STATEMENT OF GEORGE J. TERWILLIGER
Federalist Society Briefing Panel Regarding Legislation That Would
Impose Criminal Penalties For The Sale And Distribution of Defective
Consumer Products Into Interstate Commerce
October 5, 2000
Here is the lead paragraph of a news story
that this legislation could produce:
an engineer in Rolling Free Motors product safety department,
tearfully kissed her three children goodbye this morning in Detroit
as she surrendered to U.S. Marshals to begin service of her ten
year prison sentence for federal product safety criminal violations.
A federal district court jury in Washington, D.C. had convicted
Smith of failing to disclose defects in tie rods on Rollings
late model SUVs, which tend to break when used in extreme off-road
conditions. A low level Rolling designer, who cooperated with
federal prosecutors, said he had warned Smith that the tie rods
would fail when the vehicle was used in extreme conditions, such
as a rocky environment. Court observers believe Smiths
conviction was sealed by evidence of an aggressive Rolling marketing
campaign that featured the SUVs off-road capabilities.
Five persons have died and scores have been injured in off-road
accidents allegedly related to the tie rod failures. Smith
will serve her sentence at the federal prison in Alderson, West
Let me understate the case: the proposal
to criminalize consumer product safety defects is one of the more
ill-advised ideas to come down the pike in quite some time.
Although one can sympathize, if not agree, with the strong emotional
reaction that something must be done to prevent the
widely reported tragedies that have resulted from defective tires,
the criminalization of products liability is not the answer.
If our goal is to create federal law that will actually increase
product safety, we ought to use caution and restraint before concluding
that expanding federal criminal law will help.
There are several bedrock principles
that argue against the criminalization of alleged product defects
as contemplated in pending legislation:
- A primary role of the federal government is to enable commerce.
Any legislative initiative, therefore, which would have the likely
effect of inhibiting commerce of making it more risky to
make and sell goods and perform services should be closely
- The federal role of enabling commerce and the parallel role
of providing for the common welfare embrace a legitimate concern
for product safety. Unsafe products can endanger commerce
by creating disincentives to purchasers.
- Determining what course of legislation will best facilitate
commerce is often a difficult exercise; that is surely the case
where one attempts to legislatively define a contested concept
such as what constitutes a defective product.
- The core purpose of federal criminal law, and prosecutions brought
thereunder, is to secure only core federal interests. Because
criminal law is a very blunt tool i.e., one that tends
to affect and discourage conduct that is outside the immediate
range of the narrow criminal prohibition it should not
be the first tool of choice to address issues of commerce.
- Civil regulatory schemes are generally adequate to secure the
federal interest in matters of commerce.
- By definition, if criminal penalties are needed to alter commercial
behavior, they must be narrowly tailored to avoid unintended and
overly broad effects on commerce.
- Most criminal statutes punish only where there is evidence beyond
a reasonable doubt that a prohibited act was performed with mens
rea, the guilty mind.The most troublesome issues of the criminal
law involve questions of knowledge and state of mind.Any proposed
criminal statute that can be read to punish without such evidence
should be viewed with skepticism.
- Finally, the criminal law, both at the federal and state levels,
already has ample tools to address egregious instances of commercial
misconduct, including the knowing manufacture and sale of products
having concealed defects which are likely to cause harm.
The fundamental problem with the proposed
legislation is that it would use the criminal law for a purpose
well-beyond that for which it is best suited and, in so doing, would
run the risk of creating significant disincentives to lawful commercial
activities. Far from adopting a narrow approach, the proposed
legislation is broad in its importation into penal law of the state
of mind and knowledge standards of civil products liability law.The
danger of inappropriately limiting commerce and thus undermining
the federal interest is plain.
The proposed legislation may yet die
aborning. You who work on Capitol Hill know better than I
that a great many legislative initiatives are abandoned in light
of rethinking and reconsideration.
To that end, let me suggest two points
for further analysis and discussion. First, it is worth pausing
to consider how far we have already gone in expanding the scope
and jurisdiction of federal criminal law in commercial matters and
to evaluate that expansion in light of the core functions of the
Second, I suggest that the criminal
provisions of the proposed legislation are, at best, unwise.
This is particularly true in light of the preexisting means to address
the federal interest in automotive product safety, including existing
criminal laws. These existing legal regimes deserve a serious
look before creating a new set of crimes for what is, in essence,
a violation of a civil duty of care concerning product safety.
The Federal Role Concerning
The original impetus
for the federal Constitution was a desire to better ensure the free
flow of commerce among the States. In the Commerce and Supremacy
Clauses, the Framers created a means whereby Congress could act
to break down barriers to commerce.
