Supreme Court’s Southern Union Decision Helps Level the Playing Field for Corporations Subject to Criminal Fines

Supreme Court’s Southern Union Decision Helps Level the Playing Field for Corporations Subject to Criminal Fines

Alston & Bird LLP


Bruce Pasfield   By Bruce Pasfield and Elise Paeffgen, Attorneys, Alston & Bird LLP

On June 21, 2012, the Supreme Court in Southern Union Co. v. U.S., 567 U.S. __ (2012) held that the Sixth Amendment right to a jury trial requires juries not judges to decide the facts warranting a fine exceeding a statutory maximum of any crime for which a defendant is convicted. This case has significant implications for any corporation charged with a crime allowing for fines based "per-day of violation." The holding will also implicate fines imposed under the Alternative Fines Act ("AFA") which allows fines above the statutory maximum in amounts equal to twice the economic gain or loss of the offense of conviction, 18 U.S.C. § 3571(d). Under either of these provisions corporations can be subject to millions if not billions of dollars in fines even though the statute under which it was convicted may be capped at $1 million or less.

Before the Supreme Court's ruling, prosecutors were free to ask courts to impose criminal fines above the statutory maximum without ever having to present the facts supporting the fine to a jury. As long as a sentencing court found that those facts existed by a preponderance of the evidence,[1] it could exceed the statutory maximum based on the AFA or other provisions. Now the government will have to present the facts supporting the enhanced fine amounts to a jury and the jury must be convinced beyond a reasonable doubt before any enhanced fines can be imposed by a court. This heightened standard is likely to help level the playing field for corporate defendants as the government will have a harder time threatening the specter of enhanced fines if its proof is lacking. The decision is also likely to increase the use of special verdict forms that will require juries to make specific findings of fact to support an enhanced fine.

Case Background and Procedural History

Southern Union, a First Circuit case from the District of Rhode Island, involves the illegal storage of mercury in violation of the Resource Conservation and Recovery Act (RCRA). A subsidiary of Southern Union Company stored liquid mercury in its Pawtucket, Rhode Island facility. In September 2004, children broke into the facility and spread the mercury around the facility and a neighboring apartment complex. Liquid mercury is a hazardous substance.

After conducting an investigation, a grand jury returned an indictment in 2007 against Southern Union, charging it with the illegal storage of hazardous waste at its Pawtucket facility. Unique to this prosecution was an over two year (762-day) timeframe for a single storage count. The presentencing report stated that mercury was stored from September 19, 2002 to October 19, 2004, which, at a maximum criminal fine of $50,000 per day, totaled almost $38 million.

A jury found Southern Union guilty on the one storage count. Notably, the jury verdict form on which the conviction was based did not require the jury to identify on which dates within the time frame the violation had occurred. The form listed the violation's alleged start day in approximate terms - "on or about" - and the jury was only required to agree that the illegal storage had taken place on at least one day within the time frame specified.

Although the jury verdict only represented an agreement that a single violation happened at some point during the date range, Southern Union was fined for multiple days of violation. District Court Judge William E. Smith imposed $18 million in penalties-a $6 million criminal fine and $12 million in payments to community interests. In its appeal, Southern Union Co. argued that it should have only been fined $50,000, not $6 million, for a single incident of illegally storing mercury on its property - all the jury verdict represented. Further, the company argued that any amount in excess of $50,000 should have been put before the jury, which would require the government to present proof beyond a reasonable doubt as to each date the  per-day  violation provision applied. Although the U.S. Court of Appeals upheld the conviction and fines, the Supreme Court agreed that any facts warranting a fine in excess of $50,000 should have been put before the jury.

In its petition for a writ of certiorari, Southern Union Co. contended that the criminal fine imposed ran afoul of the Sixth Amendment, as interpreted in Apprendi v. New Jersey, 530 U.S. 466 (2000). Specifically, it argues that "any fact," other than a prior conviction "that increases the penalty for a crime beyond the prescribed statutory maximum must be submitted to a jury and proved beyond a reasonable doubt."


In Apprendi, the defendant Charles Apprendi, Jr. pled guilty to weapons possession charges, which carried sentences between 5 and 10 years. During sentencing, the prosecution sought to enhance his sentence because the crime was committed with a racially biased purpose, a factor that was not put before the jury. The judge found by a preponderance of the evidence that the crime was racially biased, and sentenced Apprendi to 12 years, a two year enhancement over the statutory maximum. Although the enhancement was affirmed by both the New Jersey Superior Court and the New Jersey Supreme Court, the U.S. Supreme Court reversed, finding that the enhancement must have been submitted to the jury and proved beyond a reasonable doubt. The Court held that the Sixth Amendment right to a jury trial, applied to the states through the Due Process Clause of the Fourteenth Amendment, prohibits judges from enhancing criminal sentences beyond statutory maximums based on facts that have not been decided by the jury beyond a reasonable doubt.

Apprendi did not address the enhancement of criminal fines. Prior to Southern Union, the circuits were split as to whether the Apprendi holding extends to such fines.

Supreme Court Decision

In the Opinion of the Court, written by Justice Sotomayor, the Court held that the rule of Apprendi-that the "Sixth Amendment reserves to juries the determination of any fact, other than the fact of prior conviction, that increases a criminal defendant's maximum potential sentence" above the statutorily prescribed limit-applies to sentences of criminal fines. 567 U.S. __, 1. Although the Court had previously applied Apprendi to cases with punishments of imprisonment or death, the Court saw "no principled basis under Apprendi for treating criminal fines differently." Id. at 4. Now, according to the Court's decision, a judge may only sentence above the statutory maximum if the jury found the facts which warrant a fine in excess of the statutory maximum.

