Llacua v. Western Range Association

FILED
United States Court of Appeals
Tenth Circuit
PUBLISH July 16, 2019
Elisabeth A. Shumaker
UNITED STATES COURT OF APPEALS Clerk of Court
TENTH CIRCUIT
RODOLFO LLACUA; ESLIPER
HUAMAN; LEOVEGILDO
VILCHEZ GUERRA; LIBER
VILCHEZ GUERRA; RAFEAL DE
LA CRUZ,
Plaintiffs - Appellants,
No. 17-1113
v.
WESTERN RANGE ASSOCIATION;
MOUNTAIN PLAINS
AGRICULTURAL SERVICE;
MARTIN AUZA SHEEP
CORPORATION; NOTTINGHAM
LAND AND LIVESTOCK, LLLP;
TWO BAR SHEEP CORPORATION,
LLC; CUNNINGHAM SHEEP
COMPANY; DENNIS RICHINS,
D/B/A Dennis Richins Livestock,
Defendants - Appellees.
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:15-CV-01889-REB-CBS)
David H. Seligman (Alexander N. Hood with him on the briefs), Towards Justice,
Denver, Colorado for Plaintiffs-Appellants.
James Larry Stine, Wimberly, Lawson, Steckel, Schneider & Stine, P.C., Atlanta
Georgia, and Amber J. Munck, Greenberg Traurig, Denver, Colorado (Elizabeth
K. Dorminey, Wimberly, Lawson, Steckel, Schneider & Stine, P.C., Atlanta,
Georgia, and Naomi G. Beer and Harriet McConnell, Greenberg Traurig, Denver,
Colorado, with them on the brief), for Defendants-Appellees Western Range
Association and Mountain Plains Agricultural Service.
Kenneth F. Rossman IV, Lewis Roca Rothgerber Christie LLP, Denver, Colorado,
(Stacy Kourlis Guillon, Lewis Roca Rothgerber Christie LLP, Denver, Colorado;
Bradford J. Axel, Stokes Lawrence, P.S., Seattle, Washington; and J. Rod Betts,
Paul, Plevin, Sullivan & Connaughton LLP, San Diego, California, with him on
the brief), for Defendants-Appellees Nottingham Land and Livestock, LLLP, Two
Bar Sheep Corporation, LLC, Cunningham Sheep Company, and Martin Auza
Sheep Company.
Before HARTZ, MURPHY, and McHUGH, Circuit Judges.
MURPHY, Circuit Judge.
I. INTRODUCTION
Five Peruvian shepherds (the “Shepherds”) 1 who worked in the Western
United States pursuant to H-2A agricultural visas 2 brought antitrust 3 claims, on
1
Rodolfo Llacua, Esliper Huaman, Leovegildo Vilchez Guerra, Liber
Vilchez Guerra, and Rafael De La Cruz.
2
8 C.F.R. § 214.2(h)(1)(ii)(C) (“An H-2A classification applies to an alien
who is coming temporarily to the United States to perform agricultural work of a
temporary or seasonal nature.”). H-2A visas are authorized by a program
administered by the Department of Labor (“DOL”) that allows for issuance of
visas to foreign workers to temporarily fill positions American employers cannot
fill through the domestic labor market. 8 U.S.C. §§ 1101(a)(15)(H)(ii)(a) and
1188; see generally 20 C.F.R. part 655, subpart B (Labor Certification Process for
Temporary Agricultural Employment in the United States (H-2A Workers)).
3
See 15 U.S.C. § 1 (making illegal “[e]very contract, combination . . . , or
(continued...)
-2-
behalf of themselves and similarly situated classes of shepherds, against several
sheep ranchers (the “Rancher Defendants”), 4 two associations (the “Association
Defendants”), 5 and Dennis Richins 6 (referred to collectively as the “Defendants”).
The Shepherds alleged the Defendants “conspired and agreed to fix wages offered
and paid to shepherds at the minimum DOL wage floor.” The Shepherds also
brought class action RICO 7 claims against Richins and the Association
3
(...continued)
conspiracy, in restraint of trade”). This provision is referred to as § 1 of the
Sherman Act. See Hart-Scott-Rodino Antitrust Improvements Act of 1976, Pub.
L. No. 94-435, tit. III, § 305(a), 90 Stat. 1383 at 1397; see also, e.g., Am. Needle,
Inc. v. Nat’l Football League, 560 U.S. 183, 186 (2010); Copperweld Corp. v.
Indep. Tube Corp., 467 U.S. 752, 755 (1984).
4
Cunningham Sheep Company; Martin Auza Sheep Corporation;
Nottingham Land and Livestock, LLLP; and Two Bar Sheep Corporation, LLC.
5
Western Range Association (“WRA”) and Mountain Plains Agricultural
Service (“MPAS”). These associations represent ranches in, among other things,
recruiting and employing shepherds. See generally 29 U.S.C. §§ 1802(1), 1821,
1822; 20 C.F.R. § 655.103(b).
6
Richins is sued in two capacities. The Shepherds bring suit against
“Dennis Richins d/b/a Dennis Richins Livestock” for purposes of the complaint’s
antitrust claims. Thus, Richins is included within the term Rancher Defendants.
The Shepherds also bring suit against Richins as a former executive director,
board member, and president of WRA for purposes of one of their RICO claims.
See infra n.7.
7
See Racketeer Influenced and Corrupt Organizations Act, Pub. L. No. 91-
452, tit. IX, 84 Stat. 941 (1970) (codified at 18 U.S.C. §§ 1961-1968). Section
1962(c) 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
(continued...)
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Defendants. The RICO claims focus on allegedly false assurances made by the
Association Defendants to the federal government that H-2A shepherds are being
properly reimbursed for “reasonable costs incurred by the worker for
transportation and daily subsistence from the place from which the worker has
come to work for the employer,” as required by 20 C.F.R. § 655.122.
The district court dismissed the antitrust claims on the ground the
allegations in the operative complaint, the second amended complaint (“SAC”),
did not plausibly allege an agreement to fix wages. The district court dismissed
the RICO claims because the SAC failed to allege the existence of enterprises
distinct from the persons alleged to have engaged in those enterprises.
Thereafter, the district court denied the Shepherds’ request to file a third amended
complaint (“TAC”). It concluded the majority of the proposed amendments were
futile. Alternatively, the district court concluded the proposed amendments were
dilatory and allowing amendment would unduly prejudice the Defendants. The
Shepherds appeal, asserting the SAC states valid Sherman Act and RICO claims
and insisting the district court abused its discretion in denying their motion to file
the TAC. We agree that the district court erred in dismissing the RICO claim
naming Richins as a defendant. In all other regards, the district court is affirmed.
7
(...continued)
enterprise’s affairs through a pattern of racketeering activity.”
-4-
Thus, exercising jurisdiction pursuant to 28 U.S.C. § 1291, this court affirms in
part, reverses in part, and remands to the district court for further proceedings.
II. DISCUSSION
A. Second Amended Complaint
1. Background
a. Federal Regulatory Background
The federal regulatory scheme governing the importation and employment
of H-2A shepherds is set out in detail in the SAC. Because it is necessary to an
understanding of the Shepherds’ antitrust claims, this court sets out the regulatory
scheme at some length.
H-2A shepherds are nonimmigrant foreign nationals permitted to work
temporarily in the United States under visas authorized by the DOL. 8 The H-2A
program allows for issuance of visas to foreign workers to fill agricultural
8
8 U.S.C. § 1101(a)(15)(H)(ii)(a) defines qualifying “nonimmigrant aliens”
as those “having a residence in a foreign country” with “no intention of
abandoning [it],” and who come to the United States “to perform agricultural
labor or services . . . of a temporary or seasonal nature.” “H-2A-visa holders
have no independent route to apply for permanent residency or legal citizenship.
Instead, they are dependent on their visa sponsors to lawfully stay in and return to
the United States for work.” Hispanic Affairs Project v. Acosta, 901 F.3d 378,
382 (D.C. Cir. 2018). Once an H-2A visa issues, the immigrant worker can stay
for the duration of the “validity of the labor certification or for a period of up to
one year,” but in no event can the stay “exceed three years.” 8 C.F.R.
§ 214.2(h)(15)(ii)(C). In practice, most shepherds “stay and work for just short of
three years, spend three months in their home country, and then return to the
United States on another H-2A visa.” Hispanic Affairs Project, 901 F.3d at 383.
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positions employers cannot fill through the domestic labor market. 9 See generally
8 U.S.C. §§ 1101(a)(15)(H)(ii)(a), 1188. Under regulations promulgated by the
DOL to implement its statutory duty to protect American workers, employers must
first offer the job to workers in the United States. 20 C.F.R. § 655.121. 10
Furthermore, the employer must offer domestic workers “no less than the same
benefits, wages, and working conditions that the employer is offering, intends to
offer, or will provide to H-2A workers.” Id. § 655.122(a). 11 Only if an American
9
Importation of foreign workers under the H-2A visa program is prohibited
unless the DOL certifies as follows:
(A) there are not sufficient workers who are able, willing, and
qualified, and who will be available at the time and place needed, to
perform the labor or services involved in the petition, and
(B) the employment of the alien in such labor or services will
not adversely affect the wages and working conditions of workers in
the United States similarly employed.
8 U.S.C. § 1188(a)(1).
10
The highly regulated method employers must use to offer such jobs to
American workers, referred to by the regulations (and throughout this opinion) as
a Job Order, is set out in § 655.121.
