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Canyon County v. Syngenta Seeds, Inc., 06-35112 (2008)

Court: Court of Appeals for the Ninth Circuit Number: 06-35112 Visitors: 21
Filed: Mar. 21, 2008
Latest Update: Mar. 02, 2020
Summary: FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT CANYON COUNTY, a political subdivision of the State of Idaho, Plaintiff-Appellant, v. No. 06-35112 SYNGENTA SEEDS, INC., a Delaware corporation; SORRENTO LACTALIS, D.C. No. CV 05-0306 EJL INC., a Delaware corporation; SWIFT BEEF COMPANY, a Delaware OPINION corporation; HARRIS MORAN SEED CO., a California corporation; ALBERT PACHECO, an individual, Defendants-Appellees. Appeal from the United States District Court for the
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                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

CANYON COUNTY, a political              
subdivision of the State of Idaho,
                 Plaintiff-Appellant,
                 v.
                                             No. 06-35112
SYNGENTA SEEDS, INC., a Delaware
corporation; SORRENTO LACTALIS,               D.C. No.
                                            CV 05-0306 EJL
INC., a Delaware corporation;
SWIFT BEEF COMPANY, a Delaware                OPINION
corporation; HARRIS MORAN SEED
CO., a California corporation;
ALBERT PACHECO, an individual,
             Defendants-Appellees.
                                        
        Appeal from the United States District Court
                  for the District of Idaho
         Edward J. Lodge, District Judge, Presiding

                   Argued and Submitted
            August 7, 2007—Seattle, Washington

                    Filed March 21, 2008

  Before: William C. Canby, Jr., A. Wallace Tashima, and
          Consuelo M. Callahan, Circuit Judges.

                 Opinion by Judge Tashima




                             2733
2736         CANYON COUNTY v. SYNGENTA SEEDS


                       COUNSEL

Howard W. Foster, Johnson & Bell, Ltd., Chicago, Illinois,
for the plaintiff-appellant.

George R. Wood, Littler Mendelson, P.C., Minneapolis, Min-
nesota, for defendant-appellee Syngenta Seeds, Inc.
              CANYON COUNTY v. SYNGENTA SEEDS            2737
Juan P. Morillo, Sidley Austin LLP, Washington, D.C., for
defendant-appellee Sorrento Lactalis, Inc.

Marie R. Yeates, Vinson & Elkins LLP, Houston, Texas, for
defendant-appellee Swift Beef Company.

Richard A. Leasia, Thelen Reid & Priest, LLP, San Jose, Cali-
fornia, for defendant-appellee Harris Moran Seed Company.

Cynthia J. Wooley, Ketchum, Idaho, for defendant-appellee
Albert Pacheco.


                         OPINION

TASHIMA, Circuit Judge:

   This case involves an Idaho county’s attempt to recover
damages under the Racketeer Influenced and Corrupt Organi-
zations Act (“RICO”), 18 U.S.C. §§ 1961-1968, for additional
monies it claims to have expended on public health care and
law enforcement services for undocumented immigrants.
Plaintiff-appellant Canyon County commenced this action
against four companies and one individual under RICO’s civil
enforcement provision, 18 U.S.C. § 1964(c), alleging that
defendants engaged in an illegal scheme of hiring and/or har-
boring undocumented immigrant workers within the County,
and that their actions forced the County to pay “millions of
dollars for health care services and criminal justice services
for the illegal immigrants.”

   The district court concluded that the County did not have
statutory standing under § 1964(c) because the County did not
meet the threshold requirement that a civil plaintiff be “in-
jured in his business or property” by reason of the alleged
RICO violation. Consequently, the court dismissed the Coun-
ty’s complaint.
2738             CANYON COUNTY v. SYNGENTA SEEDS
   We have jurisdiction pursuant to 28 U.S.C. § 1291, and we
affirm the district court. We agree with the district court that
the County has failed to allege that it was injured in its busi-
ness or property. We also conclude that, with respect to
almost all of the defendants’ alleged RICO violations, the
County cannot show that its claimed injuries were proxi-
mately caused by defendants’ conduct. For both of these rea-
sons, the County lacks statutory standing to pursue its federal
RICO claims.

                        BACKGROUND

I.       Civil Enforcement Under RICO

   RICO focuses on “racketeering activity,” which the statute
defines as a number of specific criminal acts under federal
and state laws. See 18 U.S.C. § 1961(1). As relevant to this
case, acts which are indictable under § 274 of the Immigration
and Nationality Act (“INA”) are included in the definition of
racketeering activity. 18 U.S.C. § 1961(1)(F). INA § 274
(codified as amended at 8 U.S.C. § 1324) criminalizes the
bringing in, transportation, harboring, and employment of
undocumented aliens.

