United States v. Hilton Hotels Corp.

United States Court of Appeals, Ninth Circuit
467 F.2d 1000 (1972)

ELI5:

Rule of Law:

A corporation is criminally liable under the Sherman Act for the acts of its agents committed within the scope of their employment, even when such acts are contrary to the corporation's general policies and express instructions.

Facts:

Businesses in Portland, Oregon, including hotels, restaurants, and supply companies, formed an association to attract conventions to the city.
To fund the association, members were asked to contribute, with supply companies being asked for an amount equal to one percent of their sales to hotel members.
Hotel members, including the appellant corporation's hotel, agreed to give preferential treatment to suppliers who paid their contributions.
The hotels also agreed to curtail purchases from suppliers who did not pay their contributions.
The appellant corporation had a stated policy against conditioning purchases on a supplier's contribution to a local association.
The manager of the appellant's Portland hotel instructed the hotel's purchasing agent not to participate in the boycott.
Despite these instructions, the purchasing agent threatened a supplier with the loss of the hotel's business unless the supplier paid the association assessment.

Procedural Posture:

The appellant corporation was charged in an indictment with violating Section 1 of the Sherman Act.
At the trial in the district court, the judge instructed the jury that a corporation is liable for its agent's acts within the scope of employment, even if contrary to instructions.
A jury found the appellant corporation guilty of the charge.
The appellant appealed its conviction to the United States Court of Appeals for the Ninth Circuit.

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Issue:

Is a corporation criminally liable under the Sherman Act for the acts of its agent, undertaken within the scope of their employment, even if those acts are contrary to the corporation's express instructions and stated policies?

Opinions:

Majority - Browning, J.

Yes. A corporation is liable under the Sherman Act for the acts of its agents in the scope of their employment, even though contrary to general corporate policy and express instructions to the agent. The court reasoned that the Sherman Act is primarily concerned with the activities of business entities, and holding corporations liable for the acts of their agents stimulates maximum effort by management to ensure compliance. Because Sherman Act violations are often committed by employees under pressure to maximize profits, generalized corporate policies or instructions to obey the law are often insufficient. The corporation benefits from the illegal activity, making it appropriate and effective to hold the business entity itself accountable. Therefore, a corporation cannot exculpate itself by issuing general instructions without also undertaking commensurate efforts to enforce them.

Analysis:

This decision solidifies the principle of corporate criminal liability through respondeat superior in the context of antitrust law. It clarifies that a corporation cannot use internal policies or directives as a shield against liability for the illegal acts of its employees acting within their scope of employment. The ruling places a significant affirmative duty on corporations not just to create compliance policies, but to actively and effectively enforce them. This precedent makes it more difficult for companies to disavow the actions of rogue employees, especially when the actions are intended to benefit the corporation.

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