11
The employer must offer the “worker at least the AEWR [Adverse Effect
Wage Rate (defined at 20 C.F.R. § 655.1300(c)], the prevailing hourly wage rate
[as defined in 20 C.F.R. § 655.1300(c)], . . . or the Federal or State minimum
wage rate, in effect at the time work is performed, whichever is highest, for every
hour or portion thereof worked during a pay period.” 20 C.F.R. § 655.122(l).
Like the district court and the parties, we refer to the rate required in § 655.122(l)
as the minimum wage or wage floor. The AEWR component of the minimum
wage is the minimum rate DOL determines is necessary to ensure that wages of
(continued...)
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worker does not accept a position offered through this process can the employer
submit an Application for Temporary Employment Certification (an “H-2A
Application”) to the DOL. See generally 8 U.S.C. § 1188(a), (c)(3)(A).
The DOL can promulgate exceptions to the H-2A visa program, known as
“special procedures,” for particular agricultural industries. See 20 C.F.R.
§ 655.102. The DOL has implemented special procedures governing the
minimum wage for H-2A shepherds. 12 See id.; see also Labor Certification
Process for the Temporary Employment of Aliens in Agriculture in the United
States: Adverse Effect Wage Rate for Range Occupations Through 2016, 80 Fed.
Reg. 70,840, 70,840 (Nov. 16, 2015) (hereinafter the “2015 Special Procedures”);
Special Procedures: Labor Certification Process for Employers Engaged in
Sheepherding and Goatherding Occupations under the H–2A Program, 76 Fed.
11
(...continued)
similarly situated domestic workers will not be adversely affected by the
employment of H–2A workers. 20 C.F.R. § 655.1300(c); Am. Fed’n of Labor &
Cong. of Indus. Orgs. v. Brock, 835 F.2d 912, 913 (D.C. Cir. 1987) (holding that
the AEWR is “designed to approximate the rates that would have existed had
there been no increase in labor supply from foreign labor”).
12
“[E]mployers of open-range herders, such as sheep and goat herders, are
exempt from [the standard] minimum-wage requirement due to the unique
characteristics of the position, which include spending extended periods of time
in isolated areas and being on call twenty-four hours a day, seven days a week to
protect livestock.” Hispanic Affairs Project, 901 F.3d at 384 (quotations
omitted).
-7-
Reg. 47,256 (Aug. 4, 2011) (hereinafter the “2011 Special Procedures”). 13 Under
the 2011 Special Procedures, the DOL established an AEWR component of the
minimum wage that varied by state. As of November 16, 2015, the AEWR
component of minimum wage for H-2A shepherds was raised by the DOL to
$1206.31 per month and made uniform across all states. 14 See 2015 Special
Procedures, 80 Fed. Reg. 70,840, 70,840. 15 The SAC alleges that there is no
statute, regulation, or special procedure preventing employers from offering
higher wages to domestic workers, via relevant Job Orders, or to foreign
shepherds via H-2A Applications.
13
Although the 2011 Special Procedures only applied to sheep and goat
herders, the 2015 Special Procedures also apply “to open-range herding of other
livestock, such as cattle.” Hispanic Affairs Project, 901 F.3d at 384.
14
To be clear, however, the minimum wage can be higher in individual
states, such as California and Oregon, based on higher state-level minimum-wage
laws. See 2015 Special Procedures, 80 Fed. Reg. 70,840, 70,840. Nevertheless, it
appears that in most states the AEWR is the de facto minimum wage. Under the
2015 Special Procedures, the AEWR is now adjusted yearly pursuant to a formula
set out in the rule.
15
The history behind the DOL’s change to the method used to calculate the
AEWR for shepherds in the 2015 Special Procedures is set out Hispanic Affairs
Project, 901 F.3d at 391-95.
-8-
b. The Parties
i. The Association Defendants
WRA and MPAS are membership associations for sheep ranchers. They
recruit and hire shepherds for their member ranches. WRA characterizes itself as
a joint employer on Job Orders and H-2A Applications. See 20 C.F.R.
§ 655.103(b) (defining the term “joint employment”). 16 MPAS, on the other
16
WRA’s status of a joint employer of the H-2A shepherds employed by its
members is a significant contextual background fact with regard to the antitrust
claims set out in the SAC. The statute allowing for the admission of H-2A
agricultural workers into the United States, 8 U.S.C. § 1188, specifies as follows:
If an association is a joint or sole employer of temporary agricultural
workers, the certifications granted under this section to the
association may be used for the certified job opportunities of any of
its producer members and such workers may be transferred among its
producer members to perform agricultural services of a temporary or
seasonal nature for which the certifications were granted.
Id. § 1188(d)(2); see also 20 C.F.R. §§ 655.130(d), 655.131. In furtherance of
this statutory directive, the implementing regulations authorize associations that
are acting as joint employers to “file a master application on behalf of its
employer-members.” 20 C.F.R. §131(b). That is,
An association may submit a master application covering the same
occupation or comparable work available with a number of its
employer-members in multiple areas of intended employment, just as
though all of the covered employers were in fact a single employer,
as long as a single date of need is provided for all workers requested
by the [H-2A Application] and all employer-members are located in
no more than two contiguous States.
Id. By acting as a joint employer for all H-2A shepherds hired by its member
(continued...)
-9-
hand, characterizes itself as an agent for its member ranches. See id. (defining
the term “agent”); see also 20 C.F.R. § 655.133 (setting out requirements for
agents). The relevant statute and regulations expressly contemplate that agents
and associations acting as an agent can file Job Orders on behalf of sheep
ranchers. 8 U.S.C. § 1188(d); 20 C.F.R. §§ 655.130, 655.131, 655.133. The
Shepherds specifically focus on WRA’s and MPAS’s recruitment and hiring of
“open range” shepherds. 17 From October 1, 2013, to October 1, 2014, WRA hired
approximately 55% of all open range shepherds hired in the United States.
During that same time frame, MPAS hired approximately 36% of all open range
shepherds hired in the United States. WRA and MPAS submitted Job Orders for
domestic workers on behalf of the Rancher Defendants. They also submitted
H-2A Applications to DOL on behalf of the Rancher Defendants.
16
(...continued)
ranchers pursuant to a master application, WRA is entitled to reassign H-2A
shepherds within the association’s membership to deal with shifting labor needs.
It is worth noting that the Shepherds have never appropriately acknowledged how
these provisions impact the plausibility of their antitrust claims.
17
According to the Shepherds, the Rancher Defendants produce sheep on
the open range. Most sheep raised on the open range are moved to feedlots in
Colorado for finishing. The Shepherds contrast this to “closed range” herders,
who are alleged to earn substantially more than open range shepherds and receive
differing wages based on many variables.
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ii. The Rancher Defendants
Each of the Rancher Defendants is alleged to be, or have been, members of
WRA or MPAS within the four years prior to the filing of the SAC. The Rancher
Defendants are located in multiple western states. All of them, however, send
their sheep to Colorado for “finishing.” Except as to Richins, see supra n. 6, the
Shepherds do not allege any facts that distinguish the Rancher Defendants from
other members of WRA and/or MPAS. For example, the Shepherds allege they
were each an WRA or MPAS “employee,” 18 but do not identify the ranches at
which they worked. Instead, after identifying each of the Rancher Defendants,
the remainder of the SAC refers to these Defendants collectively. 19
18
The allegation in paragraph 20 that plaintiff Rafael De La Cruz is an
“employee of MPAS” appears to be inconsistent with exhibits attached to the
SAC. In particular, those exhibits (a Form 790 Agricultural and Food Processing
Clearance Order and an H-2A Application) show that the Martin Auza Sheep
Company is consistently listed as De La Cruz’s employer, while MPAS is listed
solely as Martin Auza Sheep Company’s agent. Because this pleading anomaly is
not relevant to this court’s resolution of this appeal, we do not consider the matter
further.
19
In their brief on appeal, the Rancher Defendants assert, as an alternative
basis for affirmance, that the failure of the SAC to set out concrete, particularized
allegations as to each of them leaves the antitrust claims against them utterly
lacking in factual support. See Rancher Defendants’ Response Br. at 13 (“Here,
every allegation against the Ranchers—other than their addresses and association
membership—is pled generally, even though the Ranchers are distinct, unrelated
parties differently situated for this litigation. Not a single fact is pled about any
individual Rancher’s conduct . . . .”). Because this court concludes infra that the
SAC does not plead a plausible conspiracy or agreement, it is unnecessary to
address the Rancher Defendants’ proposed alternative basis to affirm the district
(continued...)
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iii. The Shepherds
Paragraph forty-three of the SAC describes the essential functions of a
shepherd as follows:
shepherds tend herds of 1,000 sheep or more, often in rugged high
altitude terrain or dry desert conditions, hauling water for the
animals, herding them to grazing areas and making sure they have
enough to eat, keeping them from going astray, and protecting them
from the constant threat of natural predators like coyotes, mountain
lions, and wolves, harmful or poisonous plants, and man-made
dangers like highways and domesticated dogs. During lambing . . .
season, the shepherds assist the animals in the birthing process, and
at all times, the shepherds provide for the health and medical needs
of the herd.
Appellant’s App. Vol. I at 31. The complaint also alleges that the life of a
shepherd is socially isolated and generally devoid of most modern conveniences
Americans take for granted (i.e., access to functional indoor plumbing).
19
(...continued)
court’s order of dismissal.
