The Uncertain Future of the Corporate Death Penalty
Ghost guns have struck fear into the hearts of many across the nation, and with good reason. Virtually untraceable and almost laughably easy to make, ghost guns have been the subject of campaign promises and district attorneys’ pet projects, and the source of many a lawsuit. Last August, Polymer80, one of the nation’s largest producers of ghost gun kits, shut down.[1] According to the company’s CEO, Polymer80 was “getting sued left and right,” and appears to have buckled under the weight of litigation costs. But is this the end? The CEO reportedly told the press that Polymer80 would return “in some way shape or form.”[2] Not to detract from the value and impact of these settlements, we do still face the question: has Polymer80 been vanquished? Or is it a hydra, and we’re just waiting for the remaining two heads to grow back after a quiet infusion of cash and comprehensive self-reinvention?
A couple of years ago, I read Toms River: A Story of Science and Salvation by Dan Fagin. Toms River, New Jersey, was reinvigorated in the latter half of the twentieth century by Ciba-Geigy, a dye manufacturer. Ciba-Geigy dominated and defined the local economy and, as it turned out, irrevocably altered the local environment. The company spent years spewing toxic effluent into the eponymous Toms River, which had historically been a rich source for fisheries. Fish died, watering holes turned suspicious colors, local residents of all ages began developing cancer at alarming rates. Ciba-Geigy dumped drums of toxic sludge into the ground, contaminating the groundwater, which was arguably even worse than pouring effluent into the river. Groundwater contamination is incredibly costly to remediate, not to mention insidious and difficult to track. Ciba-Geigy was sued and paid out a handsome settlement. But by the time the settlement was reached, the company had already begun to divest from Toms River in favor of cheaper factory towns in Louisiana and later in China. The legal victory was undeniable. But the skeptical reader could ask, will Ciba-Geigy change? Was this just a tax? Maybe they had been saving up for the day of the settlement. The company operated in Toms River for decades and knew what it was doing—they tested the water and they covered up the contamination. Imagine if they invested a moderate sum of money thirty years ahead of when they paid the settlement. In a lecture last semester, Professor Livermore alluded to oil companies’ settlement funds with respect to the new state superfund laws that are being passed. Livermore suggested that companies like these expect to be sued and have accounted for it in their budgets.
I don’t want to detract from the value of these settlements and litigation. As we have seen with Polymer80, monetary damages and settlements can substantially penalize major private actors. But as we can also see in the case of Toms River, private plaintiffs’ litigation is a single piece of the puzzle. It is a crucial, highly valuable piece, but a piece. What about criminal sanctions? It is easy to imagine the hurdles to proving criminal conduct either by a corporation as a whole or its executives. Marshaling evidence that a given executive ordered or knew about a corrupt practice can be an uphill battle, particularly to meet the standard for a criminal conviction. Proving culpability of an entire corporate entity, too, is incredibly rare. Taking as a given that these cases are difficult and few, we can see how the sentences imposed in successful cases matter. They set precedents; they send a clear message. Focusing on the conviction of corporations in particular, sentencing poses a complex question. Pacific Gas & Electric is a famous example. The company has ninety-one felony convictions and has filed for bankruptcy twice.[3] The company caused a natural gas explosion in 2010 which killed eight people. It has since been accused of causing wildfires that have killed hundreds of people.[4] Yet the company appears to have escaped any significant consequences, leading some to call for its dissolution. Enter the corporate death penalty, or as it is formally called, judicial dissolution. To my knowledge, it has almost never been implemented and has rarely been attempted. The idea is that a court could order, as a criminal or civil penalty, to revoke a corporation’s charter, effectively “killing” it.
