3d 685, 691 (7th Cir. 2004), Wal-Mart contends that there is no difference between it

and the enterprise and thus there is no entity separate and distinct from Wal-Mart to comprise

a viable enterprise. The plaintiffs counter that it has adequately pled an association-in-fact

enterprise of Wal-Mart and its contractors as Wal-Mart deliberately created the enterprise

with its contractors in an effort to shield itself from immigration violations and that Kushner

rejected Wal-Mart=s argument that a corporate enterprise is not distinct from its agents for

purposes of RICO. Plaintiffs= Memorandum in Opposition to Wal-Mart=s Motion to Dismiss,

pp. 16-19.

83 (1981).

11
 In Vega, supra, the plaintiffs alleged that the enterprise was an association-in-fact

enterprise consisting of the various corporations, partnerships and other entities through

which the family that owned these various companies and entities either provided janitorial

and maintenance services or held and invested revenue derived from such services, known as

the Boltz Janitorial Enterprise (ABJE@).10 2004 WL 2358274 *2. The Defendants moved to

dismiss arguing that the plaintiffs had alleged that the defendants were both the defendants

(the various companies) and the enterprise. The Court rejected that argument and held that

the plaintiffs had not alleged that the companies were both a person and an enterprise in the

same claim under '1962(c). Id. at 14.

What both of these cases point out is that plaintiffs must be careful where they are

alleging association-in-fact enterprises. This is true particularly in situations that consist of

closely held entities, or entities controlled by the defendant. The plaintiffs must take care to

not end up with a complaint like in Baker, supra, where the Seventh Circuit found that the

plaintiffs had essentially alleged that IBP operated itself as an unlawful RICO enterprise.

Baker, 357 F.3d at 691.

Operation or Management Requirement

In Reves v. Ernst & Young, 507 U.S. 170, 179 (1993), the Supreme Court held that

In order to >participate, directly or indirectly, in the conduct of such enterprise=s

affairs,= one must have some part in directing those affairs. Of course, the

10
The Boltz family operated and/or controlled the numerous companies and entities that
provided the janitorial and maintenance services.

12
 word >participate= makes clear that RICO liability is not limited to those with
primary responsibility for the enterprise=s affairs, just as the phrase >directly or
indirectly= makes clear that RICO liability is not limited to those with a formal
position in the enterprise, but some part in directing the enterprise=s affairs is
required.
In Zavala, the plaintiffs, in response to Wal-Mart=s contention that they did not sufficiently

allege the operation or management requirement, argue that Wal-Mart is the Akingpin@ of the

enterprise and that it uses its market muscle to dictate terms and conditions of lucrative

maintenance contracts. As the sole source of those contracts, the plaintiffs argue, Wal-Mart

exercises control over the terms of those contracts and sustains its profit from the systematic

use of illegal aliens in its stores. Plaintiffs= Memorandum in Opposition to Wal-Mart=s

Motion to Dismiss, pp.20-22.

Whether claims of this nature, without more specific allegations of operation of or

participation in the enterprise, will be enough to pass muster is not likely to be decided any

time soon. As noted above, the parties in these cases are in somewhat unchartered territory.

As more of these arrangements in which a recruiter or contractor procures the illegal aliens

for the defendant become subject to attack under RICO, there will likely be many varied

factual scenarios not yet presented by the current cases.

Conclusion

The use of illegal aliens by employers in labor intensive, low wage industries is not

likely to be abated any time soon so long as employers have an incentive to continue to

employ illegal aliens from a wage and profit standpoint. Cases such as Zavala may only be

the first in what could be many such cases to come as immigrant rights activists get their

13
footing in this area.

One commentator contends it could be detrimental to the nation=s economy if RICO

suits based on illegal immigration claims spreads to other industries that heavily rely on a

workforce made up of undocumented aliens. See, Homicz, Private Enforcement of

Immigration Law: Expanded Definitions Under RICO and the Immigration and Nationality

Act, 38 Suffolk U.L.Rev. at 639. Other commentators reach the opposite conclusion and

believe that only when employers are threatened with the specter of a treble damages RICO

suit will they live up to their obligations under the nation=s wage and hour laws. Until then,

all workers will suffer in an economy driven by a race to the bottom. See, Paoletti, Should

Illegal Aliens Be Able to Sue U.S. Employers for Labor Racketeering? Yes, Insight on the

News, January 6, 2004.

At bottom, so long as there exists a class of workers that can be exploited so that

profits can be increased and costs reduced, there are likely to be employers who will avail

themselves of those opportunities. Quite clearly, there is a tension in these types of cases

brought by illegal aliens and the Mendoza line of cases, brought by legal workers who in

essence blame the illegal aliens for their low wages. To be sure, whether civil RICO will

provide a remedy to illegal aliens who find themselves exploited in these situations will play

itself out for many years to come.

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