Establishing a "Due Care" Standard Under the Lacey Act Amendments of 2008

Introduction

The Lacey Act was first enacted in 1900 as a narrow
measure for domestic bird preservation and agriculture protection. It was
significantly amended in 1981[1] and 1988[2] to prohibit trafficking in fish and wildlife “taken, possessed, transported, or
sold” in violation of state and foreign laws.[3] For the past three decades, the amended statute has provided the federal
government with a powerful tool for regulating imports of fish and wildlife. In
2008 Congress expanded its reach still further, responding to widespread
concern about the effects of illegal logging on local governance, the
environment, and American business by extending the Act’s protections to imported
plants.[4]

The Lacey Act’s penalty provision imposes both civil and
criminal liability for wildlife trafficking. At its most stringent, the Act
imposes felony liability on those who “knowingly” import fish and wildlife harvested
in violation of foreign laws. Importers and subsequent purchasers of imports
who fail to exercise “due care” in determining whether their products are legal
may be subject to misdemeanor liability or civil penalties.[5] The due care standard, which originated in the 1981 amendments, is now almost
three decades old, yet key differences exist between companies in the timber
market and the business enterprises whose operations were traditionally regulated
under the Lacey Act’s fish and wildlife provisions. These differences limit the
applicability of the few existing precedents that have interpreted and applied
this standard.

This Essay proposes a set of criteria to guide enforcement
in the context of illegal timber imports. Part I explains the significance of
the due care standard. Part II argues that because of the fact-driven nature of
Lacey Act cases, fish and wildlife precedents do not provide enough guidance
for importers attempting to comply with the Act. The Department of Justice
(“DoJ”) should emphasize distinctive features of the timber market to inform
prosecutors’ understanding of due care.

I. The Significance of Due Care

This Part presents the limited range of Lacey Act case law
on due care as part of a broader development in environmental law and explains
why a clear understanding of due care is important for distinguishing among the
responsibilities of different actors in a complicated supply chain. Next, it
argues that more than a generalized objective standard of care is needed to
produce successful enforcement of the 2008 amendments.

A. The Global Enforcement Trend

The Lacey Act’s incorporation of foreign law violations
can be viewed as part of a broader “emerging trend” toward global enforcement,
which represents a dramatic departure from conventional priorities.[6] Whereas conventional investigations involved physical tracking of items from
one site to another and ensuing direct action against transporters, the government
must now increasingly look at the supply chain history of products entering the
United States. Importers are difficult to track and supply chains are hard to
monitor. It therefore takes time for the government to develop effective information-gathering
methods for policing different kinds of regulated parties.

As the government learns what should be expected from
different actors in the supply chain, the problem of defining “due care” has
become especially pressing for the timber industry. The 2008 amendments extended
the Lacey Act’s reach to a much larger range of corporate actors: the United
States is the world’s largest wood products consumer and one of the top importers
of tropical hardwoods. A high percentage of these imported products comes from
regions known to have widespread illegal logging problems. Thus, many companies
are likely to be subject to the new legislation.

B. Insufficiency of Existing
Precedent

The need to prove due care provides timber importers with
an incentive to ask questions of their suppliers, thus sending demand-side
signals with the potential to “ripple down the chain.”[7] The success of the incentive depends on two factors, however. First, the
government must be able to prove statutory violations in a sufficient range of
cases. A low risk of prosecution may fail to produce the intended deterrent
effect, transforming compliance efforts into a mere cost of doing business. In
fact, it was concern about the feasibility of enforcement that originally led
the EU to conclude that a Lacey Act-like ban on the possession and sale of
illegal wood products would pose “significant difficulties in . . . implementation.”[8] The EU accordingly proposed a due diligence regulation that clearly outlines
measures companies must take to ensure the legality of their product. The
European Parliament appears to have overcome its qualms, however, having passed
legislation including both the due diligence requirements and a ban on illegally
sourced timber in early July.[9] The European Council has informally agreed to the legislation and is expected
soon to pass it into law.

Second, industry must view compliance as a feasible goal.
While insufficient understanding of due care on the government’s part might
lead to underenforcement, insufficient understanding on industry’s part might
produce inefficient overcompliance. For example, a common piece of compliance advice
under the 2008 amendments is that companies should simply avoid sourcing from
countries with high risks of illegal logging. Such country-based sourcing
decisions would effect a dramatic and unnecessary change in business practices.

