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                REVISED, December 30, 2014
        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT     United States Court of Appeals
                                                                         Fifth Circuit

                                                                        FILED
                                                                   December 11, 2014
                                 No. 14-10452
                                                                     Lyle W. Cayce
                                                                          Clerk
JAIME VARELA, individually and on behalf of similarly situated individuals;
YESICA WIEGERT, individually and on behalf of similarly situated
individuals,

             Plaintiffs - Appellants

v.

DAVID BENITEZ GONZALES; ANA CRISTINA BENITEZ; INTELLIGENT
MEXICAN MARKETING, INCORPORATED; MARKETING AND
INVENTORY MANAGEMENT, L.L.C.,

             Defendants - Appellees




                Appeal from the United States District Court
                     for the Northern District of Texas


Before KING, DENNIS, and CLEMENT, Circuit Judges.
PER CURIAM:
      Appellants Jaime Varela and Yesica Wiegert bring this civil action
alleging RICO violations against their former employers, Appellees David
Benitez Gonzales, Ana Cristina Benitez, Intelligent Mexican Marketing, Inc.,
and Marketing and Inventory Management, L.L.C. Appellants allege that
Appellees’ hiring of undocumented workers resulted in the depression of their
wages. On appeal, Appellants challenge the district court’s dismissal of their
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                                       No. 14-10452
second amended complaint for failure to establish RICO standing, as well as
the district court’s denial of their motion for leave to file a third amended
complaint. For the reasons below, we affirm the judgment of the district court.
                    I.     Factual and Procedural Background
       Appellees Intelligent Mexican Marketing, Inc. (“IMM”) and Marketing
and Inventory Management, L.L.C. (“MIM”) are Texas-based entities engaged
in business marketing, advertising, and consulting services for companies in
the U.S. Hispanic market. 1 Appellee David Benitez Gonzales is the president
of IMM, and Appellee Ana Cristina Benitez is the president of MIM. Gonzales
and Benitez run the companies jointly, sharing employees, staff, and payroll
obligations.
       Appellant Jaime Varela worked as a sales representative for Appellees
in Dallas, Texas from February 2011 to June 2012. In that position, Varela
was tasked with delivering products to stores and negotiating product sales
with those stores. Varela, who was paid a base weekly salary and a commission
of four to six percent of his sales, earned approximately $46,000 annually.
Appellant Yesica Wiegert worked as a merchandiser for Appellees in Dallas,
Texas from August 2011 until July 2012, with an annual base salary of
$26,000. 2 Despite her different title, Wiegert performed approximately the
same functions as Varela.
       Appellants allege that their wages were depressed due to Appellees’
racketeering      activity—specifically,       Appellees’     “transporting,      harboring,
encouraging entrance of, and hiring of illegal aliens,” which “expanded the
labor pool [Appellees] draw from.” According to Appellants, Appellees took


       1  These facts are taken from Appellants’ second amended complaint, the pleading the
district court dismissed with prejudice. As discussed below, the district court also considered
additional allegations made in Appellants’ proposed third amended complaint, but denied
Appellants’ motion for leave to amend.
        2 Wiegert did not receive any commissions.

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                                     No. 14-10452
these actions because of the “significant wage savings” that result from hiring
undocumented workers. Appellants allege that Appellees used the enterprise
of MIM and IMM to knowingly hire undocumented workers in all positions,
including sales representatives.          Appellees allegedly hired at least ten
undocumented workers during the calendar years 2010, 2011, 2012, and 2013. 3
Moreover, Appellants allege that Appellees implemented policies to conceal,
harbor, and shield these workers.
      In support of their contention that Appellees’ actions caused Appellants’
alleged wage depression, Appellants rely on data used by the Bureau of Labor
Statistics showing that the average salary in Dallas and Houston for
employees in advertising and consulting services is between $78,000 and
$81,000. Appellants further allege that “[d]epressed wages necessarily occur
as a direct result of the expansion of the labor pool by the use of legal and
illegal workers,” and that this effect occurs “regardless of the market . . . power
of the employer.” In addition, Appellants allege that the dollar amount of the
wage depression caused by the use of undocumented workers is calculable with
reasonable precision, estimating that “the direct effect of the employment of
only ten undocumented workers out of one hundred workers is a loss of
between $8,455 and $14,959 per worker, per year.”
      Appellants, on behalf of themselves and others similarly situated, filed
this action against Appellees on March 27, 2013, alleging violations of the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.
§ 1961, et seq.     The First Amended Complaint (“FAC”) 4 alleged as RICO
predicate acts the transporting, harboring, and encouraging entrance into the



