RODOLFO LLACUA; ESLIPER HUAMAN; LEOVEGILDO VILCHEZ GUERRA; LIBER VILCHEZ GUERRA; RAFEAL DE LA CRUZ, Plaintiffs - Appellants,
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.
from the United States District Court No.
1:15-CV-01889-REB-CBS for the District of Colorado
H. Seligman (Alexander N. Hood with him on the briefs),
Towards Justice, Denver, Colorado for Plaintiffs-Appellants.
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
HARTZ, MURPHY, and McHUGH, Circuit Judges.
MURPHY, CIRCUIT JUDGE.
Peruvian shepherds (the "Shepherds") who worked in the
Western United States pursuant to H-2A agricultural
visas brought antitrust claims, on behalf of
themselves and similarly situated classes of shepherds,
against several sheep ranchers (the "Rancher
Defendants"),  two associations (the "Association
Defendants"),  and Dennis Richins (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 claims against
Richins and the Association 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.
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.
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. 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
Second Amended Complaint
Federal Regulatory Background
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.
shepherds are nonimmigrant foreign nationals permitted to
work temporarily in the United States under visas authorized
by the DOL. The H-2A program allows for issuance of
visas to foreign workers to fill agricultural positions
employers cannot fill through the domestic labor
market. 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.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). Only if an American 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).
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. 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.
Reg. 47, 256 (Aug. 4, 2011) (hereinafter the "2011
Special Procedures"). 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. See 2015 Special Procedures, 80
Fed. Reg. 70, 840, 70, 840. 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
b. The Parties
The Association Defendants
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"). MPAS, on the other 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. 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
The Rancher Defendants
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,
" 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
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
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).
The Allegations in the Second Amended Complaint
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.
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. 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.
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."
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 variable- commensurate with experience, skill, work
environment, etc.-and substantially higher than the wages
offered to domestic and foreign shepherds.
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.
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
The District Court Decision
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. 544, 553 (2007) (quotation
and alteration omitted). As the district court recognized,
the facts showing such an agreement can be direct or
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.
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
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.
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 the argument trade
associations are inherently anticompetitive. 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 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.
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.
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 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).
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. 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, 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.
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 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).