The Southern Union decision applies to more than just criminal fines involving per-day fines; it applies to all facts that may increase a fine above the statutory maximum As the Court stated, the Southern Union fact pattern is merely "exemplary." Id. at 7.

"Sometimes, as here, the fact is the duration of a statutory violation; under other statutes it is the amount of the defendant's gain or the victim's loss, or some other factor.  Id. at 5.

Any fact that increases a defendant's maximum criminal fine above the statutory limit must be found by the jury. Id.

Fines in Environmental Crimes Cases

The Southern Union decision has significant implications for the calculation of fines in environmental crimes cases. The maximum statutory fine in organizational environmental crimes cases is based on the greater of the following:

   the statute of conviction, which may provide a fixed maximum amount or a fine per day of violation;

   18 U.S.C. § 3571(c), which provides a maximum fine of $500,000 for felonies or $200,000 for misdemeanors; or

   the AFA, 18 U.S.C. § 3571(d), which authorizes fines set at twice the pecuniary gain or loss. See U.S. v. Chemetco Co., 274 F.3d 1154 (7th Cir. 2001).

The Federal Sentencing Guidelines applicable to environmental crimes provides little if any guidance for interpreting or applying the above provisions when imposing fines.[2] Resultantly, the government has significant latitude when advocating for fine amounts and in many instances it has used that discretion to seek penalties well above the statutory caps. The government has had two significant hammers in its toolbox to seek such penalties: 1) as in the Southern Union case, it could charge a single count for multiple days of a violation to obtain a large cumulative per-day fine; and 2) it could use the AFA to impose a fine above the statutory maximum that is up to twice the gain or loss resulting from the crime. Now, due to Southern Union, the jury must find beyond a reasonable double either the days of violation (tool one) or the gain or loss (tool two).

Tool One: Fines Based on Per Day of Violation

Southern Union demonstrates how the government uses tool one, which enabled the government to seek a penalty of almost $38 million, rather than $50,000, in one single count of conviction. The practice of charging multiple days of violation in a single count will likely undergo significant changes at DOJ in the wake of Southern Union. Now the government will be forced to either present an indictment that includes a count for each day of violation or  charge a single count charging a time span (a month or year), but include a special verdict form in which the jury would decide on which specific date or dates the violations took place. DOJ generally charges dates ranges as opposed to charging each day as separate count for two primary reasons. First, there is the practical reason of keeping the number of counts charged against a defendant to a reasonable number. For example, if the government had significant evidence (proof beyond a reasonable doubt) that an offense occurred over a six month time period, DOJ would be likely to present a six count indictment with each count representing a full month's worth of violations rather than charging a 180 count indictment for each day of violation. Under this scenario, the Southern Union opinion is unlikely to have a significant impact because the government will be able to prove that the violation occurred on each day of the six month date range. As long as the government includes a special verdict form that specifies the days of violation, it would not run afoul of the reasoning in Southern Union.

Second, DOJ also charges date ranges when a government witnesses can only recall that a certain discharge or disposal happened in a particular year or season as opposed to knowing precisely what day or month of the year it occurred. It is in this later group of cases where the Southern Union opinion will have its desired salutary effect. In these cases, the government will have to make a Hobson's choice between a regular jury verdict form that gives the jury maximum latitude in finding that a violation happened at sometime within the range, or a special verdict form that will allow the jury to decide the specific dates of violation, but runs the risks of a mistrial or not guilty verdict because of the jury's inability to agree on a specific date. In these types of cases, the government will have a much more difficult trying to leverage the specter of a per day fine violation to extract a plea since a defendant can now push the government to provide evidence proving beyond a reasonable doubt that the defendant committed all of the acts constituting the offense for each alleged day of violation.

Tool Two: Fines Based on Twice the Loss or Gain under the AFA

The government has used tool two frequently in its criminal prosecutions of oil spill cases. Rather than seeking the statutory maximum in the cases, the government has sought much higher fine amount under the Alternative Fines Act for the cost of clean-up, i.e., twice the lost that occurred. These fines can range in the millions or even billions of dollars.

In the post Southern Union world, the government will still be able to seek fines based twice the loss or gain, but now they must put more precision on that calculation. In plea negotiations defendants will have more latitude to require the government to show sufficient proof of the gain or loss. It would be beyond the scope of this article to try and categorize all the circumstances in which the gain or loss provision could come into play and how the Southern Union opinion might affect that calculation. Suffice it to say that defendants will be wise to more carefully scrutinize any loss or gain calculation put forth by the government in plea negotiations or at trial.

 [1] The U.S. Federal Sentencing Guidelines does not state the applicable standard of proof for a court to follow in determining factual issues under the Guidelines. Most circuits have held that the standard of proof is a preponderance of the evidence.  However, if the fact may have an extreme impact on sentencing, the standard of proof may be higher. See, e.g., United States v. Kikumura, 918 F.2d 1084 (3d Cir. 1990); United States v. Jordan, 256 F.3d 922 (9th Cir. 2001).

[2] Chapter Eight of the U.S. Federal Sentencing Guidelines Manual contains guidelines that apply to most crimes committed by organizations such as corporations, partnerships and municipalities. When the Sentencing Commission adopted Chapter Eight however, it exempted environmental offenses from provisions regarding fine calculation in U.S.S.G. § 8C2.2-.9. According to the Guidelines, courts imposing environmental crimes fines are only bound by U.S.S.G. § 8C2.10 which references the general sentencing principles in 18 U.S.C. § 3553 and § 3572. Thus the guidelines do little to aid a court in applying the above criminal fine provision, leaving more flexibility in sentencing environmental crimes-a significant concern to organizations.

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