Suing corporations

[Bruce]

I have a problem with this. All too often, people tend to think of a corporation as a single entity. Whenever a "corporation" does something illegal, the company is sued as a whole, but the illegal action can usually be traced back to a single individual that did something illegal, behind the backs of (and without consent of) the rest of the company. It's the multi-million dollar equivalent of punishing the whole class when a single student misbehaves.

I don't think it's right for hundreds of innocent people to lose their jobs because Slick-Rick the accountant secretely did some illegal number crunching to impress his boss, or Ted the lacky poured a hundred pounds of mercury down the sink because he was too lazy to fill out the HazMat forms and ship it out for disposal.

Activists want to sue corporations because they think the big guys in the suits will take a hit, but it's always the little guys that get hurt. The dudes in the suits usually just pay the fines, lay off a chunk of the workforce, shut down a division, or sell the company, then retire to their island in Tahiti. Embarassing for them at the country club, but no real damage. Meanwhile, Joe average is laid off again and has to uproot is family to take on a job in Timbuktu.

Have you ever thought of it this way? What say you?

 

[Drooper]

It is worse than that. Accountability is invariably levelled (or always apears to be levelled) at executives of the company concerned rather than the poor sod who may have just made a small mistake with massive consequences.

I remember distinct examples of rail accidents where law suit proceed against the memebers of the boards of train companies when investigations into the accident reveal that the cause of the accident was a train driver going through a red light.

 

[brodski]

I think what you are talking about here is the concept of "vicarious liability".

The argument goes like this. If the heads of corporations could absolve them selves from blame by arguing that they where not aware of the illegal / harmful actions of their employees, then corporations would make it their business to not know about what their employees are up to.

When you establish a commercial undertaking then you take on responsibility for your employee’s actions whilst they are acting on your belief (i.e. any action which is undertaken in their capacity as an employee).

Suing the corporation is not equivalent to punishing the whole class; it is more akin to disaplining the teacher if he cannot keep order in the classroom.

 

[Rob Lister]

I have a problem with this. All too often, people tend to think of a corporation as a single entity.

People think that because, under the law, that is true. It is almost as much a 'single entity' as you are, notable exceptions, such as the right to vote, withstanding. The people within that organization, including the stockholders, are like the organs and cells of your body. If something goes wrong in your body, through no fault of your own (necessarily), you still suffer as an entity. It is therefore purdent to get check-ups regularly, eat your veggies, and make sure you get enough fiber in your diet.

Wait...

What was the topic?

 

[Bruce]

The argument goes like this. If the heads of corporations could absolve them selves from blame by arguing that they where not aware of the illegal / harmful actions of their employees, then corporations would make it their business to not know about what their employees are up to.

It happens anyway, and the bigger the corporation, the worse it gets. Even in the tiny start-up company I worked for, nobody wanted to tell the board of directors at the parent company ANYTHING, because you could bet that they would try to get involved, not knowing what they were doing, and we would all be made to work through vacations and clean up the messes they made. It happened so many times that we all learned our lesson. Fix the problem or hide it, keep your mouth shut, and cover your own butt (and those of your friends if you could).

Explaining problems and mistakes to upper managment only results in pain. It never solves the problem. In fact it always makes things worse. Your primary responsibility to the president/CEO is to keep him fat, dumb, happy, and on the golf course. That's the sad reality.

 

[brodski]

Explaining problems and mistakes to upper managment only results in pain. It never solves the problem. In fact it always makes things worse. Your primary responsibility to the president/CEO is to keep him fat, dumb, happy, and on the golf course. That's the sad reality.

The point is that it is not up to employees to explain things to the CEO, it is the CEO's business to know what is going on. Burrying your head in the sand is not effective leadership. Buty then you know this

If corparations wher not liable for their actions, then who would be? I still mainatin that if ignorance of your employees actions where a defence then corperations would dellibratly organise themselves so that those at the top had no idea as to what was going on oin teh ground. This siutaion seems to arrise by accident raterh than design at the moment

 

[Bruce]

If corparations wher not liable for their actions, then who would be?

Sometimes no one. Consider this:

A) Pedro is a poor migrant worker. One day he leaves his car parked on the roadside, and his engine springs a leak. He drives off the next day and fails to notice the oil. A school bus later skids through the oil spill and kills a group of kids. Pedro is charged for criminal negligence because he forgot to take his car in for an annual vehicle inspection the previous month, but he has no money so it's pointless to sue him.

B) Pedro is a poor maintenance guy for Home Depot. One day while delivering a shipment of wood, he leaves his company truck parked on the roadside, and his engine springs a leak. He drives off when his delivery is finished and fails to notice the oil. A school bus later skids through the oil spill and kills a group of kids. Home Depot is charged for criminal negligence because Pedro forgot to take his company truck in for an annual vehicle inspection the previous month. Prosecutors see dollar signs and sue Home Depot for 40 million in damages "on behalf of the children and their greving families." Pedro loses his job, but so does everyone at the local Home Depot and two other Home Depots in the nation because the company can't make up for the losses. The lawyers swim in the cash, and the community feels vindicated, but the children are still dead and hundreds of people lost their jobs through no fault of their own.

