In the

United States Court of Appeals

For the Seventh Circuit

____________

Nos. 02-3967 & 02-4065

DEBORAH BAKER and RICHARD ENYEART,

Plaintiffs-Appellants, Cross-Appellees,

v.

IBP, INC.,

Defendant-Appellee, Cross-Appellant.

____________

Appeals from the United States District Court

for the Central District of Illinois.

No. 02-4019—Michael M. Mihm, Judge.

____________

ARGUED MAY 30, 2003—DECIDED FEBRUARY 4, 2004

____________

Before FLAUM, Chief Judge, and EASTERBROOK and

RIPPLE, Circuit Judges.

EASTERBROOK, Circuit Judge. Plaintiffs want to represent

all persons, authorized to work in the United States, who

have been or are now employed at IBP’s meat-processing

plant in Joslin, Illinois. They appeal from the district

court’s decision that their claim should have been submitted

to the National Labor Relations Board rather than a court.

Despite Fed. R. Civ. P. 23(c)(1) (“As soon as practicable

after the commencement of an action brought as a class
2 Nos. 02-3967 & 02-4065

action, the court shall determine by order whether it is to be

so maintained”), the district judge dismissed the suit

without mentioning the class aspects of the complaint. The

two plaintiffs, as ex-employees at Joslin, likely are poor

representatives of its current employees— not just because

plaintiffs quit, but because the plant’s workers already have

a representative: a union certified by the NLRB. The claim

in this case is that IBP’s wages are too low, and that sort of

contention must be presented by the union rather than

individual members of the labor force. Plaintiffs’ request to

proceed on behalf of a class of all workers shows that they

seek to usurp the union’s role. But we are getting ahead of

ourselves.

Plaintiffs’ complaint alleges, and we must assume given

the case’s posture, that about half of the employees at IBP’s

Joslin plant are aliens who cannot lawfully work in the

United States—and that IBP not only knows in a statistical

sense that many of its non-citizen employees lack the sort

of visas that authorize working here but also can identify

which ones they are, yet winks at obviously fake green

cards and other spurious credentials. IBP alerts its unauthorized employees to stay away the days when immigration officials conduct inspections. (The complaint leaves it

to the imagination how IBP learns these dates.) When

immigration officials do manage to catch and remove aliens

not allowed to work (or be) in the United States, IBP pays

“recruiters” to smuggle them back into the country and

immediately re-employs them under new aliases and new

bogus identification. Moreover, the complaint alleges, IBP

has arrangements with immigrant-welfare organizations,

such as the Chinese Mutual Aid Association based in

Chicago, under which these groups refer known illegals to

IBP for employment. The upshot, plaintiffs believe, is that

wages at the Joslin plant are depressed by about $4 per

hour compared with what IBP would have to pay if the

labor force included only U.S. citizens plus aliens holding

green cards.
Nos. 02-3967 & 02-4065 3

If the allegations are true, managers at IBP have committed hundreds of felonies. We have no idea whether any

of the plaintiffs’ allegations is accurate, though we do know

that the United States has not commenced a criminal

prosecution. Still, the Racketeer Influenced and Corrupt

Organizations Act (RICO), 18 U.S.C. §§ 1961-68, permits

private actions for three times the loss caused by a pattern

of racketeering activity. See 18 U.S.C. §1964(c). Since 1996,

RICO has included among its predicate offenses “any act

which is indictable under the Immigration and Nationality

Act, section 274 [8 U.S.C. §1324] (relating to bringing in

and harboring certain aliens) . . . if the act indictable under

such section of such Act was committed for the purpose of

financial gain”. 18 U.S.C. §1961(1)(F). Plaintiffs contend

that, for financial gain (a reduction in the wages it must

pay), IBP brings in and employs illegal aliens, violating 8

U.S.C. §1324(a)(3)(A) and thus, derivatively, RICO. (Section

274(a)(3)(A) makes it a crime to hire more than 10 persons

in any 12-month period “with actual knowledge that the

individuals are aliens described in subparagraph (B)”.

Subparagraph (B) reads: “An alien described in this subparagraph is an alien who (i) is an unauthorized alien (as

defined in section 1324a(h)(3) of this title), and (ii) has been

brought into the United States in violation of this subsection.”)

