In an important decision, on July 6, 2016, the Eighth Circuit Court of Appeals affirmed the prison sentences imposed on Jack DeCoster, and his son, Peter, under the “responsible corporate officer” doctrine (aka Park doctrine) for their role in distributing eggs tainted by salmonella. (Here).
In 2010, approximately 56,000 persons fell ill from salmonella after eating contaminated eggs. The outbreak was eventually traced back to Quality Egg, owned by the DeCosters.
FDA inspectors conducted an inspection of Quality Egg’s facilities in Iowa and found that Quality Egg failed to comply with its written plans for biosecurity and salmonella prevention. A criminal investigation was initiated. Investigators found that Quality Egg employees’ falsified records, lied to auditors, and mislead regulators. One employee claimed that Jack DeCoster reprimanded the employee for failing to hide a pallet of eggs before an FDA inspector arrived.
The DeCosters each plead guilty to misdemeanor violations of 21 USC Section 331(a) for introducing misbranded eggs into interstate commerce with intent to defraud. The district judge sentenced them each to three months’ imprisonment. The DeCosters appealed claiming that the prison sentences were unconstitutional because they did not know the eggs were tainted when shipped and did not personally commit the prohibited acts. The Court of Appeals affirmed the sentences in a 2-1 ruling.
The responsible corporate officer doctrine (RCO) is controversial and imposes liability on corporate officers “by reason of [their] position in the corporation [who have the] responsibility and authority” to take necessary measures to prevent or remedy violations of the Food, Drug and Cosmetics Safety Act. RCO liability does not require the corporate officer to know or intend to cause the violation.
The FDCA “punishes neglect where the law requires care, or inaction where it imposes a duty” because Congress determined that 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.” A corporate officer may avoid liability under this doctrine by showing that he or she was “powerless to prevent the violation.” Opinion at 5-6.
In affirming the sentences of the DeCosters, the Court noted that the RCO was not unconstitutional because it imposed liability on the blameworthiness of a corporate officer who failed to prevent or remedy a condition at issue – the unsanitary conditions at Quality Egg’s facilities. The Court noted that any executive operating in the highly regulated world of food and drugs, where widespread harm can result from corporate negligence, has a duty to act with “heightened degree of foresight and care.” Opinion at 11.
The Court’s decision is likely to be appealed en banc and possibly to the Supreme Court.
For drug and food companies, the RCO is a criminal nightmare scenario where negligence is suddenly transformed into criminal liability. Corporate officers can be held criminally liable for a knowing violation, or in circumstances when they “should have known” of a certain condition.
Business groups have lined up to oppose the RCO doctrine claiming that it is unconstitutional. They will continue to press the case as part of an over-criminalization campaign. While there are certainly legal and policy questions about imposing criminal liability for negligent conduct, the Quality Egg case may not be the most attractive set of facts to push the cause. The facts in the case are “cringe-worthy” and disturbing to say the least. It is hard to see how a court may respond sympathetically to the circumstances and to the punishment imposed on the DeCosters.