United States: Developments in Environmental Criminal Law: It’s Not Just Directors And Officers Who Are Facing Jail

Could the supervisor of a rock quarrying project be sent to jail for six months following a sub-contractor’s break in a pipeline that resulted in an oil spill on the supervisor’s day off? Could a simple foreman be convicted of a crime because his company’s sub-contractor committed an environmental violation on the day the foreman was left "in charge"?

Prosecutors have historically pursued criminal charges against corporate officers and directors for violations of "public welfare statutes," often environmental violations.

In an alarming new trend, mid-level employees, without a real stake in the corporate entity for which they work, are increasingly being charged with, and often convicted of, crimes involving conduct taking place outside of their presence and without their involvement or decision-making.

Pursuing owners and high-level executives for their companies’ criminal offenses arguably serves several legitimate governmental and societal interests. Holding high-ranking individuals criminally responsible might deter criminal conduct in corporate settings because if fines incurred are lower than profits derived from the criminal violations, companies lack the financial incentive to correct conduct that may violate the environmental laws.

However, seeking criminal penalties against mid-level employees serves no legitimate purpose from a public policy standpoint. Often, the employees charged lack the discretion to affect the decisions at issue and are simply not capable of bringing about change in the conduct of their companies. In addition, charging and convicting mid-level employees implicates their right to due process and may be unconstitutional. In many cases, employees are criminally charged and convicted under standards that amount to mere negligence or even strict liability, in direct contravention of the standards enunciated in the applicable case law on individual liability for corporate acts.

The United States Supreme Court set forth the standard of proof required to hold an individual liable for corporate misdeeds in United States v. Dotterweich, 320 U.S. 277 (1943). In Dotterweich, the president and general manager of a pharmaceutical company was convicted of negligently shipping misbranded and adulterated drugs. The United States Supreme Court ruled that Dotterweich should have been aware of the possibility of a violation and should have exercised due care, but failed to do so. The Court held, however, that a finding of corporate guilt should extend only to those individuals who had a "responsible share in the furtherance of the transaction which the statute outlaws." Id. at 284. In other words, the burden of acting is placed upon a person otherwise innocent but standing in a responsible relation to a public danger.

This standard subsequently was refined in United States v. Park, 421 U.S. 658 (1975), which required that the Government establish a prima facie case demonstrating that the defendant failed to act on authority which could have prevented or corrected the violation. See id. at 673-74. The Court held that a prima facie case may be established by introducing "evidence sufficient to warrant a finding by the trier that the defendant had, by reason of his position in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of, and that he failed to do so." Id.

Until recently, the Park standards have only been used to find liable individuals who were both officers or owners of the companies in question and who possessed real power to correct the violation. See United States v. Starr, 535 F.2d 512, 515-16 (9th Cir. 1976) (finding that, where corporation’s officer delegated responsibilities for complying with the Food, Drug and Cosmetic Act ("FDCA"), 21 U.S.C. § 301, et seq., to an employee who subsequently failed to take proper action, officer was liable under the Park standards); United States v. Torigian Labs., 577 F. Supp. 1514, 1529-30 (E.D.N.Y. 1984) (finding president and owner of controlling shares of corporation personally liable for failing to use their authority to detect, prevent, or correct FDCA violations); United States v. New England Grocers Supply Co., 488 F. Supp. 230, 234 (D. Mass. 1980) (applying Park to find that holding the position of president of a corporation is insufficient, by itself, to establish responsible relationship for the purposes of individual liability for criminal conduct). These cases use the "responsible corporate officer" doctrine as a deterrent by holding the highest-ranking individuals in charge personally liable for misdeeds when they could have prevented a criminal violation.

As the following two examples demonstrate, however, the current prosecutorial trend extends the application of this doctrine too far-imputing to mere employees of a corporation the wrongful conduct of the corporate offender.

In United States v. Hanousek, 176 F.3d 1116 (9th Cir. 1999), the Ninth Circuit upheld the conviction of a railroad project manager under the Clean Water Act after a sub-contractor hired by his company struck an oil pipeline, causing a serious oil spill. Hanousek was off-duty when the sub-contractor’s negligent act occurred, rendering his conviction, under a strict liability standard, simply mind-boggling. Indeed, not only did the record establish that Hanousek was not aware of the violation, but it also demonstrated that he could not have prevented the violation had he been present on the job at the time that it occurred. The Ninth Circuit upheld a jury instruction that the Government was required to prove only that he acted negligently-- which the district court had instructed was the "failure to use responsible care"--rather than with criminal negligence, defined in the Model Penal Code as "a gross deviation from the standard of care that a reasonable person would observe in the situation." See Model Penal Code § 2.02(2)(d)(1985).