   Substantive violations of RICO are defined in 18 U.S.C.
§ 1962. Under § 1962(c), it is illegal for any person “to con-
duct or participate, directly or indirectly, in the conduct of
[an] enterprise’s affairs through a pattern of racketeering
activity,” where that enterprise affects interstate commerce. It
is also illegal for any person to conspire to do so. 18 U.S.C.
§ 1962(d). A “pattern of racketeering activity” requires at
least two predicate acts of racketeering activity, as defined in
18 U.S.C. § 1961(1), within a period of ten years. 18 U.S.C.
§ 1961(5).1
     1
   RICO violations are criminally punishable by fines, forfeiture, and
imprisonment. 18 U.S.C. § 1963(a).
                CANYON COUNTY v. SYNGENTA SEEDS                   2739
   Under RICO’s civil enforcement mechanism, “[a]ny person
injured in his business or property by reason of a violation of
[18 U.S.C. § 1962] may sue therefor in any appropriate
United States district court and shall recover threefold the
damages he sustains and the cost of the suit, including a rea-
sonable attorney’s fee . . . .” 18 U.S.C. § 1964(c). To have
standing under § 1964(c), a civil RICO plaintiff must show:
(1) that his alleged harm qualifies as injury to his business or
property; and (2) that his harm was “by reason of” the RICO
violation, which requires the plaintiff to establish proximate
causation. Holmes v. Sec. Investor Prot. Corp., 
503 U.S. 258
,
268 (1992); Sedima, S.P.R.L. v. Imrex Co., 
473 U.S. 479
, 496
(1985).

II.   Canyon County’s Complaint

   The County’s first amended complaint (“complaint”)
names as defendants Syngenta Seeds, Inc. (“Syngenta”), Sor-
rento Lactalis, Inc. (“Sorrento”), Swift Beef Company
(“Swift”), Harris Moran Seed Company (“Harris”), and
Albert Pacheco. Because we are reviewing the dismissal of
the complaint, we assume that the factual allegations of the
complaint, summarized below, are true.

   According to the complaint, each of the four defendant
companies knowingly employed and/or harbored large num-
bers of illegal immigrants within Canyon County, in an “Ille-
gal Immigrant Hiring Scheme.”2 The companies’ actions have
damaged the County because the County “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.” The individual defen-
dant, Pacheco, has engaged in a policy of “Wilful Blindness
and Harboring” of illegal immigrants, in his role as director
  2
   Each defendant apparently conducted its own separate scheme, as there
are no allegations that the defendants cooperated with each other in any
way.
2740              CANYON COUNTY v. SYNGENTA SEEDS
of a local social service agency, which has resulted in simi-
larly increased costs for the County.

   Defendants Syngenta and Harris are both growers and pro-
cessors of agricultural commodities. The County claims that
both companies have deliberately hired hundreds of workers
who the companies knew were not authorized to work in the
United States. Working with a farm labor contractor, Ag Ser-
vices, the companies agreed to employ undocumented immi-
grants supplied by Ag Services. The contractor acts as a
“front” for Syngenta and Harris: in addition to supplying
workers, the contractor channels the workers’ wages to them,
completes fraudulent I-9 employment eligibility forms for the
workers, and supplies the workers with false documents. The
companies have thus allegedly violated both 8 U.S.C.
§ 1324(a)(3),3 which criminalizes knowing hiring of more
than ten unauthorized aliens during a single year, and 8
U.S.C. § 1324(a)(1)(A)(iii),4 which criminalizes harboring of
unauthorized aliens.

   The County further alleges that Syngenta and Harris have
each formed an “association-in-fact enterprise” with the farm
labor contractor, and that the companies’ sustained custom of
hiring and/or harboring undocumented workers amounts to a
pattern of racketeering activity. As a consequence, the compa-
nies have allegedly violated 18 U.S.C. § 1962(c), by partici-
  3
      Under 8 U.S.C. § 1324(a)(3)(A), it is illegal for any person “during any
12-month period, [to] knowingly hire[ ] for employment at least 10 indi-
viduals with actual knowledge that the individuals are aliens described in
subparagraph (B) . . . .” An alien described in subparagraph B “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.” 8 U.S.C. § 1324(a)(3)(B).
    4
      Under 8 U.S.C. § 1324(a)(1)(A)(iii), it is illegal for any person to
“knowing or in reckless disregard of the fact that an alien has come to,
entered, or remains in the United States in violation of law, . . . harbor[ ]
. . . or attempt[ ] to . . . harbor . . . such alien in any place, including any
building or any means of transportation.”
                CANYON COUNTY v. SYNGENTA SEEDS                   2741
pating in the conduct of an enterprise’s affairs through a
pattern of racketeering activity.

   The complaint contains similar allegations against Sor-
rento, a cheese processor, and Swift, a meat packer, the only
difference being that Sorrento and Swift have allegedly
formed “association-in-fact” enterprises with a different labor
contractor, Labor Ready.

