Abortion Clinics: Shareholder Liability

It is settled law that corporate officers can be held responsible for damage they cause, even if the corporation itself is also found responsible.  But what about shareholders of a corporation?  Courts with equity powers (such as the DC courts) will deprive shareholders of the privilege of operating as a corporation and assign individual liability if the evidence shows misuse of the corporate form to perpetrate fraud or wrong.  An egregious local example of shareholder liability for misuse of the corporate form is that of Mrs. Vuitch, ex-wife of abortion-purveyor Dr. Vuitch.  His “clinic annex” was housed at their residence.  Although Mrs. Vuitch moved out after their divorce, she remained as a shareholder in their business and as CFO.  Educated in business and finance, she paid the bills for the vast clinic, and was aware of a brazenly illegal clinic policy that led to a gruesome injury and a jury finding of her personal liability, although she did not directly participate in the misconduct.  The case was Vuitch v. Furr, 482 A.2d 811 (D.C. 1984).

The Vuitches operated (1) a surgical center, and (2) “clinic annex.”  The two entities were incorporated separately for the purpose of skirting District of Columbia law. 

Dr. Vuitch performed a dilation & curettage abortion on Andrea Furr in 1981 at the surgical center.  He caused a laceration of the uterine wall, which he attempted to suture, and kept her overnight at the clinic despite knowing that the law under which the clinic was licensed (D.C. Ambulatory Surgical Treatment Center Licensure Act, D.C. Law 2-66, 24 D.C. Register 6836, Jan. 19, 1978) prohibited overnight stays, requiring that patients either be discharged in ambulatory condition, or be admitted to a hospital.  The next night, Dr. Vuitch moved Ms. Furr to the “clinic annex” (his residence), then returned her to the surgical center the next day and discharged her. 

The day after the discharge, Ms. Furr went to a local hospital in severe pain.  Two obstetrician-gynecologists discovered that an unsutured laceration had caused pelvic and intestinal peritonitis (inflammation of the membrane lining the abdominal cavity) and infected the uterus.  The doctors had to perform a total hysterectomy, during which they found a mass of unremoved dead fetal tissue that had traveled into the abdomen through the laceration. 

Dr. Vuitch admitted that he regularly kept patients overnight at the surgical center and, if they suffered further complications, admitted them to the clinic annex (his home) because of the D.C. regulations that prohibited keeping patients overnight at the surgical center.  The legislative history of the Licensure Act revealed its purpose was to close the gap in the licensure laws regarding non-hospital surgery, “to assure the highest level of skilled care was provided at such clinics.”  The Court held that Dr. Vuitch admitted to

a knowing and intentional violation of the District of Columbia law pursuant to corporate policy, and the record indicates he used corporate property to carry out his policy.  Courts will not allow the interposition of a corporation to defeat legislative policy.  Vuitch, supra, at 819 (citing Anderson v. Abbott, 321 U.S. 349, 362-63 (1944)). 

Mrs. Vuitch claimed she was just the business arm, and had no role in setting the medical policy.  However, the evidence showed she was the second-ranking officer in a substantial for-profit medical enterprise, and that she knew about the illegal policy of moving patients to the clinic annex to treat complications.  In fact, when she lived at the “clinic annex” during her marriage to Dr. Vuitch, Mrs. Vuitch with Dr. Vuitch had driven patients to the clinic annex from the surgical center for treatment.  She even met with a lawyer after the licensing law was enacted in 1978 and assisted in obtaining equipment necessary to comply with the 1978 law.  Although incorporated separately, the two entities (surgical center and clinic annex) had the same shareholders—Dr. and Mrs. Vuitch.  For years, all of the surgical center’s bills were paid by the annex, and the surgical center’s employees were covered by the annex’s pension and trust plan; Dr. Vuitch used a car owned by the surgical center to transport patients to the annex; the annex (which wasn’t licensed to treat patients), served as his personal residence and the business office of the annex.  The Court found:

The pattern of intermingling the identities and property of the two corporations and disregarding some corporate formalities is probative evidence that the two corporations did not have separate identities and were in fact the Vuitchs’ alter-ego for the operation of medical facilities for personal gain.  (Footnote omitted).  Vuitch, supra, at 817 (citations omitted).  

Today D.C.’s licensing requirements for ambulatory surgical facilities don’t expressly prohibit overnight stays (or impose the requirement of “same-day” treatment, which was the focus through 2014), but continue to emphasize that ambulatory surgical facility treatment is unique in that it is “not hospitalization.”  Hospitals, then and now, are regulated differently from “ambulatory surgical facilities” and “maternal centers.”  This suggests that Vuitch v. Furr is still seminal on the subject of shareholder liability for misuse of the corporate form and that its sound reasoning had a lasting influence upon the D.C. Council. 

