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Briefs and Other Related
Documents United States Court of Appeals, Ninth Circuit. Olivia MENDOZA, individually and on behalf of all others similarly
situated; Juana Mendiola, individually and on behalf of all others similarly
situated, Plaintiffs-Appellants, v. ZIRKLE FRUIT CO., a Washington corporation; Matson Fruit Company, a Washington corporation; Selective Employment
Agency, Inc., a Washington corporation, Defendants-Appellees. No. 01-35276. Argued and Submitted June 7, 2002. Filed Sept. 3, 2002. Legally documented agricultural laborers sued
fruit growers under Racketeer Influenced and Corrupt Organizations Act
(RICO), and employment agency for conspiracy under state law, alleging
that growers leveraged hiring of undocumented immigrants in order to
depress wages of legally documented employees. The United States District
Court for the Eastern District of Washington, Fred L. Van Sickle, Chief
District Judge, 2000
WL 33225470, dismissed
action. Laborers appealed. The
Court of Appeals, McKeown, Circuit Judge, held that: (1) complaint sufficiently
alleged predicate act of knowingly hiring undocumented workers; (2)
laborers were direct victims of fruit growers' alleged scheme, for purposes
of statutory standing; (3) laborers' complaint sufficiently alleged
harm to them from growers' actions, for purposes of statutory standing;
(4) laborers' claims did not present possibility of multiple recovery,
for purposes of statutory standing; (5) allegations of complaint were
sufficient to establish constitutional standing; and (6) District Court
could exercise supplemental subject matter jurisdiction involving party
over whom there was no independent basis for federal court jurisdiction,
provided that claims formed but one constitutional case and derived
from common nucleus of operative fact. Reversed and remanded. West Headnotes [1] Federal Courts [1] Federal Courts
Court of
Appeals was required to take facts derived from complaint to be true
in reviewing dismissal on pleadings for lack of jurisdiction and failure
to state claim. Fed.Rules
Civ.Proc.Rule 12(b)(1), 28 U.S.C.A. [2] Federal Courts [2] Federal Courts
Review of
a dismissal on the pleadings is de novo, and the dismissal may be affirmed
only if it is clear that no relief could be granted under any set of
facts that could be proved consistent with the allegations. [3] Federal Civil Procedure In the context
of the Racketeer Influenced and Corrupt Organizations Act (RICO), at the pleading stage, general factual
allegations of injury resulting from the defendant's conduct may suffice
to avoid a motion to dismiss, for on such
a motion it is presumed that general allegations embrace those specific
facts that are necessary to support the claim.
18
U.S.C.A. § 1961 et seq. [4] Racketeer Influenced and Corrupt Organizations Complaint
alleging that fruit growers had knowledge of illegal harboring "and/or" smuggling of undocumented
workers sufficiently alleged predicate act of knowingly hiring undocumented
workers, as required to state claim under Racketeer Influenced and Corrupt
Organizations Act (RICO), in that, even if knowledge of smuggling were
required, complaint easily contained such allegation. Immigration and Nationality Act, § 274, 8
U.S.C.A. § 1324; 18
U.S.C.A. § § 1961(1)(F), 1962(c). [5] Racketeer Influenced and Corrupt Organizations Agricultural
laborers were not required to show "property right" in lost
wages, by showing that they were promised or contracted for higher wages,
to have standing to bring action under Racketeer Influenced and Corrupt
Organizations Act (RICO) alleging that fruit growers leveraged
hiring of undocumented immigrants in order to depress wages of legally
documented employees, inasmuch as laborers' case did not implicate procedural
due process. U.S.C.A.
Const.Amend. 5; 18
U.S.C.A. § 1962(c). [6] Racketeer Influenced and Corrupt Organizations The Court
of Appeals focuses on three nonexhaustive factors in considering causation,
that is, whether an injury is too remote to allow recovery under the
Racketeer Influenced and Corrupt Organizations Act (RICO): (1) whether
there are more direct victims of the alleged wrongful conduct who can
be counted on to vindicate the law as private attorneys general;
(2) whether it will be difficult to ascertain the amount of the
plaintiff's damages attributable to defendant's wrongful conduct; and (3) whether the courts will have to adopt
complicated rules apportioning damages to obviate the risk of multiple
recoveries. 18
U.S.C.A. § 1964(c). [7] Racketeer Influenced and Corrupt Organizations Legally documented agricultural laborers
were direct victims of fruit growers' alleged scheme to leverage hiring
of undocumented immigrants in order to depress wages, for purposes of
determining whether laborers had statutory standing to sue under Racketeer
Influenced and Corrupt Organizations Act (RICO).