      3   Appellants also allege that Appellees hired at least ten such employees “during a
rolling twelve-month period in the last four years.”
        4 Appellees moved to dismiss the original complaint, but Appellants responded by

filing the FAC, thus mooting the motion.
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                                         No. 14-10452
U.S. of illegal aliens in violation of 8 U.S.C. § 1324(a)(1)(A)(ii)–(iv), as well as
the knowing hiring of at least ten illegal aliens during a twelve-month period,
in violation of 8 U.S.C. § 1324(a)(3)(A). The FAC further alleged that Appellees
used the enterprise of IMM and MIM to carry out these actions, and that
Appellees conducted the affairs of IMM and MIM through a pattern of
racketeering activity, in violation of 18 U.S.C. § 1962(c). Finally, the FAC
alleged that Appellees conspired to violate 18 U.S.C. § 1962(c), in violation of
18 U.S.C. § 1962(d). Appellees moved to dismiss the FAC; the district court
granted the motion to dismiss, without prejudice, on October 17, 2013. The
court determined that Appellants failed to sufficiently allege RICO standing—
i.e., that Appellees’ actions proximately caused Appellants’ injuries.
      Appellants filed a Second Amended Complaint (“SAC”) on November 14,
2013. In an attempt to cure the deficiencies with respect to proximate cause,
Appellants attached to the SAC an expert report purportedly authored by an
economist, Dr. Nathan Berg. 5 Appellees filed a motion to dismiss the SAC on
November 27, 2013, and Appellants filed a motion for leave to file a Third
Amended Complaint (“TAC”) on March 14, 2014. On March 31, 2014, the
district court issued an order addressing both motions. The court found the
amendments in the SAC insufficient to cure the deficiencies in the RICO
standing allegations. The court also determined that it would be inappropriate
for it to consider the expert report, as Appellants “use it entirely for Dr. Berg’s
opinion contained therein.” But even assuming the report could be considered,
the court found that it could not cure the issues with respect to proximate
cause. Therefore, the court dismissed the SAC with prejudice, as Appellants
had already filed three amended complaints, two of which “were filed after the
[district court] thoroughly discussed the implausibility of [Appellants]’ RICO


      5   No author is listed on the report itself.
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                                  No. 14-10452
standing allegations.” Having noted that the new allegations in the TAC added
nothing relevant to the RICO standing issues, the court also denied Appellants’
motion for leave to amend. The court entered final judgment on April 1, 2014.
Appellants filed a timely notice of appeal on April 15, 2014.
                           II.    Standard of Review
       A district court’s dismissal under Rule 12(b)(6) is reviewed de novo,
“accepting all well-pleaded facts as true and viewing those facts in the light
most favorable to the plaintiffs.” Randall D. Wolcott, M.D., P.A. v. Sebelius,
635 F.3d 757, 763 (5th Cir. 2011).       Rule 8 of the Federal Rules of Civil
Procedure does not require “detailed factual allegations, but it demands more
than    an   unadorned,    the-defendant-unlawfully-harmed-me        accusation.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted).
Accordingly, “the tenet that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclusions.” Id. A plaintiff’s
claim must contain “enough facts to state a claim to relief that is plausible on
its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
       A district court’s denial of a motion to amend is generally reviewed for
abuse of discretion. Ackerson v. Bean Dredging LLC, 589 F.3d 196, 208 (5th
Cir. 2009). Although leave to amend should be “freely give[n] . . . when justice
so requires,” Fed. R. Civ. P. 15(a)(2), a district court may refuse leave to amend
if the filing of the amended complaint would be futile, i.e., “if the complaint as
amended would be subject to dismissal,” Ackerson, 589 F.3d at 208. Where
“the district court’s denial of leave to amend was based solely on futility, we
apply a de novo standard of review identical, in practice, to the standard used
for reviewing a dismissal under Rule 12(b)(6).” City of Clinton v. Pilgrim’s
Pride Corp., 632 F.3d 148, 152 (5th Cir. 2010).