The importance of commercial
activity to the Framers is illustrated by a passage from Federalist
12 in which Alexander Hamilton observed:
The prosperity of commerce is now perceived
and acknowledged by all enlightened statesmen to be the most useful
as well as the most productive source of national wealth, and has
accordingly become a primary object of their political cares.
Through much of our history, Congress
use of this power was limited to affirmative acts designed to facilitate
commerce: the construction and improvement of roads and other means
of transportation, later the means of interstate communication and
the widespread availability of power and energy. A prime example
of this was the enactment of legislation following the Civil War
to enable the construction of the Transcontinental Railroad which
facilitated the settlement of the West.
Among our earliest criminal statutes
was one specifically designed to protect commerce. In 1872,
Congress adopted the ancestor of our present 18 U.S.C. 1341, the
mail fraud statute designed to protect the mails, then a vital instrumentality
of commerce, from being used in furtherance of schemes to defraud.
As the House sponsor of the legislation stated, the intent was to
enact legislation to prevent the frauds . . . by thieves,
forgers, and rapscallions generally, for the purpose of deceiving
and fleecing the innocent people of the country.
As the nation developed
and the economic system became more sophisticated, Congress again
invoked federal criminal jurisdiction to protect the channels of
commerce. This included an extensive system of criminal protections
for banks, an engine of commerce. Indeed, bank fraud statutes were
modeled after laws prohibiting mail fraud.
of criminal laws applicable to banks continued to recent times when
Congress responded to threats against savings and loan institutions
by expanding criminal banking laws to enable prosecutions where
the depositories were victimized by unscrupulous insiders and others.
Penalties for the operation of a continuing financial crimes
enterprise under these laws range from ten years to life imprisonment.
Congress has also used
criminal statutes to protect the fuel of national commerce: capital
formation. Thus, it enacted criminal sanctions to address conduct
that would threaten investor confidence in the securities market
and thereby impair the formation of capital necessary to economic
growth and stability.
In 1890, Congress adopted the Sherman
Act, an antitrust law with criminal provisions designed to protect
markets from trade practices that inhibit free market principles.
Other federal statutes have since been enacted to deter and redress
more systemic and corrupt threats to commerce. These include criminal
RICO provisions, as well as various interstate theft, transportation
and electronic communication statutes.
What all these criminal statutes have
in common is a focus on protecting the integrity of the means by
which business is conducted.
Of course, this brief review of Congress
use of the Commerce Clause is somewhat oversimplified. But
it illustrates a point: criminal statutes which go beyond the protection
of the means of commerce to criminalize ordinary commercial activity
cross an important line. When Congress steps over that line
and begins to use the criminal law to regulate the substance of
commerce it enters a new field, one in which it must be careful
not to wound or even kill commerce in order to save it.
Indeed, the few early uses of the criminal
law to regulate a particular type of commerce directly, as opposed
to the protection of the means of commerce illustrate just how far
we have come. Such early statutes were limited to the regulation
of commerce which was found to be highly objectionable on moral
grounds. These included the statutes regulating peonage and
slavery, the manufacture and transportation of alcohol, and the
Mann Act which addressed the infamous white slave trade.
Compared with the modern regulatory state, these early prohibitions
seem almost quaint.
Another venerable role for federal criminal
law is the protection of the functions and processes of federal
government itself. An example that covers a broad range of
interests is the federal false statement statute. It renders criminal
any false or misleading statement to any federal agency that is
material to that agencys functions. Government cannot
function without the ability to punish falsehoods that undermine
the integrity of its core functions.
Other criminal statutes protect various
aspects of federal interests, such as the national defense, which
is protected by several criminal statutes including those dealing
with espionage (18 U.S.C. 793 et seq.). Interestingly, the
mail fraud statute has the dual purpose of protecting the core governmental
interest in the integrity of the mails and the commercial interest
Other statutes with criminal provisions
protect the integrity of commerce, such as the Food, Drug &
Cosmetic Act, which defines requirements for truthful labeling of
food ingredients and the Federal Trade Commission Act, which has
the purpose of addressing deceptive practice in many areas of commerce,
Expansion of Federal Functions
Thus, Congress historically has used
the criminal law to protect both commerce and government functions.
These parallel functions of, and limitations on federal criminal
jurisdiction remained largely intact through the first part of the
twentieth century. Federal criminal law protected both commerce
and those federal functions that were at the core of federal government
operations. However, as these federal functions (i.e. the
scope of federal interests) expanded first to include increased
business regulation, then social entitlement programs and finally
nearly every aspect of national activity, federal criminal jurisdiction
A key stage in this
evolution was the development of corporate criminal liability.