18
U.S.C.A. § 1964(c). [8] Racketeer Influenced and Corrupt Organizations Legally documented
agricultural laborers' complaint, stating that fruit growers hired undocumented
workers in order to depress wages of documented workers, and that growers
had ability to define wages in labor market, sufficiently alleged harm
to laborers from growers' actions that was not speculative, for purposes
of determining whether laborers has statutory standing to sue growers
under Racketeer Influenced and Corrupt Organizations Act (RICO). 18
U.S.C.A. § 1964(c). [9] Racketeer Influenced and Corrupt Organizations Action by
legally documented agricultural laborers, alleging that fruit growers
engaged in scheme to leverage hiring of undocumented
immigrants in order to depress wages, did not present possibility of
multiple recovery, for purposes of determining whether laborers had
statutory standing to sue under Racketeer Influenced and Corrupt Organizations
Act (RICO), inasmuch as suit was not for derivative or passed-on harm. 18
U.S.C.A. § 1964(c). [10] Federal Civil Procedure Plaintiffs
invoking federal jurisdiction are required to establish the irreducible
constitutional minimum of standing in addition to meeting statutory
standing requirements. [11] Federal Civil Procedure [11] Federal
Civil Procedure The minimum
or threshold for constitutional standing consists of three factors:
(1) injury in fact, that is, an invasion of a legally protected interest which is (a) concrete and particularized,
and (b) actual or imminent, not conjectural or hypothetical; (2) causation,
that is, the injury must be fairly traceable to the defendant's challenged
action; and (3) redressability, that is, it must be likely as opposed
to merely speculative that the injury will be redressed by a favorable
decision. [12] Racketeer Influenced and Corrupt Organizations Allegations
of legally documented agricultural laborers' complaint were sufficient
to establish constitutional standing to bring Racketeer Influenced and
Corrupt Organizations Act (RICO) action alleging that fruit growers
engaged in scheme to depress wages by hiring undocumented workers, inasmuch
as laborers alleged concrete, actual injury in form of lost wages, and
award of money damages would redress such injury.
18
U.S.C.A. § 1961 et seq. [13] Federal Courts A district
court does not violate the Constitutional article governing the judiciary
if it exercises supplemental subject matter jurisdiction involving a
party over whom there is no independent basis for
federal court jurisdiction, provided that the federal and state claims
form but one constitutional case and derive from a common nucleus of
operative fact. U.S.C.A.
Const. Art. 3, § 2, cl. 1; 28
U.S.C.A. § 1367. [14] Federal Courts Under Constitutional
article governing judiciary, district court would be able, in its discretion,
to exercise supplemental subject matter jurisdiction involving employment
agency even though agricultural laborers had sued agency solely under
state law, such that federal question jurisdiction over agency was precluded,
and even though all parties were citizens of same state, such that diversity
jurisdiction over agency was precluded, provided that state conspiracy
claims against agency were part of same constitutional case as laborers'
federal Racketeer Influenced and Corrupt Organizations Act (RICO) claims
against growers. U.S.C.A.
Const. Art. 3, § 2, cl. 1; 18
U.S.C.A. § 1961 et seq.; 28
U.S.C.A. § § 1331, 1332, 1367. [15] Federal Courts A district
court's decision to exercise supplemental subject matter jurisdiction
involving a party over whom there is no independent basis for federal
court jurisdiction is discretionary.
28
U.S.C.A. § 1367. *1165
Steve W. Berman & Andrew
M. Volk, Hagens Berman LLP, Seattle, WA,
and Howard
W. Foster, Johnson & Bell, Ltd., Chicago,
IL, for the appellants. Irwin
Schwartz, Law Offices of Irwin Schwartz,
Seattle, WA, Sheryl
Gordon McCloud, Law Offices of Sheryl
Gordon McCloud, Seattle, WA, Walter
G. Meyer, Meyer, Fluegge & Tenney,
P.S., Yakima, WA, Terry
Schmalz, Halverson & Applegate, P.S.,
Yakima, WA, for appellees Zirkle Fruit Co. and Matson Fruit Co. J.
Jay Carroll, Brendan
Victor Monahan, Velikanje, Moore &
Shore, P.S., Yakima, WA, for appellee Selective Employment Agency, Inc. Appeal from the United States District Court
for the Eastern District of Washington;
Fred L. Van Sickle, District Judge, Presiding. D.C. No. CV-00- 03024-FLVS. Before: BRUNETTI, TROTT, and McKEOWN, Circuit Judges. *1166
McKEOWN, Circuit Judge. This case arises from claims that two agricultural
companies leveraged the hiring of undocumented immigrants in order to
depress the wages of their legally documented employees. We are called upon to decide two significant
issues. First, we must determine
whether, under the Racketeer Influenced and Corrupt Organizations Act
("RICO"), 18
U.S.C. § § 1961-1968, legally documented agricultural workers have standing to
sue their employers, whom they allege depressed their salaries by conspiring
to hire undocumented workers at below market wages. Second, we must consider the constitutionality
of supplemental subject matter jurisdiction involving a party over whom
there is no independent basis for federal court jurisdiction. The district court resolved both questions
in favor of the defendants and dismissed this lawsuit on the pleadings. We reverse. BACKGROUND [1] Olivia Mendoza, Juana Mendiola, and the purported class ("employees")
are agricultural laborers for Zirkle Fruit Company and Matson Fruit
Company ("growers"), which operate fruit orchards and packing
houses in Eastern Washington, the heart of Washington's fruit industry.