Existing case law is not sufficient to define
responsibilities under the 2008 amendments. The modern Lacey Act has been in
place for almost three decades, yet there is relatively little case law under
the statute[10] and even less on the issue of due
care.[11] This means there are few precedents
upon which the government may draw or industry may rely. More importantly, the
fact-driven nature of Lacey Act prosecutions limits the precedential value of
fish and wildlife cases. Although the cases continue to provide some guidance, existing
standards are not enough to define due care.

A couple of broadly applicable principles from existing
cases are worth identifying. First, courts have emphasized the defendant’s
level of experience in the industry in determining whether he sought information
pertinent to a shipment’s legality. For example, in United States v. Proceeds from Sale of Approximately 15,538 Panulirus
Argus Lobster Tails, the court emphasized that the defendant had been in
the business “for years.”[12] In United States v. 2,507 Live Canary
Winged Parakeets,[13] the court gave great weight to an importer’s failure to take “affirmative action”
to make sure that the species he was importing could be lawfully exported from
the country of origin.

Inquiring into the defendant’s experience and engagement
in information-seeking activities is a good starting point in many cases.
Nevertheless, both the legislative history of the 1981 statute and existing
federal case law emphasize the importance of determining what constitutes due
care on a case-by-case basis. The Ninth Circuit, which has decided more cases
involving questions of due care under the Lacey Act than any other federal
court,[14] has issued a pattern jury instruction for Lacey Act offenses that presents due
care as an objective standard, constituting “that degree of care which a reasonably
prudent person would exercise under the same or similar circumstances.”[15] This fact-based negligence standard indicates the importance of determining
what is reasonable for individual defendants. Because certain circumstances are
consistent within the timber industry, however, under the 2008 amendments the
government should first consider what is reasonable for timber defendants
collectively.

II. Developing a Due Care Standard for the Timber Industry

This Part identifies three features of the timber industry
that distinguish it from fish and wildlife importation and explains how each
should give rise to distinct responsibilities for that industry. It accordingly
advocates interpreting the traditional “reasonably prudent person” test to incorporate
specific factors the government should emphasize when prosecuting timber
companies for Lacey Act violations.

It might be argued in response that clarifying the due
care standard will actually reduce the incentive for businesses to develop
improved best practices over time. This Part takes account of such a concern by
emphasizing broadly articulated factors such as industry custom whose specific
qualities may evolve as companies become more knowledgeable about how to monitor
supply chains. It might also be argued that emphasizing a clear set of factors
will hinder enforcement efforts by unnecessarily constraining the ability of
federal prosecutors to develop an informed standard over time. Identifying
common traits of timber industry defendants and corresponding responsibilities,
however, is unlikely to cause ossification of prosecutorial methods as long as
the government weighs in its analysis the extent to which individual defendants
express those traits. Small businesses that import in low quantities and have
unique business plans, for example, should be less subject to a presumption of
knowledge about well-known industry standards.

Inquiries into individual circumstances will ensure that
methods remain fair in specific cases. Yet the need to be sensitive to
exceptions does not reduce the need to emphasize specific factors for the
industry. Because the timber industry is a broad market with many large
corporate entities, a more specific standard is likely to be helpful in many
cases. A clear test will therefore provide the government with a useful
analytical starting point when deciding whom to prosecute and what level of offense
to charge.

A. Efforts to Comply with Industry
Custom

Many prospective defendants in timber cases not only
participate in a large market, but also are likely to conduct large-scale
operations. The wood flooring market provides a good example. In 2006, U.S.
consumption of wood flooring reached $3.1 billion. Imported products accounted
for 36.4 percent of the market.[16] Of 155 total firms, the 5 largest manufacturers accounted for almost 60 percent
of the overall U.S. production. Such companies present a stark contrast to
defendants in key Lacey Act precedents. In Lobster
Tails, the individual defendant was present in the country of origin at the
time of the purchase; he was the company’s sole employee; and he ran the
importing business from his home. Although the fishing industry does involve
large corporate players, it remains that existing federal cases have not tended
to deal with these defendants. Whereas personal experience has usually been considered highly probative in fish and wildlife
cases, large-scale industries usually have the benefit of established industry
custom that supplies them with guidance about what constitutes responsible
behavior.