-12-
c. The Allegations in the Second Amended Complaint
i. Antitrust Claims 20
Job Orders submitted to the DOL by the Association Defendants during the
relevant period offered exactly the applicable minimum wage. See supra at 6-8 &
n.10 (explaining that the Job Order process is a highly regulated attempt to hire
domestic shepherds as a precursor to the filing of an H-2A Application). WRA
filed Job Orders on behalf of multiple member ranches with an identical wage rate
for all ranches operating in a state. For instance, one of the many representative
Job Orders attached to the SAC offers eighteen possible domestic shepherds
$750.00 per month—the then-minimum wage for H-2A shepherds under the 2011
Special Procedures—without distinguishing between ranches. Furthermore, the
Job Order does not allow shepherds to apply to specific ranches, instead
instructing them to apply through the WRA.
20
In setting out the relevant factual allegations from the SAC, the court
omits those allegations that are nothing more than a recitation of antitrust “buzz
words.” Tal v. Hogan, 453 F.3d 1244, 1261 (10th Cir. 2006) (“A complaint is
subject to dismissal where it does little more than recite the relevant antitrust
laws. Conclusory allegations are insufficient. Bare bones accusations of a
conspiracy without any supporting facts are insufficient to state an antitrust claim.
Moreover, the use of antitrust buzz words does not supply the factual
circumstances necessary to support conclusory allegations.” (citations, quotations,
and alterations omitted)). Furthermore, making the reasonable assumption that
they are most relevant to this court’s resolution of this appeal, we focus on the
factual allegations highlighted in the Shepherds opening brief on appeal.
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The Defendants followed this same course of allegedly anticompetitive
conduct during the H-2A Application process. See supra at 6-8 (noting that H-2A
Applications cannot offer to pay Shepherds any more than the wages and benefits
offered to domestic shepherds through the Job Order process). The WRA and
MPAS, as joint ventures operating on behalf of their member ranches, applied for
approximately 2000 H-2A visas for shepherds. Many of the shepherds WRA and
MPAS hired through this process were already working on member ranches in the
United States, meaning they were experienced and had a relationship with their
employer. Just as with its Job Orders, however, H-2A Applications filed by WRA
on behalf of multiple employers do not distinguish between ranches and do not
purport to allow workers to shop between ranches, as in a competitive labor
market. 21 The H-2A Applications include a “rate of pay” section that expressly
pegs the wage for all H-2A shepherds at precisely the minimum wage in each
state, without even identifying the ranches.
21
Notably, no such factual assertion is made as to MPAS. As noted above,
WRA acted as a joint employer as to all H-2A shepherds hired by its members.
Accordingly, consistent with the regulations set out in footnote sixteen, WRA
filed master applications listing numerous positions. MPAS, on the other hand,
acted as its members’ agent in hiring shepherds. Thus, each of the Job Orders and
H-2A Applications attached to the SAC filed by MPAS lists the specific Ranch
that is seeking to hire shepherds. See 20 C.F.R. § 655.131(b) (“An association
may file a master application on behalf of its employer-members. The master
application is available only when the association is filing as a joint employer.”).
-14-
The Shepherds assert communications between the Association Defendants
and their members corroborate that these joint ventures fix wages at the minimum
level—as opposed to the ranchers instructing the Associations to make offers to
shepherds at that level. In support of this assertion, the Shepherds note that in
January 2015, in response to an increased Oregon minimum wage for shepherds,
WRA instructed its members that they should “immediately adjust wage payments
to [that] amount.” 22
The SAC also alleges the market wage for shepherds exceeds the minimum
wage offered. According to the SAC, other jobs on ranches that require similar or
less skill than shepherding— but that are also theoretically available to H-2A
workers—are filled by domestic workers. Those workers receive wages that are
22
In its brief on appeal, the Shepherds assert MPAS issued a similar
communication to its Oregon members. The Shepherds’ brief further asserts that
a single Rancher Defendant does not always comply with the requirement that H-
2A shepherds be paid no more or less than the rate set out in the H-2A
Application. In support of this assertions, however, they cite not to the SAC (or
even, for that matter, to the appendix), but to motions on the district court docket
filed by Rancher Defendants. With a few narrow exceptions, review of the
propriety of the grant of a Fed. R. Civ. P. 12(b)(6) motion to dismiss is limited to
the contents of the complaint. Gee v. Pacheco, 627 F.3d 1178, 1186-87 (10th Cir.
2010). Because the Shepherds do not assert the cited documents fall within one
of the exceptions set out in Gee, we do not consider these allegations in reviewing
the propriety of the district court order dismissing the SAC.
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variable— commensurate with experience, skill, work environment, etc.—and
substantially higher than the wages offered to domestic and foreign shepherds. 23
ii. RICO Claims
The Shepherds’ RICO claims concern the Association Defendants’
allegedly false assurances to the federal government that H-2A shepherd
employers reimburse shepherds for “reasonable costs incurred by the worker for
transportation and daily subsistence from the place from which the worker has
come to work for the employer,” as required by 20 C.F.R. § 655.122. Both WRA
and MPAS have promised full reimbursement of these costs in Job Orders and
H-2A Applications submitted on behalf of their members. WRA and MPAS have
obtained H-2A shepherds for their members based on these assurances.
23
Although this court need not, and does not, question the validity of this
factual assertion for the purposes of resolving this appeal, the assertion that
herding jobs are substantially analogous to other ranching jobs is subject to
serious dispute. Indeed, in adopting the 2015 Special Procedures, DOL
specifically examined this question, including information indicating “that
livestock worker positions and herders were not analogous because, unlike
livestock and other H-2A workers, employers paid for herders’ food, housing,
work supplies, and protective clothing, and transportation.” Hispanic Affairs
Project, 901 F.3d at 393 (quotation omitted). Ultimately, based on information
received during the notice and comment period, DOL settled on the federal
minimum as the AEWR. Id. at 394. In so doing, DOL chose a pay rate midway
between that set out in the 2011 Special Procedures (as advocated by ranches) and
a wage based on the Farm Labor Survey (as advocated by labor). Id. at 393-95.
It appears that many allegations in the SAC amount to objections to the DOL’s
scheme for regulating H-2A shepherds simply clothed as claims arising under § 1
of the Sherman Act.
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Notwithstanding these promises, WRA and MPAS, together with their members,
allegedly have a policy of not paying for expenses H-2A shepherds frequently
incur in Peru when they are preparing to travel to the United States for work (i.e.,
costs of transportation, meals, medical checkups, and criminal background
checks). Even though WRA promises the DOL it will reimburse these costs, it
allegedly does not say anything to H-2A shepherds about any such costs but,
instead, instructs only that “[t]ransportation [costs] for travel to and from your
home country are paid if you complete the contract terms.”
d. The District Court Decision
i. Antitrust Claims
The district court began its analysis of whether the SAC stated a plausible
antitrust claim by noting that “[t]he essence of a claim of violation of Section 1 of
the Sherman Act is the agreement itself.” See Champagne Metals v. Ken-Mac
Metals, Inc., 458 F.3d 1073, 1082 (10th Cir. 2006). The agreement must be
“designed unreasonably to restrain trade.” Abraham v. Intermountain Health
Care Inc., 461 F.3d 1249, 1257 (10th Cir. 2006). Thus, “the crucial question is
whether the challenged anticompetitive conduct stems from independent decision
or from an agreement, tacit or express.” Bell Atl. Corp. v. Twombly, 550 U.S.
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544, 553 (2007) (quotation and alteration omitted). As the district court
recognized, the facts showing such an agreement can be direct or circumstantial. 24
With this legal background set out, the district court moved on to conclude
the SAC did not allege facts that directly establish a § 1 agreement. Instead, the
SAC alleged “tacit collusion” and “collusive conduct” on the part of Defendants.
That being the case, the district court applied the rule set out by the Supreme
court in Twombly: mere allegations of parallel conduct, absent additional
contextual facts, fail to state a plausible conspiracy claim. See Twombly, 550
U.S. at 556-57. That is, when the antitrust claim relies solely on circumstantial
facts of parallel behavior, the conspiracy is not plausible if in light of common
economic experience the alleged conduct is equally likely to result from
independent action. See id. at 567-68.
Finally, the district court concluded the facts alleged in the SAC did not
plausibly allege an agreement to fix wages, especially when those facts were
viewed in the context of the laws and regulations relating to the hiring of H-2A
shepherds. To imply such an agreement, the SAC alleged five types of
24
Direct facts are “explicit and require[] no inferences.” Champagne
Metals v. Ken-Mac Metals, Inc., 458 F.3d 1073, 1083 (10th Cir. 2006). Direct
evidence of a § 1 agreement may take the form of a written contract or agreement,
such as association rules, or admissions of an agreement. See id. at 1083-84. In
contrast, circumstantial facts require inferences to show that an anti-competitive
agreement exists. Id. at 1084.
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overlapping facts: (a) the Association Defendants recruit and hire shepherds for
their members; (b) opportunities exist within the associations to communicate
regarding recruiting and hiring of shepherds; (c) Job Orders and H-2A
Applications offer only the minimum wages permitted by DOL; (d) common
motives to depress wages; and (e) wages for open range shepherds are unusually
low for employees working in the United States. According to the district court,
however, these allegations are factually neutral. That is, these facts describe
conduct equally likely to result from independent, lawful action based on the
H-2A program and DOL regulations that established the process of hiring foreign
shepherds and set the minimum wage.