According to the complaint, [FN1] the employees are "persons legally authorized to be
employed in the United States."
They worked for the growers "at wages that are substantially
depressed because of the Illegal Immigrant Hiring Scheme." Pursuant to the scheme, Zirkle and Matson "knowingly
hire workers of illegal status because the illegal workers are willing
to accept wages that are significantly lower than wages would be in
a labor market comprised solely of legally authorized workers." They do so "for the purpose of depressing
employee wages below the levels they would otherwise be required to
pay if they were unable to hire substantial numbers of illegal immigrants
who, due to their economic situation and fear of asserting their rights
due to their illegal status, can be easily exploited and who are therefore
willing to work for depressed wages."
The complaint provides substantial background and detail about
the scope of the challenged scheme: FN1. These facts, which
are derived from the complaint, must be taken to be true because the
case was dismissed on the pleadings for lack of jurisdiction and failure
to state a claim. United
States v. One 1997 Mercedes E420,
175 F.3d 1129, 1131 n. 1 (9th Cir.1999).
Eastern Washington is the heart of Washington's famed apple
and fruit industry. This area
... is uniquely suited for growing fruit.... In Washington state there are more than 15,000 fruit packers
and 30,000 orchard pickers of fruit.
Many operations require unskilled, low-wage laborers for harvesting
and packing and other related tasks requiring manual labor. While
the industry now generates over $1 billion, many of these workers live
in poverty. Defendants Matson and Zirkle operate fruit orchards and packing
houses. Matson and Zirkle are motivated to keep labor costs as low as
possible and, due to a variety of complex social and economic factors,
the industry's demand for low-skilled workers has attracted many workers
of Mexican citizenship. Many
of these Mexican nationals are illegal immigrants who have been smuggled
into the U.S. and/or harbored in the U.S. by relatives, friends, and
the employers. Matson and Zirkle ... knowingly hire workers of illegal
status because illegal workers are willing to accept wages that are
significantly lower *1167 than wages would be in a labor market
comprised solely of legally authorized workers. The Immigration and Naturalization Service has
conducted investigations finding that as much as half the growers' workforce
is employed illegally, and the growers have been targeted for "raids
and other law enforcement procedures." According to the complaint, the scheme is facilitated
by Selective Employment Agency, Inc., a separate company that employs
the workers and then "loans" them to the growers. "Defendants Matson and Zirkle use Selective
Employment as a 'front company' for the purpose of perpetrating this
scheme with the hope that each will be thus shielded from charges that
they violated federal law." Although
Selective Employment was named only as an association-in-fact enterprise,
not as a defendant, in the federal RICO claim, the complaint alleged
a state conspiracy claim that did name Selective Employment as a defendant. The district court dismissed the complaint pursuant
to Federal
Rules of Civil Procedure 12(b)(1) and
12(b)(6). [FN2] Although the district court held that the employees
pled a direct injury because there was no intervening third party from
whom their injury was derived, the court dismissed the complaint on
grounds that the damages were too speculative and difficult to ascertain. [FN3] FN2. The complaint also
alleged a mail fraud RICO predicate in sending forms falsely verifying
employment eligibility to the government. In a ruling that has not been
appealed, the district court held that the mail fraud scheme did not
provide an adequate RICO predicate act because the employees were not
the party defrauded. FN3. The district court
"remanded" the remaining state law claims against the growers.
As the parties acknowledge, dismissal, not remand, was called
for because this suit was originally brought in federal court. See
28
U.S.C. § 1447. The employees moved for reconsideration, proffering
a proposed amended complaint that alleged a conspiracy broader than
the named growers and included more specific causation allegations. The amended complaint states that the growers
and unnamed conspirators "comprise a large percentage of the fruit
orchards and packing houses in the area, and therefore affect wages
throughout the labor market for apple pickers and fruit packers, [such
that] competition with respect to wages is stifled and suppressed." The proffered
complaint also adds six paragraphs explaining how the scheme injures
the workers. Nonetheless, the district court denied the motion, clarifying
that it was not dismissing merely for difficulty of proof, but for lack
of concrete injury and proximate causation. In addition, the district court, quite reluctantly,
granted Selective Employment's motion to dismiss pursuant to Rule
12(b)(1).
The district court determined that it was bound by Ayala
v. United States,
550 F.2d 1196 (9th Cir.1977), cert.
granted, 434
U.S. 814, 98 S.Ct. 50, 54 L.Ed.2d 70 (1977),
cert. dismissed, 435
U.S. 982, 98 S.Ct. 1635, 56 L.Ed.2d 76 (1978),
which it characterized as holding pendent-party jurisdiction unconstitutional. DISCUSSION [2][3] We note at the outset that the district court dismissed this
case on the pleadings. Consequently,
our review is de novo, and we may affirm the dismissal "only if it is clear that no relief
could be granted under any set of facts that could be proved consistent
with the allegations." Swierkiewicz
v. Sorema N.A.,
534 U.S. 506, 122 S.Ct. 992, 998, 152 L.Ed.2d 1 (2002) (quoting *1168Hishon
v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d
59 (1984)).
