By Rebecca Conway*
Last year, Pacific Gas & Electric (PG&E) was linked to a series of truly catastrophic wildfires.[i] At the time, the investor-owned utility in California was not even halfway through a five-year probation, a result of six felony convictions following the 2010 San Bruno pipeline explosion.[ii] That explosion was fatal, yet PG&E soon found itself behind even more destruction: the 2017-2018 wildfires in California that ultimately caused 130 deaths,[iii] burned over 245,000 acres, and destroyed 89,000 structures.[iv] Despite the severe consequences of the wildfires, district attorneys from four affected counties have announced they will not file criminal charges against PG&E for the 2017 incidents.[v] Given the company’s criminal history, this reluctance to file charges raises important questions about the purpose and value of corporate criminal liability.
Though district attorneys cited insufficient evidence to sustain the charges,[vi] they are likely concerned about the impact of criminal charges, rather than whether those charges will hold up in court. Prosecutors do face challenges proving a corporation’s mental state. However, current standards of corporate criminality allow such charges. Corporate criminality hinges on a concept from tort law, respondeat superior (“let the master answer”), in which a company can be held responsible for employees’ crimes in the course of their employment.[vii] Over time, courts have gradually expanded the limits of corporate criminal liability, making corporate mental states easier to prove. In United States v. Bank of New England, for example, the court held a corporation had sufficient knowledge of conduct if its employees had aggregate knowledge of it, also known as the “collective knowledge” doctrine.[viii] More recently, in regards to the San Bruno incident, courts held that PG&E could have a “willful” mental state based on its failure to fulfill obligations imposed by law.[ix]
Questions remain as to how, and whether, corporations can be meaningfully sentenced though. Take PG&E’s first criminal charge: in addition to 5 years of probation for the San Bruno incident, the company was sentenced to “to submit to a corporate compliance and ethics monitorship, . . . complete 10,000 hours of community service, and . . . spend up to $3 million . . .to notify the public of the utility’s criminal and neglectful behavior.”[x] PG&E also had to develop both a “compliance and ethics program” and a schedule for implementation.[xi] This sentence was relatively light — the prosecution had initially sought $562 million,[xii] and, in cases of pecuniary gain from the conduct, U.S. Code allows for fines up to twice the gross gain.[xiii] Instead, the court sentenced PG&E with the much-lighter $500,000 maximum per felony.[xiv]
Given the community service, compliance monitor, and small fine, the court seemed focused on regulatory, rather than punitive, measures. The small fine, in particular, has two possible explanations. One, the code provides an exception where determining financial gain would “unduly complicate or prolong the sentencing process.”[xv] The company was facing civil litigation with hefty fines, so instead of trying to figure out how much PG&E gained by violating regulations, the judge may have picked the easier solution. More likely though, the court weighed the potential impact of heavy fines on the company.[xvi] Rather than punishing PG&E (and its shareholders and customers), the sanctions indicate a desire to ensure public safety moving forward.
These sanctions were largely ineffective though, as PG&E was soon linked to the 2017-2018 wildfires.[xvii] In an amicus curiae brief requested by U.S. District Judge William Alsup, California Attorney General Xavier Becerra listed a series of potential charges related to the wildfires.[xviii] Spanning from a misdemeanor for failing to clear vegetation from a power line to a felony for voluntary manslaughter, these charges culminate in implied-malice murder[xix] based on the company’s “abandoned or malignant heart.”[xx] Implied-malice murder requires a mental state in which the defendant knows her act puts another’s life in danger.[xxi] By following through with the act anyway, the defendant then shows “conscious disregard for life,” a degree of recklessness so extreme it constitutes malice.[xxii] While this is a high bar to prove in criminal court, it is not implausible.
The issue, then, centers on the effects of criminal charges against corporations. Laurie Levenson, professor at Loyola Law School, likened PG&E’s potential criminal liability to “a corporate death penalty,” where the company would be subject to steep fines and debarred from contracts.[xxiii] PG&E is facing a sort of corporate death in a different setting, though, rendering a state-sanctioned one unnecessary. The company has filed for Ch. 11 bankruptcy and submitted a plan for its reorganization.[xxiv] Company bondholders and wildfire victims have also submitted their own plan for reorganization.[xxv] Despite its past conduct, it is hard to ignore that PG&E’s demise would have significant consequences on California residents. Though investor-owned, the company provides vital services to the public.[xxvi] Californians will likely already face higher utility rates stemming from legal and other bankruptcy-related costs.[xxvii] The state was also depending on PG&E to invest in solar and wind farms and electric vehicle infrastructure,[xxviii] critical components of meeting California’s 100% renewable goal by 2045.[xxix] As wildfire risk grows more and more prominent amidst a changing climate, so too does the need for poignant, targeted solutions. Whether it is stronger regulatory sentences, less local government dependence, or quicker disbanding of negligent entities, criminal treatment of corporations must be part of that solution, too.
*Rebecca Conway is a Junior Editor on MJEAL. They can be reached via email at email@example.com.