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                                 No. 14-10452
                                III.   Discussion
      A civil action under RICO may be brought by “[a]ny person injured in his
business or property by reason of a violation of” RICO’s substantive provisions.
18 U.S.C. § 1964(c) (emphasis added). The Supreme Court interpreted this
language in Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 265–
68 (1992), determining that “by reason of” connotes proximate cause, i.e., “some
direct relation between the injury asserted and the injurious conduct alleged.”
Id. at 268.     The Holmes court identified three justifications for this
requirement:   (1)   the   factual   difficulty   in    measuring   damages     and
distinguishing among other independent causal factors where the injury is
“less direct”; (2) the complexity of apportioning damages among plaintiffs
“removed at different levels of injury from the violative acts” to avoid the risk
of multiple recoveries; and (3) the notion that directly injured victims can be
relied upon to vindicate the law. Id. at 269–70. In Holmes, the plaintiff,
Securities Investor Protection Corporation—which had a duty to reimburse
customers of broker-dealers who became unable to meet financial obligations—
alleged that the defendant conspired to manipulate stock prices in violation of
federal securities laws, thus causing share prices to plummet and several
broker-dealers to liquidate.    Id. at 261–63.         The Court determined that
proximate cause was lacking, as “the link is too remote between the stock
manipulation alleged and the customers’ harm, being purely contingent on the
harm suffered by the broker-dealers.” Id. at 271.
      The Court revisited RICO standing in Anza v. Ideal Steel Supply Corp.,
547 U.S. 451, 453–54 (2006), in which the plaintiff, a competitor of the
defendants, alleged that the defendants injured it by failing to charge New
York sales tax to cash-paying customers, thus allowing the defendants to




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                                  No. 14-10452
reduce prices without affecting profit margins. 6 The Court noted that the
“central question . . . is whether the alleged violation led directly to the
plaintiff’s injuries.” Id. at 461 (emphasis added). The court determined that
the plaintiff lacked RICO standing, reasoning that “[t]he cause of [plaintiff]’s
asserted harms . . . is a set of actions (offering lower prices) entirely distinct
from the alleged RICO violation (defrauding the state).” Id. at 458. Moreover,
ascertaining damages would be difficult, as the defendant’s lowering of prices,
and the plaintiff’s lost sales, could have resulted from “any number of reasons
unconnected to the asserted pattern of fraud.” Id. at 458. The Court noted the
“speculative nature of the proceedings” that would be required to resolve the
claim, as a court would need to first calculate the portion of the defendant’s
price drop attributable to the fraud, then calculate the portion of the plaintiff’s
lost sales attributable to that relevant portion of the price drop. Id. at 459.
Moreover, the plaintiff was not the “immediate victim[]” of the alleged RICO
violations, as it was the State of New York that was defrauded, and “the State
can be expected to pursue appropriate remedies.” Id. at 460. Finally, the Court
found that the defendant’s intent to gain a competitive advantage over the
plaintiff could not “circumvent the proximate-cause requirement.” Id.
      The Supreme Court addressed civil RICO standing most recently in
Hemi Group, LLC v. City of New York, 559 U.S. 1, 4 (2010), in which the city
of New York filed suit against the defendant, a corporation that sold cigarettes
online to residents of the city.      The city alleged that the defendant, in
contravention of federal law, failed to submit customer information to the
states in which they shipped cigarettes, causing the city to lose millions of
dollars in unrecovered cigarette taxes. Id. The Court again found proximate