Prior to the first decade of the twentieth century, only natural
persons considered subject to the criminal law. Corporations,
trusts and the like were mere fictions and thus were generally held
to be not answerable to the criminal law.Then in 1903, Congress
adopted the Elkins Act dealing with tarriffs and provided for criminal
liability for corporations directly. The constitutionality
of the act was upheld in 1909 by the Supreme Court in New York
Central and Hudson River Railroad. v. United States, 212 U.S.
481 (1909). That case held that corporations could be held
liable for general but not specific intent crimes. The Courts
ruling stemmed from the development of modern business. As
While the law should
have regard to the rights of all, and to those of corporations no
less than to those of individuals, it cannot shut its eyes to the
fact that the great majority of business transactions in modern
times are conducted through these bodies, and particularly that
interstate commerce is almost entirely in their hands, and to give
them immunity from all punishment because of the old and exploded
doctrine that a corporation cannot commit a crime would virtually
take away the only means of effectually controlling the subject-matter
and correcting the abuses aimed at.
of corporate criminal liability also facilitated another movement,
one away from the traditional concept of mens rea and toward
so-called strict liability. At the outset, corporate criminal liability
required proof of general intent, even if only the intent of a single
employee to benefit the corporation. Of course, it is somewhat
odd to speak of the mental state of a fictional entity and problems
of proof of mental state are often multiplied in the corporate context.
Thus, it was an easy step to the framing of criminal statutes (environmental
law provides several examples) for which mens rea was not
required. By the middle of the twentieth century corporations
faced criminal liability for a myriad of activities that arose from
their interactions with an expanding and -- by the 1970s -- rather
bewildering array of federal regulatory mechanisms. Significantly
-- especially to the topic today -- many of these federal functions
have little or nothing to do with enabling commerce. Indeed,
most are perceived as being in opposition to the free flow of commerce.
To be sure,
there is almost always some nexus between the conduct regulated
and the need to ensure the integrity of a particular area of commerce,
just the mail fraud statute protects the integrity of the mails
as an instrument of commerce. But we should not fool ourselves
into believing that any regulatory scheme that has a nodding acquaintance
with commerce is advisable. No responsible citizen is in favor
of dirty water. But many commentators have questioned the effectiveness
of putting people in jail and subjecting corporations to expensive
criminal investigations and draconian fines for exceeding a permitted
level of pollutant discharge and like crimes.
Polluting pursuant to a permit from the government is legal, but
polluting too much can be a crime.
From Protection of Federal Functions to
modern expansion of federal regulatory jurisdiction has resulted
in the crossing of another significant line. Without much
fanfare, federal criminal jurisdiction is evolving to embrace crimes
defined, not be statute, but by regulations alone. As Congress
created regulatory agencies and empowered them to write detailed
and complex systems of business regulation, it quietly added statutory
provisions providing criminal penalties for conduct not proscribed
by the statute, but rather to be defined by regulations an agency
writes under the authority of the statute.
example, employers may be charged with criminal penalties for failing
to comply with cumbersome regulations promulgated by the Immigration
and Naturalization Service regarding the employment verification
for immigrant workers, thus discouraging those employers from hiring
minority workers. Corporations may also face criminal penalties
for violations of regulations promulgated by the Occupational Safety
& Health Administration regarding workplace safety or those
promulgated by the Food & Drug Administration regarding the
sale of various food items.
of the current legislative proposals would permit the National Highway
Traffic Safety Administration (NHTSA) to determine what information
should be reported to it. The failure to report such information
completely and accurately (in the view of the agency, of course)
would be a criminal offense.
jurisdiction has expanded so far beyond the purposes of protecting
commerce and the integrity of federal functions that those notions
seem almost quaint . . . except that they are not.
In fact, they are solid principles rooted in the core constitutional
powers and purposes of the central government. As such, they remain
a sure guide to principled formation of public policy in general
and criminal law in particular. That brings us directly to the matter
Having made the
subtle transition from using the criminal law to protect the means
of commerce to regulating commerce itself we are now ready to consider
legislation that would specifically criminalize the decisions of
product engineers, such as my fictional Sharon Smith, whose job
it is to get products ready for market. And, having already
tossed over the side the requirement of the ancient criminal law
that the wrongdoer have a guilty mind in favor of strict
liability offenses, we are now ready to impose on Engineer
Smith and her brothers and sisters what amounts to a strict criminal
liability based on a nebulous tort standard.
