High Court Declines To Rule In Mohawk Carpet Case

WASHINGTON — The Supreme Court said Monday that a lower court should reconsider whether workers can use a federal racketeering law to sue a Georgia carpet maker for hiring illegal immigrants.

Last June, the 11th U.S. Circuit Court of Appeals in Atlanta ruled that Mohawk Industries Inc., based in Calhoun, Ga., could be sued under the Racketeer Influenced and Corrupt Organizations Act, or RICO. That scared business groups, which feared the ruling could open up a flood of similar suits.

"The company is gratified that the Supreme Court vacated the appeals court decision," Mohawk attorney Juan Morillo said.

Now Mohawk will get a second chance to try to convince the appeals court to dismiss a class-action suit filed by current and former workers. Those workers say that by hiring thousands of illegal immigrants, the company violated RICO.

That federal law, enacted in 1970 to fight organized crime, allows victims to collect triple damages, plus attorney fees. Mohawk and its supporters say Congress never meant for RICO to cover actions taken by a company that has informal arrangements with individuals or other companies, such as labor recruiters.

In its one-paragraph decision, the court said the appeals court should reconsider the case in light of a separate opinion issued Monday.

In that case, the justices voted 8-1 to throw out a portion of a lawsuit accusing National Steel Supply Inc. of underpaying New York City taxes. The company's competitor, Ideal Steel Supply Corp., said it lost sales as a consequence of being undersold.

But the justices said Ideal Steel Supply could not use a RICO lawsuit to recover damages because it had not suffered "direct" injury.

In the Mohawk case, filed in 2004 in the U.S. District Court for the Northern District of Georgia, employees said the company's hiring of thousands of illegal immigrants was the "proximate cause" of their own lower wages.

Morillo said "the company is looking forward to re-arguing" its case in light of the steel ruling.

Mohawk, which makes carpet and other floor coverings, has more than 4,000 employees in northwest Georgia. It says it provides workers with competitive wages and benefits.

Under RICO, the question for the courts would be whether Mohawk and its recruiters formed a separate "enterprise" that was a racket.

The company says that merely having a contract with another company, namely a recruiter, does not constitute creation of an enterprise. During oral arguments before the Supreme Court on April 26, several justices made comments that appeared to support Mohawk attorney Carter Phillips, who said that when a company uses an outside recruiter, "it's an arm's-length deal."

The Supreme Court didn't directly settle the RICO issue, but said only that the Mohawk case was being sent back to the appeals court "for further consideration in light of" the ruling in the New York City case.

Ultimately, if Mohawk's workers were to win their RICO case, it could lead to the filing of many RICO suits in connection with the use of immigrant workers.

That would please supporters of stricter immigration controls who want the courts to empower private individuals to use RICO suits against employers in an effort to stop the use of illegal labor.

But supporters of immigrants fear a ruling against Mohawk. They believe it could force employers to conduct much stricter documentation checks whenever a worker looks or sounds foreign. That could discourage the hiring of all immigrants, including those who are legal.

The Bush administration, which has been pushing for immigration reform, sided with the workers before the Supreme Court.

Mohawk was supported by the U.S. Chamber of Commerce, the National Association of Manufacturers and other business organizations.

In their suit, workers said the company, with $6.6 billion in annual revenues, paid recruiters to go to Texas to seek out illegal workers willing to accept low wages. They allege that the company worked with the recruiters to violate immigration laws, forge documents and harbor illegals.

As a result, the plaintiffs say, wages remain depressed in the Calhoun area even though the unemployment rate is very low.

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