Abraham v. Singh

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT February 26, 2007
_______________________
Charles R. Fulbruge III
No. 05-30860 Clerk
_______________________

ROY ABRAHAM; ET AL.,

Plaintiffs,

ROY ABRAHAM; JACOB GEORGE; CICIL ANTONY AKKARA; APPALA RAJU
ALLIPILLI; SAMUEL KUTTY AMPAZHATTHUMMOOTIL; ET AL.,

Plaintiffs-Appellants,

versus

B J SINGH, individually etc; ET AL.,

Defendants,

CHAD CHANDLER, individually; FALCON STEEL STRUCTURES, INC.,

Defendants-Appellees.

On Appeal from the United States District Court
for the Eastern District of Louisiana
No. 2:04-CV-44

Before JONES, Chief Judge, and WIENER and BARKSDALE, Circuit
Judges.

EDITH H. JONES, Chief Judge:

What began with promising hopes for employment in the

United States culminated in this RICO lawsuit by Indian citizens

who were recruited under false pretenses to become steelworkers in

Louisiana. The Plaintiffs appeal the district court’s Federal Rule

of Civil Procedure 12(b)(6) dismissal of their claim that

Defendants violated the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968. Because the

Plaintiffs have adequately pled a pattern of racketeering activity

and stated claims under 18 U.S.C. § 1962(c) and (d), we REVERSE the

dismissal of their RICO claim and REMAND for further proceedings.

I. BACKGROUND

According to the allegations in a lengthy complaint, the

Plaintiffs were recruited by Chad Chandler between November 2000

and December 2002 to travel to the United States to work for his

company, Falcon Steel Structures, Inc. (“Falcon Steel”). To

persuade Plaintiffs to travel to the United States, Chandler

allegedly made various misrepresentations regarding the terms of

their employment and permanent resident status. Among other

things, Chandler promised the Plaintiffs full-time employment for

at least two years at Falcon Steel. Defendants obtained H2B visas

for Plaintiffs, which they allege bound them to Falcon Steel, and

arranged their transportation from India to Houma, Louisiana. In

return, each Plaintiff paid Chandler between $7,000 and $20,000,

often by obtaining loans in India at high interest rates.

Upon arriving in the United States, Plaintiffs found that

things were not as promised. Contrary to what they had been told,

Falcon Steel was not a manufacturing facility and had no jobs for

them. Defendants confiscated their passports and housed them in

poor conditions with little food. Chandler threatened Plaintiffs

with punitive measures for complaining about the lack of employment

2
or food. Plaintiffs were limited in their ability to find other

work because of their limited-purpose visas, and those who inquired

about employment elsewhere were threatened with imprisonment and

deportation. Those Plaintiffs who found other employment, often by

being “farmed out” by Falcon Steel, were assessed arbitrary fees

and had their wages skimmed. Chandler also demanded an additional

$5,000 for the already promised permanent resident status.

Defendants continued their unlawful scheme, Plaintiffs

alleged, until this lawsuit was filed in January 2004. Plaintiffs

sued Chandler and Falcon Steel, alleging human trafficking, state

law claims of breach of contract and fraudulent inducement, and

RICO violations. The alleged racketeering acts included money

laundering, peonage, visa fraud, immigration violations, Travel Act

violations, and Hobbs Act extortion. As required by local rules,

Plaintiffs prepared a precisely worded RICO statement.

Defendants moved to dismiss the complaint for failure to

state a claim upon which relief can be granted. Concluding that

the Plaintiffs had not shown that the predicate acts posed a threat

of continuing racketeering activity, the district court granted the

motion, dismissed the RICO claim, and declined to exercise

supplemental jurisdiction over Plaintiffs’ state-law claims.

Plaintiffs now appeal.1

II. STANDARD OF REVIEW

1
Plaintiffs do not appeal the district court’s dismissal of their
human-trafficking claim.

3
 This court reviews de novo the district court’s dismissal

for failure to state a claim pursuant to Federal Rule of Civil

Procedure 12(b)(6). Nolen v. Nucentrix Broadband Networks Inc.,

293 F.3d 926, 928 (5th Cir. 2002). We accept all of the

Plaintiffs’ allegations as true and uphold the district court’s

dismissal “only if it appears that no relief could be granted under

any set of facts that could be proven consistent with the

allegations.” Word of Faith World Outreach Ctr. Church, Inc. v.

