Jesus Cuellar-Aguilar, et al v. Degeller Attractions, Inc.

Filing

OPINION FILED - THE COURT: William Jay Riley, Kermit E. Bye and Raymond W. Gruender AUTHORING JUDGE:Raymond W. Gruender (PUBLISHED) [4346483] [15-1219]

United States Court of Appeals
For the Eighth Circuit
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No. 15-1219
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Jesus Cuellar-Aguilar; Andres Andrade-Quijano; Francisco Bernardo-Gonzalez;
Andres Contreras-Hernandez; Jose Daniel Cuellar-Aguilar; Frederik
Hernandez-Luciano; Narciso Hernandez-Zavaleta; Porfirio Hernandez-Zavaleta;
Natanael Herrera-Barreda; Javier Lopez-Celis; Angel Martinez-Damaso; Esau
Morales-Toledano; Crisanto Ortiz-Ortiz; Samuel Ronquillo-Juarez; John Swart;
Enrique Vasquez-Alejo; Juan Manuel Vasquez-Alvarez; Shanna Powell; Shenene
Swanepoel, each individually and on behalf of all other persons similarly situated
lllllllllllllllllllll Plaintiffs - Appellants
v.
Deggeller Attractions, Inc.
lllllllllllllllllllll Defendant - Appellee
-----------------------------Advocates for Human Rights, et al.
lllllllllllllllllllllAmicus on Behalf of Appellant(s)
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Appeal from United States District Court
for the Eastern District of Arkansas - Little Rock
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Submitted: September 22, 2015
Filed: December 15, 2015
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Before RILEY, Chief Judge, BYE and GRUENDER, Circuit Judges.

