Monday, Nov. 19,
2001
There is an aphorism that has been adopted by various radical
critics of the current legal system: "The Master's tools will be
used to take apart the Master's house." It suggests, of course, that
the best way to oppose powerful interests in society is not to
confront them up front, but to work subtly, from within. But it also
suggests a deeper point — the point that when it comes to
capitalism, the very weapons that helped one side today can be used
to help the other side tomorrow.
This is a intriguing theory, and it is very comforting for
lawyers, because it suggests that by doing exactly what they were
trained to do, they will eventually be able to help the forces of
change. Now it seems that some Internet professionals have taken up
the same perspective.
RTMark: A Parody, and a Serious Anti-Corporate Movement
Too
Since 1993, a corporation called RTMark — with the logo
"®TMark" — has been carrying on "business" as a "broker"
on the Internet. Its site contains the sort of graphics and language
that one associates with the many Internet brokerage sites like
E-Trade and Wit Capital that appeared in the late 90's. For
instance, RTMark markets so-called "mutual funds" represented by
symbols that look like stock ticker symbols.
On one level, RTMark is a big joke—it is a parody of the glitz
and style-over-substance of the Internet boom, especially the
Internet stock bubble. On another level, however, RTMark is a
matchmaker between anti-corporate activists and anti-corporate
donors.
The "mutual funds" are not truly groupings of securities; rather,
they are projects that need money. For example, an investor may
"invest" in the SUIC fund. The money in that fund, according to the
site, will be used to "create a corporate suicide website precisely
describing to CEOs how they can kill their own corporations (for
whatever personal reasons they may have)."
At it deepest level, RTMark is an attempt at corporate jujitsu.
RTMark is a corporation, and not just a bunch of friends in a
chatroom, for a reason. Its website states that RTMark "benefits
from 'limited liability' just like any other corporation; using this
principle, [it] supports the sabotage (informative alteration) of
corporate products, from dolls and children's learning tools to
electronic action games . . . ."
RTMark's Activities: From Deconstructing Beck to Barbie
Liberation
On June 12, 2001 an article published by the San Francisco
Chronicle breathlessly stated that "as a registered corporation,
RTMark protects its members from legal recourse for their
mischievous actions through the Teflon-coated limited-liability
feature of incorporation. Like any conglomerate, the company is
responsible for actions, not the individuals behind them."
Do the people working with RTMark need this protection from legal
liability? There is some reason to think the answer is yes.
The vast majority of the "mutual funds" offered by RTMark simply
contain criticisms of corporations, which are likely to be viewed by
a court as constitutionally-protected expressions of opinion. (For
example, for a while RTMark's anti-WTO message was conveyed on its
legally owned website GATT.org). But other activities have been
viewed, at least by some, as violating legally protected
interests.
For instance, Beck's record company, Geffen Records, noted in a letter to RTMark that it viewed "Deconstructing
Beck", a CD of remastered portions of Beck's published work, as a
violation of Beck's copyright.
Similarly, it is likely that the actions of the "Barbie
Liberation Organization"—a project sponsored by a RTMark mutual
fund—were tortious. The BLO buys Barbies and GI Joes, modifies their
voiceboxes, and returns them to stores — with the result that Barbie
says "Eat lead, Cobra" and Joe says "Let's plan our dream
wedding."
While the purchase and the modification of the Barbies and Joes
do not raise legal issues, the store returns likely do — for the
returning customer generally warrants that the product being
returned is the same as that which was bought.
Taunting Corporations Into Abridging Limited
Liability?
Do these actions — pinpricks on the hides of huge corporate
behemoths — have any broader meaning? Some in the press have
suggested they do.
According to press accounts, RTMark may want to provoke the
targets of their attacks to tighten the laws limiting corporate
criminal and civil liability. The idea is that to go after RTMark
and broaden its potential liability, corporations would seek legal
changes — but then the changes for which they lobbied would turn
around and bite them, for when they acted badly, their liability,
too, would be broader than before.
The result? RTMark's founders might be held personally liable for
some minor illegal act, but Firestone's president might face
something more scary than angry shareholders the next time his tires
fail.