As to the first type of facts, membership in associations that recruit and
hire shepherds, the district court noted it was undisputed (a) associations can
lawfully represent ranchers in recruiting and hiring; and (b) ranchers or
associations on their behalf can lawfully hire foreign employees by complying
with the DOL’s regulations. See 29 U.S.C. §§ 1802, 1821, 1822; 20 C.F.R. §§
655.121, 655.122. Furthermore, the Shepherds did not cite authority indicating
membership in a trade organization, standing alone, is suggestive of a conspiracy.
Regarding the second type of facts—opportunity to communicate via the
association—the district court stated the SAC’s implication was no different from
-19-
the argument trade associations are inherently anticompetitive. 25 The third type of
facts—Defendants always offered the minimum wage—did not suggest a
conspiracy because such parallelism is merely consistent with, not suggestive of,
conspiracy. That was true, concluded the district court, because it is equally
consistent with independently following the DOL’s minimum wage and hiring
regulations. As a matter of economic reality, it was in each Defendant’s interest
to pay no more wages than (a) legally required and (b) necessary to adequately fill
their positions. These exact considerations also demonstrated why the SAC’s
fourth type of facts—common motive to fix wages—was not suggestive of a
conspiracy. As to the final type of facts identified in the SAC—low and stagnant
wages—the district court noted the Shepherds did not address the fact very low
wages paid to shepherds are just as likely to result from individual decisions to
25
The district court noted the only specific communication identified by the
Shepherds is that in January 2015, the WRA instructed its members in Oregon to
uniformly begin paying exactly the new DOL wage floor. As alleged in the SAC,
however, the applicable regulations require that employers of H-2A shepherds,
including joint employers like the WRA, pay at least the state minimum wage if
that wage is higher than the AEWR. See 20 C.F.R. § 655.122(l). The SAC
further alleges shepherds had always accepted WRA’s offers of the minimum
wages for its members. That is, WRA knew Oregon ranches were paying
shepherds the minimum wage. Informing the Oregon members to increase their
wages to reflect a change in the minimum wage did not, according to the district
court, imply an instruction or agreement that the members could not pay more
than the minimum. Given these facts, the district court concluded the WRA
communication did not plausibly advance the Shepherds’ claim WRA had reached
an agreement with its members to suppress the wages of H-2A shepherds.
-20-
use the DOL’s minimum wage and H-2A program or that the legal minimum wage
for H-2A shepherds was so low that adding “nominal amounts” would not attract
domestic shepherds to fill the jobs.
In sum, taking all of the allegations described above as a whole, and
considering them in light of common economic experience, the district court ruled
the SAC did not allege facts that plausibly support the conclusory assertions of an
anti-competitive agreement. Instead, the Shepherds’ allegations were like the
claims dismissed in Twombly as conduct equally likely to result from independent
parallel action. “Because the [Shepherds] . . . ha[d] not nudged their claims
across the line from conceivable to plausible,” Twombly, 550 U.S. at 570, the
district court granted Defendants’ motions to dismiss the Shepherds’ antitrust
claims.
ii. RICO Claims
The district court began by noting “[t]he elements of a civil RICO claim are
(1) investment in, control of, or conduct of (2) an enterprise (3) through a pattern
(4) of racketeering activity.” Tal v. Hogan, 453 F.3d 1244, 1261 (10th Cir. 2006).
RICO defines an enterprise broadly as “any individual . . . corporation,
association, . . . and any . . . group of individuals associated in fact although not a
legal entity.” 18 U.S.C. § 1961(4). The latter type of enterprise, an
“association-in-fact,” is a group of persons associated together for a common
-21-
purpose of engaging in a course of conduct and requires evidence of an ongoing
organization, formal or informal, and evidence that the various associates
function as a continuing unit. See United States v. Turkette, 452 U.S. 576, 583
(1981). “[T]o establish liability under § 1962(c) one must allege and prove the
existence of two distinct entities: (1) a ‘person’; and (2) an ‘enterprise’ that is not
simply the same ‘person’ referred to by a different name.” Cedric Kushner
Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001).
In light of these requirements, WRA, MPAS, and Richins argued the SAC’s
allegations failed to satisfy the “enterprise” element of a RICO claim as to each
of the three alleged association-in-fact enterprises. 26 The district court agreed
with this assertion, concluding the three RICO Defendants are part of, not distinct
from, the identified enterprises. As to the Association Defendants, the district
court concluded the SAC alleged nothing more than that they associated-in-fact
with their members to submit fraudulent Job Orders and H-2A Applications.
Relying on the decision of the D.C. Circuit in Yellow Bus Lines, Inc. v. Drivers,
26
Count IV of the SAC defines two enterprises: a “Richins Enterprise”
comprised of an association-in-fact of WRA and Richins, its former executive
director and president [SAC paras 112-15; SAC R & R at 36] and a “WRA
Enterprise” comprised of an association-in-fact of WRA and its members [SAC
paras 116-21; SAC R & R at 36]. The “persons” sued as defendants in Count IV
are WRA and Richins. [SAC R & R at 36] In Count V, the SAC alleges an
“MPAS Enterprise” comprised of an association-in-fact of MPAS and its
members. [SAC paras. 122-27; SAC R & R at 36]. MPAS is the defendant
“person” for Count V. [SAC R & R at 36]
-22-
Chauffeurs & Helpers Local Union 639, 883 F.2d 132, 141 (D.C. Cir. 1989), the
district court ruled such allegations did not demonstrate the necessary distinctness
between the alleged enterprise (the alleged association-in-fact between WRA and
MPAS and their members) and the allegedly responsible person (WRA and
MPAS). See id. (“[A]n organization cannot join with its own members to do that
which it normally does and thereby form an enterprise separate and apart from
itself. Where, as here, the organization is named as defendant, and the
organization associates with its member to form the enterprise ‘association-in-
fact,’ the requisite distinctness does not obtain.”). As to Richins, the district
court first stated the SAC suffered from its failure to plead the WRA Enterprise
and Richins Enterprise separately. This fact doomed the claim against Richins,
according to the district court, because a corporation and its officer cannot be a
RICO association-in-fact regarding conduct undertaken in the corporation’s
regular business as an officer of the corporation. Because the SAC failed to
allege any enterprise distinct from the person alleged to have controlled or
conducted them, the district court dismissed all three of the RICO claims set out
in the SAC.
2. Analysis
This court reviews de novo a Fed. R. Civ. P. 12(b)(6) dismissal for failure
to state a claim. Wasatch Equal. v. Alta Ski Lifts Co., 820 F.3d 381, 386 (10th
-23-
Cir. 2016). To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to “state a claim to relief that is plausible on its
face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is facially plausible
when the plaintiff has pled “factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id.
When a complaint alleges “facts that are merely consistent with a defendant’s
liability, it stops short of the line between possibility and plausibility of
entitlement to relief.” Id. (quotation omitted). The question is whether, if the
allegations are true, it is plausible and not merely possible that the plaintiff may
obtain relief. Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008).
a. Antitrust Claims
i. Applicability of Twombly
The Shepherds assert the district court erred when it applied the analytical
framework set out in Twombly in analyzing whether the SAC states a plausible
antitrust conspiracy. This argument is not well taken.
Twombly addressed whether, in a putative class action, “a § 1 complaint can
survive a motion to dismiss when it alleges that major telecommunications
providers engaged in certain parallel conduct unfavorable to competition, absent
some factual context suggesting agreement, as distinct from identical,
independent action.” 550 U.S. at 548-49. The Supreme Court answered that
-24-
question in the negative. Id. at 549 (“We hold that such a complaint should be
dismissed.”). The district court here concluded the general principles set out in
Twombly applied to the Defendants’ motion to dismiss because the SAC did not
allege facts that directly establish an agreement to fix wages. The Shepherds
argue the district court erred in applying the Twombly framework because the
SAC alleges direct evidence of a § 1 agreement.
In contrast to the Shepherds’ argument, the district court correctly defined
direct evidence as “evidence that is explicit and requires no inferences to
establish the proposition or conclusion being asserted. With direct evidence the
fact finder is not required to make inferences to establish facts.” Champagne
Metals, 458 F.3d at 1083 (quotation and alterations omitted). It also correctly
concluded no allegation in the SAC directly established a § 1 agreement. There is
no allegation of fact showing the Association Defendants controlled member
ranches’ decision-making processes to further a collective scheme. Nor is there
any allegation member ranches lobbied their colleagues or the Association
Defendants to adopt or fix a particular wage rate. There were no factual
allegations of agreements, no reports, memoranda, or tapes of meetings, no
plainly anticompetitive association rules compelling certain behavior. In other
words, there are no factual allegations in the SAC that explicitly establish,
without the need for inferences, the existence of an agreement to fix the wages of
-25-
domestic or H-2A shepherds. See id. 27 The absence of such evidence is not
surprising. See, e.g., N. Am. Soccer League, LLC v. U.S. Soccer Fed’n, Inc., 883
F.3d 32, 39 (2d Cir. 2018) (“Rarely do co-conspirators plainly state their purpose.
As a result, courts often must evaluate circumstantial evidence of a conspiracy by
weighing plus factors, which, when viewed in conjunction with the parallel acts,
can serve to allow a fact-finder to infer a conspiracy.” (quotation omitted));
Mayor & City Council of Balt., Md. v. Citigroup, Inc., 709 F.3d 129, 136 (2d Cir.