   The County’s claim against defendant Pacheco is distinct,
as it is not based on the hiring of undocumented immigrants.
Instead, the County alleges that Pacheco, in his position as
Executive Director of the Idaho Migrant Council, has directed
his staff to assist immigrant workers in fraudulently applying
for public benefits, despite Pacheco’s knowledge that the
workers lacked legal status in the United States and were inel-
igible for such benefits. In directing his staff to take these
actions, Pacheco has allegedly committed a pattern of racke-
teering activity, by knowingly harboring undocumented
immigrants in violation of 8 U.S.C. § 1324(a)(1)(A)(iii).
Thus, based on his association with the Migrant Council,
which is asserted to be a RICO enterprise, Pacheco has alleg-
edly violated 18 U.S.C. §§ 1962(c) and 1962(d).5

III.   Dismissal by the District Court

   Defendants filed motions to dismiss the County’s com-
plaint, challenging both the County’s standing under RICO
and the adequacy of the County’s allegations of substantive
RICO violations. The district court granted defendants’
motions and dismissed the complaint in its entirety. It held
that the County lacked statutory standing to bring its federal
RICO claims because it had not been injured in its business
or property by the alleged conduct constituting the RICO vio-
lations.
  5
   The complaint also charges Pacheco with violations of the Idaho Rack-
eteering Act, Idaho Code §§ 18-7801 to 18-7805.
2742           CANYON COUNTY v. SYNGENTA SEEDS
   In evaluating whether the County had alleged injuries of a
type cognizable under § 1964(c), the district court first dis-
cussed the tort doctrine known as the “municipal cost recov-
ery rule,” drawing on our decision in City of Flagstaff v.
Atchison, Topeka & Santa Fe Ry., 
719 F.2d 322
(9th Cir.
1983). In City of Flagstaff, we held that, under Arizona law,
a municipality could not recover the cost of public services
for fire or safety protection from a negligent tortfeasor. 
Id. at 323.
We did, however, recognize several exceptions to the
“municipal cost recovery rule,” including exceptions allowing
municipal recovery “where it is authorized by statute or regu-
lation” and “where the acts of a private party create a public
nuisance which the government seeks to abate.” 
Id. at 324.
   Noting that the County appeared “to concede the existence
of the municipal cost recovery rule,” the district court rejected
the County’s argument that its claims fit within either the
exception for suits to abate a public nuisance, or the exception
for suits authorized by statute. First, the district court stated
that the County was not acting in its governmental capacity to
abate a nuisance, but suing for treble damages under civil
RICO. It then considered the County’s argument that the
RICO statute itself authorized its recovery. The court rejected
this contention, citing what it characterized as “extensive per-
suasive authority” from other circuits to the effect that a
municipality may not recover under RICO for alleged injuries
to its governmental functions.

   Thus, relying on the municipal cost recovery rule and on
case law from other circuits, the district court concluded that
the County’s claim for the costs of municipal services did not
qualify as an injury to business or property within the mean-
ing of RICO. On this basis, the court dismissed the federal
RICO claims against all defendants and entered judgment
against the County.6 The County timely appealed.
  6
   Upon dismissing the federal RICO counts against all defendants, the
court also dismissed the Idaho Racketeering Act claims against Pacheco
without prejudice to refiling those claims in state court.
                  CANYON COUNTY v. SYNGENTA SEEDS                         2743
                     STANDARD OF REVIEW

   In reviewing dismissal of the County’s complaint under
Federal Rule of Civil Procedure 12(b)(6),7 “we accept as true
the factual allegations in the amended complaint.” Anza v.
Ideal Steel Supply Corp., 
126 S. Ct. 1991
, 1994 (2006). We
will uphold the dismissal “only if it is clear that no relief
could be granted under any set of facts that could be proved
consistent with the allegations.”8 Mendoza v. Zirkle Fruit Co.,
  7
    The district court did not specify whether its dismissal was based on
Federal Rule of Civil Procedure 12(b)(1), lack of subject matter jurisdic-
tion, or 12(b)(6), failure to state a claim upon which relief can be granted,
noting that “the case law is unclear as to whether a challenge to a plain-
tiff’s standing under RICO is jurisdictional.” There is case law from other
circuits suggesting that statutory standing may sometimes be a jurisdic-
tional prerequisite. See Lerner v. Fleet Bank, 
318 F.3d 113
, 126-29 (2d
Cir. 2003). We have held, however, that the question of statutory standing
is to be resolved under Rule 12(b)(6), once Article III standing has been
established. Cetacean Cmty. v. Bush, 
386 F.3d 1169
, 1175 (9th Cir. 2004)
(“If a plaintiff has suffered sufficient injury to satisfy the jurisdictional
requirement of Article III but Congress has not granted statutory standing,
that plaintiff cannot state a claim upon which relief can be granted.”).
   In this instance, we preliminarily conclude that the County has met Arti-
cle III’s jurisdictional requirements. Although, as we discuss below, the
County cannot show the proximate causation that is necessary for civil
RICO standing, the County’s allegation that the defendants’ hiring and/or
harboring of undocumented immigrants within the County caused addi-
tional strain on County-provided health and public safety services meets
the less rigorous Article III causation threshold, at least at this stage of the
proceedings. See Lujan v. Defenders of Wildlife, 
504 U.S. 555
, 560 (1992)
(stating that Article III requires the plaintiff to have suffered an injury that
is “fairly traceable” to the defendant’s conduct); Barbour v. Haley, 
471 F.3d 1222
, 1226 (11th Cir. 2006) (“[F]or purposes of satisfying Article
III’s causation requirement, we are concerned with something less than the
concept of proximate cause.”) (citation and internal quotation marks omit-
ted), cert. denied, 
127 S. Ct. 2996
(2007); 
Lerner, 318 F.3d at 122
& n.8
(holding that plaintiffs’ allegations failed to meet RICO proximate causa-
tion requirements but satisfied “the lesser burden for constitutional stand-
ing”). Thus, because Article III jurisdiction is not at issue, we review the
question of whether the County satisfies civil RICO’s standing require-
ments under the standard for Rule 12(b)(6).
   8
     Because the County cannot meet the more liberal “any set of facts”
standard, we need not decide whether the Supreme Court’s recent “retire-
2744             CANYON COUNTY v. SYNGENTA SEEDS
301 F.3d 1163
, 1167 (9th Cir. 2002) (citation and internal
quotation marks omitted). We may, however, affirm the dis-
missal on any ground supported by the record. McKesson
HBOC, Inc. v. N.Y. State Common Ret. Fund, Inc., 
339 F.3d 1087
, 1090 (9th Cir. 2003).

