A free pass for corporate conspirators? Inconsistent distinctions between civil and criminal corporate conspiratorial liability.

Author:O'Leary, Katy
  1. INTRODUCTION

    The act of incorporating a business allows the resulting corporation to be viewed as a single entity in the eyes of the law. (1) Individual agents of the corporation acting within the scope of their professional capacities and in furtherance of corporate objectives are considered a part of this legal entity. (2) The notion of this single fictitious "person" created by the act of incorporation has resulted in troublesome conceptual discrepancies in the area of civil and criminal corporate conspiratorial liability. (3) The essence of a conspiracy charge is that two or more persons--a plurality of individuals --have agreed to engage in illegal conduct. (4) Therefore, in a corporate context, the multiplicity of actors necessary to constitute a conspiracy is negated because the corporation and its agents are viewed as a single legal actor. (5)

    The intracorporate conspiracy doctrine developed in response to the question of whether a corporation is capable of conspiring with its own agents. (6) The doctrine concludes that because it is not legally possible for an individual to conspire with himself, it is also not legally possible for a single entity consisting of a corporation and its agents to conspire with itself. (7) Although the doctrine originated in the antitrust context, federal courts have considered its applicability in the contexts of civil conspiracies under 42 U.S.C. [section] 1985 and criminal conspiracies under 18 U.S.C. [section] 371. (8) The majority of circuit courts have allowed the intracorporate conspiracy doctrine defense to civil conspiracy claims filed under [section] 1985, employing precisely the same reasoning concerning the absence of the plurality of actors requirement as applied in antitrust litigation. (9) A small number of circuit courts, however, have refused to allow the intracorporate conspiracy doctrine defense in [section] 1985 civil conspiracy claims because the doctrine was conceived for use in an entirely different and unrelated context. (10) The doctrine was never intended to shield corporations from liability for conspiring to violate an individual's civil rights. (11) For seemingly similar reasons, every court that has addressed the application of the intracorporate exception to criminal conspiracies in violation of [section] 371 has ruled that the doctrine cannot be extended as a liability shield for corporate criminal activity. (12)

    in contrast, no such uniformity exists among the circuit courts in the context of civil conspiracies, even though the doctrine was also not originally intended to act as a shield against liability for conspiring to violate one's civil rights. (13) This Note seeks to discern why the circuit courts have failed to adequately address the reasons for drawing a distinction between civil and criminal corporate conspiratorial liability. (14) Furthermore, it purports that if the doctrine's original intent serves as the courts' sole basis for refusing to extend the doctrine as a defense in criminal conspiracy claims, then it logically follows that there should be no split among the circuit courts as to its applicability in civil conspiracies. (15) This reasoning follows because the doctrine was only intended to eliminate corporate liability in an antitrust context. (16) Part II traces the origin and development of the intracorporate conspiracy doctrine in light of basic agency principles and the need to protect corporations from certain types of liability under the Sherman Antitrust Act. (17) It also discusses the current circuit split regarding the application of the intracorporate conspiracy doctrine to civil conspiracy claims, the uniform refusal among circuit courts to apply the doctrine as a defense to criminal conspiracies, and the Eleventh Circuit's unique attempt to reconcile the current inconsistencies. (18) part iii applauds the Eleventh Circuit's logical approach and asserts that, at the very least, the majority of courts that have failed to recognize the many arguments against allowing the intracorporate conspiracy defense in civil claims should consider adopting the Eleventh Circuit's reasoning. (19) it further concludes, however, that the reasoning provided by the Eleventh Circuit, like the reasoning of the majority of other circuits, fails to adequately address why a distinction exists between corporate civil and criminal conspiratorial liability. (20) Accordingly, the distinction should be reconsidered. (21)

  2. HISTORY

    1. Basic Agency Principles

      The Supreme Court described a corporation as "an artificial being, invisible, intangible, and existing only in contemplation of law. Being a mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence." (22) The act of incorporation creates a seemingly immortal fictitious being whose existence is potentially infinite, despite changes in individual leadership behind the corporation. (23) Individual agents of the corporation who act within the scope of their professional capacities and in furtherance of corporate objectives are considered a part of this legal entity and thus afforded broad immunity from any personal liability for misdeeds. (24) Courts will only pierce this corporate veil of liability and hold individual actors personally liable in very rare instances, usually when there is evidence of intermixture of affairs, lack of corporate formalities, or inadequate capitalization. (25)