The penalties for violating the licensing laws have changed as well.  In 1978 the maximum penalty was $300 or 90 day’s imprisonment for violating the licensing laws; today, violations are charged as misdemeanors with penalties of up to $25,000 or 180 days’ imprisonment or both. 

Marijuana: Seizure of Evidence

Under federal law, possession of even small amounts of marijuana is still a crime in the District.  Federal law enforcement can still arrest anyone for possession in D.C., although local law enforcement (the Metropolitan Police Department) complies with local decriminalization of possession of up to 2 ounces by a person over age 21.  But whether you’re 21 and under, or over 21, the government must not exceed constitutional prohibitions against unreasonable searches and seizures (whether seizure of a person or evidence of an alleged crime).  The Fourth Amendment of the U.S. Constitution gives enhanced protection to preserving the sanctity of the home.  Privacy in your home extends to all types of warrantless “searches,” whether the search is conducted in person by police, or through infrared technology.  Your privacy might even be protected from warrantless surveillance flights above your property, depending on how common such flights are, if you maintain a “reasonable expectation of privacy” from such intrusions.

You can voluntarily relinquish your Fourth Amendment protections by volunteering to let government and enforcement authorities into your home.  The main question in these cases is whether you voluntarily consented, or gave in to unlawful coercion.  If the authorities forced you to comply with an unlawful search, you may have grounds to prevent the evidence from being used against you. 

The circumstances of your case also impact the unlawfulness (or lawfulness) of the search.  For example, use of infrared technology does not mitigate the intrusion, Kyllo v. United States, 553 U.S. 27 (2001), and a surveillance flight over a covered portion of your acreage still requires a warrant in most circumstances, Florida v. Riley, 488 U.S. 445 (1989).  But the courts have allowed warrantless searches of garbage bags placed at the curb for pickup, asserting that the police did nothing more than what anyone on the street could have done lawfully, in California v. Greenwood, 486 U.S. 35 (1988), and have allowed police to bring drug-sniffing canines into a private driveway to sniff the outside of the garage door, in U.S. v. Holley (5th Cir. 2016).  If the canine alerts police to the presence of contraband, warrants are obtained to seize the evidence in the garage. 

Even the late U.S. Supreme Court Justice Antonin Scalia, a strict constructionist of the U.S. Constitution, wrote for the U.S. Supreme Court’s majority in Florida v. Jardines, 133 S. Ct. 1409, 569 U.S. ___ (2013), that a canine sniff of a homeowner’s front porch was an unconstitutional warrantless search.  But the U.S. Court of Appeals for the Fifth Circuit reasoned that a driveway is not a porch, because the private home life of the individual does not extend into the driveway, and that a drug-sniffing canine is not sense-enhancing technology (on the order of Kyllo).  Holley, supra.  Holley filed a petition for certiorari on February 3, 2017.  

Unusual circumstances in warrant execution and investigation also allow the government to chip away at the Fourth Amendment’s protections.  One of the most relevant for the marijuana debate is the use of illegally-seized evidence in sentencing, that is, even when the Fourth Amendment prevents use of the evidence to determine guilt, if other evidence exists that convinces a jury to find guilt, the illegally-seized evidence can be used to increase a sentence—in some cases, to the same extent as if the illegally-seized evidence had been admitted at the trial.  As the U.S. Court of Appeals for the Sixth Circuit emphasized:

[G]iven that disputed facts at sentencing need only be established by a preponderance of the evidence, see U.S.S.G. § 6A1.3, comment.; United States v. Herrera, 928 F.2d 769, 774 (6th Cir. 1991), rather than beyond a reasonable doubt, state officers now have the somewhat perverse incentive to rely more heavily on sentencing than trial to establish facts that may be of overriding importance in determining a defendant’s length of imprisonment—for example, the total amount of drugs involved in a criminal scheme.  As a result, sentencing has to a significant extent replaced trial as the principal forum establishing the existence of certain criminal conduct.  United States v. Nichols, 979 F.2d 402 (6th Cir. 1992). 

Relief was afforded to criminal defendants, however, in Alleyne v. United States, 570 U.S. _____ (2013), in which the U.S. Supreme Court held that facts that aggravate the prescribed range of sentences to which a defendant may be exposed (e.g., such as possession of a firearm during commission of the offense) are not merely "sentencing factors" but "elements" of the offense(s) of which the defendant is accused, and, therefore, must be submitted to a jury and proven beyond a reasonable doubt.  

Therefore, if the admission of illegally-seized evidence during sentencing aggravates the permissible range of sentences (by either lowering the minimum sentence, or increasing the mandatory sentence), the sentence is an unconstitutional violation of a defendant's right to jury trial.  See Alleyne, supra.  

If you have an arrest record for possession of marijuana, you may be eligible to have the record of the arrest sealed.  The Criminal Record Sealing Act of 2006 opened a pathway to sealing for many former criminal defendants charged with “eligible misdemeanors,” such as possession, or felony failure to appear (the only “eligible felony”).