Two courts of appeals have held that similar allegations

present claims that must be resolved on the merits. See

Commercial Cleaning Services, L.L.C. v. Colin Service

Systems, Inc., 271 F.3d 374 (2d Cir. 2001); Mendoza v.

Zirkle Fruit Co., 301 F.3d 1163 (9th Cir. 2002). Without

citing either decision, the district court nonetheless dismissed the suit for want of subject-matter jurisdiction, see

Fed. R. Civ. P. 12(b)(1), on the ground that it is a labor

dispute in disguise and must be presented to the NLRB. See

2002 U.S. Dist. LEXIS 24669, 171 L.R.R.M. 2355 (C.D. Ill.

Oct. 21, 2002). The district court relied principally on San
4 Nos. 02-3967 & 02-4065

Diego Building Trades Council v. Garmon, 359 U.S. 236

(1959). Because Commercial Cleaning Services was commenced by a competitor rather than an employee, Garmon

was not relevant to its disposition. But the plaintiffs in

Mendoza were employees; that decision cannot be distinguished so easily—though for reasons that we discuss later

it matters that the labor force in Mendoza was not unionized, while IBP’s staff not only has an exclusive bargaining

representative but also works under a collective bargaining

agreement.

Subject-matter jurisdiction is the first question, as it must

be in all suits filed in federal court. The district

judge described Garmon as creating a rule of preemption

and held that, because the labor laws preempt RICO, there

is no federal jurisdiction. This reasoning is hard to follow.

Federal statutes do not “preempt” other federal statutes,

and, though one may repeal another implicitly if they are

irreconcilable, RICO was enacted after the National Labor

Relations Act. Federal laws do preempt state laws, but

preemption is a defense and thus does not affect subject-matter jurisdiction. Caterpillar Inc. v. Williams, 482

U.S. 386, 393 (1987); Gully v. First National Bank, 299 U.S.

109, 116 (1936).

Garmon held that state law may not regulate conduct

arguably protected or arguably forbidden by federal labor

laws. That is a genuine doctrine of preemption, with a jurisdictional overlay: federal labor law so occupies the field of

labor relations that it is impossible to formulate a claim

under state law. See Avco Corp. v. Machinists Union,

390 U.S. 557 (1968). This misleadingly named doctrine of

“complete preemption” has jurisdictional significance in the

sense that federal law’s dominance allows removal under 28

U.S.C. §1441(b) without regard to diversity of citizenship.

See Beneficial National Bank v. Anderson, 123 S. Ct. 2058

(2003). Yet plaintiffs filed their case in federal court, exactly
Nos. 02-3967 & 02-4065 5

where the doctrine of “complete preemption” directs litigants. Federal courts are authorized to hear many labor-relations disputes by 29 U.S.C. §185, and others by the

federal-question jurisdiction. See Teamsters v. Troha, 328

F.3d 325 (7th Cir. 2003). RICO is a federal statute, and a

claim based on it therefore arises under federal law for

purposes of 28 U.S.C. §1331.

Applied to claims in federal court, and arising under

federal law, Garmon has nothing to do with either preemption or subject-matter jurisdiction. It is a rule of primary

jurisdiction, allocating to an administrative agency the first

crack at certain matters. See, e.g., Marquez v. Screen Actors

Guild, Inc., 525 U.S. 33, 49-50 (1998). And the doctrine of

primary jurisdiction is implemented by abstention—which

means by staying rather than dismissing the litigation. See,

e.g., Arsberry v. Illinois, 244 F.3d 558, 563-64 (7th Cir.

2001). Once the agency has completed its work, the parties

return to court for the resolution of any remaining issues.

Here, for example, if the dispute were referred to the NLRB,

and the Board determined that labor law neither protected

nor prohibited IBP’s conduct, the litigation could resume.

Dismissal for want of subject-matter jurisdiction was

inappropriate.

IBP has filed a cross-appeal, arguing that the district

court’s decision should be one on the merits (and thus with

prejudice to renewal later) rather than for lack of jurisdiction. Yet although dismissal under Rule 12(b)(1) was inappropriate, it does not follow that decision should have been

rendered on the merits; abstention in favor of the Labor

Board’s primary jurisdiction remains an option that must

be considered.

