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Almanza v. United Airlines, Inc.

United States Court of Appeals, Eleventh Circuit

March 13, 2017

JULIAN ALMANZA, Individually, and on behalf of all others similarly situated, ALEJANDRO DAVISON, Individually, and on behalf of all others similarly situated, NICOLAS ARROYO, Individually, and on behalf of all others similarly situated, AIDA PEREZ, Individually, and on behalf of all others similarly situated, ANA ESCOBAR, Individually, and on behalf of all others similarly situated, MIGUEL OROZCO, Individually, and on behalf of all others similarly situated, Plaintiffs - Appellants,
v.
UNITED AIRLINES, INC., A corporation, DELTA AIR LINES, INC., AMERICAN AIRLINES, INC., A corporation, AEROVIAS DE MEXICO, S.A. DE C. V., A corporation, CONCESIONARIA VUELA COMPANIA DE AVIACION, S.A.P.I. DE C. V., ABC AEROLINEAS, S.A. DE C. V., A corporation, U.S. AIRWAYS, INC., Defendants-Appellees.

         Appeal from the United States District Court for the Southern District of Georgia D.C. Docket No. 2:15-cv-00033-LGW-RSB

          Before WILLIAM PRYOR and ROSENBAUM, Circuit Judges, and UNGARO, [*] District Judge.

          ROSENBAUM, Circuit Judge:

         Some find travel taxing. Plaintiffs in this case are among them, but not for the usual reasons. Plaintiffs are Mexican nationals who, in flying with the Defendant airlines to and from the United States and Mexico, were charged, as part of their airfare, a tourism tax purportedly required under Mexican law, even though Defendants knew that, under Mexican law, Plaintiffs were actually exempt from the tax. Defendants kept those improperly collected "taxes" for themselves instead of remitting them to Mexico (to which they were not owed) or back to Plaintiffs (who technically could have utilized an obscure reimbursement procedure to get their money back, if only they knew about it).

         Plaintiffs claim Defendants defrauded them, but because of the unique contours of federal aviation law, [1] Plaintiffs assert that they are left with no hopeful route to relief other than the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-68. Those who successfully navigate RICO's complexities are compensated with treble damages and attorney's fees, among other remedies. In this case, though, the district court dismissed Plaintiffs' RICO claims on the pleadings. Because Plaintiffs failed to plead a RICO enterprise, we affirm the district court's dismissal.

         I.

         A.[2]

         Before we embark on our journey through Plaintiffs' RICO allegations, some background knowledge is necessary. Defendants are international air-transportation companies that transport passengers to and from the United States and Mexico. To facilitate their business in Mexico, Defendants all became, at one point or another, members of the Mexican legal entity Cámara Nacional de Aerotransportes ("CANAERO"). Members of CANAERO use CANAERO as a means of coordinating Mexico-related airline matters with each other and with Mexican authorities. Towards this end, "[e]ach of the Defendants regularly participates in meetings with each other and various Mexican authorities under the aegis of CANAERO."

         Mexico imposes a tax (the "Mexico Tourism Tax" or "Tax") on certain travelers who arrive in Mexico on flights that originated outside of Mexico. Among those legally exempt from the Tax are Mexican nationals and children under the age of two. Because Defendants transport passengers to and from Mexico and the United States, Defendants' businesses are affected by the Tax.

         To facilitate collecting the Tax, Mexico, Defendants, other non-party airlines, and CANAERO itself entered into an agreement (which we refer to as the "Contract") so that the parties could, among other things, implement procedures allowing the airlines to collect the tax from the passengers who owed it.[3]Plaintiffs believe their Complaint to be the first instance in which the Contract was made public, and they allege that CANAERO and Defendants had actively tried to keep the Contract secret.

          The Contract expressly designated so-called "Exempt Travelers, " from whom the CANAERO member airlines could not collect the Mexico Tourism Tax. These Exempt Travelers are "citizens of Mexico, children under the age of two, and foreigners with resident status in Mexico." Defendants were not authorized to and agreed not to collect the Mexico Tourism Tax from them. Plaintiffs and the class they hope to represent are Exempt Travelers.

         Through the Contract, Defendants agreed to procedures by which they would remit to Mexico the Mexico Tourism Tax that they collected from passengers who owed it. For example, one of these procedures required Defendants to fill out and submit to Mexico manifest forms showing the number of passengers per flight to whom the tax applied.

         But according to Plaintiffs, Defendants did not simply collect the Tax from only the passengers who legally owed it; rather, Defendants collected the tax from all passengers, including Exempt Travelers. In fact, Plaintiffs complain that Defendants took them for a ride, representing to the Exempt Travelers that they were required to pay the Tax, even though Defendants knew that not to be true. Plaintiffs allege that Defendants accomplished this by not including the Tax on the "face of the tickets, " instead "bur[ying it] in the details of the costs and fees of each ticket" as a line item and then not advising Exempt Travelers that they were entitled to a refund.[4] The amount of the Tax varied, but it was usually between $20.00 and $25.00. Plaintiffs allege that this ticketing practice was an illegal, multi-year, multi-million dollar scheme.