Sawyer, 90 F.3d 118, 122 (5th Cir. 1996) (quoting Rubinstein v.

Collins, 20 F.3d 160, 166 (5th Cir. 1994)); Crowe v. Henry, 43 F.3d

198, 203 (5th Cir. 1995).

III. DISCUSSION

A. Pattern of Racketeering Activity

Plaintiffs allege that Defendants violated 18 U.S.C.

§ 1962(a), (b), (c), and (d). These RICO subsections state, in

their simplest terms, that:

(a) a person who has received income from a pattern of
racketeering activity cannot invest that income in
an enterprise;
(b) a person cannot acquire or maintain an interest in
an enterprise through a pattern of racketeering;
(c) a person who is employed by or associated with an
enterprise cannot conduct the affairs of the
enterprise through a pattern of racketeering
activity; and
(d) a person cannot conspire to violate subsections
(a), (b), or (c).

Crowe, 43 F.3d at 203. Regardless of subsection, RICO claims under

§ 1962 have three common elements: “(1) a person who engages in

4
(2) a pattern of racketeering activity, (3) connected to the

acquisition, establishment, conduct, or control of an enterprise.”

Word of Faith, 90 F.3d at 122 (quoting In re Burzynski, 989 F.2d

733, 741-42 (5th Cir. 1993)).

As in Word of Faith, the central issue in this appeal is

whether the Plaintiffs adequately pled a “pattern of racketeering

activity.” See id. “Racketeering activity” consists of two or

more predicate criminal acts that are (1) related and (2) “amount

to or pose a threat of continued criminal activity.” Id. (citing

H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239, 109 S. Ct. 2893,

2900 (1989)).

The district court assumed that the Plaintiffs had

sufficiently alleged that the predicate acts were related.

Addressing the continuity prong, however, the court found that the

predicate acts did not pose a threat of continuing racketeering

activity. We, too, need only address the continuity prong of the

analysis.

In H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S.

229, 109 S. Ct. 2893 (1989), the Supreme Court held, “[c]ontinuity

is both a closed- and open-ended concept, referring either to a

closed period of repeated conduct, or past conduct that by its

nature projects into the future with a threat of repetition.” Id.

at 241, 109 S. Ct. at 2902. Plaintiffs have alleged open-ended

continuity, which can be shown by demonstrating either that the

predicate acts establish a “specific threat of repetition extending

5
indefinitely into the future” or “that the predicates are a regular

way of conducting the defendant’s ongoing legitimate business.”

Word of Faith, 90 F.3d at 122 (quoting H.J. Inc., 492 U.S. at 242-

43, 109 S. Ct. at 2902). As the Court noted in H.J. Inc.,

“Congress was concerned in RICO with long-term criminal conduct.”

492 U.S. at 242, 109 S. Ct. at 2902.

Nevertheless, “[i]t is unnecessary to delve into the

arcane concepts of a closed-end or open-ended continuity under

RICO” in cases “where alleged RICO predicate acts are part and

parcel of a single, otherwise lawful transaction,” for in such

cases, “a ‘pattern of racketeering activity’ has not been shown.”

Word of Faith, 90 F.3d at 123. For example, in Word of Faith, we

held that a church had failed to satisfy the continuity requirement

where the church alleged predicate acts involving the production of

television news programs that were part of a single, lawful

endeavor. Id.

Following Word of Faith, the district court found that

the Plaintiffs’ RICO claim failed for lack of continuity because

the only adequately alleged predicate acts took place in the

context of the Plaintiffs’ recruitment and entry into the United

States. The court reasoned that, as in Word of Faith, the

Defendants’ actions were part of a single transaction because the

predicate acts — recruiting, collecting fees, and obtaining

fraudulent visas — all took place in the past. The court concluded

that the predicate acts neither threatened long-term criminal

6
activity nor constituted Defendants’ regular way of conducting

their business.

