For an agent’s acts to be imputed to the corporation, both the MPC and respondeat superior require that the agent have been acting “on behalf of the corporation.” Although some similar issues arise under both approaches, they differ in the extent to which an agent’s actions can be imputed to the corporation.
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[A] Model Penal Code vs. Respondeat Superior
In states where clear standards for corporate liability have not been established, courts have considered the respective merits of respondeat superior and MPC § 2.07. In Commonwealth v. Beneficial Finance,33 the Massachusetts Supreme Court
declined to adopt the Model Penal Code approach and adhered to respondeat superior principles. The defendants in Beneficial Finance included “small loan” companies. Agents of the companies had bribed public officials to ensure that the companies could charge the highest possible interest rates. In its instructions on corporate liability, the trial court told the jury to apply a standard similar to the common law respondeat superior standard.34
On appeal, the defendant corporations argued that the MPC standards for corporate liability should apply. Under this approach, they argued, the trial court erred when it failed to require that the jury find that high-level management had approved of or recklessly tolerated the bribery scheme.
The Massachusetts Supreme Court rejected the defendants’ argument. Initially, the court noted that the jury probably could have found the defendant liable even under the MPC standard. Nonetheless, the court rejected the MPC’s requirement of high managerial approval. The court stated that the MPC standard was too lenient because “[e]vidence of such authorization or ratification is too easily susceptible of concealment.”35
The court also found that a requirement of high managerial approval would prompt large organizations to attempt to avoid potential liability. Thus, corporations could delegate decision making to lower-level employees and otherwise attempt to conceal management’s role in wrongdoing.
[B] Corporate Compliance Programs and Actions Contrary to Corporate Policy
Courts applying respondeat superior have held that a corporation can be liable for an agent’s acts that are performed on the corporation’s behalf, even where those acts are contrary to explicit corporate policy.36 Further, this is true even where the defendant has in place a “corporate compliance” program, that is, a [23/24]program that
the corporation has adopted to ensure that its agents and employees comply with the law.37
For example, in Dollar Steamship Co. v. United States,38 the Ninth Circuit affirmed the conviction of a corporation under the Refuse Act based upon an employee’s act of throwing refuse from a ship into the Honolulu harbor. At trial, the company showed that its employees were advised of its policy against such dumping, that the ship’s officers had no knowledge of the dumping, and that the company had taken reasonable steps to prevent the dumping. The court nonetheless affirmed the conviction. The court found that the statute explicitly imposed strict liability on individuals and corporations for engaging in the prohibited acts, and that the exercise of due care was not a defense under the statute.
Similarly, in United States v. Hilton Hotels Corp.,39 the defendant corporation was convicted of violating the Sherman Act’s criminal antitrust provisions despite contrary corporate policy. In that case, an agent of the corporation had participated in a plan that violated the Sherman Act. Under the plan, the agent acted to benefit suppliers who contributed to a local hotel organization, and acted to punish those suppliers who did not contribute. The agent’s actions were contrary to corporate policy, and defied the instructions of hotel management not to participate in the scheme. The agent testified that he ignored the instructions because he held a personal grudge against a supplier’s representative.
On appeal, Hilton argued that the trial court erred when instructing the jury that “[a] corporation is responsible for acts and statements of its agents, done or made within the scope of their employment, even though their conduct may be contrary to their actual instructions or contrary to the corporation’s stated policies.”40 The Ninth Circuit upheld the conviction, finding that the judge’s instruction was in accord with the Sherman Act’s design to deter proscribed anti-competitive activity in the broadest possible way. Such activity often occurs when large, complex organizations institute policy decisions over time to maximize profits. Thus, it is appropriate to punish the corporation because the corporation, rather than its employees, profits from the illegal activity, and because it is often difficult to identify the particular agent who engaged in the activity.41 The existence of corporate policy forbidding the agent’s acts in this case, and the instructions of local management to the same end, therefore were not a defense.
[C] Actions Not Taken “For the Benefit” of the Corporation
Many courts applying respondeat superior require that an agent’s acts be “for the benefit” of the corporation. This requirement is met so long as the agent intended in part to benefit the corporation. The presence of additional motives, such as an agent’s intent to gain personally from the illegal acts, will not relieve the corporation of responsibility. Further, an actual benefit is not required; it is the agent’s intent, not the result, that governs.42
The decision in United States v. Automated Medical Laboratories,43 demonstrates the breadth of respondeat superior liability. In that case, the defendant corporation, its subsidiary, and three employees were charged with conspiracy and with making false statements to the federal government under 18 U.S.C. § 1001. The government alleged that the defendants falsified books and records to conceal the subsidiary’s repeated violations of federal regulations. On appeal from its conviction, the corporation argued that (1) the government failed to prove that it intended to violate § 1001, and that (2) the government failed to prove that the corporation’s agents acted within the scope of their employment and for the benefit of the corporation under respondeat superior. The court rejected the first argument, finding that proof of criminal intent is not required under respondeat superior. The court also rejected the second argument. The court held that, even if the agents were acting contrary to corporate policy, they were still acting within the scope of their employment. Further, the agents were acting to benefit the corporation because their actions were intended, at least in part, to prevent the government from learning of the regulatory violations and thus to benefit their employer.
Can a corporation be liable for acts that are actually harmful to the corporation? As shown by the following two decisions, the result is likely to depend on the facts of the particular case. In Standard Oil Company v. United States,44 the corporate defendants were convicted of knowingly violating laws regulating oil production. The convictions were based upon employees’ actions that were designed to benefit a third party rather than the corporations. Further, the employees’ actions actually harmed the corporations because the employees both stole oil from their employers and caused the corporations to pay for oil they did not receive. The Fifth Circuit reversed the convictions, finding that the employees’ actions were not done to benefit the corporations and could not be imputed to the corporations.
In Steere Tank Lines v. United States,45 however, the same court later found that a company could be found guilty where truck drivers falsified their records to earn more money solely to benefit themselves.
Because knowledge and willfulness were elements of the offense, the appeals court found that the trial court had erred when it failed to require that corporate [25/26]agents
other than the drivers knew of the illegal activity. Nonetheless, the court affirmed the convictions. The court reasoned that, because there was evidence that conditions at the company fostered the drivers’ illegal practice, and that management knew of the practice, there was sufficient evidence of the company’s intent. Thus, the error in the jury instructions was harmless.