2013) (describing direct evidence in this context as a “smoking gun” and noting
such evidence “can be hard to come by, especially at the pleading stage”);
Mendocino Envtl. Ctr. v. Mendocino Cty., 192 F.3d 1283, 1302 (9th Cir. 1999)
(“Direct evidence of improper motive or an agreement among the parties to
violate a plaintiff’s constitutional rights will only rarely be available. Instead, it
will almost always be necessary to infer such agreements from circumstantial
evidence or the existence of joint action.”).
When the Shepherds argue they alleged direct evidence, they are referring
to allegations in the SAC that the Association Defendants prepared and submitted
27
To the extent the Shepherds argue on appeal that the January 2015
communication from WRA to its Oregon members regarding the increase in the
Oregon state minimum wage is direct evidence, this argument is misplaced. As
noted by the district court, see supra n.25, no commonsense reading of this
document is compatible with the allegation that it is some kind of binding
directive to Oregon ranchers to pay H-2A shepherds no more than the minimum
wage.
-26-
Job Offers and H-2A Applications for the Rancher Defendants and other
association members. In contrast to this argument, however, assistance in
locating and hiring H-2A shepherds as permitted under federal statutes and
regulations does not amount to evidence of a conspiracy that is beyond inference
or dispute. N. Am. Soccer League, 883 F.3d at 40 (“Not every action by a trade
association is concerted action by the association’s members. Indeed, even
though a trade association by its nature involves collective action by competitors,
a trade association is not by its nature a walking conspiracy.” (quotations,
citations, and alterations omitted)). Thus, such evidence does not constitute
direct evidence. Instead, the Shepherds are asking this court to draw inferences
that, by using WRA and MPAS to help locate and hire workers, the Rancher
Defendants and other association members have ceded control of wage decisions
to the Association Defendants. This is the classic type of circumstantial evidence
antitrust plaintiffs have historically used to attempt to demonstrate an agreement
or conspiracy. See Mendocino Envtl. Ctr., 192 F.3d 1283. It is also the exact
type of circumstantial evidence Twombly considered in holding that parallel
conduct, absent some additional type of contextual evidence, is generally not
sufficient to nudge an antitrust conspiracy allegation beyond the line from
possible to plausible. 550 U.S. at 556-57.
-27-
The SAC does not allege that the Rancher Defendants (or any other
members of WRA or MPAS) explicitly agreed to any limitation on their behavior
with regard to wages paid to either foreign or domestic shepherds. Because the
SAC did not allege direct evidence as to any of the three supposed conspiracies,
the district court correctly applied Twombly in evaluating whether the SAC
plausibly alleged an antitrust agreement.
ii. Application of Twombly
Alternatively, even assuming the applicability of the principles set out in
Twombly, the Shepherds assert the SAC alleges plausible conspiracies on the part
of Defendants to fix the wages of shepherds at the minimum wage. 28 In so
asserting, the Shepherds again focus on the allegations in the SAC that the
Association Defendants assisted in the hiring of H-2A shepherds on behalf of
their members by submitting Job Orders and H-2A Applications. The SAC
28
This court specifically agrees with the Shepherds that to the extent the
district court applied a “probability” standard in evaluating the factual allegations
set out in the SAC it erred. See Appellants’ Opening Br. at 37 (identifying places
in the district court’s analysis stating § 1 claims cannot withstand a motion to
dismiss if the alleged conduct is “equally or more likely” the result of permissible
parallel decisionmaking). As Twombly itself made clear, “plausible grounds to
infer an agreement does not impose a probability requirement at the pleading
stage; it simply calls for enough facts to raise a reasonable expectation that
discovery will reveal evidence of an illegal agreement.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007). Given that this court’s review of the grant
of a Fed. R. Civ. P. 12(b)(6) motion to dismiss is de novo, and given that in
conducting its review this court has hewed directly to the plausibility standard set
out in Twombly, any error on the part of the district court here is not meaningful.
-28-
alleges no facts, however, supporting a plausible inference that WRA and MPAS
assist in hiring because of an agreement to keep wages low, nor do they allege
facts supporting a plausible inference individual members of either association
could not offer a salary above the minimum wage if they so desired. 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. See N. Am. Soccer League, 883 F.3d at 40
(noting not every trade association is a de facto conspiracy and recognizing “it is
when a § 1 plaintiff establishes the existence of an illegal contract or combination
that the plaintiff can proceed to demonstrate that the agreement constituted an
unreasonable restraint of trade. Evidence should tend to show that association
members, in their individual capacities, consciously committed themselves to a
common scheme designed to achieve an unlawful objective.” (quotations,
citations, and alterations omitted)).
The Supreme Court has long warned courts to be hesitant about inferring
concerted action from evidence that is merely circumstantial. See Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) (“[A]ntitrust
law limits the range of permissible inferences from ambiguous evidence in a § 1
case.”); Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 763 (1984) (“On a
claim of concerted price-fixing, the antitrust plaintiff must present evidence
-29-
sufficient to carry its burden of proving that there was such an agreement. If an
inference of such an agreement may be drawn from highly ambiguous evidence,
there is a considerable danger that [important distinctions between independent
and concerted action] will be seriously eroded.”). Such evidence must “tend[] to
exclude the possibility” of independent action. Twombly, 550 U.S. at 554. 29 An
inference of conspiracy is impermissible if the defendants “had no rational
economic motive to conspire, and if their conduct is consistent with other, equally
plausible explanations.” Matsushita Elec. Indus. Co., 475 U.S. at 596. Where
circumstantial evidence is just “as consistent with” unilateral action as with
concerted action, it “does not, standing alone, support an inference of antitrust
conspiracy.” Id. at 588; see also In Re Ins. Brokerage Antitrust Litig., 618 F.3d
300, 326 (3d Cir. 2010) (explaining that “a claim of conspiracy predicated on
29
In this regard, Twombly states as follows:
In identifying facts that are suggestive enough to render a § 1
conspiracy plausible, we have the benefit of the prior rulings and
. . . commentators . . . that lawful parallel conduct fails to bespeak
unlawful agreement. . . . [A]n allegation of parallel conduct and a
bare assertion of conspiracy will not suffice. Without more, parallel
conduct does not suggest conspiracy, and a conclusory allegation of
agreement at some unidentified point does not supply facts adequate
to show illegality. Hence, when allegations of parallel conduct are
set out in order to make a § 1 claim, they must be placed in a context
that raises a suggestion of a preceding agreement, not merely parallel
conduct that could just as well be independent action.
550 U.S. at 556-57.
-30-
parallel conduct” is insufficient when “common economic experience, or the facts
alleged in the complaint itself, show that independent self-interest is an obvious
alternative explanation for the defendants’ common behavior” (quotations
omitted)); see also Twombly, 550 U.S. at 554 (“The inadequacy of showing
parallel conduct or interdependence, without more, mirrors the ambiguity of the
behavior: consistent with conspiracy, but just as much in line with a wide swath
of rational and competitive business strategy unilaterally prompted by common
perceptions of the market.”).
The Supreme Court has observed that business associations are “beneficial
to [] industry and to consumers.” Maple Flooring Mfrs.’ Ass’n v. United States,
268 U.S. 563, 566 (1925). Congress obviously reached a similar conclusion with
regard to associations like MPAS and WRA and their role in recruiting foreign
shepherds. See 8 U.S.C. § 1188(d). To avoid deterring the collaboration that
yields these benefits, it is necessary to ensure circumstantial evidence in cases
challenging the conduct of joint ventures is held to the same standard applicable
to every § 1 case: it must “tend[] to exclude the possibility” the parties to the
venture were acting independently. Twombly, 550 U.S. at 554. 30
30
The cases cited by the Shepherds are distinguishable because in each there
was an explicit agreement, typically set out in an association rule or otherwise
enforced by the association. In Anderson v. Shipowners’ Association of Pacific
Coast, 272 U.S. 359 (1926), ship owners in an association were found to have
(continued...)
-31-
The Shepherds allege no explicit agreement among the Association
Defendants or their members, nor any votes, rules, or enforcement mechanisms.
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. These allegations do not, however, plausibly suggest
individual member ranches entered into any agreement with the Association
Defendants or among themselves to establish and adhere to a specific wage. See
N. Am. Soccer League, 883 F.3d at 40 (noting circumstantial evidence in the
context of a business association must show “that association members, in their
individual capacities, consciously committed themselves to a common scheme
designed to achieve an unlawful objective” (quotation and alteration omitted)).
There is no allegation association members discussed or agreed among themselves
how to pay foreign shepherds. Instead, the allegations in the SAC simply indicate
30
(...continued)
conspired when they established regulations that controlled the circumstances
under which ships could hire staff and the wages the ship could pay. Id. at 362.
The plaintiff pled (and proved) the ship owners did far more than participate in
the governance of the association; they colluded in a scheme by which they
surrendered themselves “completely to the control of the associations.” Id.
Similarly in Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) and Law v.
National Collegiate Athletic Association, 134 F.3d 1010 (10th Cir. 1998), the
associations established schedules or rules binding on all members. Finally, in
FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411 (1990), the Court
considered a publicly recorded member vote to take joint action to be sufficient
evidence of agreement. In each case, the key factor in the analysis was the
existence of a rule, with an enforcement mechanism, binding on all members.
-32-
member ranches unilaterally decided to join the Association Defendants and
utilize their services in filling out paperwork as they saw fit in their individual
business judgment. The same goes for the Shepherds’ allegation that the wages
offered in H-2A Applications prepared by the Association Defendants were
identical. A Job Order must disclose the offered wage. 20 C.F.R. § 655.122(l).