Garmon and its successors are principally about the

relation between state and federal policy, but the doctrine

applies even in federal-question cases that include issues

within the Labor Board’s charge. See Laborers Health &
6 Nos. 02-3967 & 02-4065

Welfare Trust v. Advanced Lightweight Concrete Co., 484

U.S. 539, 552 (1988). We applied this principle in Talbot v.

Robert Matthews Distributing Co., 961 F.2d 654, 662 (7th

Cir. 1992), to hold that a RICO action based on predicate

acts that also violate federal labor law is incompatible with

the NLRB’s role in implementing labor policy. But it was

vital in Talbot that “the underlying conduct of the plaintiffs’

RICO claim [was] wrongful only by virtue of the labor laws”

(ibid.; emphasis in original), something that cannot be said

of plaintiffs’ claim here. Section 274 of the Immigration and

Nationality Act is not one of the federal labor laws; it

post-dates the National Labor Relations Act and is in some

respects incompatible with it. Although aliens may be

“employees” for purposes of the NLRA, see Sure-Tan, Inc. v.

NLRB, 467 U.S. 883, 892 (1984), those without proper visas

do not receive the same benefits under the NLRA as persons

whose employment is lawful. See Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137 (2002). When the

predicate offenses of a particular claim under RICO are federal crimes other than transgressions of the labor laws, no

dispute falls within the Labor Board’s primary jurisdiction,

even if labor relations turn out to be implicated in some

other fashion. See, e.g., United States v. Palumbo Brothers,

Inc., 145 F.3d 850, 861-63 (7th Cir. 1998). If the predicates

are state offenses that themselves would be preempted

by Garmon, then invoking those laws indirectly through

RICO does not evade that doctrine; but if the predicate acts

are offenses that could be prosecuted directly (as charges

under 8 U.S.C. §1324 could be) without any Garmon problem, then it is difficult to see why invoking RICO in quest of

treble damages gives the Labor Board a role.

How could a pattern of violating §274 (the underlying

activity that plaintiffs allege) be “arguably protected” or

“arguably prohibited” by §7 or §8 of the National Labor

Relations Act? IBP does not contend that hiring illegal

aliens is even “arguably” protected by the NLRA. Nor does
Nos. 02-3967 & 02-4065 7

the NLRA prohibit or regulate the employment of aliens (see

Sure-Tan); it is immigration law, not the NLRA, that

distinguishes among categories of visa and thus determines

which non-citizens are authorized to work. According to

IBP, what is “arguably prohibited” by §8(a)(5) of the NLRA,

29 U.S.C. §158(a)(5), is a failure to bargain with the union.

“Failure to bargain in good faith” is the best classification

of the activities alleged in plaintiffs’ complaint, IBP insists.

Yet employers must treat with unions only about mandatory subjects of collective bargaining, and then only at the

union’s request. See Ford Motor Co. v. NLRB, 441 U.S. 488

(1979). Whether to hire illegal aliens is not a mandatory

subject of bargaining; employers need not dicker with

unions about which federal crimes to commit! Anyway, the

union representing workers at IBP’s Joslin facility has not

asked to bargain about this subject, and it is not even

arguably a violation of the NLRA to refrain from bargaining

about a subject that neither employer nor union wants to

negotiate. In the absence of a request to bargain and a

refusal to do so, no one could file a charge with the NLRB; in

the absence of a (potential) charge the Board lacks primary

jurisdiction of the dispute. Perhaps there could be room for

bargaining between IBP and its unions over ancillary

subjects, such as the precautions IBP takes when recruiting

workers and evaluating the credentials applicants proffer.

Yet plaintiffs do not contend that the union representing

workers at Joslin has asked to bargain over this subject and

been rebuffed; and if it had tried in vain to bargain, the

union itself would be the aggrieved party. It, and not

individual workers, would be the right party to file a charge

that IBP had committed an unfair labor practice.