A brief description of the proposed
legislation is in order. As you know, several bills
have been introduced. Those which appear at the moment to
be moving forward are S. 3059 and H.R. 5164. These bills criminalize
the failure of automobile and automobile parts manufacturers or
their employees to report suspected or possible defects in their
products, both at home and abroad, levying prison terms of up to
fifteen years. Several proposals also increase the civil penalties
that can be imposed upon the automotive industry for reporting failures
in the case of S. 3059 and H.R. 5164, from the current limit
of $800,000 to $15 million.
of these bills which impact the automotive industrys potential
exposure to criminal liability include the imposition of a manufacturers
duty to learn of potential defects in its products and
the prohibition of confidentiality agreements as part of settlements
in civil cases. Yet another provision would allow the federal
government to disclose to foreign governments confidential business
information required to be submitted by manufacturers to NHTSA.
S. 3070 would up the ante considerably by creating a criminal products
liability standard for all products.
want to be clear that I am in complete sympathy with what are undoubtedly
the ends sought by the sponsors of this legislation. We all
want safer products. No one wants their family driving around
on unsafe tires or fixing breakfast with unsafe toasters.
I disagree only with the selection of the criminal law as means
to accomplish those ends.
The Case Against This Legislation
Let me now turn to my case against this legislation. Many
of the observations I will make here are not original to me, but
have been made in various forums by several commentators on the
proposed legislation. To these trenchant commentaries I add
my own experience as a career federal prosecutor and Department
of Justice official and, more recently, as defense counsel in white
collar criminal matters.
My first criticism of the legislation
is that it is a regrettable further step along the road toward using
the criminal law to punish commerce rather than to protect it.I
realize that the intent of the statute may be characterized as furthering
commerce by increasing public confidence that the products sold
on the market are safe. But the criminal law is, not to put
too fine a point on it, a rather blunt tool for this purpose. Legislation
that provides for punishment including imprisonment up to 15 years
in a federal penitentiary is likely to deter conduct far beyond
that which all would agree is wrong.
An additional obvious criticism of the
legislation from the standpoint of the criminal law is that it is
hopelessly, and likely unconstitutionally, vague. If a criminal
statute is to perform its function and deter bad conduct, it must
give a potential wrongdoer adequate notice regarding what conduct
is prohibited. For example, one proposal, S. 3070, defines
a defective product as one having some flaw in design, manufacture,
assembly or instruction that renders the product dangerous to human
life and limb beyond the reasonable and accepted risk associated
with such or similar products lacking such a flaw. One
obvious question is then: what is a reasonable and accepted
risk? How are manufacturers to interpret such a requirement?
What of the crime of selling products with flawed instructions?
Anyone who has tried to assembly almost anything, such as a backyard
grill, may have a case to refer to federal prosecutors.
In a more serious vein, the difficulty
of determining what is defective is highlighted by the
enormous amount of research and testing already conducted by industry
and independent labs, as well as by federal regulators such as NHTSA
and even state regulators. Each year, thousands of products
are put to tests designed to ferret out problems that might develop
under normal conditions of use and even under severe misuse.
This process is not only very expensive; it is also time-consuming.
NHTSAs administrator has acknowledged that it takes the agency
an average of 16 months to determine if a safety-related defect
Despite this extensive research and
analysis, it is often difficult to determine what is causing a problem,
how often and in what manner. If it is so difficult for this
massive testing apparatus to confidently determine that a product
is faulty, how much harder is it for the individual product engineer
in most cases to know whether her product is not only defective,
but defective in such a manner as to be beyond a reasonable
and accepted risk?
Another limitation upon such criminal
liability is reflected in S. 3059, which establishes criminal penalties
for safety-related defects that cause grievous bodily injury or
death, but only if the manufacturer knows of the defect at
the time the vehicle or equipment is introduced into interstate
This legislation also continues the
worrisome evolution toward the creation of administrative
crimes which rely upon regulatory interpretation of inadequate
statutory guidance to support criminal prosecutions.To be sure,
the flexibility afforded by regulatory interpretation may be said
to be beneficial in that it enables the expert agencies
to fashion quick responses to perceived gaps in criminal standards.
This flexibility comes, however, with a great cost: The sacrifice
of both certainty and deliberateness in the creation of sanctions
that can result in criminal punishment. In the criminal law,
such flexibility can be unfair and may even violate
Statutes specifically making commerce
in defective products a crime also carry their own unique set of
challenges to the already difficult exercise of prosecutorial discretion.
Not the least of these is the likely pressure from multiple sources
to bring cases where the facts show tragic consequences but the
cause of them is subject to considerable debate even among experts.