                            DISCUSSION

   [1] A civil RICO “plaintiff only has standing if, and can
only recover to the extent that, he has been injured in his busi-
ness or property by the conduct constituting the violation.”
Sedima, 473 U.S. at 496
; see 18 U.S.C. § 1964(c). Below, we
examine whether the allegations in the County’s complaint
meet the requirements for standing under RICO’s civil suit
provision, 18 U.S.C. § 1964(c). We discuss first whether the
County has alleged the requisite type of injury, then whether
the defendants’ alleged RICO violations could have proxi-
mately caused the County’s injury.

I.   Canyon County Has Failed to Allege that It Has Been
     Injured in Its Business or Property

   [2] To determine whether a plaintiff has sufficiently alleged
that he has been “injured in his business or property,” we
must examine carefully the nature of the asserted harm. Our
circuit requires that a plaintiff asserting injury to property
allege “concrete financial loss.” Oscar v. Univ. Students Co-
op. Ass’n, 
965 F.2d 783
, 785 (9th Cir. 1992) (en banc). Finan-
cial loss alone, however, is insufficient. “Without a harm to
a specific business or property interest — a categorical
inquiry typically determined by reference to state law — there
is no injury to business or property within the meaning of
RICO.” Diaz v. Gates, 
420 F.3d 897
, 900 (9th Cir. 2005) (en
banc), cert. denied, 
546 U.S. 1131
(2006).

ment” of the “no set of facts” standard, Bell Atl. Corp. v. Twombly, 
127 S. Ct. 1955
, 1968-69 (2007), and its adoption of a new “plausibility” stan-
dard, see 
id. at 1965-67,
applies to RICO complaints.
               CANYON COUNTY v. SYNGENTA SEEDS                2745
   In this case, the County bases its RICO claims on the fact
that “it has paid millions of dollars for health care services
and criminal justice services for the illegal immigrants who
have been employed [and/or harbored] by the defendants in
violation of federal law.” The County argues that it has suffi-
ciently alleged that it has been injured in its property because
it claims to have been forced to spend money. According to
the County, “[a]ny involuntary expenditure of money is a loss
of ‘property.’ ” However, a government entity cannot rely on
expenditures alone to establish civil RICO standing, and there
is no indication that the County holds a property interest in
the law enforcement or health care services that it provides to
the public.

  A.   Government Expenditures Alone Are Insufficient to
       Qualify as Injury to Property

   In the ordinary context of a commercial transaction, a con-
sumer who has been overcharged can claim an injury to her
property, based on a wrongful deprivation of her money. See
Reiter v. Sonotone Corp., 
442 U.S. 330
, 342 (1979) (interpret-
ing provision of the Clayton Act that grants standing to “any
person . . . injured in his business or property” by an antitrust
violation). As the Supreme Court reasoned in Reiter, “[i]n its
dictionary definitions and in common usage ‘property’ com-
prehends anything of material value owned or possessed.
Money, of course, is a form of property.” 
Id. at 338
(citation
omitted). Thus, the Court concluded that “where petitioner
alleges a wrongful deprivation of her money because the price
of the hearing aid she bought was artificially inflated . . . , she
has alleged an injury in her ‘property’ . . . .” 
Id. at 342.
   [3] Similarly, government entities that have been over-
charged in commercial transactions and thus deprived of their
money can claim injury to their property. See Chattanooga
Foundry & Pipe Works v. City of Atlanta, 
203 U.S. 390
, 396
(1906) (holding that city’s claim that it was overcharged for
its purchases of water pipe qualified as allegation that it was
2746          CANYON COUNTY v. SYNGENTA SEEDS
“injured in its property . . . by being led to pay more than the
worth of the pipe”); County of Oakland v. City of Detroit, 
866 F.2d 839
, 847 (6th Cir. 1989) (outlying counties “sustained an
injury in their property when they paid the allegedly excessive
charges” to Detroit for treatment and disposal of sewage).