    2. Development of the Intracorporate Conspiracy Doctrine

      1. Elements of Conspiracy

        A conspiracy is traditionally defined as "an agreement between two or more persons to achieve an unlawful object or to achieve a lawful object by unlawful means." (26) According to the Supreme Court, the plurality element of a conspiracy charge represents a "distinct evil." (27) This stems from the idea that two people who agree to commit a crime create a more dangerous threat to society than one or both of them planning to commit the same offense independently. (28) A civil conspiracy, while not criminally punishable, contains the same plurality of actors element. (29)

      2. Doctrinal Development in an Antitrust Context

        The intracorporate conspiracy doctrine developed in response to the question of whether a corporation is capable of conspiring with its own agents. (30) In Nelson Radio & Supply Co. v. Motorola, Inc., (31) the Fifth Circuit was the first court to announce the doctrine. The court concluded that because it was not legally possible for an individual to conspire with himself, it was also not legally possible for a single entity consisting of a corporation and its agents to conspire with itself. (32) The court found that "[i]t is basic in the law of conspiracy that you must have two persons or entities to have a conspiracy ... and it is the general rule that the acts of the agent are the acts of the corporation." (33) In Nelson Radio and its progeny, the defense of intracorporate conspiracy was utilized in an antitrust context because courts found it logical to conclude that a single corporation could not conspire with itself to restrain trade in the way imagined by Section 1 of the Sherman Antitrust Act. (34)

        In addition to conspiracies between corporations and their agents, courts have also considered whether a conspiracy can exist between a parent corporation and its subsidiaries in violation of the Sherman Antitrust Act. (35) The Supreme Court addressed this issue in Copperweld Corp. v. Independence Tube Corp.: (36) where it held that a conspiracy for the purposes of Section 1 of the Sherman Antitrust Act is not possible between a parent corporation and its wholly owned subsidiary. (37) The Court reasoned that a parent corporation and its subsidiary "have a complete unity of interest," with common objectives and corporate actions that are "guided or determined not by two separate consciousnesses, but one." (38) The Court recognized that the corporate form chosen by the corporation should not dictate whether it is subject to antitrust liability. (39) Therefore, a corporation should not be penalized simply because it chose to adopt the subsidiary form of organization in order to "serve efficiency of control, economy of operations, and other factors dictated by business judgment without increasing its exposure to antitrust liability." (40)

    3. Application of the Intracorporate Conspiracy Doctrine to Civil Conspiracy Claims

      1. Statutory Basis Under 42 U.S.C. [section] 1985

        42 U.S.C. [section] 1985 applies to alleged conspiracies to interfere with an individual's civil rights. (41) It prohibits these types of conspiracies in three distinct ways: [section] 1985(1) states that "two or more persons" cannot conspire to prevent an officer from performing his duties; [section] 1985(2) states that "two or more persons" cannot conspire to obstruct justice by intimidating a party, witness, or juror, or to injure a person or his property for lawfully enforcing or attempting to enforce the right of any person to the equal protection of the laws; and [section] 1985(3) states that "two or more persons" cannot conspire to deprive persons of their rights or privileges. (42) Courts and legal commentators have repeatedly addressed whether the application of the intracorporate conspiracy doctrine to claims arising under this statute is analogous to its application in an antitrust context. (43)

      2. Majority Rulings

        The Second, Fourth, Fifth, Sixth, Seventh, Eighth, and D.C. Circuits have allowed the intracorporate conspiracy defense in civil conspiracy claims filed under [section] 1985. (44) Employing precisely the same reasoning as applied in antitrust litigation, these courts focus on the idea that because the "acts of the agent are the acts of the corporation," the individual actors or the corporation itself cannot be considered separate entities that join forces to conspire to commit a civil wrong. (45) These...

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