Law Center Search Results

Ionia Management was indicted when some of its employees dumped waste oil into the ocean and failed to keep the required records under the Act to Prevent Pollution from Ships. It appealed its conviction to the Second Circuit, arguing in part that it could not be vicariously liable for the acts of employees who violated strict company policy, who acted outside the scope of their employment, and whose illegal acts provided no benefit to the company.

The NAM joined with 5 other groups in supporting this appeal. Our brief challenged a jury instruction and urged an approach that is consistent with Supreme Court precedent and the objectives of criminal liability. The jury instruction allowed the imposition of criminal liability on the corporation for the conduct of a single low-level employee even if he or she acted in direct contravention of corporate policy and a robust compliance program. The instruction stems from a longstanding but indisputably mistaken application of a Supreme Court decision from 1909, the New York Central & Hudson River Railroad case. Although that case stood only for the proposition that Congress may include respondeat superior principles in a criminal statute, it did not mandate the use of such principles in statutes where Congress has made no such choice. It is critically important, in light of the increasing criminal investigations of organizations and the corporate life-or-death consequences an indictment can bring, that the courts apply the correct principles and criteria to the imputation of criminal misconduct by corporate employees to their employer.

In various statutes with criminal penalties, the Supreme Court has limited a company's responsibility to the acts of supervisors and when the company has no reasonable policies in place to deter the offending employee's conduct. The trial court's decision in this case would make it easier to impute conduct and knowledge to a corporation in a criminal case than it would be in a civil case under the Civil Rights Act of 1964.

The threat of criminal liability gives government prosecutors tremendous power to require the waiver of attorney-client privilege and to create Draconian non-prosecution and deferred prosecution agreements. We urged the Second Circuit to adopt a standard that mirrors recent Supreme Court decisions and that adds an additional element to criminal liability that requires the prosecution to prove that a corporation lacks effective policies and procedures to deter and detect criminal actions by its employees. This would encourage self-policing while protecting corporations and shareholders from rogue employees who commit crimes despite a corporation's diligence.

Regrettably, on 1/20/09, the Second Circuit upheld the conviction. The court cited an earlier Second Circuit case, United States v. Twentieth Century Fox Film Corp., which held that a compliance program, no matter how robust, does not protect a company from liability when its employees break the law.

The NAM joined with 10 other major business groups to urge the Second Circuit to reject lawsuits brought by 8 states against 6 major electric power utility companies over global warming. The states claim that the utilities, by emitting carbon dioxide from the process of burning fuel to produce electricity, contribute to global warming and create a public nuisance in their states. Our brief argued, and the lower court judge found, that this issue is a political question unsuitable for resolution in the courts. We warned that this suit, if allowed, would open the door to nuisance suits targeting any activity that uses fossil fuel for energy, such as companies using a fleet of cars or trucks, and that global warming and energy usage are international and national issues that are not amenable to solution through the case-by-case, patchwork approach of nuisance suits.

This suit basically seeks to have the judiciary decide how fossil fuel energy should be used in this country. This issue is a political question that should be decided only after the kind of full debate and public participation that the political, legislative and administrative processes of government can provide. Energy-intensive industries include aluminum, chemicals, forest products, glass, metal casting, mining, petroleum refining and steel. Even farming and road building could be subject to nuisance suits. A second brief filed in the Open Space Institute case is virtually identical. See also: Open Space Institute, Inc. v. American Electric Power Co.

On Sept. 21, 2009, two judges of the Second Circuit issued an opinion reversing the trial court and sending the case back for trial. They ruled that the claims are not political questions, that the plaintiffs have standing, and that they have stated claims under the federal common law of nuisance. The court found that a decision by a single federal court concerning a common law nuisance action brought by domestic plaintiffs against domestic companies for domestic conduct does not establish a national or international emissions policy. The court said that the relief sought in this case "applies in only the most tangential and attenuated way to the expansive domestic and foreign policy issues raised by Defendants." It said that well-settled principles of tort and public nuisance law provide guidance on how to handle the case. Until Congress steps in to preempt the field of the federal common law of nuisance, courts can decide cases involving such claims. The court found that there is no unified U.S. policy on greenhouse gas emissions, and that a court case would not interfere.

With respect to standing, the court said that at this point in the litigation the plaintiffs "need not present scientific evidence to prove that they face injury or increased risk of injury, that Defendants' emissions cause their injuries, or that the remedy they seek will redress those injuries." It is enough that the states have an interest in safeguarding the public health and their own resources. The court found that the plaintiffs sufficiently alleged that their claimed injuries (global warming) are "fairly traceable" to the defendants' emissions.

The judges also ruled that private parties are allowed to bring federal common law public nuisance suits, although the case precedent for this is limited. In addition, federal environmental law does not displace this common law nuisance action, since neither Congress nor the EPA has yet regulated greenhouse gases "in any real way."

This litigation will now continue, but the case is being appealed to the Supreme Court. Major producers of electricity must go through lengthy and expensive governmental emission permitting procedures, and even when fully approved, plants will still be subject to suits challenging their emissions. This is an untenable situation that will lead to increased costs, conflicting court judgments and more expensive energy for manufacturers and the American public.

This is a consolidated case with Connecticut v. American Electric Power Co. Click here for the full summary.