[i] Sammy Roth, PG&E files for bankruptcy protection. Here’s why that could mean bigger electricity bills, Los Angeles Times (January 29, 2019), https://www.latimes.com/business/la-fi-pge-bankruptcy-filing-20190129-story.html.
[ii] United States v. Pac. Gas and Elec. Co., Case 3:14-cr-00175-TEH https://www.justice.gov/usao-ndca/press-release/file/932806/download (N.D. Cal. 2017).
[iii] Hannah Albarazi, PG&E Says Private Ownership Saves It From Wildfire Liability, Law 360 (November 19, 2019), https://www.law360.com/articles/1221572/pg-e-says-private-ownership-saves-it-from-wildfire-liability.
[iv] PG&E Corp. Current Report (Form 8-K) (Jan. 13, 2019)
[v] Steve Gorman, PG&E spared criminal charges in deadly 2017 California wildfires, Reuters (March 12, 2019), https://www.reuters.com/article/us-california-fire-pg-e/pge-spared-criminal-charges-in-deadly-2017-california-wildfires-idUSKBN1QU08W.
[vii] Andrew Park, The endless cycle of corporate crime and why it’s so hard to stop, Duke Law (January 13, 2017), https://law.duke.edu/news/endless-cycle-corporate-crime-and-why-its-so-hard-stop/. See also N.Y. Central & H.R.R. Co. v. United States, 212 U.S. 481 (1909) (“Since a corporation acts by its officers and agents, their purposes, motives, and intent are just as much those of the corporation as are the things done”).
[viii] See United States v. Bank of New England, 821 F.2d 844 (1st Cir. 1987) (“if Employee A knows one facet of the currency reporting requirement, B knows another facet of it, and C a third facet of it, the bank knows them all”); See also Timothy Crudo and Andrew Schalkwyk, Prosecuting the Corporate Mind, Association of Business Trial Lawyers Vol. 25, No. 2 at 3-4 (Spring 2017).
[ix] United States v. Pac. Gas & Elec. Co., No. 14-CR-00175-TEH, 2015 WL 9460313 (N.D. Cal. Dec. 23, 2015)
[x] U.S. Attorney’s Office, Northern District of California, PG&E Ordered To Develop Compliance And Ethics Program As Part Of Its Sentence For Engaging In Criminal Conduct (January 26, 2017), https://www.justice.gov/usao-ndca/pr/pge-ordered-develop-compliance-and-ethics-program-part-its-sentence-engaging-criminal.
[xii] Sarah Smith, PG&E criminal case penalty is ‘slap on the wrist,’ safety advocate says. SNL Energy Power Daily, (August 10, 2016), https://www.spglobal.com/marketintelligence/en/news-insights/trending/0n-wk7elv8mz7zz18osjuw2.
[xiii] 18 U.S.C.A. § 3571(d)
[xiv] Id. § 3571(c)(3)
[xv] 18 U.S.C.A. § 3571(d)
[xvi] As William K. Black told the Los Angeles Times, the Department of Justice is often reluctant to impose penalties on corporations they deem “legitimate.” Michael Hiltzik, How the criminal conviction of PG&E lets the real wrongdoers go free, Los Angeles Times (August 10, 2016), https://www.latimes.com/business/hiltzik/la-fi-hiltzik-pge-criminal-20160810-snap-story.html.
[xvii] Bob Egelko. Criminal charges against PG&E could send message in Northern California wildfires, San Francisco Chron. (June 10, 2019), https://www.sfchronicle.com/california-wildfires/article/Criminal-charges-against-PG-E-could-send-message-13963763.php.
[xviii] Attorney General’s Amicus Brief Regarding PG&E’s Potential Criminal Liability, United States v. Pac. Gas & Elect. Co., 3:14-cr-00175-WHA (December 28, 2018), http://s1.q4cdn.com/880135780/files/doc_downloads/2018/wildfire/12/AG_Filing.pdf.
[xix] Id. at 2-4.
[xx] Cal. Penal Code § 188 (2018).
[xxi] People v. Chun, 45 Cal. 4th 1172,1181 (2009)
[xxiii] Alene Tchekmedyian, Criminal charges against PG&E possible if utility is found responsible for recent wildfires, prosecutors say, Los Angeles Times (Dec. 30, 2018), https://www.latimes.com/local/lanow/la-me-ln-pge-prosecution-charges-20181230-story.html.
[xxiv] Rick Archer PG&E Bondholders, Wildfire Victims File Rival Ch. 11 Plan, Law 360 (October 18, 2019), https://www.law360.com/articles/1210999/pg-e-bondholders-wildfire-victims-file-rival-ch-11-plan.
[xxvi] Sammy Roth, PG&E files for bankruptcy protection. Here’s why that could mean bigger electricity bills, Los Angeles Times (January 29, 2019), https://www.latimes.com/business/la-fi-pge-bankruptcy-filing-20190129-story.html.
[xxix] Ariel Cohen, Part I: PG&E Gets Burned For California Wildfires, Forbes (February 7, 2019), https://www.forbes.com/sites/arielcohen/2019/02/07/part-1-pge-gets-burned-for-california-wildfires/#71defe9b1a8f