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Plausibility Impacts Damages Calculations in the Eleventh Circuit

The Eleventh Circuit recently affirmed the dismissal of a putative class action because the complaint failed to plausibly plead damages overall and failed to plead that the alleged RICOdamages were proximately caused by the racketeering activity.   Simpson et. al. v. Sanderson Farms, Inc., 2014 WL 888498 (11th Cir. March 7, 2014). Plaintiffs alleged that Defendant hired illegal aliens and completed fraudulent I-9 immigration forms, which resulted in lower wages for legal work-authorized employees.

The Court noted that Plaintiffs had only pled injury in the “highest order of abstraction and with only conclusory statements.” Id. at *5. The Court was troubled that Plaintiffs did not offer “market data” from which the court could “plausibly [] infer a gap” between wages actually earned and that which would have been earned but for the alleged wrongful conduct. Id. Moreover, the Eleventh Circuit noted that Plaintiffs “provided no direct evidence of lost profits.” This inquiry by the Eleventh Circuit into evidence of damages indicates a new outlook on “notice pleading” as it existed prior to the Twombly and Iqbal rulings requiring “plausibility.”

With respect to the RICO damages, the court held that Plaintiffs failed to adequately allege damages occurring as a result of racketeering activity. Id. at * 8. Initially, the court based this ruling on the failure of the damages allegations overall. But, the court went on to analyze the damages with respect to RICO and found that no proximate-causal relationship between the injury and conduct was sufficiently pled. Plaintiffs allegations included language such as “the violations of § 1546 are a direct and substantial cause of the depressed wage rates,” but the Eleventh Circuit rejected that language as based solely on conclusory allegations.

The practical lesson for all litigators arising from Simpson is that allegations of damage must now be much more detailed and based on evidence, rather than formulaic recitations as has historically been the practice in the Eleventh Circuit.

Scott L. Bonder is a trial lawyer who handles business litigation cases, including the defense and prosecution of RICO claims, in federal and state courts nationwide.

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