Molina-Aranda v. Black Magic Enters., L.L.C.

• Decision Date: 21 December 2020
• Docket Number: No. 19-50638,19-50638
• Citation: 983 F.3d 779
• Parties: Ruben MOLINA-ARANDA; Jose Eduardo Martinez-Vela; Juan Gerardo Lopez-Quesada, Plaintiffs—Appellants, v. BLACK MAGIC ENTERPRISES, L.L.C., doing business as JMPAL Trucking ; Carmen Ramirez; Jessie Ramirez, III, Defendants—Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

983 F.3d 779

Ruben MOLINA-ARANDA; Jose Eduardo Martinez-Vela; Juan Gerardo Lopez-Quesada, Plaintiffs—Appellants,

v.BLACK MAGIC ENTERPRISES, L.L.C., doing business as JMPAL Trucking ; Carmen Ramirez; Jessie Ramirez, III, Defendants—Appellees.

No. 19-50638

United States Court of Appeals, Fifth Circuit.

FILED December 21, 2020

Brian Wolfman, Georgetown Law Appellate Courts Immersion Clinic, Washington, DC, Bradley Girard, Americans United for Separation of Church & State, Washington, DC, Lakshmi Ramakrishnan, Texas RioGrande Legal Aid, Incorporated, Mercedes, TX, for Plaintiffs-Appellants.

Raffi Melkonian, Wright, Close & Barger, L.L.P., Houston, TX, for Defendants-Appellees.

Before Owen, Chief Judge, and Dennis and Haynes, Circuit Judges.

Haynes, Circuit Judge:

Plaintiffs allege that Carmen and Jessie Ramirez brought them to the United States under the H-2B visa program to work as construction workers. Once Plaintiffs arrived in the United States, however, the Ramirezes allegedly made them work as truck drivers, who typically receive higher wages and for whom H-2B visas are consequently harder to obtain. But Plaintiffs never saw those higher wages; instead, they claim they were paid worse than either truck drivers or construction workers, with the Ramirezes unlawfully deducting from their paychecks, denying them overtime pay, and sometimes failing to pay them entirely.

Plaintiffs sued Carmen and Jessie Ramirez and their company, Black Magic Enterprises, L.L.C. ("Black Magic"), claiming, as relevant here, that the Ramirezes violated (1) the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and (2) the Fair Labor Standards Act ("FLSA"). The district court dismissed those claims for failure to state a claim, declined to exercise supplemental jurisdiction over Plaintiffs’ related state law claims, and denied Plaintiffs’ later-filed motion for leave to amend the complaint.

For the following reasons, we AFFIRM the district court's dismissal of Plaintiffs’ RICO claims and the district court's denial of Plaintiffs’ motion for leave to amend, REVERSE the dismissal of Plaintiffs’ FLSA claims, VACATE the dismissal of the state law claims, and REMAND for further proceedings.

I. Background

Plaintiffs are former employees of the Ramirezes who were brought to work for Black Magic in Texas under the United States Department of Labor's H-2B guest worker visa program.¹ H-2B visas allow employers to bring foreign workers to the United States for temporary non-agricultural work if (1) "qualified workers in the United States are not available" and (2) "the alien's employment will not adversely affect the wages and working conditions of similarly employed United States workers." 8 C.F.R. § 214.2(h)(6)(iv)(A) ; see 8 U.S.C. § 1101(a)(15)(H)(ii)(b). To obtain an H-2B visa for an employee, the employer must first apply for and obtain a labor certification with the Department of Labor. 8 C.F.R. § 214.2(h)(6)(iii)(C).

Plaintiffs alleged that the Ramirezes "systematically defrauded the federal government to obtain" the visas that brought them to the United States by misrepresenting to the Department of Labor the type of work Plaintiffs would perform. According to Plaintiffs, the applications the Ramirezes submitted claimed falsely that Black Magic sought guest workers for "physical labor at construction sites ... operat[ing] hand and power tools of all types." Plaintiffs alleged that the Ramirezes obtained a labor certification by stating that the "offered wage" for such work "equal[ed] or exceed[ed] the highest of the most recent prevailing wage for the occupation"—$13.72 per hour. Plaintiffs alleged that, after obtaining that certification, the Ramirezes additionally submitted H-2B visa applications stating that they would "pay at least the offered wage ... during the entire period of th[e] application," minus "authorized and reasonable deductions."