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GRUENDER, Circuit Judge.
Appellants are nineteen workers who were employed by Deggeller Attractions,
Inc. (“Deggeller”), a Florida corporation that operates a traveling carnival in Arkansas
and various other states. Following their employment, the workers brought a class
action lawsuit on behalf of themselves and similarly situated Deggeller employees.
The workers alleged that Deggeller had breached its employment contracts and
violated the Arkansas Minimum Wage Act by underpaying its workers. The workers
further alleged that Deggeller fraudulently had under-reported the workers’ income
to the Internal Revenue Service (“IRS”), in violation of 26 U.S.C. § 7434. The district
court dismissed the breach of contract and tax fraud claims under Federal Rule of
Civil Procedure 12(b)(6). The court then declined to exercise supplemental
jurisdiction over the Arkansas minimum-wage claim. Finally, the court denied the
workers’ motion to alter judgment, in which the workers sought to file a second
amended complaint. We reverse the district court’s dismissal of the breach of contract
and tax-fraud claims and vacate its decision not to exercise supplemental jurisdiction
over the Arkansas minimum wage claim.
I.
In their complaint, the workers alleged that Deggeller recruited, hired, and
employed them under the H-2B temporary foreign worker program. H-2B visas allow
foreign citizens to work temporarily for non-agricultural American businesses. See
8 U.S.C. § 1101(a)(15)(H)(ii)(b). This type of visa became available as a result of the
Immigration Reform and Control Act of 1986, through which Congress divided the
H-2 program to provide either H2-A visas for agricultural work, id. at
§ 1101(a)(15)(H)(ii)(a), or H-2B visas for non-agricultural work, id. at
§ 1101(a)(15)(H)(ii)(b). A business seeking to import H-2B workers must obtain a
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temporary-employment certification from the Department of Labor.
20 C.F.R. § 655.20. To receive certification, the business first must demonstrate that
it has worked with the relevant state agency to recruit U.S. workers at the wage
determined by the National Prevailing Wage Center to represent the prevailing wage
for the position in the area. Id. at § 655.10-49. In addition, the Department of Labor
must post the job offer information in an electronic registry for public examination.
20 C.F.R. § 655.34. Only if insufficient numbers of U.S. workers are available will
the Department of Labor grant the employer a certification to import foreign workers.
Id. at § 655.51. As a condition of this certification, the law mandates that the
employer pay these foreign workers no less than the prevailing wage at which the
employer recruits U.S. workers. Id. at § 655.20. The purpose of the prevailing wage
requirement is to prevent foreign workers from adversely affecting American workers
seeking to perform the same work. See id. at § 655.0(a)(1).
The workers alleged that between 2009 and 2013, Deggeller applied for and
received certifications to hire foreign workers as ride operators, food servers, game
attendants, and ticket collectors at its carnivals. In order to obtain these certifications,
the workers alleged, Deggeller promised the Department of Labor that it would pay
any foreign workers it hired at least the prevailing wage applicable to these positions
in each location in which its carnival operated.
The workers further alleged that after Deggeller received the necessary
certifications, the company’s agents recruited both Mexican and South African
workers to come to the United States to perform the work described in the
certifications. According to the complaint, Deggeller paid these workers a flat weekly
rate regardless of the number of hours they worked. During the vast majority of
workweeks, the workers alleged, this payment represented less than the amount due
to the workers under the Department of Labor’s prevailing wage and less than the
amount mandated by the Arkansas minimum wage law. According to the workers,
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Deggeller further eroded the workers’ wage rate by refusing to pay them overtime and
by charging them more for housing than Deggeller paid to provide the facilities.
The workers brought three claims against Deggeller. First, they brought a
breach of contract claim under Arkansas common law, alleging that Deggeller had
violated the wage term of the workers’ employment contracts by paying less than the
hourly prevailing wage mandated by 20 C.F.R. § 655.20. Second, they claimed that
Deggeller had willfully filed W-2 forms containing fraudulent information regarding
the workers’ earnings, in violation of 26 U.S.C. § 7434. Third, the workers claimed
that Deggeller had paid them less than the Arkansas minimum wage. The district
court dismissed the breach of contract and tax fraud counts under Rule 12(b)(6), and
as a result of those dismissals, the court declined to exercise supplemental jurisdiction
over the Arkansas minimum-wage claim. See 28 U.S.C. § 1367(c)(3) (“The district
court[] may decline to exercise supplemental jurisdiction . . . if [it] has dismissed all
claims over which it has original jurisdiction.”). Finally, the court rejected the
workers’ request for leave to file a second amended complaint. The workers now
appeal.
II.
We review de novo a district court’s dismissal for failure to state a claim, taking
all facts alleged in the complaint as true. Trooien v. Mansour, 608 F.3d 1020, 1026
(8th Cir. 2010). Rule 12(b)(6) allows a defendant to move for dismissal based on a
plaintiff’s “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P.
12(b)(6). To survive a motion to dismiss under Rule 12(b)(6), “a complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir.
2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). A claim is plausible on
its face “when the plaintiff pleads factual content that allows the court to draw the
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reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal,
556 U.S. at 678. In making this determination, courts must draw all reasonable
inferences in favor of the plaintiff. Crooks v. Lynch, 557 F.3d 846, 848 (8th Cir.
2009).
A.
In this appeal, the workers argue that the district court erred in dismissing their
breach of contract claim. The district court based this dismissal on its finding that no
contract existed between the workers and Deggeller. The court observed that the
federal regulations governing the H2-B program lack any provision analogous to the
H-2A program’s statement that, in the absence of a written contract, “the required
terms of the job order and application . . . shall be the work contract.” 29 C.F.R.
§ 103(b). If the H-2B applications did not constitute employment contracts, the court
determined, then the workers lacked a contractual relationship with Deggeller.
In determining the existence of a state-law contract, however, we must look to
Arkansas law, rather than the pronouncements of federal agencies. Witzman v. Gross,
148 F.3d 988, 990 (8th Cir. 1998) (recognizing that federal courts exercising
supplemental jurisdiction over state-law claims must apply the substantive law of the
forum state); see also Cordova v. R & A Oysters, Inc., ---F. Supp. 3d---, 2015 WL
1934389 at *6 (S.D. Ala. Apr. 29, 2015) (declining to find that “a federal agency’s
thoughts on whether a contract exists does or could preclude the existence of a
contract under state law”). In order to state a claim for breach of contract under
Arkansas law, the workers needed to allege (1) that they had employment contracts
with Deggeller, (2) that Deggeller breached the terms of those contracts, and (3) that
Deggeller’s breach caused the workers to incur damages. See Ultracuts Ltd. v.
Wal-Mart Stores, Inc., 343 Ark. 224, 231-32, 33 S.W.3d 128, 133 (2000).

