Corporate intentionality, desert, and variants of vicarious liability.

Author:Laufer, William S.
 
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  1. INTRODUCTION

    Some very thoughtful scholars dismiss the idea of corporate criminal liability. Suggesting that artificial entities are to blame for the acts of their agents is simply too much of a fiction. Human persons, not organizations, intend and act. "The corporation itself does not behave ...," Cressey argues, it is nothing less than anthropomorphic error to attribute moral fault to a lifeless entity.(1) Add to this error the fact that it is paradoxical to attribute fault to an entity by suggesting that it has a mental state. After all, who could not see the incongruity that "[c]orporations have no "minds," as humans do, so how can they possess a state of mind?"(2)

    Those who acknowledge corporate criminal liability, for reasons of regulatory policy, efficiency, deterrence or desert, fall into at least two camps. First, there are those who ask which liability regimes offer the optimal allocation of risk of financial loss and liability.(3) Their arguments turn on such matters of cost internalization, incentive maintenance, inducing policing measures, and reducing sanction costs. Their objective is to identify an optimal liability and sanctioning regime that maximizes or enhances social welfare by minimizing the net social costs of law violation and its prevention.(4) To some economists, this means that the "only policy issue is how heavily the law should tax the corporation in order to induce it to monitor its agents more closely to prevent further illegalities."(5) To others, the objective is to maximize the "incentives to exercise care, to gather information about the risks associated with corporate products, and to share that information within the corporation."(6)

    In order to address the disincentives and inefficiencies in vicarious liability rules, mixed, composite or multi-tiered liability regimes are touted from a long menu of possibilities.(7) These regimes, evaluated on the basis of their "desirability," include variants of vicarious liability and "duty-based rules" derived from the United States Sentencing Guidelines for Organizational Defendants (USSG).(8) Compliant firms will be more law abiding, it is argued, with whatever incentives to self-police vicarious liability offers, together with appropriate residual penalties.(9) Commentators discuss a number of such variants, while dismissing "corporate mens rea" and what we call genuine corporate fault. The philosophy underlying all of this work is deterrence.(10)

    Those in a second camp, our camp, are less concerned with creating optimal liability and sanctioning regimes. We maintain an allegiance to the foundation of the general part of the criminal law, requiring evidence of moral fault in the offending person, whether biological or corporate.(11) By conceiving of the corporation as a moral actor, we challenge the work of those who see the corporate person as "soulless," and the only or primary objective of the corporate criminal law as deterrence.(12) Principles of desert that meld the notions of harm and culpability flow directly from the idea of an organizational fault.(13) Simply stated, principles of desert inform liability rules and sanctioning regimes, and trump considerations of efficiency or desirability.(14)

    At the heart of the difference between those promoting optimal regimes and those who do not is the weight placed on corporate intentionality. We argue that an assessment of the intentionality of the corporation is indispensable for those crimes requiring it.(15) They argue that it is imprudent, unnecessary, or wrong to attribute intentionality to a corporate entity.(16) We argue that their exclusive or near-exclusive reliance on deterrence; fails to promote values beyond crime control or reduction, and mimics the pricing rationale of civil law remedies.(17) They cannot conceive of a desert-based regime that satisfies the most fundamental concerns of the criminal law.

    Indeed, one of us has proposed a constructive standard of liability and culpability that is consistent with desert-based regimes and captures the moral fault of the actor.(18) Constructive standards recognize, as do recently articulated federal prosecutorial guidelines (FPG) and the culpability provisions of the USSG, what Khanna and his colleagues find inconceivable--that corporations act and intend.(19) Notably, constructive fault avoids most, if not all, of the limitations commonly associated with corporate mens rea standards, e.g., the disincentives for both the entity and its agents to collect information, share information, and engage in suboptimal levels of care.(20)

    In bemoaning a proposal for optimal liability a commentator once remarked, "No longer is it necessary to find a guilty intent in the mind of the human being. Crime can now occur by accident, by inadvertence, or simply by a lack of communication; moral culpability is superfluous."(21) Indeed, this is our argument. Liability rules that focus exclusively on the guilty minds of humans miss the very features of the corporate form that should, in certain cases, be held responsible and blamed. With such cases, the moral culpability of the entity is ignored.(22) Similarly, liability rules that strictly impute the acts and intentions of agents to an entity risk disregarding the very features of the corporate form that should, in certain cases, absolve the entity from liability and any resulting blame.