         In Plaintiffs' view, not only did this practice defraud customers, but it also violated the Contract: Defendants were obligated to have in place procedures to identify Exempt Travelers so that only non-exempt passengers would be taxed, and Defendants also agreed to provide refunds to any passengers who were improperly taxed. Plaintiffs further claim that, despite possessing adequate information to ensure no passenger would be improperly taxed (i.e., having passengers' passport numbers and nationalities), Defendants "([i]) charged Exempt Travelers the Mexico Tourism Tax, (ii) concealed from Exempt Travelers that they were not subject to the Mexico Tourism Tax, (iii) failed to offset ticket prices charged for such Exempt Travelers, and (iv) failed to refund the tax." On top of that, Plaintiffs contend that Defendants retained the improperly assessed taxes and reinvested the proceeds into their respective operations.

         Finally, Plaintiffs complain that Defendants engaged in tactics to obfuscate their alleged scheme. According to Plaintiffs, their injuries were difficult to discover because (1) separate and apart from the Contract, Defendants had an agreement among themselves, whether express or implied, to create and perpetrate their fraudulent tax-collection practices as a collective scheme, and (2) Defendants in fact carried out this illicit side agreement over many years.

         B.

         Plaintiffs filed their Complaint in March 2015. They bring their claims under RICO, which provides a private right of action for treble damages to "[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter." 18 U.S.C. § 1964(c). Section 1962, in turn, lists four types of RICO violations. See id. § 1962. Plaintiffs assert they have suffered violations of three of these provisions: § 1962(c), which proscribes participating in the conduct of the affairs of an enterprise engaged in interstate commerce, through a pattern of racketeering activity (Count One); § 1962(a), which prohibits investing income gained from a pattern of racketeering activity into such an enterprise (Count Two); and § 1962(d), which renders conspiracy to violate § 1962(a), (b), or (c) a crime (Count Three). The predicate acts making up the pattern of racketeering activity for these claims are violations of the federal mail and wire-fraud statutes, 18 U.S.C. §§ 1341, 1343.

         Defendants filed motions to dismiss the complaint for failure to state claims under RICO, among other reasons. The district court heard oral argument on the motions, after which the court invited the parties to submit supplemental briefing. In the supplemental briefing, Plaintiffs requested leave to amend and filed a proposed amended complaint, adding details about Defendants' relationships with CANAERO. The new allegations pled in that proposed amended complaint are discussed below as necessary.

         Ultimately, the district court granted the motions to dismiss, denied Plaintiffs leave to amend on the basis that the proposed amended complaint was futile, and dismissed the case with prejudice. The court determined that Plaintiffs failed to plead the existence of a RICO "enterprise" or a "pattern of racketeering activity." Because the court also found that the additional allegations in the proposed amended complaint did not remedy the deficiencies, it dismissed the case with prejudice.[5]

         II.

         A district court's dismissal of a complaint with prejudice for failure to state a claim is subject to a de novo standard of review. See Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1288 (11th Cir. 2010). We must accept the factual allegations in the complaint as true and construe them in the light most favorable to the plaintiff, see Strickland, 772 F.3d at 882, but the allegations must nevertheless state a claim for relief that is plausible-and not merely possible-on its face, see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Under this standard, "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678.

         III.

         Plaintiffs bring their claims under RICO's private cause of action, 18 U.S.C. § 1964(c). To state a claim for relief under § 1964(c), a plaintiff must plead facts establishing three elements: (1) a violation of 18 U.S.C. § 1962; (2) injury to business or property; and (3) causation. See Avirgan v. Hull, 932 F.2d 1572, 1577 (11th Cir. 1991).

         As we have noted, § 1962, in turn, outlaws various kinds of racketeering conduct: subsection (a) prohibits investing income gained from a pattern of racketeering activity into an enterprise engaged in interstate commerce; subsection (b) forbids using a pattern of racketeering activity to acquire or maintain any interest in or control over such an enterprise; and subsection (c) proscribes participating in the conduct of the affairs of such an enterprise through a pattern of racketeering activity. See Pelletier v. Zweifel, 921 F.2d 1465, 1495-96 (11th Cir. 1991), abrogated on other grounds by Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008). Subsection (d) criminalizes conspiring to violate subsections (a), (b), or (c). See Pelletier, 921 F.2d at 1496.

         Plaintiffs sought relief under subsections (a), (c), and (d). Each of these subsections requires Plaintiffs to have alleged the existence of an "enterprise"- subsections (a) and (c) require this explicitly, see 18 U.S.C. § 1962(a), (c), and subsection (d) requires it implicitly by virtue of incorporating the elements of subsection (c). See United States v. Starrett, 55 F.3d 1525, 1543 (11th Cir. 1995). Though Plaintiffs make a strong effort to sufficiently allege the existence of an "enterprise, " they ultimately fail.

         A.

         RICO defines an "enterprise" as "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). In the simple case, the enterprise is an "individual, partnership, corporation, association, or other legal entity." Id. The more challenging case occurs when the enterprise is alleged to be a "union or group of individuals associated in fact although not a legal entity." Id. Plaintiffs ...


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