June 21 (Bloomberg) -- The U.S. Supreme Court made it more difficult for prosecutors to secure stiff fines for corporate wrongdoing, ruling that jurors must play a greater role in determining how large criminal penalties can be.
The justices in a 6-3 vote today set aside a $6 million fine and $12 million in community service obligations imposed against Southern Union Co. for illegally storing liquid mercury. The court said a judge couldn’t constitutionally impose a fine that large without a specific jury finding about the length of time the mercury was stored.
The ruling may have broad implications for corporate prosecutions, complicating trials and giving defendants more leverage in plea negotiations. At least 15 federal criminal statutes, including environmental and banking laws, tie the potential fine to the duration of the violation, and more than 40 states have similar provisions.
“For corporations, it’s huge because the only way they can be punished is through fines,” said Carter Phillips, a Washington lawyer at Sidley Austin LLP who represented Southern Union in the case.
More than 70 percent of federal sentences against corporations and other organizational defendants involved fines in fiscal 2011.
The case tested the reach of recent Supreme Court rulings bolstering the constitutional right to a jury trial. Starting with a 2000 case known as Apprendi v. New Jersey, the Supreme Court has said juries must make any factual findings that increase the maximum possible prison sentence.
Today’s ruling extends that reasoning to criminal fines.
“Apprendi’s core concern is to reserve to the jury the determination of facts that warrant punishment for a specific statutory offense,” Justice Sonia Sotomayor wrote for the majority. “That concern applies whether the sentence is a criminal fine or imprisonment or death.”
Justices Stephen Breyer, Anthony Kennedy and Samuel Alito dissented. Breyer said the ruling “will lead to increased problems of unfairness in the administration of our criminal justice system.”
Prosecutors said Southern Union, a pipeline operator now part of Energy Transfer Equity LP, improperly stored mercury-sealed gas regulators from customers’ homes in a company building in Pawtucket, Rhode Island. Company workers were accused of putting the regulators in kiddie pools and the liquid mercury in various containers, including a milk jug and a paint can.
Youths broke into the brick building in 2004, found the liquid mercury and spilled it around the building and at their apartment complex.
A jury found Southern Union guilty of storing the mercury without a permit. A trial judge then imposed a $6 million fine, plus $12 million in community service obligations.
Southern Union contended that, based on the jury’s finding, the maximum fine is the $50,000 the company would have to pay under a federal environmental law for a single day’s violation.
The case now returns to a lower court, where Phillips said one issue will be whether the Supreme Court ruling applies to the community service obligation as well as the fine.
The U.S. Chamber of Commerce supported Southern Union at the Supreme Court.
The case is Southern Union v. United States, 11-94.
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