    A disregard of corporate intentionality in liability determinations can severely undercut perceptions of desert.(23) This is true when the law permits a blind imputation of an agent's intentionality to the entity. It is also true when the attribution of an agent's act alone serves as the basis of corporate liability, neglecting any consideration of an agent's or organization's intention. In both cases, strict vicarious liability rules fail to reflect the blameworthy decisions, policies, procedures, and reactions of an offending organization.(24) The same may be said of collective intention or collective knowledge standards.(25) This failure is not remedied by endorsing a composite regime at time of sentencing. The post-conviction assessment of culpability is far too late to first consider organizational fault.(26)

    Before discussing the limitations of strict vicarious liability, the notion that deterrence serves as the primary rationale is considered in Section II. In particular, we argue that desert principles are among the most elementary in criminal jurisprudence; that they are such a profound and important part of the criminal justice system that any departure would constitute a radical change in the meaning of legal guilt and punishment, not to mention a radical diminution in the moral value of criminal justice. In Section III, we make the case that legislatures, courts, prosecutors, and corporations have engaged in a systematic and successful effort to circumvent vicarious liability, especially when it appears strict. These efforts shifted the risks and losses associated with corporate crime. The explanations for corporate risk and loss shifting are simple and straightforward matters of risk management.(27) Explanations for legislative bodies, courts, and prosecutors, however, often turn on considerations of fairness and desert. In Section IV we discuss a model of corporate liability and culpability that avoids the deficiencies of vicarious fault, striking a balance between the strict attribution of an agent's mens rea and actus reus to a corporation, and the arguably burdensome requirement of a genuine corporate fault.

  2. DESERT FOR CORPORATE CRIMINALS

    An elementary idea in criminal jurisprudence is that it is wrong to convict a defendant of a crime except to the extent that he deserves to be convicted.(28) We shall maintain that any significant departure from this desert principle involves a radical change in the meaning of legal guilt and punishment and a diminution in the moral and social value of criminal justice. Hence we have worked hard to craft a theory of corporate criminal liability that is consistent with it.(29) The fundamental difficulty in crafting such a theory is developing an account of what it means for a corporation to deserve criminal conviction and punishment.(30) Paradigmatically, one deserves punishment only for engaging in a wrongful act while having a relevant culpable state of mind.(31) There is, to say the least, no obvious answer to the question, what it means to say that a corporation satisfies these conditions. Our theory, though, proposes an answer to this question.

    Khanna, too, proposes a theory of corporate criminal liability.(32) Oddly, however, he fails to address the question of how a corporation can deserve to be convicted of a crime or punished; he does not explain how punishing the corporation can satisfy the desert principle. Instead, he proposes a theory of corporate criminal liability that flouts the desert principle.(33) He proposes a "composite regime" of corporate criminal liability, by which he means a theory that is a mix of strict liability, negligence liability, and liability based on a corporation's culpable mental states or mens rea.(34) In practical terms, however, Khanna proposes a strict liability regime, but allows departures from this regime when socially attractive incentive effects would derive from the imposition of liability. The result is that Khanna proposes that the state impose criminal liability on corporations merely because social advantages would derive from doing so and without regard to considerations about whether the corporation deserves to be convicted of a crime. By appealing to mere considerations of deterrence to justify conviction and punishment, Khanna apparently rejects the desert principle. We believe this is an enormous error. To appreciate the magnitude of this error, it will prove useful to consider how problematic it is to reject the desert principle in the simple case of criminal liability outside the...

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