In rejecting Hanousek’s due process claim, the Court of Appeals reasoned that the criminal provisions of the Clean Water Act constitute public welfare legislation regulating "conduct that a reasonable person should know is subject to stringent public regulation and may seriously threaten the community’s health and safety." Hanousek, 176 F.3d at 1121. Even though Hanousek had no prior criminal record, he was sentenced to six months in jail, six months in a halfway house, and six months of supervised release. His petition for writ of certiorari to the United States Supreme Court was denied, with Justices Thomas and O’Connor dissenting. See Hanousek v. United States, 120 S.Ct. 860 (2000).

In State v. Pratt, Case No. 99-0228286 MM 10a (Florida 2000), a Florida state prosecution bearing similar facts to Hanousek, a foreman in charge of yard activities at a marina was convicted of an environmental violation. The violation occurred after a sub-contractor, hired by the foreman’s employer, raised turbidity screens (used to prevent water pollution) from the water too early after conducting dredging in the river on which the marina was situated.

At trial, the record demonstrated that Pratt reported to a general manager who was responsible for overseeing the dredging operations at the Marina, and for ensuring that sub-contractors performed their jobs correctly. Pratt was left in charge of the marina itself for one day, the day of the offense, when his boss was out of town. There was no evidence that Pratt received instructions from anyone concerning the turbidity screens or the expected performance of the sub-contractors.

The record contained evidence that the investigating officer never questioned the sub-contractors who performed the dredging activity on the marina’s premises. In addition, the officer never asked Pratt what he understood the marina’s permits to require or what he thought his obligations were regarding the sub-contractor’s dredging. There was no evidence that Pratt was familiar with the specifics of the permit requirements or that he had anything to do with the setting of the screens. There was no evidence that Pratt affirmatively committed a violation of any sort. At worst, Pratt’s failure to closely monitor the activities of the sub-contractors constituted negligence, not a willful intent to break the law. However, the officer issued a citation to Pratt because he happened to be the person in charge that day.

Pratt was convicted of a state environmental violation after the court refused to instruct the jury that it could find him guilty only if he intentionally and purposely failed to properly set turbidity screens and that his failure to do so was not the result of a mere mistake or accident. The case is presently on appeal.

These examples are but two of several recent cases in which prosecutors have sought to impose criminal penalties against lower-level employees, and courts have incorrectly extended, or completely ignored, the Dotterweich and Park standards for individual liability for a corporate crime. This prosecutorial trend reduces the government’s burden of proof to a quasi-civil standard. In addition, it leaves all mid-level employees who have any degree of responsibility or authority in companies without guidance as to their duty under the law, or their exposure to criminal liability.

As a matter of public policy, this type of ambiguity and lack of notice is both discouraged and dangerous. Indeed, Justice Holmes once spoke of "fair warning given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed." McBoyle v. United States, 283 U.S. 25, 27 (1931). Due process principles require that an individual be given fair notice as to what constitutes illegal conduct and an opportunity to conform his conduct to the requirements of the law. See Colautti v. Franklin, 439 U.S. 379, 390 (1979), overruled in part on other grounds; Webster v. Reproductive Health Servs., 492 U.S. 490 (1989); United States v. Dahlstrom, 713 F.2d 1423, 1427 (9th Cir. 1983), cert. denied, 466 U.S. 980 (1984); United States v. Curcio, 712 F.2d 1532, 1543 (2d Cir. 1983). In addition, it is doubtful that future offenders will be deterred by convictions based on ordinary negligence by mid-level employees.

Because of the serious consequences of vagueness in criminal and quasi-criminal regulations, courts must construe them "rigorously in order to protect unsuspecting citizens from being ensnared by ambiguous statutory language." United States v. Insco, 496 F.2d 204, 206 (5th Cir. 1974). Defense counsel should insist that this principle of strict construction be enforced vigorously, particularly in circumstances where Congress has delegated to an agency of the executive branch--the same branch of government entrusted with enforcement powers--the authority to determine how the penal sanctions should apply and what types of remedies should be sought. See Kropp Forge Co. v. Secretary of Labor, 657 F.2d 119, 122 (7th Cir. 1981) (approving of the "traditional rule that the applicability of penal sanctions in regulations is to be narrowly construed by the judiciary"); see also Diamond Roofing Co. v. OSAHRC, 528 F.2d 645, 650 (5th Cir. 1976).

Although corporate officers, directors, and owners are arguably in the best position to ensure that their companies comply with regulatory schemes and laws, lower to mid-level employees and managers are increasingly facing incarceration for the acts or omissions of others. This trend is dangerous and constitutionally suspect. Employees lack the responsibility and authority either to prevent in the first instance, or to promptly correct, the alleged violations. Only corporate officers, directors and owners who have knowledge of criminal conduct and fail to act, or wilfully ignore such criminal conduct, should face criminal liability. Exposing mere employees to heightened criminal liability in the name of enforcing "public welfare regulations" violates the mandates of Dotterweich and Park and potentially deters people from seeking employment in managerial or supervisory positions in heavily regulated industries.

This article was originally published by the National Association of Criminal Defense Lawyers in the June 2001 issue of Champion.