In the RICO context, "[a]t the pleading stage, general factual
allegations of injury resulting from the defendant's conduct may suffice,
for on a motion to dismiss we presume that general allegations embrace
those specific facts that are necessary to support the claim." NOW
v. Scheidler,
510 U.S. 249, 256, 114 S.Ct. 798, 127 L.Ed.2d 99 (1994) (quoting Lujan
v. Defenders of Wildlife,
504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). [4] The district court offered two bases for dismissal on the
pleadings: RICO standing and
supplemental jurisdiction. We
discuss those issues below, but first we address one proffered alternative
ground for affirming the dismissal for failure to state a claim, an
argument that need not detain us long.
RICO prohibits engaging in a pattern of "racketeering activity,"
defined as violating certain laws; as
such, a predicate illegal act must be alleged.
18
U.S.C. § § 1962(c), 1961(1)(F). The district court
held that the "Illegal Immigrant Hiring Scheme" as pleaded
involved a predicate RICO act, knowingly hiring undocumented workers
in violation of Immigration and Naturalization Act §
274, 8
U.S.C. § 1324. We are unpersuaded by the growers' argument that the district court erred
in this respect. Their argument
rests on a hypertechnical reading of the complaint inconsistent with
the generous notice pleading standard.
See Swierkiewicz,
122 S.Ct. at 999.
The complaint alleges that the defendants had knowledge of illegal
harboring "and/or" smuggling.
Even if knowledge of smuggling were required by the statute,
an issue about which we express no opinion, the complaint easily contains
this allegation. We affirm the
district court's analysis and reasoning on this issue, and turn to standing
and supplemental jurisdiction. I. STANDING A. STATUTORY STANDING [5] We turn first to the statutory standing requirements particular
to RICO. Under RICO, "[a]ny person injured in his business or property
by reason of a violation of section
1962 of this chapter may sue therefor
in any appropriate United States district court" for civil damages. 18
U.S.C. § 1964(c). This statute is quite
similar to the antitrust statute granting standing to "any person
who shall be injured in his business or property by reason of anything
forbidden in the antitrust laws," 15
U.S.C. § 15(a), and consequently the two have been interpreted in tandem.
Holmes
v. Sec. Inv. Protection Corp.,
503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). The employees allege an injury to their property in the
form of lost wages. [FN4] The key task is to
determine whether this injury was "by reason of" the growers' alleged violations, a requirement
the Supreme Court has interpreted to encompass proximate as well as
factual causation. FN4. The growers suggest
that the employees would have to show a "property right" in
the lost wages, by showing that they were promised or contracted for
higher wages. This argument
is misplaced in the context of RICO. This case does not implicate procedural
due process; rather, what is required is precisely what the
employees allege here: a legal
entitlement to business relations unhampered by schemes prohibited by
the RICO predicate statutes. 18
U.S.C. § § 1962(c), 1961(1); Dumas
v. Major League Baseball Prop.,
104 F.Supp.2d 1220, 1222 (S.D.Cal.2000),
aff'd sub nom. Chaset
v. Fleer/Skybox Int'l, LP,
300 F.3d 1083, 1087 (9th Cir.2002) (holding
no "injury to property" under RICO). In a series of cases beginning in the antitrust
context and later extended to RICO, the Supreme Court clarified that
potential plaintiffs who have suffered *1169 "passed-on"
injury--that is, injury derived from a third party's direct injury--lack
statutory standing. Ill.
Brick Co. v. Illinois,
431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977); Assoc.
Gen'l Contractors v. Calif. State Council of Carpenters,
459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983); Holmes,
503 U.S. at 268.
Illinois
Brick held that
government consumers could not sue on a theory that high prices were
passed on to them as a result of the defendants' illegal price-fixing
scheme. 431
U.S. at 736.
Similarly, in Associated
General Contractors, unions lacked standing to sue a contractors' association
for an illegal conspiracy to use nonunion subcontractors because such
a conspiracy would directly victimize the union subcontractors, not
the unions. 459
U.S. at 520-21.
Holmes extended the requirement to RICO; nonpurchasing customers, forced to cover costs
when brokers became insolvent as a result of an illegal stock manipulation
scheme, could not sue for this derivative harm. 503
U.S. at 268. [6] In this circuit, we focus on three nonexhaustive factors
in considering causation, that is whether the injury is "too remote"
to allow recovery: (1) whether there are more direct victims of the alleged wrongful
conduct who can be counted on to vindicate the law as private attorneys
general; (2) whether it will
be difficult to ascertain the amount of the plaintiff's damages attributable
to defendant's wrongful conduct; and
(3) whether the courts will have to adopt complicated rules apportioning
damages to obviate the risk of multiple recoveries. Ass'n
of Wash. Pub. Hosp. Dists. v. Philip Morris Inc.,
241 F.3d 696, 701 (9th Cir.) (quoting Oregon
Laborers--Employers Health & Welfare Trust Fund v.
