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Getting Loud For Justice

It’s been awhile since we beat the drum about respondeat superior (here). But that’s OK. A a couple of very smart guys have been doing it for us. They’re Stanley A. Twardy Jr., a former U.S. Attorney for Connecticut, and Daniel E. Wenner, a former Assistant U.S. Attorney in the Eastern District of New York, both now with Day Pitney. Their view? Respondeat superior as currently used should be drop-kicked out of the American criminal justice system.

Nothing magnifies the impact of the Foreign Corrupt Practices Act on corporations more than respondeat superior. Latin for “let the master answer,” it’s the legal doctrine holding companies vicariously liable for crimes committed by employees acting within the scope of their employment. Once an employee — even a low-level worker acting against the company’s orders — admits to an offense or is found guilty, the company is automatically guilty too. Case closed.

In a National Law Journal article about the decision in U.S. v. Ionia Mgmt. S.A., 555 F.3d 303 (2d Cir. 2009), Twardy and Wenner pound away, starting with the title: “One Rogue Worker Can Take an Entire Company Down.” Obviously, they say, a company can act only through its employees. “The question asked of the 2nd Circuit in Ionia was whether the company should be criminally responsible when its employees commit criminal acts without corporate direction or authorization.” The court said yes. They say fuhgeddaboudit.
Listen to this:

The [Ionia] courts’ views of the respondeat superior doctrine in the context of corporate criminal liability stands in stark contrast with the same liability in other contexts. For example, in discrimination suits under Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e, et seq., the U.S. Supreme Court has limited respondeat superior liability to actions taken by supervisors. See, e.g., Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 762 (1998).

And this:

More recently, the U.S. Supreme Court reiterated its precedent that “government officials may not be held liable for the unconstitutional conduct of their subordinates under a theory of respondeat superior.” Ashcroft v. Iqbal, No. 07-1015, 77 U.S.L.W. 4387, slip op. at 11-12 (U.S. May 18, 2009) (an action brought pursuant to Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388 (1971)). In fact, as the dissent in Iqbal noted, the majority’s opinion even “does away with supervisory liability under Bivens.” Id. slip op. at 1 (Souter, J., dissenting).


With such an exacting limit to respondeat superior liability in the Title VII and Bivens contexts, perhaps the same standard should apply to a corporation for the criminal acts of its employees.

That’s nice research and first-class argument.

What to do? Let organizations defend themselves, the authors say. Give them a chance to show that the crimes were committed by “a truly rogue employee, who was acting in violation of a robust compliance program.” Juries are smart. They can decide “whether the employee was, in fact, truly acting in a rogue manner . . .” and whether companies have effective compliance programs (the U.S. Attorneys’ Manual and the Federal Sentencing Guidelines describe what an “effective compliance program” looks like).

Our view: What’s controversial here? To give organizations the best possible reason to have an effective compliance program, give them a defense based on their efforts to comply. Isn’t that what everyone, including the Justice Department, should want?

“One Rogue Worker Can Take an Entire Company Down” by Twardy and Wenner in the July 16, 2009 National Law Journal can be viewed here.

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