Strict vicarious criminal liability for corporations and corporate executives: stretching the boundaries of criminalization.

• Author: Greenberg, Joshua D.
• Position: Reducing Corporate Criminality: Evaluating Department of Justice Policy on the Prosecution of Business Organizations and Options for Reform

Under the doctrine that currently prevails in the federal courts of appeals, a corporation is subject to strict vicarious liability for a criminal act by one of its employees if the employee acted within the scope of his employment and intended, at least in part, to benefit the corporation. Similarly, under the doctrine of United States v. Park, (1) a corporate executive is subject to strict vicarious liability for a criminal act by one of her employees if the executive's position gave her the ability to prevent or promptly correct the act. (2) This article examines both doctrines of strict vicarious criminal liability. Part I begins by considering the history of strict liability crimes in general. Parts II and III examine the doctrines of strict vicarious criminal liability for corporations and corporate executives, respectively, concluding that both regimes are unfair, are bad public policy, and should be abolished. Part IV proposes two reforms to mitigate the adverse effects of strict vicarious criminal liability for corporations and corporate executives: a requirement that a statute clearly provide for such liability before it can be imposed, and an affirmative defense based on a corporation's compliance policy.

1. THE HISTORY OF STRICT LIABILITY CRIMES

   Strict liability offenses are a relatively recent phenomenon, have historically involved light penalties, and are disfavored.

   At common law, mens rea was a prerequisite for criminal liability. "Unqualified acceptance of this doctrine by English common law in the Eighteenth Century was indicated by Blackstone's sweeping statement that to constitute any crime there must first be a 'vicious will.'" (3) Strict liability offenses originated in the mid-to-late 1800s. (4) As the U. S. Supreme Court explained in its 1952 opinion in Morissette v. United States, the Industrial Revolution spawned the creation of strict liability crimes. Among other things, industrialization "multiplied the number of workmen exposed to injury from increasingly powerful and complex mechanisms" and resulted in "[c]ongestion of cities and crowding of quarters [that] called for health and welfare regulations undreamed of in simpler times." (5) In addition, "[w]ide distribution of goods became an instrument of wide distribution of harm when those who dispersed food, drink, drugs, and even securities, did not comply with reasonable standards of quality, integrity, disclosure and care." (6) The new "dangers" resulting from industrialization led legislators to adopt "increasingly numerous and detailed regulations which heighten the duties of those in control of particular industries, trades, properties or activities that affect public health, safety or welfare." (7) Many of these regulations created a new species of strict liability crimes, known as "public welfare offenses," that "are in the nature of neglect where the law requires care, or inaction where it imposes a duty." (8) Because such offenses present a risk of injury regardless of the violator's intent, "legislation applicable to such offenses, as a matter of policy, does not specify intent as a necessary element." (9) Foreshadowing the Park doctrine, the Morissette Court added: "The accused, if he does not will the violation, usually is in a position to prevent it with no more care than society might reasonably expect and no more exertion than it might reasonably exact from one who assumed his responsibilities." (10)

   Until the past several decades, strict liability crimes were generally limited to regulatory offenses with comparatively light penalties. As the U.S. Supreme Court observed in Morissette, for the strict liability crimes that existed at the time, the "penalties commonly [were] relatively small, and conviction d[id] no grave damage to an offender's reputation." (11) In a more recent opinion, the Court similarly observed: "Certainly, the cases that first defined the concept of the public welfare offense almost uniformly involved statutes that provided for only light penalties such as fines or short jail sentences, not imprisonment in the state penitentiary." (12) The Court recognized that "the small penalties attached to such offenses logically complemented the absence of a mens rea requirement: In a system that generally requires 'vicious will' to establish a crime, imposing severe punishments for offenses that require no mens rea would seem incongruous." (13)

   The U.S. Supreme Court has been reluctant to endorse strict liability offenses. The Court has repeatedly described such offenses as "disfavored." (14) It has demanded "far more than the simple omission of the appropriate phrase from the statutory definition" to "justify dispensing with an intent requirement." (15) Rather than making a statute's silence on the subject dispositive, the Court has "suggested that some indication of congressional intent, express or implied, is required to dispense with mens rea as an element of a crime." (16) The Court has thus applied a "presumption favoring mens rea," (17)