   [4] But the law commonly distinguishes between the status
of a governmental entity acting to enforce the laws or promote
the general welfare and that of a governmental entity acting
as a consumer or other type of market participant. See, e.g.,
Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, 
458 U.S. 592
, 601-02 (1982) (distinguishing between the sover-
eign, quasi-sovereign, and proprietary interests of governmen-
tal bodies). When a governmental body acts in its sovereign
or quasi-sovereign capacity, seeking to enforce the laws or
promote the public well-being, it cannot claim to have been
“injured in [its] . . . property” for RICO purposes based solely
on the fact that it has spent money in order to act governmen-
tally. All government actions require the expenditure of
money in this sense, insofar as the government acts through
public servants who are paid for their services. If government
expenditures alone sufficed as injury to property, any RICO
predicate act that provoked any sort of governmental response
would provide the government entity with standing to sue
under § 1964(c) — an interpretation of the statute that we
think highly improbable. We find it particularly inappropriate
to label a governmental entity “injured in its property” when
it spends money on the provision of additional public ser-
vices, given that those services are based on legislative man-
dates and are intended to further the public interest.

  B.   The County Does Not Have a Property Interest in
       Services It Provides to Enforce the Laws and
       Promote the Public Welfare

   [5] As the County cannot satisfy the requirement of injury
to a “specific property interest” based solely on its expendi-
ture of money to provide public services, we must examine
               CANYON COUNTY v. SYNGENTA SEEDS                 2747
whether the County can claim a property interest in the ser-
vices themselves. We conclude that the government does not
possess a property interest in the law enforcement or health
care services that it provides to the public; therefore, a gov-
ernmental entity is not “injured in its property” when greater
demand causes it to provide additional public services of this
type.

   [6] We base this conclusion on several factors. First, the
ordinary meaning of the term “property” does not include the
interests of local governments in performing functions such as
policing, caring for the indigent sick, and otherwise protecting
the well-being of the public. Moreover, following Diaz’s
instruction to determine whether the relevant state’s law rec-
ognizes the alleged property interest, we see no indication that
Idaho law creates a property-like entitlement in such services
on the part of counties. See 
Diaz, 420 F.3d at 900
. The County
has made no showing that Idaho law grants counties a protect-
able legal interest in the public services they provide, and we
have found none. The persuasive authority of other jurisdic-
tions tilts against such an interest. Cf. 
id. (plaintiff’s claim
for
lost wages due to false imprisonment alleged harm to a prop-
erty interest, because California law recognizes the torts of
intentional interference with contract and interference with
prospective business relations); see also Living Designs, Inc.
v. E.I. Dupont de Nemours & Co., 
431 F.3d 353
, 364 (9th Cir.
2005) (plaintiff’s claim alleging diminished litigation settle-
ment due to the defendant’s fraud alleged injury to a property
interest, because fraudulent inducement is an actionable tort
under Hawaii law), cert. denied, 
126 S. Ct. 2861
(2006).

   [7] Second, the Supreme Court has interpreted the statutory
provision that served as a model for § 1964(c) to exclude
claims for damages to governments’ non-proprietary interests.
The civil enforcement provision of the antitrust laws, § 4 of
the Clayton Act, provides a private right of action to “any per-
son who shall be injured in his business or property by reason
of anything forbidden in the antitrust laws . . . .” 15 U.S.C.
2748          CANYON COUNTY v. SYNGENTA SEEDS
§ 15(a). Because Congress based the RICO private right of
action on § 4, courts have often, though not invariably, inter-
preted the two statutory provisions in a like manner. See, e.g.,
Holmes, 503 U.S. at 267-68
; 
Sedima, 473 U.S. at 489
, 498-99.
Interpreting the Clayton Act, the Court has read the phrase
“injured in his business or property” to encompass only injury
to a state’s “commercial interests,” meaning “the interests of
the [state] as a party to a commercial transaction.” 
Reiter, 442 U.S. at 341-42
. If a similar interpretation of the identical
phrase is applied in the RICO setting, a government’s claim
for its law enforcement and health care expenditures would
not qualify as injury to property.

