August 06 2012
In Southern Union Co v United States(1) the Supreme Court provided corporations and their officers and directors with an important new tool in responding to criminal charges by holding that juries, not judges, must find beyond a reasonable doubt all facts that affect the imposition of a fine. The decision rests on principles first elaborated in Apprendi v New Jersey,(2) a seminal sentencing case that increased the role of the jury in sentencing in the context of imposing a term of imprisonment. The decision has significant ramifications not only for the conduct of the trial itself, but also for pre-trial negotiations, such as plea negotiations and deferred or non-prosecution agreements. By recognising an additional constitutional safeguard applicable to the process by which the government can obtain a criminal fine, the court has provided additional leverage to corporations and individuals when negotiating with the government before trial or even indictment, and has imposed an arguably heavier burden on the government at trial.
The case arose out of the government's indictment of Southern Union for violating the Resource Conservation and Recovery Act of 1976 by allegedly improperly storing mercury without a permit. The indictment covered a two-year period; the act allows for the imposition of a fine of "not more than $50,000 for each day of violation". A jury convicted Southern Union of violating the act and, at sentencing, the probation officer calculated a maximum fine of $38.1 million. Southern Union objected to the calculation, arguing that the imposition of the fine would violate Apprendi because the jury was not asked to find how long the violation lasted. The district court agreed with Southern Union that Apprendi applied not just to sentences of imprisonment, but also to the imposition of criminal fines. However, it concluded that the jury had necessarily found that Southern Union's violation lasted for nearly the entire two-year period. The district court then imposed a $6 million fine and a $12 million community service obligation.
On appeal, the First Circuit disagreed that the jury had necessarily concluded that the violation lasted nearly two years, but affirmed the sentence anyway. It did so because it concluded that Apprendi did not apply to the imposition of fines, and accordingly the district court was entitled to make its own factual findings when calculating the amount of the fine. However, that decision conflicted with two other circuit court cases - United States v Pfaff(3) and United States v LaGrou Distribution Systems, Inc(4) - and the Supreme Court decided to review Southern Union's case to resolve the circuit split.
Apprendi held that the Sixth Amendment requires that any fact, other than the fact of a prior conviction, which "increases the statutory penalty for a crime beyond the statutory maximum... be submitted to a jury and proved beyond a reasonable doubt".(5) In short, a judge may impose a sentence only based on facts found by the jury. Justice Sotomayor's majority opinion in Southern Union held that this constitutional protection extends to facts that are necessary to determine the amount of a criminal fine, and not just to those facts relevant to determining a term of imprisonment.
Apprendi's application to criminal fines had been thrown into doubt by the court's 2009 decision in Oregon v Ice, in which the court held that judges could, consistent with the Sixth Amendment, determine whether sentences were to run concurrently or consecutively. In Ice the court had noted that "[t]rial judges often find facts about the nature of the offense or the character of the defendant in determining... the imposition of statutorily prescribed fines and orders of restitution".(6) However, in Southern Union the court treated the statement as dicta and affirmed Apprendi's application to criminal fines.
It seems likely that Southern Union will aid companies and their officers and directors in responding to government allegations of wrongdoing. As the majority opinion noted, groups like the US Chamber of Commerce supported the majority's position because they believed that subjecting the government to additional burdens at trial would strengthen defendants' positions in plea negotiations. This substantial benefit may be counterbalanced to some degree by increased costs in those cases that do proceed to trial and possibly by elevating the importance of experts to calculate economic loss for use in plea negotiations - unintended negative consequences that may have influenced Justice Breyer's dissent in positing that the court's decision may ultimately harm corporate interests in some respects. In any event, business organisations and their executives who are facing criminal investigations will want to give careful consideration to the means by which this additional safeguard can promote a quicker and fairer resolution of charges that the government has brought or may be contemplating.
For further information on this topic please contact Don J DeGabrielle, Darryl W Anderson or Eliot Turner at Fulbright & Jaworski LLP by telephone (+1 713 651 5151), fax (+1 713 651 5246) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org).
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