Case Note-The United States vs. Hilton Hotel Corporation

United States of America, Plaintiff-appellee, v. Hilton Hotels Corporation et al., Defendants, western International Hotels Company, Defendant-appellant

Facts

The case of The United States vs. Hilton Hotel Corporation focuses on the inherent actions of the Hilton Head Corporation. The Hilton head corporation was accused of violating the Sherman Act of 1980 which was formulated to ban monopolistic practices among organizations and to protect the inherent opportunity of free trade among organizations (Epstein, 2009). Hilton Head Corporation was accused of violating this act based on the actions of the organizations heads of staff and lesser employees in Portland, Oregon. Operators of various entities in the city which included Hotel operators, restaurants as well as owners of Supply chain companies gathered in an effort to attract business conventions to the city. Financing for this endeavor included contributions that were to be submitted by members of the formed group. Contributions were based on predetermined amounts. Hilton Head , as a apart of the agreement among the group ruled that those entities that participated would receive preferential treatment and those that did not would be boycotted.

The basis for the case served upon violation of the Sherman Act and its principles. The Sherman Act of 1980, in relation to those involved, was formed as a law for Antitrust. Under the act, free uninhibited competition is protected as a rule of trade. The Hilton Head International Hotel Company was accused of hindering free trade as the agreement among Appellant and others would inhibit free competition as those entities of hotel supply that did not participate would be boycotted. The act also covers any attempt of monopolization that could occur due to agreements made by organizations. Throughout the case the apparent evidence where trade restraint occurred without a reasonable doubt were difficult to discover based on the evidence. An important part of the case was also the Hotels intention. If the hotel intentionally formed alliances with other businesses with an intention other than the initial presented by the companies’ boards, then the firm could be found guilty under the basis of the Sherman Act.

Coercion and Scope of employment also play a key role in the case as supplier involved participated due to wanting to maintain relationships that were conducive to a profitable business, thus the appearance of being coerced. Employees also go on the record, during trial, of saying to various suppliers that they should participate so that they would not lose large amounts of business. This evidence which came in the form of testimony by employee’s proved to be invalid due to directions given by heads of the Hilton Corporation to not participate in eth boycott and continue ordering from those that do not participate in the mulit-operator agreement.

A direct agent of the Appellant was noted on record to have reported to suppliers about the loss of business which brought about the question of employers being held liable for the actions of employees under the Sherman Act of 1980.

Issue

Should the employer be held liable for the actions of an employee held under the Sherman Act of 1980 that were against corporate policy and not authorized by the employer?

Decision

Ruling for the case was affirmed as evidence provided was sufficient in holding the employer liable for the acts of the agent.

Section II

The court ruling of the case was fair under the following circumstances: the inherent act of the employee, specifics under the Sherman Act of 1980 along with company policy and responsibility of the organization. Initially the court ruling for the case was affirmed in that it preceded with the ruling that was given to Hilton Head Corporation by the lower court. The act of the employee comes into question due to the notion of liability among corporate officers and directors. Under Corporate Office Doctrine, a court can impose liability (criminal) on an individual that is considered a corporate officer regardless if they actively participated or even had knowledge of the criminal violation (Miller & Gentz, 2010). This is the issue with Hilton head Corporation.

An agent of the corporation, who held a supervisory position, was noted to tell suppliers that that a loss of business would occur should they not decide to contribute to the association. The agent, according to Hilton Head Corporation, however was notified by an individual of higher authority to not participate in the boycott and to continue to order from suppliers even though they did not participate in the association. The employee then found it necessary to behave on their own merit and proceed to inform certain supplier of the potential loss of business due to non –participation. The court, in this instance was correct to hold the employer liable for the actions of the employee despite Hilton Corporation insinuating that the employee was obliged to do differently. Criminal liability can be imposed upon a business entity for acts or omissions of said firm’s employee’s that perform in the course and scope of their employment (New York Central & Hudson R. R. Co. v. United States, 1909). The employee, as a result of their own behavior does not benefit one’s self but instead benefits the corporation as a whole in ways included but not limited to: increased profit for the organization and proposed elimination of the competition. Due to this, the corporation of Hilton is and can be held liable for the actions of their employees as it is the corporation that will profit from the specific illegal activity mentioned and not the agent.