Plaintiffs claimed, however, that the Ramirezes knowingly lied in those materials: the Ramirezes did not want physical laborers—they actually wanted heavy truckers. That lie, Plaintiffs claimed, was central to the Ramirezes getting the visas in the first place. Heavy truckers are paid more than physical laborers at $20 per hour, and, because there might be American citizens willing to work at that rate, the Ramirezes might not have been able to get the H-2B visas had they told the truth in their applications. According to Plaintiffs, the Ramirezes’ gambit paid off; although Plaintiffs were ostensibly brought in as construction workers, the Ramirezes made them work as heavy truck drivers once they arrived. But Plaintiffs did not make $20 per hour—or even the $13.72 per hour they were initially promised. Instead, because the Ramirezes allegedly unlawfully deducted from their pay, failed to pay overtime despite work weeks between fifty and eighty hours, and sometimes failed to pay Plaintiffs entirely, Plaintiffs claimed they effectively made much less.

On the basis of these allegations, Plaintiffs sued the Ramirezes in federal district court. In their complaint, Plaintiffs sought relief under RICO's civil penalty section, 18 U.S.C. § 1964(c) ; the FLSA, 29 U.S.C.§ 216(b) ; and Texas state law. The district court dismissed the federal causes of action with prejudice for failure to state a claim under Federal Rules of Civil Procedure 12(b)(6) and 9(b). With no federal claims left, the district court declined to exercise supplemental jurisdiction over the remaining state-law claims. After their complaint was dismissed, Plaintiffs filed a motion for leave to amend, which the district court denied. Plaintiffs timely appealed.

II. Jurisdiction & Standard of Review

The district court had federal-question jurisdiction over Plaintiffs’ RICO and FLSA claims, see 28 U.S.C. § 1331, and we have jurisdiction to review the district court's final judgment, see id. § 1291.

We review a district court's dismissal under Rule 12(b)(6) de novo, accepting all well-pleaded facts as true and viewing those facts in the light most favorable to the plaintiffs. See Gonzalez v. Kay , 577 F.3d 600, 603 (5th Cir. 2009). To meet the pleading standard of Rule 12(b)(6), plaintiffs must allege "enough facts to state a claim that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Additionally, allegations of fraud—like the predicate acts Plaintiffs allege in connection with their RICO claims—must meet Rule 9(b)’s heightened pleading standard, under which plaintiffs "must state with particularity the circumstances" of the allegedly fraudulent conduct. See Williams v. WMX Techs., Inc. , 112 F.3d 175, 177 (5th Cir. 1997). Accordingly, plaintiffs alleging fraud must additionally describe, in short, "the who, what, when, and where" supporting their fraud allegations. Id. at 178.

Plaintiffs also challenge the district court's denial of leave to amend their complaint, which we review for abuse of discretion. N. Cypress Med. Ctr. Operating Co., Ltd. v. Aetna Life Ins. Co. , 898 F.3d 461, 477 (5th Cir. 2018). A district court does not abuse its discretion when denying leave to amend if, for example, amendment would be futile, the moving party has repeatedly failed to cure the deficiencies in its pleadings, or the opposing party would suffer undue prejudice. See id.

III. Discussion

On appeal, Plaintiffs argue that the district court erred in dismissing their RICO, FLSA, and state law claims and abused its discretion in denying their motion for leave to amend. We address each argument in turn.

A. RICO Claims

RICO makes it "unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c). It allows "[a]ny person injured in his business or property by reason of a violation of section 1962" to bring a civil suit for treble damages. Id. § 1964(c). To state a claim under § 1962(c), a plaintiff must adequately plead that the defendant engaged in "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co. , 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985) (footnote omitted).²

A RICO plaintiff must also plausibly allege that the RICO violation proximately caused the plaintiff's injuries. See Holmes v. Secs. Inv. Prot. Corp. , 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). The proximate causation standard in this context is not one of foreseeability; instead, the plaintiff must demonstrate that the alleged violation "led directly" to the injuries. Anza v. Ideal Steel Supply Corp. , 547 U.S. 451, 461, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006) ; see also Hemi Grp., LLC v. City of New York , 559 U.S. 1, 10, 12, 130 S.Ct. 983, 175 L.Ed.2d 943 (2010) (plurality opinion). If some other conduct directly caused the harm, the plaintiff cannot sustain a RICO claim. See Hemi Grp., LLC , 559 U.S. at 11, 130 S.Ct. 983 (rejecting a RICO claim on proximate causation grounds because "the conduct directly causing the harm was distinct from the conduct giving rise to the fraud").

Here, Plaintiffs’ allegations, taken as true, do not support a conclusion that their underpayment injuries were directly caused by the Ramirezes’ alleged fraud in obtaining the H-2B visas. Rather, their complaint shows that the injury was caused by the alleged underpayments which were not required by the alleged fraud. See Walters v. McMahen , 684 F.3d 435 (4th Cir. 2012). The Fourth Circuit in Walters addressed a similar situation where a set of domestic U.S. workers alleged that a company's managers filed false immigration forms that led to depressed wages for local workers—allegations the Fourth Circuit found insufficient precisely because other managerial decisions more directly impacted the workers’...