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Director/Manager Personal Liability for Health and Safety Violations
In general, forming a corporation or a limited liability company will shield the officers and directors of the company from personal liability for corporate debt and obligations, including obligations that are violations of laws. However, there are some circumstances in which an officer or director can be held personally liable when the corporation has violated public health and safety law and/or regulations. This is, in general, called the “responsible corporate officer doctrine.” Here is a quick rundown. When you have questions about personal liability for corporate actions, you should call a good San Diego corporate attorney.
What is the Responsible Corporate Officer Doctrine?
In general, the responsible corporate officer doctrine is limited to health and safety laws and regulations. The responsible corporate officer doctrine provides that the corporate officers who are in the responsible positions of authority can be held personally liable for violating strict liability statutes protecting the public welfare. It is a judge-made theory of liability distinct from piercing the corporate veil doctrine and distinct from the doctrine that imposes personal liability for direct participation in tortious or criminal conduct.
The case most often cited with respect to the responsible corporate officer doctrine is US v. Park, 421 U.S. 658 (1975). In that case, under federal health and safety laws, the President and CEO of a company was help personally liable for failure to rid a food warehouse of rats. The company was Acme Markets, Inc., which, at the time, was a national retail food chain that had approximately 36,000 employees, 874 retail outlets, 12 general warehouses, and four special warehouses. Its headquarters was in Philadelphia. A Federal Food and Drug Administration investigation discovered that a warehouse in Baltimore was infested with rats and maintained other unsanitary conditions. The company was charged with five counts of violating various federal health and safety laws and, even though President and CEO — Mr. Park — was located in Philadelphia, he was also charged personally with the criminal violations. The company pleaded guilty, but Mr. Park pleaded not guilty because he was not personally involved with the Baltimore warehouse or with the health and safety violations.
Despite that argument, Mr. Park was found guilty on each of the five charges. The United States Supreme Court affirmed the convictions. The court held that, under the Food and Drug Act, Congress had not imposed a requirement of knowledge or individual acts in furtherance of the health and safety violations. Thus, under the Food and Drug Act, there is a sort of strict liability because Congress expressed that, as the court stated, “… the public interest in the purity of its food is so great as to warrant the imposition of the highest standard of care on distributors.”
Other examples of the responsible corporate doctrine being held to apply include:
- The federal Clean Water Act
- The federal Resource Conservation and Recovery Act of 1976
- Minnesota’s hazardous waste laws
- Indiana’s Environmental Management Act
- Washington’s Water Pollution Control Act
- Wisconsin’s solid and hazardous waste laws
The Responsible Corporate Officer Doctrine in California
The responsible corporate officer doctrine also applies in California under California laws. Again, the doctrine is limited to health and safety laws and regulations. For example, in People v. Roscoe, 169 Cal. App. 4th 829 (Cal. App. 3rd Dist. 2008), a corporate officer was held personally liable for the corporation’s violation of California underground storage tank laws. See Cal. Health & Saf. Code, § 25280 et seq. In particular, the two officers, directors and owners of their family business were convicted and fined $2,493,250 in monetary civil penalties for an underground storage tank that leaked over 3,000 gallons of gasoline into the ground. They and the company were held jointly and severally liable. The California Court of Appeals affirmed the personal liability against the two officers and directors. The court held that the particular statute at issue was one where the responsible corporate officer doctrine was meant to apply.
The doctrine was also held to apply with respect to the California Hazardous Waste Control Act (Cal. Health & Saf. Code, § 25100 et seq.). See People v. Matthews, 7 Cal. App. 4th 1052 (Cal. App. 2nd Dist. 1992) (doctrine applied to provisions of Act related to improperly storing and labeling and permitting the leaking of hazardous waste containers).
Contact San Diego Corporate Law
For more information and advice on liability relating to corporate actions, contact Michael Leonard, Esq. of San Diego Corporate Law. Mr. Leonard was named “best of the bar” three years running by the San Diego Business Journal. Contact Mr. Leonard via email or by calling (858) 483-9200.
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