In light of the liberal pleading standard with which the

Plaintiffs’ allegations must be viewed, see Jones v. Bock,

127 S. Ct. 910, 919 (2007), the district court erred in turning the

Supreme Court’s explanation of the continuity prong into a

stringent pleading requirement. See Whelan v. Winchester Prod.

Co., 319 F.3d 225, 231 (5th Cir. 2003); see also H.J. Inc.,

492 U.S. at 241, 109 S. Ct. at 2902 (“[Showing continuity] may be

done in a variety of ways, thus making it difficult to formulate in

the abstract any general test for continuity. We can, however,

begin to delineate the requirement.”). For pleading purposes, we

must determine whether a pattern of racketeering has been alleged

that is sufficiently similar to what the Supreme Court contemplated

in its H.J., Inc. discussion and what this Court has held to

constitute a pattern of racketeering activity. At this early

stage, a plaintiff’s burden is not tied to the precise language

that the Supreme Court used but to the Court’s general explanation

of the statute. Thus, the Court itself provided examples of how

the continuity element may be satisfied and cautioned that the

analysis “depends on the specific facts of each case . . . [and]

cannot be fixed in advance with such clarity that it will always be

apparent.” Id. at 242-43, 109 S. Ct. at 2902.

Based on these standards, Plaintiffs have sufficiently

pled “a continuity of racketeering activity, or its threat.” Id.

7
at 241, 109 S. Ct. at 2902. The Plaintiffs did not allege

predicate acts “extending over a few weeks or months and

threatening no future criminal conduct.” Id. at 242, 109 S. Ct. at

2902. Rather, they alleged that the Defendants engaged in at least

a two-year scheme involving repeated international travel to

convince up to 200 or more Indian citizens to borrow thousands of

dollars to travel to the United States only to find upon their

arrival that things were not as they had been promised. See, e.g.,

United States v. Delgado, 401 F.3d 290, 298 (5th Cir. 2005); Abell

v. Potomac Ins. Co., 946 F.2d 1160, 1168 (5th Cir. 1991).

Moreover, the allegations include not just Plaintiffs’ recruitment

in India but also their treatment in the United States. Unlike our

precedents identifying a single illegal transaction, there are

multiple victims, and there is no reason to suppose that this

systematic victimization allegedly begun in November 2000 would not

have continued indefinitely had the Plaintiffs not filed this

lawsuit. Cf. Word of Faith, 90 F.3d at 123; In re Burzynski,

989 F.2d 733, 743 (5th Cir. 1993); Calcasieu Marine Nat’l Bank v.

Grant, 943 F.2d 1453, 1464 (5th Cir. 1991); Howell Hydrocarbons,

Inc. v. Adams, 897 F.2d 183, 193 (5th Cir. 1990); Delta Truck &

Tractor, Inc. v. J.I. Case Co., 855 F.2d 241, 244 (5th Cir. 1988).

After a careful review of the complaint, we are confident

that the allegations satisfy the liberal pleading standard and

allege continuity of racketeering activity. The district court

erred in granting the Defendants’ motion to dismiss on this basis.

8
 B. Violations of 18 U.S.C. § 1962(a), (b), (c), and (d)

Defendants also contend that the Plaintiffs have failed

to adequately allege violations of the RICO subsections. See

Crowe, 43 F.3d at 205. We agree that the complaint fails even the

liberal pleading standard for subsections (a) and (b), but

Plaintiffs have adequately alleged violations of subsections (c)

and (d).

1. 18 U.S.C. § 1962(a)

To state a claim under subsection (a), a plaintiff must

allege an injury from “the use or investment of racketeering

income.” St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425,

441 (5th Cir. 2000) (citations omitted). An injury arising “solely

from the predicate racketeering acts themselves is not sufficient.”