   In Hawaii v. Standard Oil Co., 
405 U.S. 251
(1972), the
State of Hawaii sued four petroleum suppliers for antitrust
violations. Hawaii raised claims in three capacities: a claim in
the state’s proprietary capacity for overcharges it paid directly
as a consumer of petroleum products; a claim in its parens
patriae capacity as a representative of the state’s citizens; and
a class action claim on behalf of all consumers in the state. 
Id. at 253-56.
To support the claims brought in the state’s parens
patriae capacity, Hawaii alleged various harms, including loss
of its citizens’ revenues, increases in taxes as a result of lost
revenues, lost opportunities in commerce, and frustration of
state measures to promote its citizens’ welfare. 
Id. at 255.
The
Court held that the state, acting in a parens patriae capacity to
redress injury to its general economy, had not been injured in
its property and thus lacked standing to recover damages
under § 4 of the Clayton Act. The Court stated:

    Like the lower courts that have considered the mean-
    ing of the words ‘business or property,’ we conclude
    that they refer to commercial interests or enterprises.
    When the State seeks damages for injuries to its
    commercial interests, it may sue under § 4. But
    where, as here, the State seeks damages for other
    injuries, it is not properly within the Clayton Act.
              CANYON COUNTY v. SYNGENTA SEEDS                2749
Id. at 264
(citations omitted).

   The Court also relied on 15 U.S.C. § 15a, an adjacent pro-
vision permitting the federal government to recover damages
whenever “injured in its business or property” by an antitrust
violation. That provision, the Court wrote, did not permit the
United States to “recover for economic injuries to its sover-
eign interests, as opposed to its proprietary functions.” 
Id. at 265.
Similarly, the Court held, “[§] 4, which uses identical
language, does not authorize recovery for economic injuries
to the sovereign interests of a State.” 
Id. Later, in
Reiter, the Court clarified that states could claim
to have been injured in their property when alleging harm to
their interests as consumers, despite the reference in Hawaii
to the state’s “commercial interests”:

    The phrase ‘commercial interests’ was used [in
    Hawaii] as a generic reference to the interests of the
    State of Hawaii as a party to a commercial transac-
    tion. This is apparent from Hawaii’s explicit reaffir-
    mance of the rule of Chattanooga Foundry and
    statement that, where injury to a state ‘occurs in its
    capacity as a consumer in the marketplace’ through
    a ‘payment of money wrongfully induced,’ treble
    damages are recoverable by a state under the Clayton
    Act.

Reiter, 442 U.S. at 341-42
.

   [8] As used in the Clayton Act’s private right of action,
then, the phrase “business or property” excludes states’ inter-
ests in their sovereign or quasi-sovereign capacities, but does
include states’ interests as ordinary marketplace actors. We
believe that this interpretation of the phrase “business or prop-
erty” should apply in the context of a civil RICO claim, as
well.
2750          CANYON COUNTY v. SYNGENTA SEEDS
   The Second Circuit has already applied Hawaii and Reiter
in this way. In Town of West Hartford v. Operation Rescue,
915 F.2d 92
, 103-04 (2d Cir. 1990), the court considered a
town’s civil RICO claims against abortion protesters who had
demonstrated for two days at a local clinic. According to the
town, the protesters’ activities amounted to extortion against
the town under the Hobbs Act and thus were a pattern of rack-
eteering activity. 
Id. at 95-98.
The town alleged that the pro-
testers had limited the police department’s ability to respond
to other public safety needs, and caused extraordinary police
overtime wage expenses, among other harms, all of which
amounted to “injury to the governmental functions and prop-
erty” of the town. 
Id. at 95-96.
   The court first concluded that extortion under the Hobbs
Act required the “obtaining of property from another by
wrongful means” and that neither “altered official conduct”
nor overtime police expense qualified as property for this pur-
pose. 
Id. at 101-02
(internal quotation marks omitted). There-
fore, the town had failed properly to allege any RICO
predicate acts and there was “no plausible basis for . . . asser-
tion” of the RICO claim. 
Id. at 102-03.
The court then ana-
lyzed whether the town had alleged injury to its “business or
property” resulting from the RICO violation, as required for
civil RICO standing. Relying on Hawaii and Reiter for the
proposition that a governmental entity may “recover for such
injury only when it functions ‘as a party to a commercial
transaction,’ ” the Second Circuit held that “[i]njuries of the
sort asserted by the Town do not fall within the ambit of sec-
tion 1964(c).” 
Id. at 104.
   Thus, the Second Circuit held that the town’s claimed inju-
ries stemming from the burden the protesters placed on the
town’s police department — which included expenditures for
increased overtime costs — did not qualify as injury to the
town’s business or property. Rather, these were injuries to the
                 CANYON COUNTY v. SYNGENTA SEEDS                        2751
town’s sovereign or quasi-sovereign interests of the sort held
non-compensable in Hawaii.9

   [9] The injuries claimed by the County in this case,
increased expenditures for law enforcement and health care
services, are analogous to those that the Second Circuit ruled
non-compensable in Town of West Hartford. The County sus-
tained these injuries in its sovereign and/or quasi-sovereign
capacities, and may not claim the costs as damages to its
property for purposes of civil RICO standing.