Secondly, the Appellant is held liable due to specifics under the Sherman Act of 1980 along with company policy. Under the Antitrust Act, it is illegal for a contract or even a combination of the form to be utilized for the restraining of trade or commerce. Monopolization or any attempt thereof to gain a footing in trade or commerce is also illegal (Sherman Act, July 2, 1890, ch. 647, 26 Stat. 209, 15 U.S.C.1–7). Though the Hilton Corporation claimed that the direct goal of the association formed among various entities in the community was to gain customers through conventions, the firm’s agents proved otherwise. The deliberate statements of agents to non-participating suppliers did not aid in the stance Hilton Corporation was attempting to take during proceedings. Being that the goal of the Sherman Antitrust Act is to protect the public’s choice, the Hilton Corporation denied that ideal and thus violated the act. The case notes that formulation of the association was indeed not a tactic to meet a business objective but more or less a combined effort of those in the local hospitality business to press on to suppliers who failed to contribute to the association. Company policy of Hilton Corporation as stated in the case is that the hotel is obliged to purchase from suppliers based on three fundamental entities. Those entities are price, quality, and service of the supplier. Judgment of purchase from a supplier based on anything other than mentioned is a direct violation of corporate policy. The purchasing agent who acted on his own merit not only aided in condoning acts that were against the Sherman Act of 1980 but also Hilton Head corporate policy. It is noted that a violation of the Sherman Act only occurs if price, quality and service is affected by the decision of a company or an agent. Acts of the purchasing agent, should suppliers comply would have directly affected price in that preferential treatment would have been given to those that participated in the association.

Finally, the Appellant is held liable due to the responsibility of the organization. Under corporate doctrine, businesses must exhibit responsibility in terms of the actions of firm employees. This is due to the relationship that corporate officers hold with an organization. Corporate officers by law are obliged to know the conduct and whereabouts of employees as the officer themselves have the power to prevent proposed violations that might occur. A prime example of this is the case, United States vs. Park (1975). In this case, The CEO of a rather large grocery store chain was held liable for violations directly committed by corporate warehouses. Corporate warehouses of the grocery store chain violated FDA regulations as they contained food which exposed to rodent contamination. Though the violation was not committed directly by the CEO, the individual is still liable as he was in the authoritative position to cease the wrongdoing that occurred in the warehouse. Since this case, corporate officers have been held responsible for the acti0ons of their employees, hence the ruling of the United States vs. Hilton Head.

The purchasing agent of Hilton head was stated to be acting within the course and scope of their employment. Course and scope of employment entails the behavior that an employer directly expects of an employee as part of their specific job duties (Morisette, 2012). This also entails the basic of the employees job description, normal conduct of the individual performing the job as well as conduct during normal business hours. The behavior exhibited from the agent was assumed to be normal behavior even though it went against what corporate officers obligated the agent to do. Even still, the corporate officers were still held of the responsibility of making sure employees followed directions given as it as well in the corporate officers power.

The case of The United States vs. Hilton Hotel Corporation focuses on the inherent actions of the Hilton Head Corporation. The Hilton head corporation was accused of violating the Sherman Act of 1980 which was formulated to ban monopolistic practices among organizations and to protect the inherent opportunity of free trade among organizations. Hilton Head Corporation was accused of violating this act based on the actions of the organizations heads of staff and lesser employees in Portland, Oregon. Operators of various entities in the city which included Hotel operators, restaurants as well as owners of Supply chain companies gathered in an assumed effort to attract business conventions to the city. Financing for this endeavor included contributions that were to be submitted by members of the formed group. Contributions were based on predetermined amounts. Hilton Head , as a apart of the agreement among the group ruled that those entities that participated would receive preferential treatment and those that did not would be boycotted.

The ruling of affirmed that was decided for the case of the United States vs. Hilton Head was fair in that it held the corporation liable for the act of the Purchasing agent. The ruling for the case is an attempt to hold the corporations liable for the acts of their employees. This is due to the notion that companies are responsible for educating their employees in a way where they are knowledgeable about company and industry specific standards. A form of accountability has been offered by the ruling of the case. Accountability needs to be exhibited by employers when employees actions are in the employees course and scope of employment, during company time, and the conduct is not outside of the employees normal conduct.

References

Miller, R., Jentz, G. (2010). Fundamentals of Business Law. Summarized Cases. 8th Ed. Mason: Cengage Learning.

Sherman Act, July 2, 1890, ch. 647, 26 Stat. 209, 15 U.S.C.1–7

New York Central & Hudson R. R. Co. v. United States, 212 U.S. 481, 29 S.Ct. 304, 53 L.Ed. 613 (1909)

United States v. Park, 421 U.S. 658 (1975)

Morissette, E.. (2012).Personal Injury and the Law of Torts for Paralegals. Frederick: Wolters Kluver Law & Business ,.

Epstein, R. A. (2009). Monopolization follies: The dangers of structural remedies under section 2 of the sherman act.Antitrust Law Journal,76(1), 205-237. Retrieved from http://search.proquest.com/docview/89220456?accountid=158586