The Job Orders attached to the SAC show the Association Defendants complied
with this regulation. There are no facts alleged in the SAC from which it can be
inferred ranches needed to offer more to attract a sufficient number of qualified
workers. The federal government sets the lowest wage that may be offered to
H-2A shepherds. Assuming a sufficient supply of qualified labor is available at
this wage, no rancher would be logically inclined to offer more.
In addition, the alleged conspiracy does not make economic sense. The
Shepherds ask this court to infer that ranches in California and Oregon
participated in a conspiracy to seriously depress wages paid by their competitors
in other states. The inference ranches in the higher-wage states would participate
in a conspiracy that locks in substantial advantages for their competition is
implausible. The Supreme Court has indicated courts should look carefully at
antitrust cases where the defendants “had no rational economic motive to
conspire.” Matsushita Elec. Indus. Co., 475 U.S. at 596.
-33-
In sum, if the Shepherds’ allegations suffice to allege a plausible § 1
agreement, all members of an association could be deemed to have entered into an
antitrust conspiracy simply because they joined the association, participated in its
governance, and agreed to abide by its rules. This would be true even, as is the
case here, absent the existence of an anticompetitive rule or practice binding on
all association members. Cf. supra n.30 (discussing cases involving associations
with such rules or practices). This is simply not the law. The district court
correctly determined the exceedingly limited factual allegations in the SAC did
not plausibly state the existence of a conspiracy to fix wages.
Moreover, in reaching this conclusion, the district court correctly concluded
the H-2A regulations play an important role. The regulatory overlay is a critical
backdrop that provides relevant economic context to the Association Defendants’
and Rancher Defendants’ alleged conduct. As Twombly directs, in analyzing
whether allegations in a complaint state a plausible antitrust agreement, courts
must consider the larger context. 550 U.S. at 557. That the regulatory scheme
permits, and in places requires, the very actions the Shepherds contend support
the inference of a conspiracy is an important contextual consideration. For
example, federal law governing the H-2A program explicitly and specifically
authorizes associations to coordinate with members to submit “Master
Applications” and to act as joint employers of H-2A shepherds. See supra n.16
-34-
(quoting relevant provisions). Given these regulations, the mere process of
utilizing joint applications and acting as joint employer does not give rise to a
plausible inference of an improper agreement.
b. RICO Claims
i. Background Legal Concepts
Under 18 U.S.C. § 1962(c), a RICO plaintiff must allege a “person” “(1)
conducted the affairs (2) of an enterprise (3) through a pattern (4) of racketeering
activity.” George v. Urban Settlement Servs., 833 F.3d 1242, 1248 (10th Cir.
2016). A “person” is “any individual or entity capable of holding a legal or
beneficial interest in property.” 18 U.S.C. § 1961(3). A person sued as a RICO
defendant conducts the affairs of a RICO enterprise by “participat[ing] in the
operation or management of the . . . enterprise.” Resolution Tr. Corp. v. Stone,
998 F.2d 1534, 1541 (10th Cir. 1993); see also W. Hills Farms, LLC v.
ClassicStar Farms, Inc. (In re ClassicStar Mare Lease Litig.), 727 F.3d 473, 490
(6th Cir. 2013) (“The enterprise itself is not liable for RICO violations; rather, the
‘persons’ who conduct the affairs of the enterprise through a pattern of
racketeering activity are liable.”). “RICO broadly defines enterprise as any
individual, partnership, corporation, association, or other legal entity, and any
union or group of individuals associated in fact although not a legal entity.” Safe
Sts. All. v. Hickenlooper, 859 F.3d 865, 882 (10th Cir. 2017) (quotations omitted);
-35-
see also 18 U.S.C. § 1961(4). Each of the RICO enterprises identified in the SAC
falls within the last portion of this definition, i.e., the association-in-fact.
“Association in fact enterprises are composite entities whose legal status derives
from 18 U.S.C. § 1962(c).” Laurence A. Steckman, RICO Section 1962(c)
Enterprises and the Present Status of the “Distinctness Requirement” in the
Second, Third, and Seventh Circuits, 21 Touro L. Rev. 1083, 1205 (2006)
[hereinafter “Steckman Article”]. The Supreme Court has made clear that “the
very concept of an association in fact is expansive.” Boyle v. United States, 556
U.S. 938, 944 (2009). An “association-in-fact enterprise is a group of persons
associated together for a common purpose of engaging in a course of conduct.”
Id. at 946 (quotation omitted). It “need not have a hierarchical structure or a
chain of command.” Id. at 948 (quotation omitted). Its existence only requires “a
purpose, relationships among those associated with the enterprise, and longevity
sufficient to permit these associates to pursue the enterprise’s purpose.” Id. at
946, 956.
For liability to attach to a RICO defendant, the defendant “‘person’ must be
an entity distinct from the alleged enterprise.” Brannon v. Boatmen’s First Nat’l
Bank of Okla., 153 F.3d 1144, 1146 (10th Cir. 1998); see also ClassicStar, 727
F.3d at 490 (“To establish liability under § 1962(c), a plaintiff ‘must allege and
prove the existence of two distinct entities: (1) a “person”; and (2) an “enterprise”
-36-
that is not simply the same “person” referred to by a different name.’” (quoting
Cedric Kushner, 533 U.S. at 161)). “This interpretation flows from the statute’s
mandate that the person who engages in the pattern of racketeering activity be
‘employed by or associated with’ the enterprise.” Brannon, 153 F.3d at 1146
(quoting 18 U.S.C. § 1962(c)). 31 This statutory distinctness requirement “is one
of the most heavily litigated requirements in RICO cases.” Steckman Article at
1088-89. It has also generated substantial disagreement among the circuits. See
id. at 1089 & n.10, 1092-93 & n.20; see also ClassicStar, 727 F.3d at 490 (“The
federal courts have encountered significant conceptual difficulties when
attempting to apply the distinctness requirement in the context of complex
relationships among affiliated and non-affiliated corporations and individuals.”).
This is most likely because “[e]xactly what type of ‘separateness’ must be pleaded
for § 1962(c) purposes is not described in the statute.” Steckman Article at 1092.
In dismissing the RICO claims set out in the SAC, the district court focused
solely on the distinctness requirement. That is, the district court concluded each
of the three prospective RICO defendant persons (respectively, Richins, WRA,
and MPAS) was not distinct from the relevant RICO association-in-fact enterprise
whose affairs he/it was alleged to have conducted (respectively, WRA, WRA and
31
“Many courts and commentators have concluded that it is illogical that a
person or entity can associate with oneself, and many cases have been dismissed
for this reason.” Steckman Article at 1092 & n.19.
-37-
its membership, and MPAS and its membership). Even given the high level of
disagreement as to the contours of the distinctness requirement, and the lack of
definitive Tenth Circuit precedent as to the appropriate test(s) courts should
employ in analyzing distinctness, this court concludes the district court erred in
dismissing the RICO claim against Richins. On the other hand, this court affirms
the district court’s dismissal of the RICO claims against WRA and MPAS. Such
a result is compelled by the limited nature of the allegations in the SAC, as well
as the failure of the Shepherds to cite to analogous authority supporting their
position that an association can be distinct from an association-in-fact involving
itself and its members in the context alleged in the SAC. 32
ii. RICO Claim Against Richins
At base, the district court ruled that, as a matter of law, “a corporation and
its officer cannot be a RICO association-in-fact regarding conduct undertaken in
the corporation’s regular business as an officer of the corporation.” Although this
32
The issues in the instant appeal exist at the very core (claim against
Richins) or beyond the boundaries (claims against the Association Defendants) of
the distinctness requirement. For that reason, it is unnecessary to adopt or
formulate a definitive test (or, more likely, set of tests) for routinely analyzing the
distinctness requirement. See generally Steckman Article (setting out numerous
tests employed by just three circuits to analyze the existence of distinctness in the
multiple situations in which the issue can come into play); see also ClassicStar,
727 F.3d at 491 (“The number of different approaches to the distinctness analysis
roughly mirrors the number of cases that have addressed it. The analysis is so
fact-intensive that a generic test is difficult to formulate.”).
-38-
statement of the law is generally true in the abstract, see Brannon, 153 F.3d at
1149 (collecting cases), it has no application to the allegations in the SAC. This
rule arises in cases attempting to hold a corporation responsible as the RICO
defendant person for a RICO enterprise composed of the corporation and its
officers and/or employees. Id.; see also Steckman Article at 1119-25. Brannon
specifically recognized this distinction and noted the inapplicability of the rule to
situations in which the RICO defendant person was the corporate employee or
officer. 153 F.3d at 1147-48 & 1148 n.4 33
33
In particular, Brannon “decline[d] plaintiffs’ invitation to adopt a rule in
this circuit that a mere allegation that the RICO “person” is the subsidiary
conducting the affairs of the parent is sufficient to state a claim under § 1962(c).”
153 F.3d at 1147-48. Then, in a footnote, Brannon went on to note as follows:
Plaintiffs also contend that the result they seek is compelled by
the Third Circuit’s decision in Jaguar Cars, Inc. v. Royal Oaks
Motor Car Co., 46 F.3d 258 (3d Cir. 1995). In so doing, they
misconstrue that opinion. Jaguar Cars holds only that “corporate
officers/employees . . . may properly be held liable as persons
managing the affairs of their corporation as an enterprise through a
pattern of racketeering activity.” Id. at 261. We note that this
conclusion has long been the rule in this circuit. See Liberty Group,
965 F.2d at 886 (noting that employee of partnership may be liable
under § 1962(c) for conducting the affairs of the partnership).