Philip Morris, Inc.,
185 F.3d 957, 963 (9th Cir.1999)), cert.
denied, 534
U.S. 891, 122 S.Ct. 207, 151 L.Ed.2d 147 (2001)
("Wash.Pub.Hosp."). At this stage of the
proceedings, we cannot say that there is "no set of facts that
could be proved," to satisfy these requirements.
Swierkiewicz,
122 S.Ct. at 998. Our analysis is guided by two key cases, both
decided after the district court's original opinion. See Knevelbaard
Dairies v. Kraft Foods, Inc.,
232 F.3d 979, 987 (9th Cir.2000); Commercial
Cleaning Servs. v. Colin Serv. Sys., Inc.,
271 F.3d 374, 378 (2d Cir.2001). The relationships among the parties in this case
bear a striking resemblance to those in Knevelbaard
Dairies, an antitrust case in which
we recently held that the plaintiffs had standing. There, milk producers sued defendant cheese
producers, who illegally fixed the price of cheese, which in turn set
the price of milk artificially low.
232
F.3d at 989.
Applying classic antitrust standing principles, we looked "to
the chain of causation between [plaintiff's] injury and the alleged
restraint in the market." Id.
at 989 (quoting Am.
Ad Mgmt. Inc. v. General Tel. Co.,
190 F.3d 1051, 1058 (9th Cir.1999)). We concluded that the milk producers' injury
was sufficiently direct. Their
allegations that they would "receive[ ] less for milk than they
otherwise would have received in the absence of the defendants' unlawful
conduct" were "disputed claims of causation and injury [that]
cannot be decided on a Rule 12(b)(6) motion." Id.
at 989.
The employees here, like the milk producers in Knevelbaard
Dairies, claim a direct market injury
as a result of the alleged illegal hiring scheme (or in the case of
Knevelbaard
Dairies, as a result of the price
fixing in the cheese market). In
fact, the causation allegations here are more direct than Knevelbaard
Dairies, as the employees allege a
direct impact on the labor market, not the more attenuated claim of
*1170 an impact on the cheese market, which in turn affected
the milk prices. The Second Circuit, the only circuit to have
considered allegations of illegal immigrant hiring based on the same
predicate act as that at issue here, held that the plaintiffs had standing
to sue under RICO. In Commercial
Cleaning, a competitor alleged that
the defendant janitorial service underbid it by relying on laborers
that the defendant knew to be undocumented.
271
F.3d at 378. The injury was not derivative
of an injury to a third party because "the theory of Commercial's
claim is that Colin undertook the illegal immigrant hiring scheme in
order to undercut its business rivals."
Id.
at 384. Similarly here, the employees
allege that the illegal hiring scheme was divined in order to depress
the normal labor market. [7] Turning to the first factor, taking the allegations in the
complaint as true, we are unable to discern a more direct victim of
the illegal conduct. The documented
employees here do not complain of a passed-on harm. They
allege that the scheme had the purpose and direct result of depressing
the wages paid to them by the growers.
Thus, as the district court correctly determined, "plaintiffs
have stated a claim that they are the direct victims of the illegal
hiring scheme." As in Knevelbaard
Dairies and Commercial
Cleaning, the scheme aims to gain
an illegal commercial advantage--here, disproportionate bargaining power
in employment contracts--in the growers' dealings with the employees. Neither the government nor the undocumented
workers are an intervening third party in this scheme, despite the growers'
arguments to the contrary. The
claims here thus differ fundamentally from passed-on injury cases. See Imagineering
Inc. v. Kiewit Pac. Co.,
976 F.2d 1303, 1312 (9th Cir.1992) (holding
that minority- and women-owned subcontractors could not sue general
contractors under RICO for an illegal scheme to evade federally required
quotas because the direct harm was to competitor general contractors
who complied with the quotas); Oregon
Laborers,
185 F.3d at 963-67 (holding that health
care trust funds could not sue tobacco companies under RICO because
their injury derived from the smokers' injury);
Wash.
Pub. Hosp.,
241 F.3d at 703 (same for health care
providers). In contrast to these
other cases, the alleged scheme here was intended to give the growers
a contract advantage at the expense of the documented workers, a direct
rather than a pass-through injury. We also note that the undocumented workers cannot
"be counted on to bring suit for
the law's vindication." Holmes,
503 U.S. at 273;
cf. Hoffman
Plastic Compounds Inc. v. NLRB,
535 U.S. 137, 122 S.Ct. 1275, 152 L.Ed.2d 271 (2002) (holding that undocumented workers are not entitled to backpay wrongfully
withheld in a labor dispute). Although
not dispositive, see Oregon
Laborers,
185 F.3d 957, we heed the Supreme Court's
example and consider this factor in our analysis.