      6  The defendants in Anza concealed their conduct by submitting fraudulent tax
returns to the New York State Department of Taxation, constituting the alleged RICO
predicate acts of mail and wire fraud. Id. at 454.
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                                 No. 14-10452
cause lacking, as “the conduct directly responsible for the City’s harm was the
customers’ failure to pay their taxes,” while “the conduct constituting the
alleged fraud was [the defendant]’s failure to file [the required] reports.” Id.
at 11. The theory of causation was especially attenuated here: “The City’s
theory thus requires that we extend RICO liability to situations where the
defendant’s fraud on a third party (the State) has made it easier for a fourth
party (the taxpayer) to cause harm to the plaintiff (the City).” Id. at 11. Again
the Court determined that a separate party—here, the state of New York—
would be better situated to seek recovery. Id. at 11–12.
      We have not addressed whether legally authorized workers have RICO
standing to bring a claim based on allegations of depressed wages caused by
an employer’s hiring of undocumented workers, although several other circuits
have weighed in on this issue. Compare Williams v. Mohawk Indus., Inc., 465
F.3d 1277, 1287–92 (11th Cir. 2006) (holding that plaintiffs, employees of a
carpet and rug manufacturer, had standing to bring RICO claim based on
allegations that the manufacturer conspired to hire undocumented workers to
keep wages low), Trollinger v. Tyson Foods, Inc., 370 F.3d 602, 605, 615–20
(6th Cir. 2004) (allowing civil RICO claim to proceed where employees alleged
that Tyson Foods engaged in a scheme to depress wages by hiring
undocumented workers), and Mendoza v. Zirkle Fruit Co., 301 F.3d 1163,
1168–72 (9th Cir. 2002) (holding that a group of legally documented
agricultural workers, who alleged that the defendant fruit grower’s hiring of
undocumented workers directly harmed them by depressing their wages,
stated a civil RICO claim), with Simpson v. Sanderson Farms, Inc., 744 F.3d
702, 708–13 (11th Cir. 2014) (dismissing similar claims for failure to
sufficiently plead RICO injury or proximate cause), and Baker v. IBP, Inc., 357




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                                         No. 14-10452
F.3d 685, 692 (7th Cir. 2004) (noting, in dicta, “the difficulty of establishing
that unlawful hiring of aliens caused a diminution in . . . wages”). 7
       However, we need not decide whether a civil RICO claim based on
allegations of depressed wages caused by the hiring of undocumented workers
may ever proceed, as the allegations here are clearly insufficient to state such
a claim. 8 As a threshold matter, we must address Appellees’ argument that
the expert report attached to the SAC should not be considered in this analysis.
Federal Rule of Civil Procedure 10(c) states: “A copy of a written instrument
that is an exhibit to a pleading is a part of the pleading for all purposes.” In
Financial Acquisition Partners LP v. Blackwell, 440 F.3d 278, 285–86 (5th Cir.
2006), a Private Securities Litigation Reform Act case, the district court
refused to consider opinions contained in an expert report attached to a
complaint for purposes of a motion to dismiss, but considered the report’s
“nonconclusory, factual portions.” (internal quotation marks omitted).                         On
appeal, the Fifth Circuit made clear—and the parties here agree—that even if
factual portions of an expert’s report constitute an instrument under Rule 10,
opinions contained in the report may not be considered, as “opinions cannot
substitute for facts.” Id. Appellees argue that we should disregard even factual
portions of the expert report, as an expert report is not a “written instrument”
under Rule 10(c). We need not reach this issue. Even considering the report’s


       7  Many of these cases may be of minimal relevance, as they were decided prior to
Twombly, 550 U.S. 544, and Iqbal, 556 U.S. 662.
       8 A contrary conclusion is not compelled by the following Supreme Court language on