Id. at 1148 n.4; see also Bd. of Cty. Comm’rs v. Liberty Group, 965 F.2d 879,
884-86 (10th Cir. 1992) (rejecting RICO claims against a defendant person
corporation because the corporation was not distinct from the alleged association-
in-fact, while noting an individual officer of the corporation was a proper RICO
defendant person).
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The distinction drawn in Brannon was explicitly endorsed by the Supreme
Court in Cedric Kushner, 533 U.S. at 161 (citing Brannon’s footnote 4); see also
id. at 164. In Cedric Kushner, the Supreme Court considered a case from the
Second Circuit that extended the distinctness requirement regarding corporations
as RICO defendant persons to also cover suits where the corporation was the
RICO enterprise and the corporate officer was the RICO defendant person. Id. at
163; see also Steckman Article at 1119-25 (discussing the decision in Cedric
Kushner). The Court rejected that extension, holding as follows:
While accepting the “distinctness” principle, we nonetheless
disagree with the appellate court’s application of that principle to the
present circumstances—circumstances in which a corporate
employee, “acting within the scope of his authority,” allegedly
conducts the corporation’s affairs in a RICO-forbidden way. The
corporate 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. And we can find
nothing in the statute that requires more “separateness” than that.
Linguistically speaking, an employee who conducts the affairs
of a corporation through illegal acts comes within the terms of a
statute that forbids any “person” unlawfully to conduct an
“enterprise,” particularly when the statute explicitly defines “person”
to include “any individual capable of holding a legal or beneficial
interest in property,” and defines “enterprise” to include a
“corporation.” And, linguistically speaking, the employee and the
corporation are different “persons,” even where the employee is the
corporation’s sole owner. After all, incorporation’s basic purpose is
to create a distinct legal entity, with legal rights, obligations, powers,
and privileges different from those of the natural individuals who
created it, who own it, or whom it employs.
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Cedric Kushner, 533 U.S. at 163 (citations and alteration omitted). 34
Brannon and Cedric Kushner make clear that the RICO distinctness
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). Thus, the district court erred in determining, as a matter
of law, that Richins was not distinct from WRA.
iii. RICO Claims Against WRA and MPAS
In dismissing the RICO claims against the Association Defendants as
defendant persons, the district court concluded the SAC alleged WRA and MPAS
were “part of, not distinct from, the identified enterprises.” In so ruling, the
34
In rejecting the Second Circuit’s extension of its distinctness requirement
to a RICO claim against a corporate employee as the defendant person, Cedric
Kushner noted as follows:
We note that the Second Circuit relied on earlier Circuit
precedent for its decision. But that precedent involved quite
different circumstances which are not presented here. This case
concerns a claim that a corporate employee is the “person” and the
corporation is the “enterprise.” It is natural to speak of a corporate
employee as a “person employed by” the corporation. [18 U.S.C.]
§ 1962(c). The earlier Second Circuit precedent concerned a claim
that a corporation was the “person” and the corporation, together
with all its employees and agents, were the “enterprise.” It is less
natural to speak of a corporation as “employed by” or “associated
with” this latter oddly constructed entity.
533 U.S. at 164 (citation omitted).
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district court relied on, inter alia, the D.C. Circuit’s decision in Yellow Bus Lines,
883 F.2d at 141. As Yellow Bus Lines aptly noted,
Several courts . . . have disallowed a § 1962(c) claim where the
relationship among the members of the enterprise association is the
relationship of parts to a whole. That is, while the corporate or
organizational defendant may itself be a member of the enterprise
association, the member of the enterprise association may not simply
be subdivisions, agents, or members of the defendant organization.
In short, an organization cannot join with its own members to
do that which it normally does and thereby form an enterprise
separate and apart from itself. Where, as here, the organization is
named as defendant, and the organization associates with its member
to form the enterprise “association-in-fact,” the requisite distinctness
does not obtain. . . . [T]here is no difference between the union as an
entity including Woodward as officer, and the union plus Woodward,
since “the whole is no different than the sum of its parts in this
context.” Furthermore, allowing plaintiffs to generate such
“contrived partnerships” consisting of an umbrella organization and
its subsidiary parts, would render the non-identity requirement of
section 1962(c) meaningless. We decline to permit such an “end
run” around the statutory requirements.
883 F.2d at 141 (citations omitted). In our view, the rule set out in Yellow Bus
Lines is entirely consistent with extant Tenth Circuit precedent, Brannon and
Liberty Group, and sets out the proper rule for evaluating whether the allegations
in the SAC state a valid RICO claim against the Association Defendants in light
of the RICO distinctness requirement. Indeed, in setting out the rule adopted
therein, Brannon specifically cited with approval the decision in Yellow Bus
Lines. Brannon, 153 F.3d at 1146. The limited allegations in the SAC merely
state that each Association Defendant has formed an association-in-fact with its
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members, the common purpose of each member of these associations-in-fact is to
recruit shepherds at low wages, and that Association Defendants file job orders
and H-2A Applications on behalf of their membership. As to the acts of
racketeering, the SAC simply states that WRA and MPAS have filed numerous
Job Orders and H-2A Applications that falsely state shepherds are properly
reimbursed for travel costs, as required by 20 C.F.R. § 655.122. The SAC further
asserts, in entirely conclusory fashion, that the Association Defendants are the
“lynchpins” of the alleged associations-in-fact. Based on these limited
allegations, this court can perceive no distinction between the alleged RICO
persons (WRA and MPAS) and the corresponding RICO enterprises (WRA and its
members and MPAS and its members).
Importantly, especially given the very limited set of facts set out in the
SAC, the 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. Nor has this court been
able to locate any such precedent. Instead, the Shepherds claim this court’s recent
decision in George supports the assertion WRA and MPAS are distinct from the
enterprises composed of themselves and their members. The Shepherds have
significantly misread George. In George, the plaintiff alleged an association-in-
fact, composed of, inter alia, a Bank and a Mortgage Solutions Provider, had a
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“common purpose” to provide as few loan modifications as possible. 833 F.3d at
1246, 1248. The district court concluded Bank was not distinct from the
association-in-fact enterprise for no reason other than Mortgage Solutions
Provider was Bank’s agent. Id. at 1249. That is, although it was a distinct legal
entity, Mortgage Service Provider was hired by Bank to conduct certain business
on Bank’s behalf. In reversing, this court specifically noted it was delivering a
decision entirely consistent with Cedric Kushner, Brannon, and Liberty Group.
Id. at 1249. That is, George recognized § 1962(c) embodies a distinctness
requirement; a RICO plaintiff must plausibly allege the defendant person
conducted the affairs of the enterprise, rather than its own affairs; and a defendant
corporation, acting through its subsidiaries, agents, or employees cannot typically
be both a RICO enterprise and a RICO person. Id. at 1249-50. George
concluded, however, that the plaintiff’s claim satisfied the distinctness
requirement because Bank and Mortgage Solutions Provider were entirely distinct
legal entities:
[T]he plaintiffs here allege an association-in-fact enterprise. They
don’t contend that either a parent corporation or its subsidiary
corporation is the enterprise. Rather, they assert that [Bank] and
[Mortgage Solutions Provider]—two separate legal entities—joined
together, along with several other entities, to form and conduct the
affairs of the . . . association-in-fact enterprise. The plaintiffs
further allege that [Bank] conducted the enterprise’s affairs, rather
than [Bank’s] own affairs, by acting in concert with [Mortgage
Solutions Provider] and other members of the enterprise to
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implement and execute a scheme to fraudulently deny . . . loan
modifications to qualified borrowers.
Moreover, [Bank’s] act of contracting with [Mortgage
Solutions Provider] to provide [loan-modification-related] services
didn’t somehow render [Mortgage Solutions Provider] a [Bank]
subsidiary, a [Bank] agent, or even part of the [Bank’s] corporate
family. Instead, the plaintiffs assert that [Bank] and [Mortgage
Solutions Provider] remained separate legal entities in distinct lines
of business. Specifically, [Bank] is a mortgage lender whose
services extend well beyond participation in [loan modifications],
while [Mortgage Solutions Provider] is a limited liability corporation
that provides mortgage-related services to numerous clients,
including [Bank]. Further, the plaintiffs allege that each entity
performed distinct roles within the enterprise while acting in concert
with other entities to further the enterprise's common goal of
wrongfully denying [loan modification] applications.
Id. at 1250. 35
As should be clear from this recitation, there is nothing in George to
indicate that the type of association-in-fact at issue here, one between an
agricultural association and its members, is sufficiently distinct from the
agricultural association so as to allow the agricultural association to be a RICO
person. Instead, George reaffirms the analytical approach set out in Brannon,
35
The Shepherds’ reliance on the Sixth Circuit’s decision in ClassicStar is
likewise misplaced. In ClassicStar, the record demonstrated with particularity the
distinct roles the related entities played that helped facilitate the fraudulent
scheme. 727 F.3d at 493. Other than conclusory and general assertions, there are
no such allegations in the SAC. Likewise, the Shepherds’ attempt in their
appellate brief, see Appellants’ Opening Br. at 57, to cobble together such
information from the limited allegations in the SAC is entirely unsuccessful.
Absent even the allegation of the kind of meaningful evidence of distinctness at
issue in ClassicStar, that decision is not remotely helpful to the Shepherds.
