In a decision that will impact white collar criminal trials — and potentially civil enforcement trials in which the government agency seeks substantial civil monetary penalties — the U.S. Supreme Court recently held in Southern Union v. United States, No. 11-94 (Sup. Ct. June 21, 2012) that facts necessary to the imposition of a substantial criminal fine must be determined by the jury, not the District Court. The Supreme Court ruled that where a defendant is facing “substantial” or “severe” criminal fines, a jury, not a judge, must determine the facts that support the imposition of criminal fines thereby overturning the First Circuit’s decision that upheld an $18 million fine against Southern Union Company, a natural gas distributor. The decision, authored by Justice Sotomayor, is a clear extension of the Sixth Amendment requirement that a jury must determine any fact that increases a defendant’s maximum potential sentence, referred to as the “Apprendi rule.”
In 2007, Southern Union Company was indicted on multiple counts of violating federal environmental statutes for knowingly storing liquid mercury without a permit at its Pawtucket, Rhode Island facility. One count of the indictment alleged that the company engaged in this conduct on or about September 19, 2002 until on or about October 19, 2004, in violation of the Resource Conservation and Recovery Act of 1976 (RCRA). A jury convicted the company on this count following a trial in the District Court. The maximum criminal fine for a violation of the RCRA was $50,000 for each day of violation. Relying on the theory that Southern Union violated the statute for each of the days alleged in the indictment (762 days from September 19, 2002 to October 19, 2004), the trial court imposed a fine of $38.1 million. Southern Union objected to the calculation arguing that because the jury was not asked to determine the precise duration of the violation (one day versus every day) the only violation the jury necessarily found was for one day and the appropriate fine amount should be no more than $50,000. Any other amount would have required the jury to conclude that the defendant violated the statute every day during the alleged time period. Therefore, because the jury was not specifically asked to specify the duration of the violation, Southern Union contended that the sentencing court engaged in improper fact-finding by imposing the higher penalty, in violation of the Apprendi rule and the Sixth Amendment.
The government objected and argued that the Sixth Amendment right to jury as outlined in Apprendi and other cases does not apply to criminal fines. The First Circuit agreed with the government but reduced the fine to $18 million and held that the Sixth Amendment right to a jury trial did not extend to criminal fines.
Application of the Apprendi Rule
Under Apprendi, other than the fact of a prior conviction, any fact 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 its new Southern Union opinion, the Supreme Court first reviewed its previous decisions in which Apprendi has been applied to a variety of sentencing schemes. These included cases where a sentencing court elevated the “upper term” of imprisonment, increased the imprisonment range for a defendant under mandatory Federal Sentencing Guidelines, and imposed the death penalty upon the finding of existence of aggravating factors. In each of these prior cases, the Court held that the imposition of these increased punishments ran afoul of the Sixth Amendment, which required the jury (not the sentencing court) to make factual findings to justify the increased punishment.
In reaching its decision to extend the Apprendi rule to the imposition of criminal fines, the Court noted that in its previous decisions it had never distinguished one form of punishment from another. Further, the Court stressed that dating back to the early 1800s, juries often have been tasked with the responsibility of making factual findings on the value of damaged or stolen property, particularly in prosecutions for offenses such as arson and theft. The fact that criminal fines are “less onerous than incarceration and the death sentence” is not the correct inquiry, according to the Court. Rather, “the relevant question is the significance of the fine from the perspective of the Sixth Amendment’s jury trial guarantee. Where a fine is substantial enough to trigger that right, Apprendi applies in full.”
Impact of Southern Union
Apprendi and its progeny already have resulted in significant changes to the method by which the government files charges and plea bargains cases. In both state and federal jurisdictions, pleading documents are now more detailed requiring the government to allege aggravating or elevating factors in the actual complaint or indictment, as opposed to simply pleading the facts that give rise to the specific violation. Further, plea bargaining has become a more elaborate process because the parties now execute jury trial waivers for a litany of ever-increasing aggravating factors that may increase a defendant’s sentence.
The Southern Union case will no doubt add another level to the plea negotiation process by forcing the government, when seeking stiff criminal monetary penalties against corporate defendants, to establish the full amount of loss or financial wrongdoing by a defendant in the early part of a prosecution. This is typically a difficult and time-consuming undertaking, and the Court’s decision will likely restrict or hinder the leverage of prosecutors to obtain higher criminal penalties, at least in the plea bargain process.
The decision has the potential to become a significant milestone for all defendants facing government enforcement actions. A future court may extend the requirement that a jury decide the facts that enhance penalties into other areas where a defendant is being “punished” by the imposition of significant monetary penalties. This issue is currently pending before the Ninth Circuit in an SEC enforcement case. In civil SEC and other regulatory enforcement actions, government agencies routinely seek the imposition of significant civil penalties. These penalties may be construed as the equivalent of “punishment” for purposes of analyzing the right to a jury’s determination of the key facts. The Supreme Court’s decision this week provides support for the proposition that such civil actions against defendants who are facing severe or significant civil penalties are not in a different position than the defendant in the Southern Union case.
This opinion signals yet another significant change in the criminal sentencing landscape. This decision further restricts the discretion of judges in determining sentences and forcing prosecutors to prove at trial all the factors they believe should enhance criminal fines.