519 F.3d 969 (9th Cir. 2008), 06-35112, Canyon County v. Syngenta Seeds, Inc.

Docket Nº:06-35112.
Citation:519 F.3d 969
Party Name:CANYON COUNTY, a political subdivision of the State of Idaho, Plaintiff-Appellant, v. SYNGENTA SEEDS, INC., a Delaware corporation; Sorrento Lactalis, Inc., a Delaware corporation; Swift Beef Company, a Delaware corporation; Harris Moran Seed Co., a California corporation; Albert Pacheco, an individual, Defendants-Appellees.
Case Date:March 21, 2008
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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519 F.3d 969 (9th Cir. 2008)

CANYON COUNTY, a political subdivision of the State of Idaho, Plaintiff-Appellant,

v.

SYNGENTA SEEDS, INC., a Delaware corporation; Sorrento Lactalis, Inc., a Delaware corporation; Swift Beef Company, a Delaware corporation; Harris Moran Seed Co., a California corporation; Albert Pacheco, an individual, Defendants-Appellees.

No. 06-35112.

United States Court of Appeals, Ninth Circuit.

March 21, 2008

Argued and Submitted Aug. 7, 2007.

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[Copyrighted Material Omitted]

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Howard W. Foster, Johnson & Bell, Ltd., Chicago, IL, for the plaintiff-appellant.

George R. Wood, Littler Mendelson, P.C., Minneapolis, MN, for defendant-appellee Syngenta Seeds, Inc.

Juan P. Morillo, Sidley Austin LLP, Washington, D.C., for defendant-appellee Sorrento Lactalis, Inc. Marie R. Yeates, Vinson & Elkins LLP, Houston, TX, for defendant-appellee Swift Beef Company.

Richard A. Leasia, Thelen Reid & Priest, LLP, San Jose, CA, for defendant-appellee Harris Moran Seed Company.

Cynthia J. Woolley, The Law Offices of Cynthia J. Woolley, PLLC, Ketchum, ID, for defendant-appellee Albert Pacheco.

Appeal from the United States District Court for the District of Idaho; Edward J. Lodge, District Judge, Presiding. D.C. No. CV 05-0306 EJL.

Before: William C. Canby, Jr., A. Wallace Tashima, and Consuelo M. Callahan, Circuit Judges.

TASHIMA, Circuit Judge.

This case involves an Idaho county's attempt to recover damages under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, for additional monies it claims to have expended on public health care and law enforcement services for undocumented immigrants. Plaintiff-appellant Canyon County commenced this action against four companies and one individual under RICO's civil enforcement provision, 18 U.S.C. § 1964(c), alleging that defendants engaged in an illegal scheme of hiring and/or harboring undocumented immigrant workers within the County, and that their actions forced the County to pay "millions of dollars for health care services and criminal justice services for the illegal immigrants."

The district court concluded that the County did not have statutory standing under § 1964(c) because the County did not meet the threshold requirement that a civil plaintiff be "injured in his business or property" by reason of the alleged RICO violation. Consequently, the court dismissed the County's complaint.

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We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm the district court. We agree with the district court that the County has failed to allege that it was injured in its business or property. We also conclude that, with respect to almost all of the defendants' alleged RICO violations, the County cannot show that its claimed injuries were proximately caused by defendants' conduct. For both of these reasons, the County lacks statutory standing to pursue its federal RICO claims.

BACKGROUND

I. Civil Enforcement Under RICO

RICO focuses on "racketeering activity," which the statute defines as a number of specific criminal acts under federal and state laws. See 18 U.S.C. § 1961(1). As relevant to this case, acts which are indictable under § 274 of the Immigration and Nationality Act ("INA") are included in the definition of racketeering activity. 18 U.S.C. § 1961(1)(F). INA § 274 (codified as amended at 8 U.S.C. § 1324) criminalizes the bringing in, transportation, harboring, and employment of undocumented aliens.

Substantive violations of RICO are defined in 18 U.S.C. § 1962. Under § 1962(c), it is illegal for any person "to conduct or participate, directly or indirectly, in the conduct of [an] enterprise's affairs through a pattern of racketeering activity," where that enterprise affects interstate commerce. It is also illegal for any person to conspire to do so. 18 U.S.C. § 1962(d). A "pattern of racketeering activity" requires at least two predicate acts of racketeering activity, as defined in 18 U.S.C. § 1961(1), within a period of ten years. 18 U.S.C. § 1961(5). 1

Under RICO's civil enforcement mechanism, "[a]ny person injured in his business or property by reason of a violation of [18 U.S.C. § 1962] may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee ...." 18 U.S.C. § 1964(c). To have standing under § 1964(c), a civil RICO plaintiff must show: (1) that his alleged harm qualifies as injury to his business or property; and (2) that his harm was "by reason of" the RICO violation, which requires the plaintiff to establish proximate causation. Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992); Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985).