The danger here is that even non-meritorious cases arousing public
outrage will be indicted, because it is easier for the prosecutor
to charge and lose rather than to decline and explain restraint.
These legislative proposals also offer
prosecutors some powerful in my view, too powerful
tools to be used against corporations. For example, the imposition
of liability on any officer or employee of a manufacturer
for concealment of a material fact related to the proposed
reporting requirements presents the possibility that literally thousands
of lower-level employees with no decision-making authority for their
companies can subject the corporations and themselves to prosecution.
Yet this is exactly what many of these bills do. They also
present the possibility that these lower-level employees
frightened at the suggestion that they will face up to 15 years
imprisonment for any involvement in safety testing for products
will make a deal with prosecutors to implicate the corporation
early for possible problems rather than work with the corporation
to address safety concerns before they become an issue.
Finally, the criminal provisions are
counterproductive to the overall goals of the legislation.
The threat of criminal penalties virtually guarantees that some
corporations will be less forthcoming concerning product defects.
A businesswoman faced with a decision between the choices disclose
and maybe go to jail versus dont disclose and
maybe avoid any punishment may be tempted to take the second
route. The threat of criminal fines or, worse, imprisonment
causes an understandable tendency to involve defense counsel who
frequently advise clients not to disclose any information.
Even the civil provisions of the bills
are problematic from the standpoint of criminal defense. For
example, S.3070 would prohibit federal courts from approving
nondisclosure provisions as part of settlement agreements in civil
cases where issues relevant to the protection of public health
or safety or in the public interest of disclosure of
potential health or safety hazards arise. These provisions
would strip corporations of their ability to negotiate settlements.
They would thus provide prosecutors with ready evidence of so-called
defects. Prosecutors could then proceed to use this evidence
which is relevant to a civil strict liability case
to bootstrap another wise weak criminal case, threatening corporations
with indictment for knowledge of these vaguely-defined defective
Looking to Alternatives
the most important problem with these bills is that they ignore
ample alternative means under existing law to address the same concerns.
course, one logical starting point is NHTSAs existing regulatory
authority. The agency already has extensive powers to review
safety issues. It is even empowered to levee substantial civil fines
against manufacturers who fail to report safety defects. The
potential applicability of these provisions has been swept hastily
aside in favor of criminal sanctions. Before proceeding headstrong
into the adoption of criminal penalties, I would suggest that it
is prudent to consider how existing avenues such as the NHTSA
complaint review process already provide an opportunity to
confront potentially dangerous products.
should criminal sanctions be necessary to address a particularly
egregious case, several existing federal laws provide a means to
accomplish that result. Not the least of these is the provision
of 18 U.S.C. § 1001 which provides for a fine and imprisonment
of up to 5 years for making false statements to the government in
any matter over which any of its branches have jurisdiction.
This statute is an example of that which effects compliance with
federal programs initiated by Congress rather than that which merely
leaves to the bureaucracy the responsibility for determining what
is criminal. Similarly both the wire and mail fraud statutes
are broad enough to be used against any truly nefarious effort to
conceal dangerous safety defects.
particular useful relevant statute in this context is the general
conspiracy statute which has been held to apply to conspiracies
to thwart the proper functions of federal agencies.
list could go on and on.
Moreover, in a meeting
sponsored by the Federalist Society we should not overlook the fact
that the Framers intended that the states, not the federal
government, would be the primary sources of criminal law.
In fact, many states have criminal statutes that are directly relevant
to the issue of product safety. For example, the California
Corporate Criminal Liability Act imposes personal, criminal liability
upon managers as well as corporations that conceal product defects
Of course, in some cases
criminal sanctions will be necessary. In such cases criminal
prosecutions can be sought under a wide range of statutes ranging
from the aforementioned state law provisions to the big gun of the
federal law enforcement to fight organized crime, the Racketeer
Influenced and Corrupt Organizations Act (RICO).
Finally, if legislation is needed to
address these issues, I would suggest that we concentrate first
on strengthening the civil law infrastructure to encourage more
voluntary testing and reporting of possible defects. One solution
may be found in the simple &SHY;&SHY;&SHY;carrot-rather-than-stick
approach. What is needed to discover defects which,
after all are the inevitable consequence of a robust market for
complex products is a means to encourage all of the interested
parties to work towards the same goal. Often overlooked in
the debate regarding this legislation is the need to encourage manufacturers
and their employees to disclose potential problems and work to remedy
them without fear of criminal repercussions. One solution
is to adopt statutory provisions to provide immunity and reductions
in civil liability for voluntary disclosures and remedial actions
taken by manufacturers to assist in the development and use of safe