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With respect to the first element, the workers’ allegations describing their status
as Deggeller’s employees were sufficient to plead that they had contracts with the
company. Under Arkansas law, “[t]he [employment] relationship . . . may be
created . . . by conduct, which shows that the parties recognize that one is the
employer . . . and that the other is the employee,” ConAgra Foods, Inc. v. Draper, 372
Ark. 361, 366, 276 S.W.3d 244, 249 (2008), and this relationship “is contractual in
nature,” Turner v. Ark. Ins. Dep’t, 297 F.3d 751, 756 (8th Cir. 2002). The complaint’s
allegations demonstrated that the workers received offers to work for Deggeller and
that they accepted those offers by traveling to the United States to perform the offered
work. Those facts were sufficient to establish that a contractual relationship existed
between Deggeller and the workers under Arkansas law.
In addition to pleading that they had a contractual relationship with Deggeller,
the workers also needed to plead that Deggeller breached the terms governing that
relationship by failing to pay them the prevailing wage. In order for a contract term
to be enforceable, a plaintiff usually must allege that the parties to the contract reached
a “meeting of the minds” with respect to that particular term. Alltel Corp. v. Sumner,
360 Ark. 573, 576, 203 S.W.3d 77, 80 (2005).1 Under Arkansas law, however, a
“meeting of the minds” is not the exclusive mechanism for establishing the terms of
a contract. Arkansas courts have recognized that “the law in effect at the time a
contract is made forms a part of the contract as if it had been expressed in the

1

The workers argue that such a “meeting of the minds” occurred because
Deggeller’s agents did in fact offer them the prevailing wage, but the workers did not
directly allege this fact in their complaint. The workers alleged only that Deggeller
promised the Department of Labor that it would pay the prevailing wage when the
company applied for H-2B visas, that Deggeller recruited and hired the workers
“pursuant to” those visas, and that Deggeller subsequently failed to pay the workers
the prevailing wage. However, we need not decide whether these allegations were
sufficient to support a reasonable inference that Deggeller offered the workers the
prevailing wage. As described below, we are confident that courts applying Arkansas
law would import the prevailing wage into the contract as a matter of law.
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contract.” Woodend v. Southland Racing Corp., 337 Ark. 380, 384, 989 S.W.2d 505,
507 (1999); see also Norfolk & W. Ry. Co. v. Am. Train Dispatchers Ass’n, 499 U.S.
117, 130 (1991) (“Laws which subsist at the time and place of the making of a
contract, and where it is to be performed, enter into and form a part of it, as fully as
if they had been expressly referred to or incorporated in its terms.”) (quoting Farmers’
& Merchs.’ Bank of Monroe v. Fed. Reserve Bank of Richmond, 262 U.S. 649, 660
(1923)). Adhering to this principle, the Arkansas Supreme Court read a state salary
regulation into the terms of teacher contracts, overriding the teachers’ acceptance of
a lower salary from their school district. Fennell v. Sch. Dist. No. 13, 208 Ark. 620,
623-24, 187 S.W.2d 187, 189 (1945). Although Arkansas courts have not yet applied
this rule to the Department of Labor regulations at issue here, most courts facing this
question in other jurisdictions have held that H-2, H-2A, and H-2B workers can
enforce a federally mandated wage rate under state contract law. See, e.g.,
Salazar-Calderon v. Presidio Valley Farmers Ass’n, 765 F.2d 1334, 1341 (5th Cir.
1985) (adopting H-2 workers’ argument that “because [the H-2] regulations have the
force of law, these terms were part of [the workers’] employment agreement”);
Moodie v. Kiawah Island Inn Co., LLC, ---F. Supp. 3d---, 2015 WL 5037038, at *12
(D.S.C. Aug. 4, 2015) (“[T]he law and regulations applicable to the H-2B program at
the time were part of the contract.”); Frederick Cty. Fruit Growers Ass’n v. Martin,
703 F.Supp. 1021, 1031 (D.D.C. 1989) (“The terms of [an H-2A] job clearance order
which reflect DOL requirements become a part of the employment contract as a matter
of law” even where “none of the Farmworkers saw or relied upon the promise of
higher wages.”), aff’d 968 F.2d 1265 (D.C. Cir. 1992).2
2