As the district court noted, the fact that RICO specifically
provides that illegal hiring is a predicate offense indicates that Congress
contemplated the enforcement of the immigration laws through lawsuits
like this one. 18
U.S.C. § 1961(1)(F). [8] The second concern to which we direct our attention is the
speculative measure of harm. The
district court noted that "intervening factors ... could have interfered
with the plaintiffs receiving higher pay absent the defendants' hiring
of undocumented workers. These
intervening factors include the wage paid by other orchards in the area,
the skill and qualifications of each plaintiff, the profitability of
the defendants' businesses without the undocumented workers, and the
general *1171 availability of documented workers in the area." In other words, the district court dismissed
the complaint based on the conclusion that factors other than the scheme
coupled with the growers' power in the relevant labor market could
account for the plaintiffs' depressed wages.
The difficulty with this reasoning is that the employees allege
that the growers singularly have the ability to define wages in
this labor market, akin to monopsony or oligopsony power. See Phillip Areeda, et al., Antitrust
Law ¶ ¶ 574, 1431 (1995). They further allege that it is the illegal
scheme that has caused their injury.
The proposed amended complaint lays to rest any remaining doubt
about attributing the alleged harm to the scheme, by spelling out a
broad conspiracy causing direct harm to the workers.
For example, it makes clear that the scheme involves fruit growers
that "comprise a large percentage of the fruit orchards and packing
houses in the area, and therefore affect wages throughout the labor
market." The district court's analysis focused primarily
on cause-in-fact, not proximate cause, and it is inappropriate at this
stage to substitute speculation for the complaint's allegations of causation.
As we explained in Knevelbaard
Dairies when we rejected the claim
that milk prices might have been lower due to independent factors instead
of the cheese price fixing: "Whether experts will be able to measure
the difference between the allegedly restrained price for milk and the
price that would have prevailed but for the antitrust violation remains
to be seen; in deciding a Rule
12(b)(6) motion we are dealing only with
the complaint's allegations, which in this instance do not make the
claim speculative." 232
F.3d at 991. Similarly here, the workers must be allowed to
make their case through presentation of evidence, including experts
who will testify about the labor market, the geographic market, and
the effects of the illegal scheme. Questions
regarding the relevant labor market and the growers' power within that
market are exceedingly complex and best addressed by economic experts
and other evidence at a later stage in the proceedings.
For now, it is sufficient that the employees have alleged market
power--they must not be put to the test to prove this allegation at
the pleading stage. See Scheidler,
510 U.S. at 256;
In
re Warfarin Sodium Antitrust Litigation,
214 F.3d 395, 398 (3d Cir.2000) (reversing
dismissal based on lack of antitrust standing because "the District
Court considered facts gleaned from counsel's argument and from its
own experience, factors not contemplated by the dictates of Rule
12(b)(6)"). Finally, it is important to distinguish between
uncertainty in the fact of damage and in the amount of damage. Knutson
v. Daily Review, Inc.,
548 F.2d 795, 811 (9th Cir.1976) ("Different
standards govern proof of the fact and proof of the amount of damages.").
That wages would be lower if, as alleged, the growers relied
on a workforce consisting largely of undocumented workers, is a claim
at least plausible enough to survive a motion to dismiss, whatever difficulty
might arise in establishing how much lower the wages would be.
Cf. Oregon
Laborers,
185 F.3d at 964 (holding medical costs
resulting from injury to smokers easily established). [9] Turning to the final factor, the growers do not appear to
argue that there is a significant risk of multiple recovery in this
case. No other potential plaintiffs emerge with clarity.
Also, as the Second Circuit reasoned, even if there are other classes of potential
plaintiffs who could recover for the alleged illegal hiring scheme,
such lawsuits would not threaten multiple recovery of passed-on harm. Commercial
Cleaning,
271 F.3d at 383- 84. *1172 This factor does not bar suit
for "different classes of plaintiffs, each of which suffered a
different concrete injury, proximately caused by the violation." Id.
at 384.
In sum, there is no difficulty avoiding multiple recovery here
because this is not a suit for derivative or passed-on harm. B. CONSTITUTIONAL STANDING [10][11] Because they are invoking federal jurisdiction, the employees
must establish "the irreducible constitutional minimum of standing"
in addition to meeting the statutory standing requirements. Lujan,
504 U.S at 560-61. This minimum or threshold consists of three
factors: (1) injury in fact: "an invasion of a legally protected interest
which is (a) concrete and particularized, and (b) actual or imminent,
not conjectural or hypothetical," id.
at 560 (citations and internal quotations
omitted); (2) causation: the injury must be fairly traceable to the defendant's
challenged action, id.; and (3) redressability: "it must be likely as opposed to merely
speculative that the injury will be redressed by a favorable decision,"
id.
at 561 (internal quotations omitted). [12] Based on the complaint, the employees easily meet this test.
First, they allege a concrete, actual injury in their
lost wages. As discussed above,
their causation allegations are sufficient at this stage. See Scheidler,
510 U.S. at 256 (rejecting a constitutional
causation challenge in a RICO suit where the plaintiffs alleged that
a conspiracy to threaten staff and patients "has injured the business
and/or property interests of the [petitioners]").