2. STRICT VICARIOUS CRIMINAL LIABILITY FOR CORPORATIONS

   1. The Prevailing Law in the Federal Courts

      Courts generally hold that a corporation is subject to strict vicarious liability for a criminal act by one of its employees if the employee acted within the scope of his employment and intended, at least in part, to benefit the corporation. For example, the Second Circuit affirmed a corporation's conviction under a theory of strict vicarious criminal liability on the ground that its employees "acted within the scope of their employment" when they engaged in unlawful conduct "to benefit [the corporation]." (18) Similarly, the First Circuit has held that the test for whether a corporation is subject to strict vicarious criminal liability "is whether the agent [was] 'performing acts of the kind which he is authorized to perform,' and those acts [were] 'motivated--at least in part--by an intent to benefit the corporation.'" (19) Likewise, the Fourth Circuit has held that a corporation may be held criminally responsible for its employees' acts '"if they were acting within the scope of their authority, or apparent authority,"' and they "acted, at least in part, with the intent of benefiting [the corporation]." (20) Based on decisions such as these, the U.S. Attorneys' Manual strictly states that "[t]o hold a corporation liable for [its agent's] actions, the government must establish that the corporate agent's actions (i) were within the scope of his duties and (ii) were intended, at least in part, to benefit the corporation." (21)

      Although theoretically more demanding than the standard for respondeat superior liability in the civil context, the standard for strict vicarious corporate criminal liability is generally not meaningfully different in practice. Civil respondeat superior liability for a corporation requires that the employee's act was done within the scope of his employment. Strict vicarious criminal liability for a corporation requires, in addition, that the employee intended at least in part to benefit the corporation. This additional requirement will rarely make a difference. Except in cases where an employee stole from the corporation, an employee's misconduct will usually result in a financial benefit to the corporation, which will satisfy the intent requirement. For instance, a sales representative's off-label promotion of a prescription drug will increase his or her employer's sales of that drug. Similarly, when a truck driver for a waste hauling company unlawfully disposes of hazardous waste, he or she saves the employer the costs of disposing of the waste properly.

      Moreover, even if the corporation did not receive any financial benefit from an employee's crime, it will still be subject to strict vicarious criminal liability if the employee intended, in part, to benefit the corporation. For example, the Fourth Circuit has taken the position that "it is not necessary for an agent's actions to have actually benefited the corporate entity." (22) The Fourth Circuit reasoned that "whether the agent's actions ultimately redounded to the benefit of the corporation is less significant than whether the agent acted with the intent to benefit the corporation." (23) In the Fourth Circuit's view, the "intent to benefit" requirement adequately protects the corporation because it "insulate[s] the corporation from criminal liability for actions of its agents which [were] inimical to the interests of the corporation or which may have been undertaken solely to advance the interests of that agent or of a party other than the corporation." (24)

      A number of courts have claimed support for subjecting corporations to strict vicarious criminal liability from the Supreme Court's decision in New York Central & Hudson River Railroad Co. v. United States. (25) For example, the Sixth Circuit has cited New York Central for the proposition that "so long as the criminal act is directly related to the performance of the duties which the officer or agent has the broad authority to perform, the corporate principal is liable for the criminal act also, and must be deemed to have 'authorized' the criminal act." (26) The Fourth Circuit has similarly construed New York Central as recognizing vicarious corporate criminal liability. (27) The Third Circuit has described New York Central as broadly "holding [a] corporation liable for its agents' crimes." (28) Citing New York Central, the D.C. Circuit has made the sweeping statement that "[corporations may be held liable for specific intent offenses based on the 'knowledge and intent' of their employees." (29) Similarly, the Seventh Circuit has cited New York Central to support the notion that "if a crime at least ostensibly in the corporation's financial interest is committed or condoned at the managerial or board of directors level of the corporation, the corporation itself is criminally liable." (30)

      Contrary to these courts of...