Deggeller’s contention that Garcia v. Frog Island Seafood, Inc., 644 F. Supp.
2d 696, 717-19 (E.D.N.C. 2009) held to the contrary is incorrect. Garcia decided only
that H-2B workers had no contractual right to forty hours per week of work when
Department of Labor regulations did not “establish[] an actual obligation of the
number of hours that must be guaranteed each week.” Id. at 718. The court
distinguished between the non-binding minimum-hours guidelines and the wage
requirements, which “guaranteed [the workers] that their pay will be consistent with
the prevailing wage for the assigned locality.” Id. at 717. But see Bojorquez-Moreno
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Like a minimum-wage law, the Department of Labor regulations imposed upon
Deggeller a legal obligation to pay its H-2B employees no less than the prevailing
wage. See 20 C.F.R. § 655.20. In light of this legal duty, we hold that the terms of
the labor certification applications, including the agreement to pay the prevailing
wage, represented “the law in effect at the time [the] contract[s] [were] made,”
Woodend, 989 S.W.2d at 507, and therefore, under Arkansas law, these terms form
a part of the workers’ contracts. As a result, the workers’ allegation that Deggeller
failed to pay the prevailing wage stated a valid claim for breach of their employment
contracts.
B.
The workers also contend that the district court erred in dismissing their claim
for statutory damages under 26 U.S.C. § 7434. This statute allows a plaintiff to “bring
a civil action for damages” against any party that “willfully files a fraudulent
information return” on the plaintiff’s behalf. 26 U.S.C. § 7434(a). According to the
statute, a defendant found liable in any such action will owe to the plaintiff damages
“in an amount equal to the greater of $5,000 or the sum of--(1) any actual damages
sustained by the plaintiff . . . (2) the costs of the action, and (3) in the court's
discretion, reasonable attorneys’ fees.” Id. at § 7434(b).
The workers’ claim under this statute alleged that in 2009 and 2010 Deggeller
fraudulently under-reported some of its workers’ earnings on the workers’ W-2 forms
in order to reduce the business’s tax obligations under the Federal Insurance
Contributions Act, 26 U.S.C. § 3102, and the Federal Unemployment Tax Act, 26
U.S.C. § 3301. The district court dismissed the workers’ claim because the court
v. Shores & Ruark Seafood Co., Inc., 92 F. Supp. 3d 459, 467 (E.D. Va. 2015)
(relying on reasoning similar to Garcia’s to dismiss a breach of contract claim in
which the workers alleged that the prevailing wage included on H-2B visa
applications constituted a term of the workers’ contracts).
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found that a required element of such a claim was an allegation of actual damages, and
the workers had failed to allege that any actual damages had resulted from Deggeller’s
fraudulent filing.
We previously have held that where a federal statute provides for either
statutory damages or actual damages, plaintiffs who fail to allege actual damages
nonetheless satisfy both the injury in fact and redressability requirements of Article
III standing by suing for statutory damages. Hammer v. Sam’s E., Inc., 754 F.3d 492,
498-500 (8th Cir. 2014), cert. denied, 135 S. Ct. 1175 (2015). In Hammer, we
recognized that plaintiffs bringing claims under the Fair and Accurate Credit
Transactions Act, 15 U.S.C. § 1681c(g)(1), demonstrated an injury-in-fact “solely by
[alleging] the invasion of a legal right that Congress created.” 754 F.3d at 498
(emphasis omitted); see also Golan v. Veritas Entm’t, LLC, 788 F.3d 814, 820-21 (8th
Cir. 2015) (applying the same principle to claims brought under the Telephone
Consumer Protection Act, 47 U.S.C. § 227). We further held that the availability of
statutory damages showed that the plaintiffs’ injury was redressable. Hammer, 754
F.3d at 499.
Our reasoning in Hammer informs our decision here. Congress created a
statutory right for employees to have accurate tax documents filed on their behalf, and
it provided that employers who violated that right would be liable to the employee “in
an amount equal to the greater of $5,000 or the sum of” any actual damages, costs,
and attorneys’ fees. 26 U.S.C. § 7434(b) (emphasis added). Congress’s decision to
“describe[] these permissible damages in the disjunctive” indicates that a plaintiff “can
bring a claim to recover statutory damages . . . as an alternative to a claim for actual
damages.” Hammer, 754 F.3d at 500. Adhering to our decision in Hammer, we must
“reject [the] invitation to foreclose statutory damages in the absence of actual damages
when the language of the [statute] dictates otherwise.” Id. Because the workers
alleged that Deggeller intentionally filed fraudulent tax documents on their behalf,
their complaint stated a claim for statutory damages under 26 U.S.C. § 7434(b).
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III.
The workers’ complaint sufficiently alleged that they had employment contracts
with Deggeller, the terms of which included the Department of Labor’s prevailing
wage. The complaint therefore stated a valid claim that Deggeller breached those
contracts by failing to pay the required wage. The workers also stated a valid claim
for statutory damages under 26 U.S.C. § 7434(b). Accordingly, we reverse the district
court’s Rule 12(b)(6) dismissals of these claims and vacate its decision under 28
U.S.C. § 1367(c)(3) not to exercise supplemental jurisdiction over the Arkansas
minimum wage claim.

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