Which situation is more greivous?

 

[brodski]

the pointy is that a corporation is responsible for the condition of its trucks, the are also responsible for hiring and traoining people who will take all due care.

If the corporation put eth driver in the position where his actions would cause harm to others, then the corperation bears some of the responsibility.

as for who gets sacked. I allways mainatin that blame for consequences should be aportioned based on the actionbs whiuch casued the consequences, not the concequences of those actions.

 

[Thanz]

Sometimes no one. Consider this:

A) Pedro is a poor migrant worker. One day he leaves his car parked on the roadside, and his engine springs a leak. He drives off the next day and fails to notice the oil. A school bus later skids through the oil spill and kills a group of kids. Pedro is charged for criminal negligence because he forgot to take his car in for an annual vehicle inspection the previous month, but he has no money so it's pointless to sue him.

B) Pedro is a poor maintenance guy for Home Depot. One day while delivering a shipment of wood, he leaves his company truck parked on the roadside, and his engine springs a leak. He drives off when his delivery is finished and fails to notice the oil. A school bus later skids through the oil spill and kills a group of kids. Home Depot is charged for criminal negligence because Pedro forgot to take his company truck in for an annual vehicle inspection the previous month. Prosecutors see dollar signs and sue Home Depot for 40 million in damages "on behalf of the children and their greving families." Pedro loses his job, but so does everyone at the local Home Depot and two other Home Depots in the nation because the company can't make up for the losses. The lawyers swim in the cash, and the community feels vindicated, but the children are still dead and hundreds of people lost their jobs through no fault of their own.

Which situation is more greivous?

Well, I think that your fact situation is a little dubious in terms of liability, so I am going to take the liberty of altering the facts to make liability on the driver a little clearer while (I hope) maintaining the essence of your inquiry. Let's say that instead of oil on the ground, it is a run of the mill traffic accident.

In situation A, Pedro is rushing across town to meet his girlfriend. He is late, and his girlfriend gets major pi$$ed when he is late. He sees that the light is turning, but thinks he can make it so he guns the engine. He doesn't make it, runs the red and t-bones a minivan, killing the three year old and crippling the father for life. Pedro has no insurance, has no money, so it is pointless to sue him.

In situation B, Pedro is a pizza driver, rushing across town for a delivery. He is late, and his boss gets major pi$$ed when he is late. He sees that the light is turning, but thinks he can make it so he guns the engine. He doesn't make it, runs the red and t-bones a minivan, killing the three year old and crippling the father for life. Pedro still has no insurance. The pizza company gets sued by the family, who then gets some compensation for the loss. The pizza parlour, (whose insurance had just expired) goes under as a result of having to pay the family.

Which situation is more grevious? I'd say situation A, where the injured parties get no compensation at all, while those responsible for the injury have no consequences.

 

[brodski]

The pizza parlour, (whose insurance had just expired) goes under as a result of having to pay the family.

A quick question here, in the US can corporationsoperate without insurance.

In the UK it is illigal for corporations to operate without havving sufficant "employers liability issurance" (ELI).

this ELI should actually protect against the effects of beign sued, though it will not protect against fines. (you cannot insure against criminal sanction)

Now is it immor to fine a coproation for illaigal activites when this may bankrupt the company putting people out of work? Or deos the fact that they cave commited a criminal act warrent some sort of sanction irrigrdless of the poetential concequences of those sanctions?

 

[drkitten]

Pedro is a poor maintenance guy for Home Depot. One day while delivering a shipment of wood, he leaves his company truck parked on the roadside, and his engine springs a leak. He drives off when his delivery is finished and fails to notice the oil. A school bus later skids through the oil spill and kills a group of kids. Home Depot is charged for criminal negligence because Pedro forgot to take his company truck in for an annual vehicle inspection the previous month.

In this case, Home Depot should get sued. It's not Pedro's job to take the company truck in for annual inspections. It's Home Depot's, as a corporate entity. (If Pedro, for example, had had a stroke and been hospitalized for three months, Home Depot would still have expected the business to run smoothy in his absence. It would have had other maintenance people in place to cover for Pedro's absence, and there would have been people -- including Pedro's boss -- whose job it was to make sure that Pedro did what needed to be done.)

There's a principle in law, dating back to the Roman Empire, that "what I do through an agent, I do myself." I can't absolve myself of (legal) responsibility for an action by telling someone else to do it, and then blaming them when they screw up. It is my responsibility, both legal and moral, to make sure that the people doing stuff on my behalf are doing it properly. So Pedro may have forgotten about the vehicle's annual maintenance.... but someone else forgot to remind Pedro of it. And so on up the chain, until you get to the chairman of the board.