Finally, because the award of money damages will redress the
injury of lost wages, the third element is also met. II. SUPPLEMENTAL PARTY JURISDICTION The employees sued Selective Employment solely
under state law, precluding federal question jurisdiction, and all parties
are Washington citizens, precluding diversity jurisdiction. See 28
U.S.C. § § 1331 & 1332. In such a situation,
absent an independent basis for federal subject matter jurisdiction,
Congress has authorized the district court to exercise supplemental
jurisdiction: [T]he district courts shall have supplemental jurisdiction
over all other claims that are so related to claims in the action within
such original jurisdiction that they form part of the same case or controversy
under Article III of the United States Constitution.
Such supplemental jurisdiction shall include claims that involve
the joinder or intervention of additional parties. FN5. The statute restricts
supplemental jurisdiction in certain cases where the underlying basis
for federal jurisdiction is diversity.
28
U.S.C. § 1337(b). This provision is
not at issue in this case, which rests on federal question jurisdiction. Prior to the passage of § 1337, supplemental
jurisdiction was more circumscribed and the addition of a party was
one factor that barred jurisdiction over additional claims brought by
plaintiffs. See generally Denis F. McLaughlin, The
Federal
Supplemental Jurisdictional Statute--A Constitutional and Statutory
Analysis,
24 Ariz. St. L.J. 849, 859-89 (1992).
In 1973, the Supreme Court expressed some skepticism about "pendent
party jurisdiction"--jurisdiction over plaintiffs' claims requiring
the addition of parties not involved in the main lawsuit.
The Court characterized this issue as a "subtle and complex
question with far-reaching implications."
Moor
v. County of Alameda,
411 U.S. 693, 715, 93 S.Ct. 1785, 36 L.Ed.2d 596 (1973). Continuing this thread, in Aldinger
v. Howard,
427 U.S. 1, 96 S.Ct. 2413, 49 L.Ed.2d 276 (1976),
the *1173 Court held that pendent party jurisdiction was impermissible
as a matter of statutory construction under the particular circumstances
of the case. Finally, in Finley
v. United States,
490 U.S. 545, 549, 109 S.Ct. 2003, 104 L.Ed.2d 593 (1989), the Court "assume[d], without deciding," that pendent party jurisdiction
was constitutional, but cautioned that it requires an express statutory
jurisdictional grant. In 1990, Congress enacted § 1367 to provide
such an express grant. Pub.L.
No. 101-650 § 310. [13] The statutory grant of jurisdiction is, of course, limited
by constitutional boundaries. Upon
careful review, however, we are convinced that the controlling constitutional
standard remains that articulated in United
Mine Workers of America v. Gibbs,
383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966): The claims must form
"but one constitutional 'case' " and "derive from a common
nucleus of operative fact." We
therefore decline Selective Employment's invitation to impose a per
se constitutional bar on supplemental jurisdiction over claims against
additional parties. A. Ayala V. United States Selective Employment relies on Ayala
v. United States,
550 F.2d 1196, 1199- 1200 (9th Cir.1977),
where we held that federal courts were without power to exercise pendent
party jurisdiction under the Federal Tort Claims Act. At that time,
neither of the key Supreme Court cases, Moor and Aldinger, had resolved the question, nor did we have the benefit of
the explicit language of Finley, which came ten years later. Selective Employment, however, points to language
that implied that, in addition to not being authorized under any statute,
pendent party jurisdiction posed constitutional difficulties. Id. at
1199, 1200 n. 8. These statements, however,
are best read as flagging the necessity for caution due to potential
constitutional problems that might arise with an unduly broad exercise
of pendent jurisdiction. Significantly, Ayala also came before intervening decisions that clarified that
Ayala
's restrictive interpretation does not
survive the 1990 passage of § 1367. We explained in Galt
G/S v. Hapag-Lloyd AG,
60 F.3d 1370, 1374 (9th Cir.1995), that
Finley imposed two requirements for supplemental jurisdiction: (1) the claims must be "part of the same
constitutional 'case' "; and
(2) the jurisdiction must be expressly authorized by statute. We further
observed that "28
U.S.C. § 1367 supercedes this second Finley requirement...." Id.
at 1374 n. 3;
see also Yanez
v. United States,
989 F.2d 323, 327 n. 3 (9th Cir.1993)
(holding that court lacked jurisdiction in pre-1990 suit, but noting
that "Congress has now explicitly authorized pendent party jurisdiction"
(citing 28
U.S.C. § 1367)). B. Constitutionality of Supplemental Jurisdiction
Under § 1367 Any lingering doubt that Ayala establishes a binding constitutional rule is put to rest
by the Supreme Court's recent decision in Raygor
v. Regents of the University of Minnesota,
534 U.S. 533, 122 S.Ct. 999, 1004, 152 L.Ed.2d 27 (2002). Holding that a tolling
provision was curtailed by the Eleventh Amendment, the Court discussed
the history of supplemental jurisdiction: In Mine
Workers v. Gibbs, this Court held
that federal courts deciding claims
within their federal-question subject matter jurisdiction, 28
U.S.C. § 1331, may decide state law claims not within their subject matter jurisdiction
if the federal and state law claims "derive from a common nucleus
of operative fact" and comprise "but one constitutional 'case.'