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Liberty Group, and Cedric Kushner and supports this court’s conclusion that
Yellow Bus Lines has properly synthesized those precepts in the context of a
RICO claim involving an association as the RICO person, while also being a part
of the alleged RICO enterprise-in-fact with its own members. Cf. Tronsgard v.
FBL Fin. Group, Inc., 312 F. Supp. 3d 982, 998 (D. Kan. 2018) (so interpreting
George). All that George held is that when two legally distinct entities combine,
even if that combination is initiated by one entity hiring the other, the distinctness
requirement can be satisfied. Because, given the facts alleged in the SAC, the
Association Defendants are not distinct, as RICO defendant persons, from the
alleged associations-in-fact (the Association Defendants and their respective
members), the district court properly dismissed the RICO claims against WRA
and MPAS.
3. Conclusion
The district court erred in dismissing the RICO claim against Richins.
Pursuant to Brannon and Cedric Kushner, Richins is legally distinct from the
association-in-fact composed of himself and WRA. In all other respects, the
district court properly dismissed the RICO and antitrust claims set out in the SAC.
B. Proposed Third Amended Complaint
The Shepherds appeal from the district court’s denial of their motion to file
the TAC, a complaint designed to rectify the inadequacies identified in the SAC.
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According to the Shepherds, the district court abused its discretion in concluding
the filing of the TAC should not be allowed because of undue delay. They assert
the delay was not “undue” or “unexplained,” see Minter v. Prime Equip. Co., 451
F.3d 1196, 1205-11 (10th Cir. 2006), because the proposed amendments were
based largely on reactions to late-breaking arguments of the Defendants and new
evidence. The Shepherds further assert there was no prejudice to Defendants
because little discovery has been taken and continued litigation cannot constitute
prejudice. See id.
1. Background
a. Factual Background
Soon after this case was filed, MPAS filed a motion to stay discovery
pending resolution of various motions to dismiss. Less than a week later, the
Shepherds filed their First Amended Complaint (“FAC”). A magistrate judge
held a status conference to consider, inter alia, MPAS’s motion to stay. In
addressing the stay motion, the magistrate judge pointed out that Fed. R. Civ. P. 1
expressly imposed on both the court and all parties the responsibility for ensuring
the “just, speedy, and inexpensive determination of every action.” Emphasizing
the seriousness with which the court took the objectives underlying Rule 1, the
magistrate judge cautioned the parties at length that it already foresaw the case—a
putative class action involving complex antitrust and racketeering claims—“on a
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glide path to slow.” The magistrate judge, therefore, denied the motion to stay
and authorized limited discovery.
The magistrate judge then addressed the Shepherds’ counsel. Noting two
motions to dismiss the FAC already had been filed and two more were anticipated
within the next few days, the magistrate judge told the Shepherds they should not
expect unfettered leeway to proffer multiple iterations of their complaint,
followed inevitably by multiple rounds in which Defendants’ motions to dismiss
were countered with yet further requests to amend. The magistrate judge
specifically informed the Shepherds he would “impose upon [them] a specific
obligation”:
As to the motions to dismiss that were filed [or are soon to be filed],
I will require plaintiffs’ counsel, to the extent that plaintiffs’ counsel
has any inclination, even as a fall-back position, to the extent that
plaintiff’s counsel has any inclination to raise the possibility of
further amendments as a cure, I’ll require you to take the initiative to
put together a telephone conference call with all the defense counsel
[within less than ten days] to raise that prospect. I don’t want to wait
21 days [after the motions to dismiss are filed] for you to simply say
“OK, judge, well we think the motions are losers, [but] we want to
amend yet one more time.” Because that doesn’t benefit . . . it
certainly doesn’t benefit the plaintiffs and I can tell you without a
moment’s of [sic] hesitation, it doesn’t benefit the court.
So if you have any inclination to respond to these motions by raising
or asserting yet another motion for leave to amend, I want that
discussed with defense counsel [relatively quickly]. You’re going to
have to put your cards on the table. Okay?
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Appellants’ App. Vol. V at 1287-88. Counsel for plaintiff’s replied, “Understood,
Your Honor.” In case that discussion was not sufficiently clear, the magistrate
judge again cautioned it did not “want to be in a situation where we spend untold
months briefing, with an outside possibility of amending.”
The magistrate judge eventually recommended that the federal claims set
forth in the SAC be dismissed without further leave to amend. Two-and-a-half
months after that recommendation was docketed, and nearly three weeks after the
Shepherds’ objections to the recommendation were fully briefed, the Shepherds
submitted a proposed TAC, conditioned on the district court’s ruling on the
magistrate judge’s recommendation regarding the pending motions to dismiss.
The district court referred the motion to file a TAC to the magistrate judge.
Meanwhile, three weeks later, the district court adopted the magistrate judge’s
recommendation to dismiss the antitrust and RICO claims asserted in the SAC.
Thereafter, focusing exclusively on the issue of futility, the magistrate judge
recommended that the Shepherds be allowed to file a TAC as to the RICO claim
against Richins, but that all other aspects of the motion to amend be denied.
b. District Court Decision
The district court rejected the magistrate judge’s recommendation to allow
partial amendment of the RICO claim against Richins. The district court
concluded the magistrate judge took inadequate account of the court’s prior
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efforts to prevent the filing of seriatim complaints and motions to dismiss. The
district court further concluded delays in moving the case to completion were
attributable largely to the Shepherds’ failure to set out a definitive articulation of
their claims. It concluded the Shepherds’ serial amendments were “inefficient”
and inconsistent with their responsibilities under Rule 1, exactly the circumstance
the court had attempted to avoid, more than a year earlier, when it directed the
Shepherds to “put their cards on the table” just prior to the filing of the SAC.
Importantly, the district court also concluded the Shepherds should have been
aware of many of the facts they proposed to add by way of the TAC. Given this
history, the district court concluded the Shepherds’ attempts at amendment were
dilatory, resulting in undue delay and prejudice to all Defendants. The district
court recognized “[l]ateness does not of itself justify the denial of the
amendment,” see Minter, 451 F.3d at 1205, but noted that longer delays weighed
more heavily against allowing amendment, see id. Given the length of the delay
and the relative lack of a reasonable explanation therefor, the district court denied
the motion to amend.
2. Analysis
a. Standard of Review
This court reviews the denial of a Fed. R. Civ. P. 15(a) motion to file an
amended complaint for abuse of discretion. Minter, 451 F.3d at 1204. In
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applying this standard, we keep in mind that “[t]he court should freely give leave
when justice so requires.” Fed. R. Civ. P. 15(a); Minter, 451 F.3d at 1204. A
district court abuses its discretion when it “clearly err[s] or venture[s] beyond the
limits of permissible choice under the circumstances” or when it “issues an
arbitrary, capricious, whimsical, or manifestly unreasonable judgment.” Birch v.
Polaris Indus., Inc., 812 F.3d 1238, 1247 (10th Cir. 2015) (quotations omitted).
b. Merits
The district court acted well within the bounds of its discretion in denying
the Shepherds’ motion to file a TAC. The Shepherds’ appellate briefing of this
issue can charitably be described as exceedingly limited. They merely assert as
follows:
The delay was not “undue” or “unexplained.” Plaintiffs based their
amendment largely on reactions to late-breaking arguments of
Defendants and new evidence procured between the filing of the
SAC and the TAC, including through an investigative trip by counsel
to rural Peru. Further, there was no prejudice to Defendants because
little discovery has been taken, and continued litigation cannot
constitute prejudice.
Appellants’ Opening Br. at 59. The problem with this argument is that the district
court specifically concluded the information set out in the TAC was known or
reasonably should have been known to the Shepherds at the time the SAC was
filed. Rather than acting out of surprise or the acquisition of new information,
the district court concluded the Shepherds had engaged in strategic
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gamesmanship. 36 Given the failure of the Shepherds to offer a convincing
explanation for the delay; the relative length of the delay, Minter, 451 F.3d at
1205; and the significant expenditure of resources on the part of the defendants
and the judiciary in responding to three previous iterations of the Shepherds’
complaint, the district court acted well within the bounds of its discretion in
denying the Shepherds’ motion to file the TAC.
3. Conclusion
The district court’s denial of the motion to file the TAC was a reasonable
and permissible choice under the circumstances of this case. See Minter, 451
36
In that regard, the district court found as follows:
What strikes this court as far more likely is that plaintiffs—
knowing the magistrate judge recommended dismissal of their federal
claims, and fully aware from prior discussions with the magistrate
judge that this court was likely to rule on the motions to dismiss the
Second Amended Complaint before the end of September 2016—
decided to chance one last shot at attempting to cure the deficiencies
the magistrate judge had identified. It is precisely this type of
manipulation which has led the Tenth Circuit to caution courts
against allowing plaintiffs “to make the complaint a moving target, to
salvage a lost case by untimely suggestion of new theories of
recovery, [or] to present theories seriatim in an effort to avoid
dismissal[.]” Minter, 451 F.3d at 1206 (citations and internal
quotation marks omitted). All three of those boundaries are
transgressed by plaintiffs’ efforts to amend in this matter.
Appellants’ App. Vol. V at 1292 (alterations in original).
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F.3d at 1204; Birch, 812 F.3d at 1247. Thus, that decision does not amount to an
abuse of discretion.
III. CONCLUSION
The district court’s dismissal of the Shepherds’ RICO claim against Richins
is REVERSED and the matter is REMANDED to the district court for further
proceedings. In all other respects, the orders of the district court are hereby
AFFIRMED.
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