Opinion ID: 3051440
Heading Depth: 2
Heading Rank: 1

Heading: The County’s Claims Against the Defendant

Text: Companies Canyon County alleges that it “has paid millions of dollars for health care services and criminal justice services for the illegal immigrants who have been employed by the defendants in violation of federal law.” We conclude that the 2754 CANYON COUNTY v. SYNGENTA SEEDS County cannot, as a matter of law, show an adequate causal nexus between the four defendant companies’ employment of undocumented workers and the financial harm the County claims to have suffered. [11] A “showing that the defendant violated § 1962, the plaintiff was injured, and the defendant’s violation was a ‘but for’ cause of plaintiff’s injury” is insufficient to meet the requirement in § 1964(c) that the plaintiff’s injury be “by reason of” the RICO violation. Holmes, 503 U.S. at 265-66. Rather, a plaintiff must also show that the defendant’s RICO violation proximately caused her injury. Id. at 268. Proximate causation requires “some direct relation between the injury asserted and the injurious conduct alleged.” Id. In Holmes, the Court applied the proximate cause requirement to preclude a RICO suit by a plaintiff whose injury was entirely contingent on the injury of direct victims. Id. at 27174. In that case, a number of conspirators had allegedly engaged in a fraudulent stock manipulation scheme which led to the insolvency of two securities broker-dealers. As a result of the insolvency, the broker-dealers could no longer meet their obligations to their customers, and the plaintiff, the Securities Investor Protection Corporation (“SIPC”), was forced to cover the broker-dealers’ debts. Id. at 262-63. SIPC asserted the broker-dealers’ customers’ claims against the conspirators, arguing that the customers had been injured “by reason of” the conspirators’ fraudulent scheme in violation of RICO. The Court disagreed, noting that “the conspirators have allegedly injured these customers only insofar as the stock manipulation first injured the broker-dealers and left them without the wherewithal to pay customers’ claims.” Id. at 271. Finding “the link . . . too remote between the stock manipulation alleged and the customers’ harm, being purely contingent on the harm suffered by the broker-dealers,” the Court concluded that proximate causation was lacking. Id. [12] Subsequently, in Anza, the Supreme Court clarified that the Holmes proximate cause requirement not only bars CANYON COUNTY v. SYNGENTA SEEDS 2755 RICO suits by derivative victims, or those whose injuries are “purely contingent on the harm suffered by” direct victims, but generally precludes recovery by those whose injuries are only tenuously related to the RICO violation at issue. 126 S. Ct. at 1996. Under Anza, courts must scrutinize the causal link between the RICO violation and the injury, identifying with precision both the nature of the violation and the cause of the injury to the plaintiff. See id. at 1996-98. Where the violation is not itself the immediate cause of the plaintiff’s injury, proximate cause may be lacking. In Anza, Ideal Steel Supply Company sued its competitor, alleging that the competitor had violated RICO by conducting its business through a pattern of defrauding the State of New York of sales tax payments. Id. at 1994. According to Ideal, the defendant was able to undersell Ideal by not charging sales tax on cash purchases, and thus deprived Ideal of sales it otherwise would have made. Id. at 1994-95, 1997. The Court concluded, however, that the competitor’s alleged violations could not have proximately caused Ideal’s injuries, because “[t]he cause of Ideal’s asserted harms . . . is a set of actions (offering lower prices) entirely distinct from the alleged RICO violation (defrauding the State).” Id. at 1997. In support of this conclusion, the Court discussed the rationale for the requirement that the plaintiff’s harm directly result from the alleged RICO violation. Id. (citing Holmes, 503 U.S. at 269-270). First, the Court cited “the difficulty that can arise when a court attempts to ascertain the damages caused by some remote action.” Id. The Court emphasized the attenuated causal chain between the defendant’s tax fraud and the plaintiff’s loss of sales. It noted the difficulty of determining whether the defendant’s lower prices were in fact based on the defendant’s fraudulent failure to pay sales tax, or whether other causes determined the defendant’s pricing. Id. The Court also pointed out that the plaintiff’s lost sales could have resulted from a host of factors other than its competitor’s fraud. Id. 2756 CANYON COUNTY v. SYNGENTA SEEDS Second, the Court discussed “the speculative nature of the proceedings that would follow if Ideal were permitted to maintain its claim.” Id. at 1998. A court would have to determine the portion of Ideal’s damages resulting from the RICO violation, by evaluating the relative causal role of the defendant’s fraud in lowering the defendant’s prices, and the relative causal role of those lowered prices in diminishing Ideal’s sales — in effect, requiring a complex apportionment of fault among various causes. Id. The proximate causation requirement “is meant to prevent these types of intricate, uncertain inquiries from overrunning RICO litigation.” Id. Finally, the Court referenced the consideration of whether “the immediate victims of an alleged RICO violation can be expected to vindicate the laws by pursuing their own claims.” Id. In the case before the Court, the State of New York could be expected to pursue its own remedies for the fraud practiced upon it by the defendant. Thus, the Court found “no need to broaden the universe of actionable harms to permit RICO suits by parties who have been injured only