Nolen, 293 F.3d at 929. In this case, Plaintiffs have alleged

nothing more than that their injuries were caused by the

Defendants’ “use and investment of income derived from the pattern

of racketeering activity.” Plainly, Plaintiffs’ alleged injuries

stem not from the use or investment of racketeering income, but

from the Defendants’ alleged predicate acts of visa fraud,

immigration violations, Travel Act violations, and money

laundering. See id. at 929-30; Williamson, 224 F.3d at 441; cf.

Crowe, 43 F.3d at 205. Conclusory allegations are insufficient to

state a claim under § 1962(a). See Nolen, 293 F.3d at 928; Whelan,

319 F.3d at 230.

9
 2. 18 U.S.C. § 1962(b)

We have interpreted subsection (b) as stating that “a

person cannot acquire or maintain an interest in an enterprise

through a pattern of racketeering.” Crowe, 43 F.3d at 203.

Plaintiffs must show that their injuries were “proximately caused

by a RICO person gaining an interest in, or control of, the

enterprise through a pattern of racketeering activity.” Id. at

205. Plaintiffs, again in conclusory terms, averred that the

Defendants “have, through a pattern of racketeering activity,

maintained . . . an interest in or control of an enterprise.”

Their complaint describes no facts that would show a causal

relationship between their injuries and the Defendants’ acquisition

or maintenance of an interest in the enterprise. See id. at 205

(“there must be a nexus between the claimed RICO violations and the

injury suffered”); Old Time Enters., Inc. v. Int’l Coffee Corp.,

862 F.2d 1213, 1219 (5th Cir. 1989). Because of this critical

deficiency, Plaintiffs’ § 1962(b) claim must be dismissed.

3. 18 U.S.C. § 1962(c)

Subsection (c) prohibits any “‘person employed by or

associated with any enterprise’ from participating in or conducting

the affairs of the enterprise through a pattern of racketeering

activity.” Crowe, 43 F.3d at 205 (emphasis in original). To state

a claim under subsection (c), a plaintiff must demonstrate, inter

alia, that the RICO person is distinct from the RICO enterprise.

10
Id. at 205-06; Whelan, 319 F.3d at 229. In this case, Plaintiffs

have identified Chandler as the RICO person and Falcon Steel as the

RICO enterprise. This allegation is sufficient to demonstrate that

the RICO person, an individual employee of the corporation, is

distinct from the RICO enterprise, the corporation itself. See

Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 163,

121 S. Ct. 2087, 2091 (2001) (“The corporate owner/employee, a

natural person, is distinct from the corporation itself, a legally

different entity”); Williamson, 224 F.3d at 447; see also Khurana

v. Innovative Health Care Sys., Inc., 130 F.3d 143, 156 (5th Cir.

1997), vacated on other grounds, Teel v. Khurana, 525 U.S. 979,

119 S. Ct. 442 (1998). Accordingly, Plaintiffs have alleged

sufficient facts to state a claim under § 1962(c).

4. 18 U.S.C. § 1962(d)

Plaintiffs have also alleged that Defendants conspired to

violate § 1962(a), (b), and (c). “[B]ecause the core of a RICO

civil conspiracy is an agreement to commit predicate acts, a RICO

civil conspiracy complaint, at the very least, must allege

specifically such an agreement.” Crowe, 43 F.3d at 206 (quoting

Tel-Phonic Servs., Inc. v. TBS Int’l, Inc., 975 F.2d 1134, 1140

(5th Cir. 1992)). Plaintiffs specifically alleged that the

Defendants entered into an agreement and that each agreed to commit

at least two predicate acts of racketeering. These allegations are

11
specific enough to state a claim that the Defendants conspired to

violate § 1962(c).

IV. CONCLUSION

For the reasons stated above, we conclude that the

Plaintiffs adequately pleaded violations of 18 U.S.C. § 1962(c) and

(d) but not § 1962(a) and (b). We express no view on the ultimate

determination of the Defendants’ liability. In a related matter,

we are confident that, on remand, the district court will

reconsider its decision to decline supplemental jurisdiction over

the Plaintiffs’ state law claims. Accordingly, we REVERSE the

district court’s order dismissing Plaintiff’s RICO claim and REMAND

to the district court for further proceedings.

REVERSED and REMANDED.

12