  We note finally that the common law doctrine barring gov-
ernment recovery of the costs of public safety services in tort
supports our holding. The rationale underlying the “municipal
cost recovery rule” is twofold: (1) that there is little reason for
courts to use tort law to unsettle expectations and disrupt the
existing, tax-payer funded system of providing public safety
  9
    Although the Second Circuit’s interpretation of “business or property”
for RICO standing purposes in Town of West Hartford has been character-
ized as dicta, lower courts have relied on it in several instances. See Attor-
ney Gen. v. R.J. Reynolds Tobacco Holdings, Inc., 
103 F. Supp. 2d 134
,
151-55 (N.D.N.Y. 2000) (holding that “Town of West Hartford compels
the Court to conclude that [increased law enforcement] costs do not con-
stitute a cognizable RICO injury to Canada as a party to a commercial
transaction”), aff’d on other grounds, 
268 F.3d 103
(2d Cir. 2001); City
of New York v. JAM Consultants, Inc., 
889 F. Supp. 103
, 105 (S.D.N.Y.
1995) (holding that city’s relationship with its employees is a “commercial
relationship” under Town of West Hartford, and thus inducement of dis-
loyal employee conduct injures city in its property interests for purposes
of RICO standing); Town of Brookline v. Operation Rescue, 
762 F. Supp. 1521
, 1523 (D. Mass. 1991) (holding that town could not establish that it
had been injured in its business or property based on increased expenses
resulting from abortion protests). But see City of New York v. Cyco.Net,
Inc., 
383 F. Supp. 2d 526
, 555-56 (S.D.N.Y. 2005) (characterizing the law
as “unsettled” following Town of West Hartford and holding that city’s
loss of its right to collect sales taxes may qualify as injury to its business
or property); Eur. Cmty. v. RJR Nabisco, Inc., 
150 F. Supp. 2d 456
, 492-
93 (E.D.N.Y. 2001) (concluding that foreign government’s claim for lost
tax revenues and increased law enforcement costs “are, at bottom, claims
for lost money” and thus qualify as property for RICO standing purposes).
2752             CANYON COUNTY v. SYNGENTA SEEDS
services; and (2) that it is not the courts’ role to disturb the
legislature’s decision to fund such services as a part of its
overall fiscal policy choices. See City of 
Flagstaff, 719 F.2d at 323-24
. A number of courts have applied this rule to bar
recovery by local governments of public safety expenses.10

   In this instance, we are not dealing with state common law,
but with a statutory cause of action created by Congress.
Therefore, we are not concerned that our court might upset
the local legislative body’s fiscal policy by allowing recovery
for public safety services. Instead, the question is one of Con-
gress’ intent, specifically whether Congress meant to disrupt
settled expectations and alter the legislatively-chosen system
of funding local government services. We recognize that Con-
gress could have used its powers to do so, enabling local gov-
ernments to pursue treble damages under RICO for injuries
arising from their provision of governmental services. But had
Congress intended such a result, we believe that Congress
would have been more explicit; the term “business or proper-
ty” does not readily connote a government’s interest in the
services it provides in its sovereign or quasi-sovereign capaci-
ty.11 As we think it unlikely that Congress intended this type
  10
      See, e.g., District of Columbia v. Air Florida, Inc., 
750 F.2d 1077
,
1080 (D.C. Cir. 1984); County of San Luis Obispo v. Abalone Alliance,
223 Cal. Rptr. 846
, 850-52 (Ct. App. 1986); City of Chicago v. Beretta
U.S.A. Corp., 
821 N.E.2d 1099
, 1144-47 (Ill. 2004); City of Bridgeton v.
B.P. Oil, Inc., 
369 A.2d 49
, 54 (N.J. Super. Ct. 1976); Koch v. Consol.
Edison Co., 
468 N.E.2d 1
, 7-8 (N.Y. 1984). But cf. White v. Smith & Wes-
son Corp., 
97 F. Supp. 2d 816
, 821-23 (N.D. Ohio 2000); City of Gary v.
Smith & Wesson Corp., 
801 N.E.2d 1222
, 1242-44 (Ind. 2003); James v.
Arms Tech., Inc., 
820 A.2d 27
, 48-49 (N.J. Super. Ct. 2003); City of Cin-
cinnati v. Beretta U.S.A. Corp., 
768 N.E.2d 1136
, 1149-50 (Ohio 2002).
   11
      There is no legislative history regarding Congress’ intent in this
regard. Cf. 
Sedima, 473 U.S. at 495
n.13 (referring to what lower court
described as the “ ‘clanging silence’ of the legislative history” of
§ 1964(c) regarding the provision’s scope); see also 
Reiter, 442 U.S. at 343
(“Many courts and commentators have observed that the respective
legislative histories of § 4 of the Clayton Act and § 7 of the Sherman Act,
its predecessor, shed no light on Congress’ original understanding of the
terms ‘business or property.’ ”).
              CANYON COUNTY v. SYNGENTA SEEDS             2753
of recovery under RICO, and because Idaho’s legislature has
assigned the fiscal burden for law enforcement and health
care services differently, it is not our place to disturb these
decisions.

