New York Central & Hudson River Railroad Co. v. United States
212 U.S. 481 (1909)
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Rule of Law:
A corporation can be held criminally liable for the illegal acts of its agents when those agents are acting within the scope of their employment and for the benefit of the corporation.
Facts:
- New York Central and Hudson River Railroad Company (Railroad) had an established, published tariff rate for shipping sugar from New York City to Detroit.
- The Railroad's traffic managers entered into a secret agreement with Lowell M. Palmer, an agent for the American Sugar Refining Company (Sugar Company).
- The agreement was to provide the Sugar Company a special, lower rate to prevent them from using a cheaper water route and to help them meet competition.
- The arrangement required the Sugar Company to pay the full, published tariff rate for each shipment upfront.
- After the shipments, the Sugar Company's agent submitted claims to the Railroad for a rebate, representing the difference between the published rate and the secret lower rate.
- Upon receiving the claims, the Railroad's assistant traffic manager processed them, and the Railroad paid the rebates back to the Sugar Company's agent.
- The funds for these rebate payments ultimately came from the Railroad company's treasury.
- This process of paying the full rate and then receiving a rebate occurred for numerous shipments over several months in 1904.
Procedural Posture:
- The United States government indicted the New York Central and Hudson River Railroad Company and its assistant traffic manager, Fred L. Pomeroy, in the U.S. Circuit Court for the Southern District of New York.
- The indictment charged the defendants with violating the Elkins Act by paying illegal rebates on sugar shipments.
- A jury in the trial court convicted both the railroad company and Pomeroy on six counts of the indictment.
- The trial court sentenced the railroad company to pay a fine of $18,000 on each count, for a total of $108,000, and sentenced Pomeroy to a fine of $1,000 on each count.
- The railroad company (plaintiff in error) sought a writ of error from the Supreme Court of the United States to review the judgment against it.
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Issue:
Does the Elkins Act, which holds a corporation criminally liable for the illegal acts of its agents committed within the scope of their employment, violate the Due Process Clause of the Constitution?
Opinions:
Majority - Mr. Justice Day
No. The Elkins Act is constitutional because a corporation can be held criminally liable for the acts of its agents committed within the scope of their employment. The historical view that a corporation cannot commit a crime is an obsolete doctrine. Modern corporations act only through their agents, and therefore the intent and actions of those agents, when undertaken for the corporation's benefit, are imputed to the corporation itself. This principle is well-established in tort law, where corporations are held liable for their agents' actions, and it is a necessary extension to apply it to criminal law to ensure public policy is upheld. To grant corporations immunity from criminal prosecution for their agents' acts would render statutes regulating interstate commerce, like the Elkins Act, ineffective, as it would remove the only practical means of controlling corporate behavior and correcting abuses.
Analysis:
This landmark decision firmly established the doctrine of corporate criminal liability under federal law, definitively rejecting the older common law view that a corporation could not form criminal intent. By imputing the intent of agents to the corporate entity under the principle of respondeat superior, the Court provided a powerful tool for government regulation. This ruling paved the way for modern corporate criminal enforcement, holding corporations accountable for a wide range of statutory offenses and fundamentally altering the landscape of corporate governance and compliance.
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