The unique situation of commercial defendants under the
Lacey Act has been established by the National Oceanic and Atmospheric Administration
(“NOAA”),[17] which
has consistently held that the duty of care is “high in a commercial context.”[18] When establishing what constitutes due care in a particular commercial context,
prosecutors should identify the kinds of knowledge a responsible participant in
a particular part of the industry would be likely to have or to seek. In In re Duong Vo, the ALJ deciding the case for NOAA reasoned that a group
of commercial fishermen who had imported fish harvested illegally in Mexican
waters had not exercised due care because they should have known, simply from
being in the profession, that they were “responsible for knowing their vessel
location . . . and . . . having adequate navigational
equipment aboard to ascertain their location.”[19]

Private sector initiatives to guide procurement, green
building rating systems, and well known voluntary certification programs such
as the Forest Stewardship Council and the Sustainable Forestry Initiative alert
industry members to the kind of behavior viewed by others in the business as
environmentally responsible and thus likely to effect compliance with legal
obligations. In addition to these initiatives, specialized industry
publications provide more targeted information about what certain kinds of
producers should do to fulfill their legal duties.

In products liability suits, compliance with trade or
industry custom often provides meaningful evidence for a party defending
against a negligence claim. Similarly, compliance with procurement standards,
rating systems, or certification programs intended to address illegal logging
should provide meaningful evidence of due care under the Lacey Act. As in tort
law, compliance with commercial standards should not be an absolute defense.[20] Prosecutors may nevertheless draw on such standards to obtain information about
measures a defendant might have taken to exercise due care.

B. Responsiveness to Legality
Standards and Conservation Hot Spots

Another distinctive characteristic of the timber market is
the complicated set of foreign laws to which it is subject. Laws governing
timber and logging often include forest management schemes that can be difficult
for foreign companies to monitor. Indonesia, for example, has over nine hundred
laws, regulations, and decrees that govern timber exploitation, transportation,
and trade. The difficulty of determining one’s legal duties suggests that a
prosecutor charging a due care violation, rather than focusing narrowly on the
defendant company’s noncompliance with the foreign law at issue, should assess
whether it was responsive to available information about “legality standards”
issued by the government in the country of origin and conservation “hot spots.”

Importers especially should attempt to comply with the
“legality standards” that some countries have begun to issue in an attempt to
help foreign companies comply with domestic laws. Indonesia has issued a
legality standard to help buyers differentiate between legal and illegal wood.
The standard consists of seven principles, each supported by several indicators
linking it to existing legislation; in addition, the government has issued
guidance notes to assist auditors in verifying compliance with each indicator.
Evidence of audits or good-faith attempts to assess relevant indicators should
help a defendant establish due care.

Although in some cases it may be difficult for importers
and purchasers to discover exactly where a product originated, companies that
sell timber products should be careful to construct supply chains that avoid
known problem areas. Some regions are widely known to face illegal logging problems
or to pose conservation concerns. Timber sourced from these regions is
particularly likely to implicate the Lacey Act’s provisions. The International
Paper Company has emphasized the important role of Conservation International-identified
“hot spots” in the company’s decision making about where to conduct logging
operations. The Floor Covering Institute has warned the industry to be careful
about sourcing from the Chinese-Russian border, where much of the timber is
illegally harvested. When companies do source from these regions, they should
be careful to monitor their trading partners through careful contracting and
site visits.

C. Good-Faith Efforts to Monitor the
Supply Chain

A final distinctive factor is an often a complex supply
chain. Timber products, unlike lobster tails or parakeets,[21] often go through many intermediaries, making it increasingly difficult to
recognize a particular product or to keep track of its origin. Even companies
recognized as industry leaders in promoting sustainable wood harvesting may
wind up using illegally harvested wood, as demonstrated by the recent government
raid on the Gibson guitar factory in Nashville, Tennessee.

In deciding whether to prosecute timber cases, prosecutors
should focus on whether defendants engaged in particular kinds of
information-seeking activities. As the former Deputy Assistant Attorney General
for the DoJ’s Environment and Natural Resources Division emphasized during
hearings in the House, purchasers should be expected to verify certifications
before purchasing products or visit harvest areas in order to understand their
supply chains. The American Hardwood Federation has also recommended that
companies must be sure to question suppliers thoroughly and review published
information on the concerns particular to timber markets in each country of
origin.