   Contrary to the County’s argument, in holding that the
costs of their law enforcement and public health care services
are not recoverable damages under civil RICO, we are not
inserting an additional injury requirement into § 1964(c).
Rather, our holding is based on the statutory language itself.
We simply do not think that the term “business or property”
can be interpreted to encompass the sorts of interests that the
County relies on in this case.

   [10] In light of the foregoing reasoning, we conclude that
the County lacks RICO standing and cannot bring suit under
RICO for the injuries that it asserts in its complaint.

II.    Canyon County Cannot Show That the Alleged
       RICO Violations Proximately Caused Its Injuries

   Even if the County’s claimed injuries were cognizable
under § 1964(c) as injuries to property, the County’s com-
plaint is flawed in another critical aspect: most of the defen-
dants’ alleged RICO violations do not bear a direct
connection to the County’s asserted harms. See 
Anza, 126 S. Ct. at 1998
(“When a court evaluates a RICO claim for
proximate causation, the central question it must ask is
whether the alleged violation led directly to the plaintiff’s
injuries.”).

  A.    The County’s     Claims    Against    the   Defendant
        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 defen-
dants 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 rea-
son 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 require-
ment to preclude a RICO suit by a plaintiff whose injury was
entirely contingent on the injury of direct victims. 
Id. at 271-
74. 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 vio-
lations 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 ratio-
nale 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 determin-
ing 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 deter-
mine the portion of Ideal’s damages resulting from the RICO
violation, by evaluating the relative causal role of the defen-
dant’s fraud in lowering the defendant’s prices, and the rela-
tive 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 require-
ment “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.” Trol-
linger 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 plain-
tiff’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 require-
ment 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 con-
trary to centuries of precedent concerning proximate causa-
tion.

   [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, insur-
ance 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 compa-
nies’ 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 sce-
nario 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 ser-
vices, 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 vio-
lations who are likely to sue. See Newcal Indus., Inc. v. IKON
Office Solution, 
2008 WL 185520
, at *13 (9th Cir. 2008).13

   The County has attempted to limit Anza’s reach, character-
izing 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 bring-
ing 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.

  B.   The County’s Claim Against Pacheco

   The County’s claim against Albert Pacheco, the former
Executive Director of the Idaho Migrant Council, is founded
on two specific factual allegations: first, that Pacheco directed
his staff to assist undocumented immigrants in filing false
applications for the County’s indigent medical assistance
fund, which cost the County money; and second, that Pacheco
directed his staff to assist undocumented immigrants in pro-
curing public housing, and that those immigrants subse-
quently burdened the County’s public assistance and criminal
justice systems. As we noted above, neither of these allega-
tions supports a claim that the County was injured in its
“property,” and so the claim against Pacheco was properly
dismissed for that reason. The second allegation against
Pacheco, that he assisted immigrants in securing housing, suf-
fers from an additional flaw: lack of proximate causation.

   Here, as in Anza, the defendant’s alleged RICO violation
(assisting undocumented immigrants in securing housing) is
distinct from the cause of the plaintiff’s harm (increased
demand placing a burden on Canyon County’s public assis-
tance and criminal justice systems). Further, the consider-
ations cited in Anza demonstrate that proximate cause is
absent. See 
id. at 1997-98.
The causal chain between the
2760          CANYON COUNTY v. SYNGENTA SEEDS
RICO violation and the plaintiff’s harm is dubious for any
number of reasons: for example, the immigrants might have
secured public housing without Pacheco’s staff’s assistance,
and the immigrants might have remained in the County even
without being able to occupy public housing. It is even more
attenuated to postulate that having the benefit of public hous-
ing made the immigrants more prone to commit crimes,
require health care, or otherwise increase their use of County
services. Given the speculative nature of the causal links
between the alleged harm and Pacheco’s actions, a court
attempting to identify the specific portion of the County’s
financial loss caused by Pacheco’s actions would be sorely
pressed to do so. Finally, to the extent that Pacheco’s actions
were indeed unlawful, the most direct victim is the public
housing authority itself; there is little need to allow the
County to pursue this RICO claim in order to vindicate the
laws.

  [18] Thus, we conclude that proximate causation is lacking
as to this portion of the County’s claim against Pacheco.

                       CONCLUSION

   We conclude that the County lacks statutory standing under
18 U.S.C. § 1964(c) to proceed with its federal RICO claims
against the four defendant companies. First, the County has
failed to plead that it has been “injured in [its] business or
property” by reason of the defendants’ alleged RICO viola-
tions. Second, the County cannot show that its claimed inju-
ries were proximately caused “by reason of” the defendant
companies’ alleged RICO violations.

   As for the County’s claim against the individual defendant,
Pacheco, the County lacks standing to pursue this claim as
well: the County has not pled injury to its business or prop-
erty, and proximate causation is lacking as to at least a portion
of Pacheco’s alleged RICO violations.
             CANYON COUNTY v. SYNGENTA SEEDS          2761
  As a consequence, the judgment of the district court dis-
missing the County’s federal RICO claims is AFFIRMED.

Source:  CourtListener

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