What IBP tries to characterize as a potential dispute

about the bona fides of its bargaining strategy really has

nothing to do with negotiations and everything to do with

substance. The complaint alleges that IBP has expanded
8 Nos. 02-3967 & 02-4065

the pool of available labor and thus depressed the price that

labor can command. When supply rises and demand is

constant, price falls. Employers and unions bargain in the

shadow of supply and demand; they do not bargain about

what supply and demand will be. IBP concedes that the

NLRB has never concluded that an employer violated the Act

by expanding the supply of labor and thus depressing

wages, or that the employer has any duty to bargain about

efforts to augment the supply of labor. Employers regularly

line up additional help; they may, for example, recruit and

train persons who will serve as permanent replacements if

the union strikes. This supply-expanding activity is lawful,

see NLRB v. Mackay Radio & Telegraph Co., 304 U.S. 333,

345-46 (1938), and employers need not bargain with unions

about it. Nor need employers bargain about other acts, such

as closing plants and moving operations to places where

labor is cheaper, that expand the effective size of the labor

pool. See First National Maintenance Corp. v. NLRB, 452

U.S. 666 (1981) (adding, however, that the employer must

bargain about what happens to employees dismissed in the

closure).

To see the limited effect of Garmon on activity that affects

the size of the labor pool, and thus the outcome of bargaining over wages, consider claims under the antitrust law

that particular activities have unduly raised (or depressed)

the price of labor and of goods made with that labor. Most

arrangements between labor and management are protected from antitrust challenge by §6 of the Clayton Act, 15

U.S.C. §17, and a “nonstatutory exemption” to the Sherman

Act. See Brown v. Pro Football, Inc., 518 U.S. 231 (1996).

But some remain open to contest, see Connell Construction

Co. v. Plumbers Union, 421 U.S. 616 (1975), and the

Supreme Court has never thought that antitrust challenges

to labor arrangements are forbidden by the Garmon

doctrine because they arise from, or may affect, bargaining

between unions and employers. Quite the contrary, the
Nos. 02-3967 & 02-4065 9

Court held in Connell that Garmon does not interfere with

antitrust claims just because “labor law questions [may]

emerge as collateral issues in suits brought under independent federal remedies”. 421 U.S. at 626. If Garmon does

not block contentions that reduction of supply had driven

the price of labor too high, it does not block contentions that

seeking out new supply has driven the price too low. Many

federal statutes require courts to resolve issues that touch

on labor relations. Consider ERISA: pension and welfare

benefits often turn on the interpretation or validity of

collective bargaining agreements, questions that courts

resolve without the Labor Board’s assistance. See, e.g.,

Central States Pension Fund v. Gerber Truck Service, Inc.,

870 F.2d 1148 (7th Cir. 1989) (en banc); Moriarty v. Larry

G. Lewis Funeral Directors Ltd., 150 F.3d 773 (7th Cir.

1998). Just so with a claim under RICO.

Garmon preemption is only part of the battle for

plaintiffs, however. Their wages were set by a collective

bargaining agreement; the wages of persons working at the

Joslin plant today are determined under a collective bargaining agreement. This suit is at its core about the adequacy of the wages IBP pays, and, if the NLRB is out, it still

does not follow that plaintiffs are entitled to represent all

of the other workers. They have a representative—one that

under the NLRA is supposed to be “exclusive” with respect to

wages, see 29 U.S.C. §159(a)—their union. Individual

workers may step into the union’s shoes only if it has

violated its duty of fair representation. See Vaca v. Sipes,

386 U.S. 171, 186 (1967). Yet the complaint does not name

the union as a party and does not contend that the union

neglected its duty to represent the employees’ interests with

respect to wages.

Unless something went seriously wrong with the union’s

representation of the workers, IBP as the employer is not

only entitled but also legally required to pay at the rates
10 Nos. 02-3967 & 02-4065

specified by the collective bargaining agreement. Without

the union as a party, the litigants could not settle this suit

for higher hourly pay (or back pay)— that would be a real

refusal on IBP’s part to bargain with its union—nor could

the judge order IBP to increase its rate of pay. Yet it is only

financial relief that plaintiffs seek. As ex-employees, they

could obtain nothing else. (Normally equity will not enjoin

the commission of a crime, such as future violations of §274.

Whether RICO creates an exception to this rule in private

litigation is a question that has divided the circuits, and

that the Supreme Court did not resolve in Scheidler v.

National Organization for Women, Inc., 537 U.S. 393

(2003).) Plaintiffs have not established the foundation for

displacing the union as their representative with respect to

wages. We don’t say that this is impossible—for all we

know, the union may be controlled by persons not authorized to work in the United States and may be pursuing a

policy of expanding employment opportunities for those

similarly situated—but only that plaintiffs have not tried.