Conclusion

Timber companies complain that they are left in a state of
uncertainty about how to comply with their obligations under the Lacey Act Amendments
of 2008. Prosecutors should help dispel this uncertainty by emphasizing the
importance of the following three factors: compliance with industry custom;
responsiveness to legality standards and conservation hot spots; and evidence
of good-faith efforts to monitor the supply chain.

In products liability law, compliance with standards is
not an absolute defense to liability but nevertheless provides evidence of
reasonable care. Judicial attention to nongovernment standards allows industry
to innovate effectively while changing safety standards over time. If Lacey Act
enforcement authorities were similarly responsive to the factors listed above,
timber companies would be less likely to engage in inefficient overcompliance
and more likely to continue to develop effective best practices.

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Rachel Saltzman is a member of the Yale Law School class of 2011. The author thanks Andrea Johnson at the Environmental Investigation Agency for her thoughtful review of this article.

Suggested citation: Rachel Saltzman, Establishing a “Due Care” Standard Under the Lacey Act Amendments of 2008, 109 Mich. L. Rev. First Impressions 1 (2010), http://www.michiganlawreview.org/assets/fi/109/saltzman.pdf.

[1]. Pub. L. No. 97-79, 95 Stat. 1074
(1981).

[2]. Pub. L. No. 100-653, 102 Stat.
3825 (1988).

[3]. 16 U.S.C. § 3372(a)(2)(A).

[4]. Food, Conservation, and Energy Act
of 2008, Pub. L. No. 110-234, § 8204, 122 Stat. 923 (to be codified at 16
U.S.C. § 3372).

[5]. 16 U.S.C. § 3373(d)(2).

[6]. See, e.g., The New Frontier
of Cross-Border Enforcement, 40 Envtl.
L. Rep. News and Analysis 10127, 10132-34 (2010).

[7]. Hearing on H.R. 1497 Before the H. Subcomm. on Fisheries, Wildlife and
Oceans, Comm. on Natural Resources, 110th Cong. 27 (2007) (testimony of
Alexander von Bismarck, Environmental Investigation Agency, Inc.).

[8]. Commission Proposal for a Regulation of the European Parliament and of
the Council Laying Down the Obligations of Operators Who Place Timber and
Timber Products on the Market, at 6, COM (2008) 644/3.

[9]. See Press Release, European Parliament, MEPs Vote To Cut Illegal
Timber Out of the EU Market (July 7, 2010), available
at http://www.europarl.europa.eu.

[10]. A Westlaw search in the ALLFEDS
database for “lacey act,” limited to 1981 and after, yielded 223 cases.

[11]. Searching for the phrase “due
care” within the results described above limited the pool of relevant cases to
twenty-three.

[12]. 34 F. Supp. 385, 392 (S.D Fla.
1993).

[13]. 689 F. Supp. 1106 (S.D. Fla.
1988).

[14]. Of the twenty-three cases
addressing “due care” identified above, ten were in the 9th Circuit.

[15]. Model Crim. Jury Instr. 9th Cir.
9.11 (2003).

[16]. U.S.
Int’l Trade Comm’n, Wood Flooring and Hardwood Plywood: Competitive Conditions
Affecting the U.S. Industries, 3-11 tbl.3.5 (2008).

[17]. It should be noted that the
standard of care imposed in administrative proceedings, where less is at stake
in terms of penalties, cannot be readily imported into federal courts, particularly
where the court is considering criminal sanctions. Accordingly, this Section
does not advocate importing an administrative law standard; rather, it looks to
administrative cases to develop the standard of care for a particular type of
defendant.

[18]. See, e.g., In re Brooks,
6 O.R.W. 535 (N.O.A.A. 1991); In re Albert,
5 O.R.W. 374 (N.O.A.A. 1988); In re Brownsville
Shrimp Cases, 3 O.R.W. 828 (N.O.A.A. 1984).

[19]. Nos. SE990435FM, SE990436FM, 2002
WL 31742934 (N.O.A.A. Oct. 22, 2002) (citing Brownsville Shrimp, 3 O.R.W. at 841).

[20]. See 57A Am. Jur. 2d Negligence § 165 (2010).

[21]. United States v. 2,507 Live Canary
Winged Parakeets, 689 F. Supp. 1106 (S.D. Fla. 1988).