State v. CECOS Intern., Inc.

• Decision Date: 03 August 1988
• Docket Number: No. 87-1091,87-1091
• Citation: 526 N.E.2d 807,38 Ohio St.3d 120
• Parties: The STATE of Ohio, Appellant, v. CECOS INTERNATIONAL, INC., Appellee.
• Court: Ohio Supreme Court

Page 120

38 Ohio St.3d 120

526 N.E.2d 807

The STATE of Ohio, Appellant, v. CECOS INTERNATIONAL, INC., Appellee.

No. 87-1091.

Supreme Court of Ohio.

Submitted May 18, 1988.

Decided Aug. 3, 1988.

Syllabus by the Court

1. Pursuant to R.C. 2901.23(A)(4), a business entity may be found guilty of a criminal offense only if the criminal act or omission was approved, recommended, or implemented by high managerial personnel with actual or implied authority to approve, recommend or implement same. High managerial personnel are those who make basic corporate policies.

2. A corporate employee's grand jury testimony is discoverable under Crim.R. 16(B)(1)(a) when the statement concerns an alleged criminal act or omission performed on behalf of the corporation and within the scope of employment. The declarant must hold sufficient authority to impute criminal culpability to the corporation.

On March 31, 1985, indictments were issued by the Clermont County Grand Jury against CECOS International, Inc. (hereinafter "CECOS"), Browning-Ferris Industries, John Stirnkorb, and Allan Orth. The investigation and indictments emerged from allegations of illegal hazardous waste discharges into a tributary of Pleasant Run Creek from CECOS' Clermont County landfill during 1984. The indictments consisted of twenty-four counts alleging violations of R.C. Titles 37, 29, and 61, and Ohio Adm.Code Chapters 3701 et seq.

On July 19, 1985, CECOS filed a pretrial motion for discovery of the grand jury testimony of all present and former officers and employees who testified before the panel. CECOS contended that Crim.R. 16 permits discovery of a defendant's grand jury testimony. CECOS argued the word "defendant" in Crim.R. 16 should be construed to include all present and former employees because all such employees were capable of imputing criminal liability to the entity. In the alternative, CECOS claimed it was entitled to the testimony under Crim.R. 6(E). CECOS argued it met the Crim.R. 6(E) particularized need requirement because it was faced with the possibility of calling witnesses at trial who could be impeached by testimony given at the grand jury proceedings.

The trial court granted CECOS' motion on both grounds. The court stayed proceedings while the prosecution appealed.

The court of appeals affirmed. In holding that the word "defendant" in Crim.R. 16 encompassed all corporate employees, the court relied on federal case precedent that purportedly established corporate criminal liability for acts or omissions of all employees working in the scope of employment. The court noted "the idea that a corporation can * * * commit a crime through its agents', employees', and officers' acts or omissions within the scope of their employment has emerged and is today well accepted in Ohio." The court held that "[i]n a fair system, one cannot impute knowledge and simultaneously bar its disclosure to the incorporeal entity alleged to possess it. Yet, this is what * * * [the state] would have us do."

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Anthony J. Celebrezze, Jr., Atty. Gen., E. Dennis Muchnicki, Dale T. Vitale, Charles R. Dyas, Jr., Columbus, and George E. Pattison, Pros. Atty., Batavia, for appellant.

Bauer, Morelli & Heyd Co., L.P.A., and Arnold Morelli, Cincinnati, for appellee.

Jill R. Heck, Pros. Atty., urging reversal for amicus curiae, Ohio Pros. Attys. Assn.

WRIGHT, Justice.

The modern corporation is nearly omnipresent in American society. Yet, legal sanctions on corporate criminal activity are difficult to enforce because a corporation is but an intangible, ethereal being created by the state. Its actions affect employees, assets, the economy, and finally, society; yet, it remains, in Lord Thurlow's words, a being that "has no soul to be damned, and no body to be kicked." ¹ Deterring and punishing corporate criminal conduct thus has become a difficult and sometimes elusive quest.

One of the most controversial aspects of enterprise criminal liability concerns the problem of identifying who represents the corporation for purposes of indictment and prosecution. We address this question today in the setting of a discovery dispute between the state and the criminal defendant, CECOS International, Inc.

We begin by noting that the trial court's decision to disclose grand jury testimony may not be disturbed unless we find an abuse of discretion. State v. Greer (1981), 66 Ohio St.2d 139, 20 O.O.3d 157, 420 N.E.2d 982, paragraph one of the syllabus. With this in mind, we now analyze the arguments posed by the state and defendant, as well as the applicable statutes and case precedent.