II. Canyon County's Complaint

The County's first amended complaint ("complaint") names as defendants Syngenta Seeds, Inc. ("Syngenta"), Sorrento Lactalis, Inc. ("Sorrento"), Swift Beef Company ("Swift"), Harris Moran Seed Company ("Harris"), and Albert Pacheco. Because we are reviewing the dismissal of the complaint, we assume that the factual allegations of the complaint, summarized below, are true.

According to the complaint, each of the four defendant companies knowingly employed and/or harbored large numbers of illegal immigrants within Canyon County, in an "Illegal Immigrant Hiring Scheme."2 The companies' actions have damaged the County because the County "has paid millions of dollars for health care services and criminal justice services for the illegal immigrants who have been employed by the

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defendants in violation of federal law." The individual defendant, Pacheco, has engaged in a policy of "Wilful Blindness and Harboring" of illegal immigrants, in his role as director of a local social service agency, which has resulted in similarly increased costs for the County.

Defendants Syngenta and Harris are both growers and processors of agricultural commodities. The County claims that both companies have deliberately hired hundreds of workers who the companies knew were not authorized to work in the United States. Working with a farm labor contractor, Ag Services, the companies agreed to employ undocumented immigrants supplied by Ag Services. The contractor acts as a "front" for Syngenta and Harris: in addition to supplying workers, the contractor channels the workers' wages to them, completes fraudulent I-9 employment eligibility forms for the workers, and supplies the workers with false documents. The companies have thus allegedly violated both 8 U.S.C. § 1324(a)(3), 3 which criminalizes knowing hiring of more than ten unauthorized aliens during a single year, and 8 U.S.C. § 1324(a)(1)(A)(iii), 4 which criminalizes harboring of unauthorized aliens.

The County further alleges that Syngenta and Harris have each formed an "association-in-fact enterprise" with the farm labor contractor, and that the companies' sustained custom of hiring and/or harboring undocumented workers amounts to a pattern of racketeering activity. As a consequence, the companies have allegedly violated 18 U.S.C. § 1962(c), by participating in the conduct of an enterprise's affairs through a pattern of racketeering activity.

The complaint contains similar allegations against Sorrento, a cheese processor, and Swift, a meat packer, the only difference being that Sorrento and Swift have allegedly formed "association-in-fact" enterprises with a different labor contractor, Labor Ready.

The County's claim against defendant Pacheco is distinct, as it is not based on the hiring of undocumented immigrants. Instead, the County alleges that Pacheco, in his position as Executive Director of the Idaho Migrant Council, has directed his staff to assist immigrant workers in fraudulently applying for public benefits, despite Pacheco's knowledge that the workers lacked legal status in the United States and were ineligible for such benefits. In directing his staff to take these actions, Pacheco has allegedly committed a pattern of racketeering activity, by knowingly harboring undocumented immigrants in violation of 8 U.S.C. § 1324(a)(1)(A)(iii). Thus, based on his association with the Migrant Council, which is asserted to be a RICO enterprise, Pacheco has allegedly violated 18 U.S.C. §§ 1962(c) and 1962(d). 5

III. Dismissal by the District Court

Defendants filed motions to dismiss the County's complaint, challenging both the

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County's standing under RICO and the adequacy of the County's allegations of substantive RICO violations. The district court granted defendants' motions and dismissed the complaint in its entirety. It held that the County lacked statutory standing to bring its federal RICO claims because it had not been injured in its business or property by the alleged conduct constituting the RICO violations.

In evaluating whether the County had alleged injuries of a type cognizable under § 1964(c), the district court first discussed the tort doctrine known as the "municipal cost recovery rule," drawing on our decision in City of Flagstaff v. Atchison, Topeka & Santa Fe Ry., 719 F.2d 322 (9th Cir. 1983). In City of Flagstaff, we held that, under Arizona law, a municipality could not recover the cost of public services for fire or safety protection from a negligent tortfeasor. Id. at 323. We did, however, recognize several exceptions to the "municipal cost recovery rule," including exceptions allowing municipal recovery "where it is authorized by statute or regulation" and "where the acts of a private party create a public nuisance which the government seeks to abate." Id. at 324.

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