 

[LTC8K6]

Let's change the second one a bit more. What if Pedro's boss has specifically told him that he must not break any traffic laws to meet delivery times, and the company also has a written policy saying the same?

Pedro has signed a copy of the policy, indicating that he has read and agrees with it.

I don't think the company could operate without insurance, btw.

The Pizza company still gets sued for the crash and goes under anyway. If not from the financial loss, then from the inability to get insurance coverage in the future.

 

[drkitten]

Pedro has signed a copy of the policy, indicating that he has read and agrees with it.

I don't think the company could operate without insurance, btw.

The Pizza company still gets sued for the crash and goes under anyway.

I don't accept that the pizza company would necessarily go under in this situation. In this case, the company has a very clear defense against being held liable as a company. In technical terms, the lawsuit is almost certainly "without merit." Under normal circumstances, the company will neither be fined nor be forced to pay damages, nor will the insurance compny cancel its insurance. To assume otherwise is pathological and perverse.

Companies are sued for meritless reasons all the time. Insurance companies typically take it in stride as part of doing business unless there's something unusual about the suit.

 

[Thanz]

Let's change the second one a bit more. What if Pedro's boss has specifically told him that he must not break any traffic laws to meet delivery times, and the company also has a written policy saying the same?

Pedro has signed a copy of the policy, indicating that he has read and agrees with it.

That will be a factor in determining liability at the trial, but will not have an effect on whether they get sued in the first place. It may be that the written policy is one thing, but when he goes out the door Pedro's boss says "one more late pizza and your ass is grass" that is another.

I don't think the company could operate without insurance, btw.

I was trying to take insurance out of the picture. So, instead of saying that the pizza parlour had no insurance at all, I say that that it just expired and Guido the owner forgot to renew it/didn't pay a premium/whatever - just so that the financial consequence lands on the business, not their insurer.

 

[LTC8K6]

I'm saying it doesn't matter. The company cannot win most of the time. No matter how diligent they are.

If Pedro's boss reminded him of the policy every time he went on a delivery, it still wouldn't matter.

 

[brodski]

Let's change the second one a bit more. What if Pedro's boss has specifically told him that he must not break any traffic laws to meet delivery times, and the company also has a written policy saying the same?

Pedro has signed a copy of the policy, indicating that he has read and agrees with it.

I don't think the company could operate without insurance, btw.

The Pizza Company still gets sued for the crash and goes under anyway. If not from the financial loss, then from the inability to get insurance coverage in the future.

I will try and answer your point form the viewpoint of UK law; I am very hazy about where the US legal system stands on this.

In the UK employers are required to do everything which is "reasonably practicable" to prevent their undertaking from either
1) Harming employees
2) Harming non employees (members of the public, contractors etc.)

In order to sue someone for negligence in the UK you must prove 3 things

1) The individual owed you a duty of care
2) That duty was breached
3) That beach caused you harm.

All companies owe all people (employees and non employees) a duty to care not to actively harm them, that usually takes care of point 1
If you have been harmed by a companies, its employees or agents, then that takes care of most of point three.

Point 2 is often the sticking point. If The Company had done everything which was "reasonably practicable" to uphold its duty of care, then they have not breached their duty of care and the legal action must fail.


So if the Pizza company did everything that was "reasonably practicable" to prevent Pedro from killing people on company time, then they would not have any civil liability either.
In other words, if the company checked Pedro’s driving skills and offered training where those skills may be lacking. where they took steps to prevent their drivers speeding, informed them that speeding was both illegal and a disciplinary offence, and lastly if eth company did not assign work to their drivers with deadlines which meant that they would often have to speed
Then they would probably have done everything which was reasonably practical and would therefore be neither criminally nor civilly liable for the accident.

 

[drkitten]

I'm saying it doesn't matter. The company cannot win most of the time.

And I'm saying you're wrong.

Got any evidence to support your claim that meritless lawsuits succeed "most of the time"?

 

[LTC8K6]

That sums up the way I think it should be nicely, Brodski.

Unfortunately, I don't think it works out that way most of the time in the U.S.

did not assign work to their drivers with deadlines which meant that they would often have to speed

That's a good point, as well.

 

[LTC8K6]

Well, the jury decides merit, doesn't it?

While our definition of "meritless" may vary, ultimately if the jury awarded compensation, then the suit had merit in their eyes.

Even if I would call it meritless.

 

[Bruce]

I think my point is pretty much being understood here, unlike many of my other rants. To put it more concisely:

Should innocent people (those who have nothing to do with the problem at hand) lose their jobs because of the mistakes or illegal activity of another employee/excutive?

Assuming the answer is no, how could such situations be avoided? I'll leave the situations and details open, but let's try to focus on this question. I think it happens often enough to merit serious discussion (a rare thing coming from me). Thanks.