Cruel and Unusual Corporate Punishment.

• Author: Wagner, Robert

I am not an advocate for frequent changes in laws and constitutions, but laws and institutions must go hand in hand with the progress of the human mind. As that becomes more developed, more enlightened, as new discoveries are made, new truths discovered and manners and opinions change, with the change of circumstances, institutions must advance also to keep pace with the times. We might as well require a man to wear still the coat which fitted him when a boy as a civilized society to remain ever under the regimen of their barbarous ancestors. --Thomas Jefferson (1) I. INTRODUCTION 560 II. CORPORATE FOUNDATIONS 561 A. Corporations and Human Beings Compared and Contrasted 561 B. How Corporations Are Punished 567 III. CORPORATE CONSTITUTIONAL STANDING 570 IV. CRUEL AND UNUSUAL PUNISHMENT 573 A. The History of Cruel and Unusual Punishment 573 B. Application of the Proportionality Principle to Cruel and 578 Unusual Punishment C. The Case for Applying the Cruel and Unusual Punishments 583 Clause to Corporations VI. CONCLUSION 588 I. INTRODUCTION

The Eighth Amendment of the Constitution states: "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted." (2) This amendment has been interpreted in numerous ways over the centuries, recognizing different rights for different groups at different times. This right has not been extended to corporations. In this Article, I argue that it should be, if necessary.

To understand why it could be necessary, begin by considering a hypothetical. Imagine an environmental regulation involving how much quadrizine (a fictitious chemical) a company can release into the water system. The law exists because quadrizine causes water to turn green and develop an unpleasant odor if a certain amount is reached. However, it does not kill or even significantly harm anyone. Further, quadrizine can be cleaned up from the water system at a cost of $1 million per ton over the acceptable limit. However, the law says that there is a penalty of $10 million per ton over the limit. Further, if a violation occurs, the CEO must be terminated and a permanent overseer must be placed in the corporation. In this situation, it is possible that the corporation may spend millions of dollars more than the cost of cleaning quadrizine trying to avoid the penalty. For example, if the equipment could be insulated to a level that virtually guarantees no spill but at a cost significantly higher than cleaning up any spill. Furthermore, if there is a spill, the resulting fine could put the corporation out of business even though the harm may be completely contained at a fraction of the cost. This is a specific example of over deterrence, where the law can create an incentive to use resources in a way that causes more harm than good--or at least that causes an inefficient use of resources. The quadrizine example (if real) may not have involved cruel and unusual punishment, but the question should at least be available for inquiry. otherwise, either shareholders would not get the return that they should on their investments or in the second situation, shareholders would lose everything, as would all the workers and possibly the surrounding community that depended upon that corporation for a living. Clearly, this is an intentionally extreme scenario, but the extreme is what the Eighth Amendment is designed to protect against, and it is why it should apply to corporations.

Punishments against corporations can be extreme and not limited to monetary fines, even though fines can be extreme and possibly cruel and unusual. For example, in 2017 over 20 corporate penalties have involved over 100 million and five penalties over one billion, with the highest being over seven billion dollars. (3) All of these crimes, while very serious, were nonviolent. Yet, they resulted in punishments of a magnitude almost unimaginable to most people. In addition to fines, other types of punishments have been endorsed and some applied against corporations, including judicial surveillance, the confiscation of assets, exclusion from public procurement, closure of one or more corporations' establishments, the imposition of independent compliance monitors, and, ultimately, dissolution of the corporation. (4) Monitoring, which can be punitive (in many instances control of the corporation is actually in the hands of the monitor), has been forced upon more than 40% of all companies that entered into a settlement or plea bargain on Foreign Corrupt Practices Act (FCPA) charges from 2004 to 2010. (5)

In addition, as the Court has stated in the context of punitive damages, the severity of a penalty should be predictable, enabling someone to know what the stakes are when he or she decides to take a certain course of action. (6) As the Supreme Court stated, "[t]he common sense of justice would surely bar penalties that reasonable people would think excessive for the harm caused in the circumstances." (7) The Court pointed out that while there are differences, there are also many similarities between punitive damages and criminal sanctions in that they both advance punishment and deterrence. (8)

In arguing that corporations should receive protection against cruel and unusual punishment, this Article examines the differences between natural and artificial entities and the inherent difficulties of applying a criminal system meant for one to the other. This Article examines the history of both corporate criminal liability and the history of the Eighth Amendment going back to its early English precursor in the 15th Century. This Article also examines the history of corporations in the United States and the process through which they obtained constitutional rights over the last century. It specifically argues that while the underlying reasoning for the Eighth Amendment is not spelled out in history or in our legal system, the rationales of the criminal justice system, which the Amendment serves, are, should be used to determine if the Eighth Amendment applies to corporations. Finally, this Article argues that due to both retributive and utilitarian rationales, the justice system and individuals themselves would be well served by granting corporations the right to be free from cruel and unusual punishments.

2. CORPORATE FOUNDATIONS

   1. Corporations and Human Beings Compared and Contrasted

      Corporations dramatically vary in terms of their structure, their purposes, and their size. "A corporation may have a very large group of shareholders and separate management if it is a public corporation with stock that is listed, or it may be a very large corporation with private owners." (9) On the other hand, the vast majority of corporations are very small. (10) The purposes of corporations also vary greatly: GE, Ford, Facebook, the Guardian Angels, at least one chapter of the Black Panthers, and some Ku Klux Klan chapters are all organized as corporations. (11) We should also bear in mind the differences between publicly and privately held corporations, and also between private corporations with large and small numbers of shareholders. (12) In one case, "[t]he Court noted the difficulty in categorizing firms, which range from media companies to small closely held corporations to large public companies, and recognized that they exist for a wide range of purposes." (13)

      Over the centuries, corporations have changed from simple organizations with specific purposes to sometimes very complex organizations owned by thousands (or more) that are managed by people hired from outside and with near-unlimited purposes. (14) originally corporations came out of European joint stock companies created for a limited period of time, for a specific purpose and chartered by the monarch. (15) At the beginning of the Nineteenth Century, there were only 335 corporations chartered in the U.S. (16) Today, "[c]orporations are a necessary feature of modern business activity, and their aggregated capital has become the source of nearly all great enterprises." (17) Possibly as far back as 1886, the Court unanimously held (18) that under some circumstances, the word person in the Constitution applied to corporations, and this was so clear that the Court even refused to hear arguments about the question. (19) Some claim that regardless of the personhood status of a corporation, it is bound by reciprocity to accept the responsibilities and burdens, including legal criminal liability, that come with legal personhood and the advantages that entails. (20) However, some also think that the now famous (or infamous) case of Citizens United improperly recognized corporate personhood in the first place. (21)

      Some have claimed that to determine if a corporation is entitled to constitutional rights, an evaluation of corporate personhood is required. (22) Arguably, the Court has never settled upon exactly what a corporation is for constitutional purposes and, hence, has never had a consistent test for determining if a constitutional right applies to a corporation. (23) In fact, courts and scholars have used varying theories of corporate personhood to attempt to resolve various arguments about what rights a corporation should have. (24) One view of corporations is that they are artificial entities created by the law and owing their existence to the sovereign. (25) Chief Justice John Marshall called a corporation "an artificial being, invisible, intangible, and existing only in contemplation of law," but he also felt that corporations were extremely able "to realize the 'charitable or other useful' and 'beneficial' goals of their creators." (26) Another view of corporations is that they are simply groupings of individuals that make them up and hence get the rights that the individuals would possess. (27) This view was supported early on by the U.S. Supreme Court in Santa Clara County v. Southern Pacific Railroad Co. (28) when the Court said that a...