Of course, it is highly unlikely that companies advised by
high-priced lawyers would ever shoot themselves in the foot in this
obvious way. Moreover, if this is RTMark's true goal, then the site
needs to get a few facts straight about the law.
Limited Liability: Less Limited Than It Looks
First, RTMark itself may not really be a registered corporation
entitled to limited liability. Its website does not give its address
or place of incorporation, but no matter where it is incorporated,
it may be in trouble.
In all 50 states, a corporation maintains its limited liability
status if and only if it satisfies that state's Secretary of State
(or its equivalent) that certain legal criteria have been met. In
many states, one of those criteria is that a limited liability
corporation must have as its major goal the pursuit of financial
"profit" for its investors. Yet RTMark admits on its website that it
defines profit not in terms of dollars, but the improvement of
culture.
Let's assume, though, that RTMark really is a limited liability
corporation under the laws of the relevant state. In that case, is
it really true that the doctrine of limited liability insulates the
managers of RTMark — and other qualifying corporations from personal
liability, either civil or criminal?
At least in theory, the answer is no. Notwithstanding what one
might think from watching The Sopranos, tortious or criminal
activity done by individuals cannot magically be made "corporate."
If the owners of an enterprise use the enterprise to engage in a
variety of criminal acts, including mail and wire fraud, they may be
prosecuted personally under federal and state racketeering law and
they may be sued personally under civil racketeering laws.
Furthermore, one does not even have to look to racketeering law
to understand why the doctrine of "limited liability" is not an
absolute bar to holding managers personally responsible for their
wrongdoing: actual real-world prosecutions will suffice. Formally,
at least, the law does not prevent corporate managers from being
held liable in either criminal or civil law for their misdeeds, and
sometimes prosecutions apply the law in precisely this formal
way.
For example, in 1990, the former president of Film Recovery
Systems, Inc, two officers, the plant manager, and the plant foreman
were charged with involuntary manslaughter and murder and convicted
in Illinois for the cyanide poisoning of an employee who had died as
a result of safety violations at the workplace.
Why Do Individual Corporate Wrongdoers So Often Get Off the
Hook?
Nevertheless, whatever the law formally may say, there is also a
reality for which RTMark may be trying to get attention:
Empirically, personal liability is very rarely assessed for acts
performed by corporate managers in pursuit of corporate ends. (The
Film Recovery Systems prosecutions were a rare counterexample.)
The reason for this state of affairs is complex, and has been the
subject of a very large literature. There are two basic reasons,
however, why plaintiffs' lawyers and prosecutors rarely pursue
individual corporate officers for actions taken in the boardroom.
(Securities plaintiffs' lawyers are an exception; as the increase in
the cost of insurance for boards of directors demonstrates, they are
not afraid to go after directors).
The first is the problem of attribution of responsibility in a
complex hierarchy. Unlike the law of conspiracy, which has at its
center someone who clearly intends to engage in an illegal
act, often it is hard to locate such a person in the context of
corporate decision-making, an institution famous for buck-passing,
blame-shifting, and, more innocently, the division of responsibility
among multiple people.
Anti-corporate activists may be convinced — and perhaps rightly
so — that when wrongdoing occurs, some individual the appropriate
state of mind is hiding somewhere in the corporation. But even if
they are right, the rules of civil procedure and criminal procedure
make it very difficult to prove such suspicions in court.
That leads to the second, closely-related reason individuals are
rarely held accountable: It is very hard to prove intent or
negligence on the part of a single person in the context of a large
organization. In criminal law, we often require proof of specific
intention beyond a reasonable doubt for most serious offenses. And
even in the context of civil law, where the standard of proof is
reduced, the problem of proving state of mind, while less daunting,
still remains.
RTMark: Influential Political Theater, But Not the Correct
Legal Point
As political education, RTMark is very interesting. As political
theater, it is spectactularly successful. As legal jujitsu, it
misfires.
The problem is not — as the site seems to suggest — that limited
liability offers special protections to corporate managers. Rather,
the problem is that our criminal and civil law contains principles,
that, when applied evenhandedly to individuals in and out of
corporations, make it very difficult prove criminal and civil claims
against corporate managers. RTMark may think the culprit is limited
liability, but it would be more accurate to say that standards of
proof and evidence rules create the problems at which RTMark takes
aim.