I

Crim.R. 16(B)(1)(a) permits disclosure of statements made by a "defendant" during grand jury proceedings. ² A corporation operates through its employees, officers, and directors. Logic dictates that the employees whose criminal conduct may be imputed to the corporation constitute the corporate defendant. The gravamen of this appeal, therefore, rests in the question of whose criminal conduct may be imputed to the corporation.

The criminal liability of an enterprise has evolved through three phases. The early common-law view was that a corporate body could not be criminally liable because it was incapable of forming the requisite criminal intent to commit a crime and could not be imprisoned. ³ Under the revised common-law view, criminal conduct of any employee acting on behalf of the corporation and within the scope of employment was generally imputed to the business entity upon the theory of vicarious liability. ⁴ The modern trend limits the revised common law by imputing criminal liability to high managerial personnel only. ⁵

CECOS suggests Ohio follows the revised common-law view while the prosecution suggests Ohio subscribes to the modern trend. This issue is addressed, in part, by the Revised Code.

R.C. 2901.03(A) states, in pertinent part, that "[n]o conduct constitutes a criminal offense against the state unless it is defined as an offense in the Revised Code." Thus, in Ohio, criminal liability is rigidly and precisely limited to those situations that the General Assembly has specifically delineated by statute.

In R.C. 2901.23, the General Assembly carefully identified which employees may create criminal liability for a business entity. R.C. 2901.23 provides in pertinent part:

"(A) An organization may be convicted of an offense under any of the following circumstances:

" * * *

"(4) If, acting with the kind of culpability otherwise required for the commission of the offense, its commission was authorized, requested, commanded, tolerated, or performed by the board of directors, trustees, partners, or by a high managerial officer, agent, or employee acting on behalf of the organization and within the scope of his office or employment. * * * "

Appellee suggests any employee's criminal conduct may be imputed to the corporation. ⁶ CECOS correctly notes there is no Ohio case law on point that construes the statute. In support of its position, appellee cites cases from several federal courts that have determined a "corporation may be criminally bound by the acts of subordinate, even menial, employees." Standard Oil Co. of Texas v. United States (C.A. 5, 1962), 307 F.2d 120, 127. See, also, United States v. Illinois Central Railroad (1938), 303 U.S. 239, 58 S.Ct. 533, 82 L.Ed. 773 (corporation subject to penalty liable for acts of manual laborers); United States v. George F. Fish, Inc. (C.A. 2, 1946), 154 F.2d 798 (corporation may be criminally liable for acts of salesman); Riss & Co. v. United States (C.A. 8, 1958), 262 F.2d 245 (criminal conduct of clerical workers imputed to corporation).

Appellee relies primarily on United States v. Hughes (C.A. 5, 1969), 413 F.2d 1244. Hughes applies the reasoning of Standard Oil to a dispute under former Fed.R.Crim.P. 16(a)(3). The court observed at 1252:

"The significance of a witness' testimony to the inquiry into potential corporate criminal liability, and to the defense in preparing its case, does not depend upon organizational charts. * * * If the door to Rule 16(a)(3) is to be open to corporations at all--and we are of the opinion that it must--its availability should not be based upon corporate titles."

Hughes dealt with Fed.R.Crim.P. 16(a)(3) prior to its amendment. The amended rule, Fed.R.Crim.P. 16(a)(1)(A), effectively overruled Hughes by requiring that the employee have authority to "legally * * * bind the defendant." Nevertheless, the assertion that organizational charts and titles should not determine potential criminal liability remains viable in many jurisdictions. It is not the only viable argument on this subject, however.

The state submits the corporate defendant, for purposes of criminal liability, is composed of those employees with the assigned authority and function to act on behalf of the corporation with regard to the matter that gave rise to the criminal offense. In support of its argument, the state relies on a strict construction of R.C. 2901.23.

Inherent in the state's argument is that R.C. 2901.23(A)(4) requires authorization by "a high managerial officer, agent, or employee * * *," while subsection (A)(1), which refers to misdemeanors, permits authorization by "an officer, agent, or employee." (Emphasis added.) Conspicuously absent in the description of the (A)(1) class are the adjectives "high managerial."

The state submits the language in subsection (A)(4), therefore, should be construed to mean "high managerial officers, high managerial agents, or high managerial employees." Although the state concedes there is no Ohio precedent to support such a view, it suggests that any other construction would read the phrase "high managerial" out of the statute.

Accordingly, the state contends the high managerial personnel directly responsible for the proper disposal of waste at the site are the only employees whose...