Lest this be taken as an invitation to add the union as a

party and start it anew as a hybrid RICO/DFR suit, we add

that there is another fatal problem in this complaint: specification of the “enterprise.” 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 enterprise’s

affairs through a pattern of racketeering activity”. For

purposes of this section, the “person” must be IBP, the only

defendant. But how is IBP conducting the affairs of an

enterprise through a pattern of racketeering activity? The

complaint alleges that the “enterprise” is IBP plus the

persons and organizations who help it find aliens to hire.

We may assume that this congeries is a “group of individuals associated in fact although not a legal entity” (18
Nos. 02-3967 & 02-4065 11

U.S.C. §1961(4))—though the complaint comes perilously

close to alleging that IBP plus its agents and employees is

the “enterprise,” a theory that won’t fly. See Bucklew v.

Hawkins, Ash, Baptie & Co., 329 F.3d 923, 934 (7th Cir.

2003). And it is not altogether clear how this “association in

fact” has a common purpose, an essential ingredient. See

United States v. Turkette, 452 U.S. 576, 583 (1981). IBP

wants to pay lower wages; the recruiters want to be paid

more for services rendered (though IBP would like to pay

them less); the Chinese Mutual Aid Association wants to

assist members of its ethnic group. These are divergent

goals.

Even if the congeries is an enterprise, how is it that IBP

operates or manages that enterprise through a pattern of

racketeering activity? The nub of the complaint is that IBP

operates itself unlawfully—it is IBP that supposedly hires,

harbors, and pays the unlawful workers, for the purpose

of reducing its payroll. IBP does not manage or operate

some other enterprise by violating §274; the complaint does

not allege—and on appeal plaintiffs do not seek an opportunity to show—that IBP has infiltrated, taken over, manipulated, disrupted, or suborned a distinct entity or even a

distinct association in fact. Contrast United States v.

Neapolitan, 791 F.2d 489, 500 (7th Cir. 1986). Without a

difference between the defendant and the “enterprise” there

can be no violation of RICO. See Sedima, S.P.R.L. v. Imrex

Co., 473 U.S. 479, 496-97 (1985); Fitzgerald v. Chrysler

Corp., 116 F.3d 225, 227-28 (7th Cir. 1997); Haroco, Inc. v.

American National Bank & Trust Co., 747 F.2d 384, 401-02

(7th Cir. 1984), affirmed on other grounds, 474 U.S. 606

(1985).

These conclusions enable us to bypass still another potential problem with plaintiffs’ theory: the difficulty of

establishing that unlawful hiring of aliens caused a diminution in their wages. RICO provides treble damages for
12 Nos. 02-3967 & 02-4065

direct injuries but not remote ones. See Holmes v. SIPC,

503 U.S. 258 (1992). Although the ninth circuit concluded

in Mendoza that the injury workers suffer when wages are

depressed by competition from aliens is similar to the kind

of injuries redressed under the antitrust laws, things may

not be so straightforward. An increased supply of labor

logically affects, not just the wages at IBP’s Joslin plant,

but wages throughout the region (if not the country).

Workers can change employers (leaving IBP for higher pay

elsewhere), and this process should cause equilibration

throughout the labor market. Yet plaintiffs’ theory is not

that too many aliens depress wages around Joslin; it is that

IBP pays lower wages than some competitors, and that

effect would be very hard to attribute to particular violations of 8 U.S.C. §1324(a)(3)(A). Suppose that plaintiffs

believed that IBP has violated the Fair Labor Standards

Act by failing to calculate other workers’ overtime premium;

could plaintiffs obtain damages from IBP even though it

had paid them all that the FLSA requires? Cf. Mid-State

Fertilizer Co. v. Exchange National Bank, 877 F.2d 1333

(7th Cir. 1989). Given the other problems in this case,

however, it is unnecessary to decide whether this circuit

will follow Mendoza once the issue must be faced and

resolved.

The judgment is modified from a dismissal for lack of

jurisdiction to a dismissal for failure to state a claim on

which relief may be granted. As so modified, it is affirmed.
Nos. 02-3967 & 02-4065 13

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—2-4-04