Pinochio becomes a real boy?

The Pinochio Law carries the fiction of companies as persons to greater depth, finally.

Last week, the British government agreed to introduce a new law titled the “Corporate Manslaughter Statute.” This law is remarkable because it attempts to make companies–not persons–criminally responsible for deaths caused by a firm’s gross negligence. In this column, I will examine the law’s structure, its history, and finally, I will ask how American law approaches the same problems the Corporate Manslaughter Act is designed to solve.

The Corporate Manslaughter Act
The British law allows the state to prosecute a corporation or partnership (an “organization” for short) for the crime of manslaughter if the organization causes the death of a person as the result of its “gross” breach of a duty owed under the law of negligence. However, in order for the state to prove its case, it must prove that a substantial element of the gross breach of duty resulted from the way in which the organization’s activities were “managed or organised by its senior management.”

The penalties for violating the act are quite interesting. First, a court can impose unlimited financial penalties on the organization, once it is convicted. Second, a court may issue a “publicity order,” which requires the organization to publicly announce (through advertisements, it seems) that it has been successfully prosecuted for corporate manslaughter and is subject to any other penalties the court may have ordered.

The third and final potential penalty is that the court can order the organization to publicly take remedial steps to correct the conditions that led to the breach of duty. This penalty could have potentially far-reaching consequences, depending on how the courts choose to interpret it. For example, under this remedy, suppose a court decides that a design defect was the result of conscious indifference to the safety of others (such as in the famous Ford Pinto case). The court could simply order a manufacturer to change the design of their product–a power that no American court currently possesses.

The Impetus for the British Law: Spectacular and Disturbing Accidents
The most direct explanation for the advent of the British law is that there have been a number of spectacular industrial and transportation accidents in the United Kingdom since the Thatcher era of privatization. This is especially true in the area of rail traffic, where the public has become increasingly uneasy about the degree to which the private train operators who took over public lines have placed profit about the public good.

The Southall rail crash of 1997, in which 10 people died in a high-speed train in London, illustrated for many the weakness of the old laws. The company that operated the train, GWT, was prosecuted for common-law manslaughter, but the case failed, despite the voluminous evidence that there was a systematic failure of safety management. Similar disasters involving ferry wrecks and gas works explosions helped reinforce the impression that corporations were not answerable in court because senior management always pointed the finger at someone else.

British versus American Law on Corporate Responsibility
In the United States, as in England, it is very difficult to hold either organizations or their officers responsible for gross negligence. For example, while many law students learn about the success civil tort plaintiffs had in suing Ford for failing to spend $13 per car to strengthen a gas tank known to be vulnerable to rear- end collisions, few learn that, at the same time, a prosecutor brought a case in criminal negligence against Ford in Indiana—and lost the jury trial.
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In conclusion, the new Corporate Manslaughter Act is a fascinating experiment. Americans who are interested in deterring organizational wrongdoing should watch carefully to see how British judges apply the law, which prosecutions are and are not brought, and whether the law has a measurable, positive impact on either accident costs or liability costs. If the U.S. Supreme Court continues to cut back on the availability of punitive damages under state and federal law, perhaps the gap in deterrence–if there is one–created by the Supreme Court’s recent decisions could, in the future, be filled by something like the Corporate Manslaughter Act.

America relies on private litigation to obtain redress of harm, but this method does not regard the company as a person in the way other parts of US law allow. The British proposal allows for this viewpoint of the fiction of ‘person’ but does not have the private citizen mechanism for ‘punitive damages’ that US law allows. What do we wish for?
(BTW, I made up the title, just like The McGyver heist between Switzerland and China)