02 March 2009

White Collar Crime:
Oil Dumping, Respondeat Superior, and Alcohol

I know, I know . . . Since when did I start thinking about white collar crime or the 2d Circuit? Well, when fellow W&L graduate, Charles E. James Junior, forwards a brief article he has co-written, it merits some consideration.

Ionia’s corporate policy dictated that its ships would not discharge untreated waste and it had in place a robust compliance program to ensure that its employees adhere to that policy. Senior Ionia officials did not know that employees aboard the ship were refusing to comply with that policy and were falsifying ship records to cover up their non-compliance.
The company was held liable anyway.

The 2d Circuit's opinion is mostly about whether a record book is maintained or merely possessed if no records are entered prior to a ship coming into US jurisdictional waters (it's maintained). The respondeat superior arguments are given short shrift. They find that the evidence (giving the best light to the prevailing party below) showed that the sailors dumping oily water without processing it, falsifying records about the dumping, and lying to the Coast Guard about the dumping were within the scope of their authority, acting under the orders of their supervisors.

That all makes sense, but it's followed by a weird sentence. "The jury could, moreover, infer from the expert testimony about the maintenance and expense involved in using the Oil Water Separator that the crew used the bypass hose to benefit Ionia and subsequently lied to protect the company." Since the Court just said they'd admitted to acting under the orders of their supervisors, I have no clue what this sentence is referring to.

Next, the Court states that corporate criminal actions don't have to originate from managerial employees, but that it's not relevant because the actions in question were ordered by the ship's chief engineers.

Finally, the Court dismisses the amici curiae's argument "that the prosecution, in order to establish vicarious liability, should have to prove as a separate element in its case-in-chief that the corporation lacked effective policies and procedures to deter and detect criminal actions by its employees." The only test is whether the employee was acting within the scope of his employment. Corporate policies may be relevant to this question, but not dispositive in and of themselves.


Respondeat superior isn't something those of us down in the trenches deal with often. In fact, I didn't think Virginia used it at all in criminal law. I thought that if a situation similar to this arose in Virginia we'd probably prosecute the company as a principal in the second degree.

However, it appears that respondeat superior does exist under Virginia law. It's found in old alcohol cases. Specifically, O'Donnell v. Commonwealth, 108 Va. 882 (1909), in which a store clerk sold illegal alcohol the Court stated this:
It is wholly immaterial, under the positive prohibition and policy of the statute, what the instructions were from the defendant to his clerk, or that the sale was in violation of his instructions. Neither the motives nor the intent of the defendant, nor his purpose to obey the law, can relieve him, when it is shown that a sale in violation of the statute was actually and purposely made either by himself or by another for him. The clerk knew he was selling the liquor, and the proof shows that he was selling it as the agent of and for the defendant.
Who knew? Virginia was ahead of the federal courts by 100 years.

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