" ... This Court later
made *1174 clear that absent authorization from Congress,
a district court could not exercise pendent jurisdiction over claims
involving parties who were not already parties to a claim independently
within the court's subject matter jurisdiction.
See Finley
v. United States,
490 U.S. 545, 109 S.Ct. 2003, 104 L.Ed.2d 593 (1989). 122
S.Ct. at 1004 (emphasis added; some citations omitted). The Court elaborated that § 1367 provided
just such authorization, functioning as a "general grant of jurisdiction."
Id.
at 1005.
As the Supreme Court explained in Raygor, Article III permits supplemental jurisdiction "if the
federal and state law claims 'derive from a common nucleus of operative
fact' and comprise 'but one constitutional case.' " Id.
at 1004(quoting Gibbs,
383 U.S. at 725) (some internal quotation
marks omitted). Thus, any suggestion
in Ayala that the Constitution imposes a bar on supplemental jurisdiction
over additional parties independent of statutory authorization has been
undermined by intervening Supreme Court authority. See United
States v. Gay,
967 F.2d 322, 327 (9th Cir.1992) (holding
that a prior panel decision is not binding in such a situation). Selective Employment provides no compelling rationale
to restrict supplemental jurisdiction beyond the limitation imposed
in Gibbs. Indeed, the district
court suggested that it would hold otherwise but for the belief that
its hands were tied by Ayala. The district court's
instincts were vindicated by the Supreme Court's later ruling in Raygor. We acknowledge, of
course, that federal courts are courts of limited jurisdiction. U.S. Const.
Art. III, sec. 2; Finley,
490 U.S. at 550(quoting Aldinger,
427 U.S. at 15).
The Gibbs standard defines the minimum constitutional constraints,
offering both Congress and the district courts flexibility to shape
each case in a way that is efficient for the courts, fair to the parties,
and respectful of state sovereignty. Finally, we note that none of our sister circuits
has imposed a per se constitutional restriction on supplemental jurisdiction
over additional parties. See
Hinson
v. Norwest Financial S.C., Inc.,
239 F.3d 611, 615 (4th Cir.2001) (holding
that district court did not abuse its discretion in joining plaintiffs
who asserted only state law claims);
HB
Gen'l Corp. v. Manchester Partners, L.P.,
95 F.3d 1185, 1197-98 (3d Cir.1996) (holding
that nondiverse party could be joined for counterclaims); Ammerman
v. Sween,
54 F.3d 423, 424 (7th Cir.1995) (noting
that only Gibbs now limits pendent party jurisdiction); Palmer
v. Hosp. Auth.,
22 F.3d 1559, 1566-67 (11th Cir.1994)
(holding that district court had pendent party jurisdiction because
claims involved the "same facts, occurrences,
witnesses, and evidence"). [14][15] Thus, to avoid dismissal for lack of federal subject matter
jurisdiction, the employees must show that the state conspiracy claims
against Selective Employment constitute part of the same constitutional
case as the federal RICO claims against the growers.
Assuming that the claims meet the Gibbs standard, the district court has the power to exercise supplemental
jurisdiction. The decision to
exercise that jurisdiction remains discretionary with the district court.
City
of Chicago v. Int'l Coll. of Surgeons,
522 U.S. 156, 172-73, 118 S.Ct. 523, 139 L.Ed.2d 525 (1997) (holding that district courts may decline to exercise jurisdiction
over supplemental state law claims in the interest of judicial economy,
convenience, fairness, and comity).
We therefore remand for the district court to determine, in the
first instance, whether the application of the Gibbs standard permits the exercise of supplemental jurisdiction,
and to exercise discretion over whether such *1175 jurisdiction
would be appropriate in the context of this litigation. REVERSED and REMANDED. 301 F.3d
1163, RICO Bus.Disp.Guide 10,323, 2 Cal. Daily Op. Serv. 8040, 2002
Daily Journal D.A.R. 10,079 Briefs and
Other Related Documents (Back to top) . 2001
WL 34121061
(Appellate Brief) Appellants' Reply (Sep. 21, 2001) . 2001
WL 34093349
(Appellate Brief) Appellants' Reply in Response to Brief of Defendants-Appellees
Zirkle Fruit Co. and Matson Fruit Co. (Aug. 30, 2001) . 2001
WL 34121057
(Appellate Brief) Response Brief of Defendants-Appellees Zirkle
Fruit Co. and Matson Fruit Co. (Aug. 03, 2001) . 2001
WL 34121071
(Appellate Brief) Brief of Appellee Selective Employment (Jul.
31, 2001) . 2001
WL 34121065
(Appellate Brief) Appellants' Brief (Jun. 29, 2001) END OF DOCUMENT |
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