Defendants in a putative class action lawsuit alleging wage fixing antitrust claims no longer need to count sheep to rest easily. A district court judge in Colorado recently denied plaintiffs’ request for leave to amend, effectively dismissing claims brought by a group of shepherds working under the H-2A Visa Program, which covers agricultural guest workers. In Llacua et al. v. Western Range Association et al. report and recommendation adopted, plaintiffs alleged that two trade associations representing sheep ranchers, and some of their members, conspired to suppress the wages paid to shepherds in violation of the Sherman Act. The Court adopted the Magistrate Judge’s ruling that plaintiffs failed to plausibly allege a conspiracy and failed to allege facts sufficient to warrant granting leave to amend their Complaint a third time, describing the Magistrate Judge’s opinion as a “masterful[] and cogent[]” analysis of the substantive allegations. Because this is one of the first judicial opinions following the DOJ and FTC’s recent announcement of an initiative to prosecute wage fixing claims, the Magistrate’s report and recommendation provides important guidance for associations and their members facing similar claims.

Under the H2-A Visa Program, the Department of Labor (“DOL”) sets a monthly wage floor for shepherds. Plaintiffs asserted that Defendants conspired to fix wages by agreeing to pay wages only at the minimum wage floor set by DOL. Plaintiffs alleged five categories of concerted action, including (1) membership in trade associations; (2) opportunities to communicate regarding recruitment of shepherds; (3) job orders detailing identical wages paid; (4) common motives among ranches to depress wages; and (5) a history of low wages paid to shepherds. The Magistrate Judge, in his report and recommendation, held that plaintiffs’ allegations were based solely on allegations of circumstantial evidence, and not on direct facts establishing an agreement. Evaluating each category of allegations in turn, the Magistrate Judge held that, stripped of plaintiffs’ conclusory verbiage, plaintiffs’ claims were “factually neutral” and were equally likely to result from independent action in light of DOL regulations and the H-2A program that set the wage floor.

The Magistrate Judge also addressed plaintiffs’ novel arguments regarding the intersection of DOL rules, antitrust law, and association law. Plaintiffs alleged some Defendants paid higher wages to guest worker shepherds, but did not disclose that to DOJ in violation of H-2A compliance rules, which require that employers offer domestic workers “no less than the same benefits, wages, and working conditions that the employer is offering, intends to offer, or will provide to H-2A workers.” 20 C.F.R. § 655.122(a). Defendants’ decision not to report and risk fines and debarment from the H-2A program, Plaintiffs alleged, was in furtherance of protecting the wage fixing agreement. Though the Magistrate Judge recognized that a ranch’s nondisclosure could violate regulations, the Magistrate Judge held that regulatory violations alone do not suggest a conspiracy under Twombly.

Similarly, the Magistrate Judge evaluated allegations that the decision of ranches to delegate the hiring of shepherds to trade associations was suggestive of a conspiracy. First, the Magistrate Judge held that Plaintiffs could not impute a ranch’s rule violation to an association under the H-2A regulations, unless an Office of Foreign Labor Certification Administrator determined that the association also participated in the violation, which was not alleged. Additionally, because H-2A regulations authorize associations to handle recruiting and hiring of members, the fact that associations set wages for members did not mean that the associations were walking conspiracies. Rather, it was equally plausible that the members delegated hiring to associations so that they could participate in the H-2A program and enjoy the efficiencies of outsourcing hiring.

Though interest has renewed regarding wage-fixing antitrust claims in light of recent guidance from the agencies, Llacua underscores key issues where wages are subject to a regulatory framework. Where a regulatory system provides companies with an incentive to offer only a minimum wage, Plaintiffs have a significant burden to demonstrate more than parallel conduct on behalf of Defendants.[1]