Spoiled Eggs: Eighth Circuit Imposes Prison Time on Negligent Executives

Thursday, August 18, 2016
By Miles Indest, J.D./M.B.A.; Law Clerk, The Health Law Firm

On July 6, 2016, the United States Court of Appeals for the Eighth Circuit upheld prison sentences for two executives who had pled guilty to misdemeanor violations of the Food, Drug and Cosmetic Act (FDCA). United States v. Decoster, No. 15-1890 (8th Cir. July 6, 2016). The decision raises issues concerning the “responsible corporate official” (RCO) doctrine and the imposition of criminal penalties for negligence under the FDCA.


Strict Liability on “Responsible Corporate Officials”

In United States v. Decoster, two commercial farm executives pled guilty to misdemeanor violations of the FDCA—21 U.S.C. § 331(a)—for introducing salmonella-tainted eggs into the stream of commerce. The violation allegedly sickened 2,000 people and led to the recall of 500 million eggs, according to the Food and Drug Administration. The district court imposed a three-month prison sentence on the executives under the RCO doctrine.

The RCO doctrine imposes strict liability on corporate officers who have the ability to prevent or promptly correct a violation of the FDCA. The United States Supreme Court has held that a RCO may face criminal liability even if the officer had no knowledge of the FDCA violation. In Decoster, both executives appealed the district court’s decision, arguing that the prison sentences were unconstitutional because they were based on vicarious liability—the liability of lower-level employees. The Eighth Circuit rejected this argument in a 2-1 decision, finding that RCO’s are personally liable for their own failure to prevent violations of the FDCA by employees.

The dissenting opinion rejected the court’s holding on several grounds, concluding that (1) an FDCA violation by an RCO requires a mental state beyond negligence, and (2) the executives were not negligent.


To read the Eighth Circuit opinion, click here.


Legal Insight: Implications of U.S. v. Decoster for Corporations and Consumers


Some legal scholars praise the decision as a victory for consumers and a clear warning to food company executives to strengthen compliance with health and safety regulations. Others fear that the decision expands potential criminal liability: a corporate manager can face prison time for unknown actions of employees.

One thing is clear, federal officials are making it a priority to hold executives personally liable for the actions of their corporations and employees. Recently, we discussed the Department of Justice’s focus on executive accountability and the Securities and Exchange Commission’s $4.2 million penalty against a health care executive of an assisted living provider. This case is yet another example of the increased focus on individual accountability for corporate executives.


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To contact The Health Law Firm, please call (407) 331-6620 and visit our website at www.ThehealthLawFirm.com.


About the Author:
Miles Indest, J.D./M.B.A., graduated in May 2016 from Tulane University Law School and the Freeman School of Business. He has served three years as a member of Tulane Law Review and served one year as the Writing Skills Chair of Tulane Moot Court.



Sources:


Bethany Hills and Benjamin Zegarelli. “Questions of Culpability After 8th Circ. Egg Exec Decision.” Law360. (Aug. 1, 2016). Web.

Steven Sellers, “Execs' Prison Terms Spark Legal, Food Industry Debate.” BNA. (July 15, 2016). Web.


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“The Health Law Firm" is a registered fictitious business name of George F. Indest III, P.A. - The Health Law Firm, a Florida professional service corporation, since 1999. Copyright © 2016 The Health Law Firm. All rights reserved.
8/18/2016

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