indirectly.” Id. [13] Under Anza, we must determine whether the County meets the proximate cause requirement by examining “whether the alleged violation led directly to the plaintiff’s injuries.” Id.12 The basis of the RICO violation, according to the County’s complaint, is the defendant companies’ knowing hiring of undocumented immigrants. The alleged harm is the 12 We are mindful that, in evaluating a complaint’s adequacy at the motion to dismiss stage, we must “presume that general allegations embrace those specific facts . . . necessary to support the claim.” Trollinger v. Tyson Foods, Inc., 370 F.3d 602, 615 (6th Cir. 2004) (quoting Nat’l Org. for Women v. Scheidler, 510 U.S. 249, 256 (1994), in support of the proposition that “a weak or insubstantial causal link” is not a good basis for dismissal on the pleadings). Anza itself, however, dealt with the adequacy of the proximate cause allegations at the motion to dismiss stage. 126 S. Ct. at 1994. It is therefore evident that courts need not allow RICO plaintiffs leeway to continue on with their case in an attempt to prove an entirely remote causal link. CANYON COUNTY v. SYNGENTA SEEDS 2757 County’s increased expenditures on health care and criminal justice services. Here, just as in Anza, the cause of the plaintiff’s asserted harms is a set of actions (increased demand by people within Canyon County for public health care and law enforcement services) entirely distinct from the alleged RICO violation (the defendants’ knowing hiring of undocumented workers). [14] The three rationales for the proximate cause requirement described in Anza also suggest that the County’s harm fails the proximate cause test. Cf. id. at 1997. As to the first consideration, the difficulty of assessing causation, the asserted causal chain in this instance is quite attenuated, and there are numerous other factors that could lead to higher expenditures by the County. In fact, it is not clear how the companies’ hiring of undocumented immigrants would increase demand for health care and law enforcement within Canyon County. Further, holding employers liable for the actions of their employees that are not even recognized as being a basis for respondent superior liability would be contrary to centuries of precedent concerning proximate causation. [15] The causal chain would also be difficult to ascertain because there are numerous alternative causes that might be the actual source or sources of the County’s alleged harm. Increased demand for public health care and law enforcement may result from such varied factors as: demographic changes; alterations in criminal laws or policy; changes in public health practices; shifts in economic variables such as wages, insurance coverage, and unemployment; and improved community education and outreach by government. [16] Second, the proceedings required to evaluate the County’s injury would be speculative in the extreme, perhaps more so than those discussed in Anza. Cf. id. at 1998. A court would be forced to evaluate the extent to which the companies’ illegal hiring practices had created increased demand for 2758 CANYON COUNTY v. SYNGENTA SEEDS County services. This would not consist of simply estimating the number of undocumented immigrants employed by the companies and their average usage of County services. Rather, the court would have to construct the alternative scenario of what would have occurred had the companies employed legally authorized workers, and determine how this might have affected the County’s total population, and how these alternative workers might have differed from the undocumented workers in their consumption of County services, if at all. This would be an “intricate, uncertain” inquiry of the type that the Anza Court warned against. Id. Given the substantial — and fatal — shortcomings of the complaint in meeting Anza’s proximate cause requirements, we need not inquire into the question of whether there are more immediate victims of the defendants’ alleged RICO violations who are likely to sue. See Newcal Indus., Inc. v. IKON Office Solution, 2008 WL 185520, at  (9th Cir. 2008).13 The County has attempted to limit Anza’s reach, characterizing the holding as applying only to “derivatively injured plaintiffs.” Because the County’s injury is not “derivative of an injury suffered by any other party,” the County asserts that Anza is inapplicable. We are, however, unpersuaded by the County’s attempt to distinguish Anza as a “derivative or passed-on” injury case. It is true that the Court in Holmes dealt with derivative injury, in the sense that any harm to the plaintiff occurred only to the extent that a direct victim’s injuries were “passed on,” or flowed through another victim. But there was no such 13 We note that under Anza, the likelihood of more direct victims bringing suit is not essential to a finding of no proximate cause. See Anza, 126 S. Ct. at 1998 (noting that “[t]he requirement of a direct causal connection is especially warranted where the immediate victim of an alleged RICO violation can be expected to vindicate the laws by pressing their own claims”) (emphasis added). CANYON COUNTY v. SYNGENTA SEEDS 2759 “passed-on” harm in Anza: the plaintiff alleged that it lost business due to the defendant’s lowered prices, a harm which was distinct from and not contingent on the harm suffered by the state due to the defendant’s sales tax fraud. Thus, Anza applies fully to cases like this one, where the harm to the plaintiff from the defendant’s RICO violation does not flow through any intervening victims. [17] The County’s claims against the defendant companies fail for lack of proximate causation. The asserted link between the companies’ hiring practices and increased demand for County services is far too attenuated.