In the wake of Citizens United, judicial dissolution poses an interesting quandary. A Cornell Journal of Law and Public Policy article considers whether such a sanction would constitute cruel and unusual punishment under the Eighth Amendment.[5] Although the death penalty for humans continues to be permissible, the potential for collateral, disproportionate damage emanating from judicial dissolution raises questions about whom the dissolution would hit hardest. Shareholders would take losses; employees would lose jobs. Any positive benefits created by the corporation, even if they were mere fringe benefits, would be eviscerated. In a way, the conversation turns to what a corporation is: is it anything more than a group of people and if so, is the collective punishment inevitably engendered by judicial dissolution disproportionate and perhaps unconstitutional? The Cornell article makes the point that depending on how a court defines a corporation, it could have different standards for justifying the use of the corporate death penalty. Under what is referred to as the artificial entity theory (i.e., the view that corporations are a legal fiction freely regulated by the state), the threshold for justifying the corporate death penalty would be at the state’s discretion, since the corporation would not be entitled to constitutional protections as a mere vessel of the state. In contrast, under what is called the aggregation theory, which views corporations as real entities that derive constitutional protections from their constituents purely as a means of extending full constitutional protections to those constituents, a court would have to find that the impacts on those constituents would be justified. In other words, the offense would warrant the economic impacts on the shareholders, employees, etc. Under aggregation theory, judicial dissolution would be much more vulnerable to Eighth Amendment arguments, seeing as there may not be a direct line from the corporation’s behavior to those of all constituents. Interestingly, the Cornell article notes that the Citizens United court failed to reach a consensus on which of these theories, if either one, it preferred.[6]
What the juxtaposition of the artificial and aggregation theories reveals is the elusiveness of the corporation. As the Polymer80 CEO alluded, the core of a corporation’s being is itself slippery and lends itself to regeneration. As the Cornell article argues, even the Supreme Court has yet to reach a consensus as to what reification of a corporation really means. And, the extension of the Bill of Rights in its entirety to corporations has yet to be tested. Even those instances in which it has been tested lead to curious disjunctions: the Fifth Amendment, for instance, does not extend to the constituents of a corporation, since the Fifth Amendment cannot be invoked on behalf of a third party.[7] In such a case, it appears that the Bill of Rights leaves corporations curiously vulnerable. But in contrast, the fact that corporate dissolution could be deemed unconscionable while the human death penalty, which has undeniable collateral effects on entire families and communities of the party condemned to death, persists, feels dissonant.
In 2020, the New York Attorney General brought a lawsuit against the National Rifle Association (NRA), seeking to have its charter revoked. The lawsuit alleged a failure to manage funds and comply with various state and federal laws. Interestingly, the complaint primarily centered upon the four individual defendants, who were named in addition to the NRA as a whole.[8] The lawsuit presents an interesting contrast to the PG&E case, which appears to center on the corporation’s conduct as a whole (though naturally implicating individuals). The Attorney General won the trial, in which three of the named defendants were found liable and the NRA itself was found to have improperly administered funds and violated state law.[9] However, the NRA survived the litigation intact, though the individually named plaintiffs were liable for significant monetary damages.[10] Following the litigation, NRA President Bob Barr bragged that “The NRA remains strong, safe and independent.”[11] Dissolution of the NRA would arguably have different collateral effects than dissolution of a for-profit entity, in that its effects could be felt most by the people the nonprofit serves. Scholarship regarding Eighth Amendment implications of judicial dissolution appears to focus on employees and shareholders. It remains an open question whether nonprofits fit within this framework. It remains an even larger question whether there will be an opportunity for the Supreme Court to formally address the Bill of Rights’ coverage of corporations.
[1] www.thetrace.org/2024/08/polymer80-closed-ghost-gun-lawsuits/.
[2] Id.
[3] www.liberationnews.org/pges-rap-sheet-the-criminal-history-of-the-largest-utility-monopoly-in-the-u-s/.
[4] www.npr.org/2022/01/24/1075267222/californias-embattled-utility-leaves-criminal-probation-but-more-charges-loom.
[5] “Would a Corporate Death Penalty Be Cruel and Unusual Punishment,” Drew Isler Grossman, Cornell Journal of Law and Public Policy.
[6] Id.
[7] Id.
[8] www.ag.ny.gov/press-release/2020/attorney-general-james-files-lawsuit-dissolve-nra.
[9] www. ag.ny.gov/press-release/2024/attorney-general-james-wins-trial-against-nra-and-wayne-lapierre.
[10] www.courthousenews.com/yearslong-legal-battle-between-nra-and-ny-attorney-general-ends-with-final-compliance-judgment/#:~:text=MANHATTAN%20(CN)%20%E2%80%94%20A%20New,the%20nation's%20leading%20gun%20rights.
[11] Id.