which Appellants rely heavily: “[A]cceptance by illegal aliens of jobs on substandard terms
as to wages . . . can seriously depress wage scales . . . of citizens and legally admitted aliens.”
DeCanas v. Bica, 424 U.S. 351, 356–57 (1976); see also Sure-Tan, Inc. v. NLRB., 467 U.S.
883, 892 (1984) (quoting DeCanas). Those cases involved separate legal questions from those
at issue here. See DeCanas, 424 U.S. at 356–57 (analyzing preemption of state immigration
statute); Sure-Tan, Inc., 467 U.S. at 892 (interpreting scope of National Labor Relations Act).
Even if we were required to accept that language as true, it only establishes that the hiring
of undocumented workers “can” be a but-for cause of depressed wages, not that it is always a
proximate cause.
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                                       No. 14-10452
factual assertions, along with the factual allegations of the SAC itself,
Appellants have failed to establish RICO standing.
       First, to the extent the SAC relies on conclusory assertions that
depressed wages are the “direct result” of the Appellees’ hiring of illegal
workers, we need not accept such conclusory allegations as true. See Iqbal,
556 U.S. at 679 (“[A] court considering a motion to dismiss can choose to begin
by identifying pleadings that, because they are no more than conclusions, are
not entitled to the assumption of truth.”); see also Simpson, 744 F.3d at 713
(“[T]he plaintiffs cannot plausibly establish proximate cause merely by tacking
a conclusory allegation onto their high-level market claims.”). 9 In addition, the
Supreme Court has made clear that the fact that Appellees may have intended
to depress wages does not “circumvent the proximate-cause requirement.”
Anza, 547 U.S. at 460. Rather, we must analyze the facts of the SAC to
determine whether Appellants’ theory of wage depression is plausible and
whether, under that theory, the alleged RICO “violation led directly to the
[Appellants]’ injuries.” Id. at 461 (emphasis added).
       It is unclear whether Appellants are alleging that Appellees’ hiring of
illegal workers depressed wages only within IMM and MIM, or within the
broader market including Appellees’ competitors. The former theory would be
plausible only if IMM and MIM had substantial market power in the relevant
labor market. See Baker, 357 F.3d at 692 (noting “the difficulty of establishing
that unlawful hiring of aliens cause[s] a diminution in [documented workers’]
wages” because “[w]orkers can change employers . . . [which] should cause
equilibration throughout the labor market”); cf. Mendoza, 301 F.3d at 1171



       9 Appellants argue that Simpson is inapposite, as the alleged RICO predicate act in
that case was the use of fraudulent forms to facilitate the hiring of undocumented workers,
rather than the hiring of illegal workers itself. While this is accurate, Simpson, 744 F.3d at
707, the case’s discussion of the RICO injury and standing requirements remains persuasive.
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                                        No. 14-10452
(“[T]he employees allege that the growers singularly have the ability to define
wages in this labor market . . . .”). The expert report attempts to resolve this
issue by “assum[ing] . . . monopolistic competition in the market” based on the
small number of firms requiring “labor with specialized skills matched to the
production of . . . Hispanic food branding, distribution, and inventory
management.” But even if we took this assumption as true, the SAC does not
adequately allege that Appellees hired a sufficient number of undocumented
workers to affect Appellants’ wages.                  Although Appellants allege that
Appellees hired at least forty to fifty undocumented workers from 2010 through
2014, the SAC does not state what proportion of Appellees’ total employees
these undocumented workers constitute. 10 Without an allegation as to the
proportion of undocumented workers within Appellees’ workforce, it is
impossible to determine whether the hiring of undocumented workers could
have had any plausible effect on overall wages. See Simpson, 744 F.3d at 710
(“The plaintiffs have said that [the defendant] has hired at least three hundred
undocumented workers since 2008. That’s the numerator. But the plaintiffs
have not pled the corresponding denominator.”); cf. Trollinger, 370 F.3d at 606
(“As a result of the scheme, the complaint alleges, over half of the workers at
15 of Tyson’s facilities are illegal immigrants . . . .”).
       If Appellants instead are alleging that Appellees’ hiring of illegal
workers depressed wages throughout the industry (as opposed to within MIM
and IMM), this theory too is implausible. Appellants make no attempt to




       10 In their briefing on appeal, Appellants assert that Appellees employ approximately
one hundred workers. But this fact is not alleged in the SAC; rather, it comes from
Appellants’ motion for class certification. We therefore may not consider it. See Lovelace v.
Software Spectrum Inc., 78 F.3d 1015, 1017 (5th Cir. 1996) (“[I]n deciding a motion to dismiss
for failure to state a claim, courts must limit their inquiry to the facts stated in the complaint
and the documents either attached to or incorporated in the complaint.”). Appellants’
proposed TAC also fails to include any allegation as to the size of Appellees’ workforce.
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                                  No. 14-10452
define this market, other than by referring to data concerning advertising and
consulting services employees in Dallas and Houston. Cf. Simpson, 744 F.3d
at 707 (“[T]he amended complaint does not specify or even estimate the number
of legal or illegal workers in the relevant market—however that market may
be defined.”) Nor have Appellants “describe[d] the relevant labor market in
quantifiable terms” by, for example, suggesting “what percentage of that
workforce is work-authorized.” Id. at 710. Even if we could infer the size of
this market, we deem implausible the notion that hiring fifty undocumented
workers would have any tangible effect on wages in such a market.               Cf.
Williams, 465 F.3d at 1289 (“[Defendant] . . . employ[ed] literally thousands of
illegal, undocumented aliens at its manufacturing facilities in north Georgia .
. . .”). “In certain markets,” it may be true that “there are enough illegal
workers in the mixed-status labor pool to logically infer the depression of wages
paid to legal workers.” Simpson, 744 F.3d at 709–10. But “[t]he conclusion is
not self-evident in all markets” and here, as in Simpson, “plaintiffs have
alleged no facts to render it plausible.” Id. at 710. Thus, Appellants have failed
to sufficiently allege proximate cause.
      In addition, Appellants’ allegations are insufficient to establish that they
suffered any injury, much less an “injur[y] . . . by reason of a violation of” RICO.
18 U.S.C. § 1964(c). Although Appellants conclusorily allege that they suffered
depressed wages, the only facts they allege to support that conclusion are
Varela’s and Wiegert’s respective annual salaries of $46,000 and $26,000, and
the average salary for employees in advertising and consulting services in
Dallas and Harris Counties ($78,000–$81,000). Although the latter figure is
purportedly derived from data used by the Bureau of Labor Statistics, it is
implausible to infer that the employees in that data set are comparable to
Appellants solely because Appellants work within the broad field of advertising
and consulting services. The expert report does not cure this deficiency. Even
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                                    No. 14-10452
assuming the truth of the report’s statement that this category “most closely
correspond[s] with the business operations of IMM,” (emphasis added), this
does not suggest that the employees working within that category are similar
to Appellants in terms of factors critical to one’s salary—e.g., job functions,
education, and work experience. 11 As Appellees suggest, this category may
“include a spectrum of jobs ranging from door-to-door salesperson to someone
handling national sales accounts.”          Moreover, through the expert report,
Appellants allege that Appellees “are differentiated from . . . other firms”
because they are “one among only a small number of buyers of labor with
specialized skills matched to the production of . . . Hispanic food branding,
distribution, and inventory management.” This suggests that Appellants are
not comparable to others within the generic field of advertising and consulting
services. Thus, it is implausible to infer that Appellants suffered any injury in
the form of depressed wages. See Simpson, 744 F.3d at 709 (“[Plaintiffs] have
not, for example, offered or even estimated the wages paid by any comparable
poultry processing plant employers in the relevant market . . . .”); Price v.
Pinnacle Brands, Inc., 138 F.3d 602, 606 (5th Cir. 1998) (per curiam)
(“[P]laintiffs’ conclusional allegations, unaccompanied by assertions of even
general facts to show injury, fail to satisfy the RICO standing requirement.”).
      Finally, the district court did not err by dismissing the SAC with
prejudice and denying Appellants leave to file the TAC. We have reviewed the
additional allegations contained in the TAC and conclude that they are
insufficient to remedy the defects discussed above. The new facts only add
detail to the allegations that Appellees hired undocumented workers at rates
lower than they would otherwise pay documented workers. This does not


      11 Indeed, Varela and Wiegert—who purportedly perform the same job in the same
industry—have vastly different salaries and pay structures, underscoring the relevance of
such factors.
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                                 No. 14-10452
render plausible the allegation that Appellants’ wages were depressed, or that
the hiring of undocumented workers caused such wage depression. The new
allegations do not cure, for example, Appellants’ failure to put forward
adequate comparators to Wiegert and Varela, or to define the size of either
Appellants’ workforce or the relevant market. Thus, because the TAC would
be subject to dismissal, the lower court did not err in denying leave to file the
TAC. See Ackerson, 589 F.3d at 208.
                                IV.   Conclusion
   For the foregoing reasons, the judgment of the district court is AFFIRMED.




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