by Jason Driscoll
This post is the first part of a multi-part post by the author.

Over the last decade, the Food and Drug Administration and the Department of Justice have revived the use of the Responsible Corporate Officer (“RCO”) doctrine in an attempt to increase compliance with the Food, Drug, and Cosmetic Act (“FDCA”). Two recent cases—United States v. Purdue Frederick Co.[1] and United States v. Quality Egg, LLC[2]—illustrate the regulators’ new approach: impose strict criminal liability on individual corporate officers and seek enhanced sanctions in the name of effective deterrence. However, while the Supreme Court has upheld criminal fines premised on the RCO doctrine,[3] the Court has not yet opined on the legality of more serious penalties such as long-term debarment or imprisonment. The Court now has that opportunity. In DeCoster v. United States,[4] the Quality Egg defendants (Jack and Peter DeCoster) have filed cert. petitions asking the Court to review the lawfulness of their prison sentences and the RCO doctrine altogether. For anyone concerned about the expanding scope of corporate officer liability, this case could mark a turning point.

First, some background on the RCO doctrine and the FDCA. Under the RCO doctrine, a corporate agent may be held criminally liable for a violation despite having no “knowledge of, or personal participation in,” the underlying criminal act.[5] To impose liability, the government need only prove that the agent had “responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of, and that he failed to do so.”[6] Notably, there is no explicit RCO provision in the FDCA. However, the Act criminalizes both committing any of the prohibited acts or “the causing thereof.”[7] Because a corporate officer’s omissions can be construed as “causing” a violation, the Supreme Court has read RCO liability into the FDCA.[8] This reading of the Act is buttressed by the Court’s interpretation of the FDCA as a public welfare statute, which renders the statute exempt from the presumption against strict liability criminal sanctions. Thus, FDCA violations “depend on no mental element but consist only of forbidden acts or omissions,”[9] subjecting corporate officers to the risk of RCO liability.

In Purdue Frederick, three corporate executives[10] pleaded guilty to misdemeanor misbranding, in violation of 21 U.S.C. section 331(a) and section 333(a)(1), for their admitted failure to prevent Purdue’s fraudulent marketing of OxyContin. The plea agreements premised liability on the RCO doctrine. Each defendant was sentenced to 400 hours of community service, fined $5,000, and put on probation for three years. While section 333(a)(1) allows for a sentence of imprisonment up to one year, the defendants agreed to disgorge compensation totaling $34.5 million to avoid incarceration. However, because the Purdue executives were convicted of a crime relating to fraud, the Department of Health and Human Services imposed on the defendants a 12-year exclusion from federal health care programs under the Social Security Act.[11] Perhaps foreshadowing a possible outcome of the DeCoster appeal, the D.C. Circuit limited the penalty by finding the length of the exclusion to be arbitrary and capricious.[12]

While the executives in Purdue were afforded the opportunity to avoid incarceration, DOJ is no longer afraid to ask for sentences of imprisonment. The Quality Egg case is the best example. In Quality Egg, a CEO and COO of an Iowa egg production company pleaded guilty as responsible corporate officers to misdemeanor violations of sections 331(a) and 333(a)(1) of the FDCA.[13] The information alleged that Quality Egg distributed contaminated eggs, causing over 56,000 cases of salmonellosis. While neither defendant had knowledge of the underlying violations, the court imposed $100,000 fines and three-month prison sentences.[14] On appeal, the 8th Circuit affirmed the sentence and held that three months’ incarceration premised on the RCO doctrine was constitutional.[15] A petition for a writ of certiorari followed, inviting the Court to review the doctrine for the first time since 1975.

The DeCosters’ petition alleges that traditional jurisprudence does not allow for imprisonment absent proof of scienter or an affirmative wrongful act. It has long been understood that “crime [is]. . . generally constituted only from concurrence of an evil-meaning mind with an evil-doing hand.”[16] But as the 8th Circuit noted, the Supreme Court has never drawn such a line in the public welfare context. In fact, the Court has previously described FDCA offenses as “belong[ing] to a category of another character, with very different antecedents and origins.”[17] Despite the public welfare distinction, the DeCosters argue that the Supreme Court has never upheld a sentence of incarceration in the absence of both mens rea and actus reus, which is precisely what RCO liability imposes.

The petition also notes that DOJ’s recent enforcement trend “raises fresh questions about whether the Court’s long-criticized decisions in Dotterweich and Park should finally be reviewed and revised.”[18] If the Court entertains this question, then it could mean the end of the RCO doctrine altogether. To hold as much would require the Court to dust off its hickory broom. “For more than 70 years,” the Government’s brief notes, the Supreme Court “has construed the FDCA to impose criminally enforceable legal duties . . . on corporate officials.”[19] The Government is correct, and the Court’s RCO analysis has reverberated through almost a century of public welfare jurisprudence. And, while many remain skeptical of incarceration premised on strict liability theories, or even negligence for that matter, the DeCosters three-month prison sentence is hardly as severe as what courts can impose in other strict liability contexts.

For professionals concerned about the expanding scope of corporate officer liability, DeCoster v. United States has the potential to dramatically change FDCA enforcement and the RCO doctrine. A victory for the Government could inspire a bold strategy of seeking more misdemeanor sentences of imprisonment for individual corporate officers. If the DeCosters prevail, however, then the Government could lose what it deems a “valuable enforcement tool.”[20] Either way, this case is certainly one to watch.

Footnotes

[1] United States v. Purdue Frederick Co., 495 F. Supp. 2d 569 (W.D. Va. 2007).

[2] United States v. Quality Egg, LLC, 99 F. Supp. 3d 920 (N.D. Iowa 2015), aff’d sub nom. United States v. DeCoster, 828 F.3d 626 (8th Cir. 2016).

[3] See, e.g., United States v. Dotterweich, 320 U.S. 277 (1943); United States v. Park, 421 U.S. 658 (1975).

[4] United States v. DeCoster, 828 F.3d 626, 629 (8th Cir. 2016).

[5] United States v. Park, 421 U.S. 658, 670 (1975).

[6] Id. at 674.

[7] 21 U.S.C.A. § 331 (West) (“The following acts and the causing thereof are prohibited”) (emphasis added).

[8] See, e.g., United States v. Dotterweich, 320 U.S. 277 (1943); United States v. Park, 421 U.S. 658 (1975).

[9] See, e.g., Liparota v. United States, 471 U.S. 419, 432 (1985).

[10] Michael Friedman was the president and CEO of Purdue, Howard Udell was the executive vice president and chief legal officer, and Paul Goldenheim was the chief scientific officer.

[11] 42 U.S.C.A. § 1320a–7(b)(1)(A).

[12] Friedman v. Sebelius, 686 F.3d 813 (D.C. Cir. 2012).

[13] United States v. DeCoster, 828 F.3d 626, 629 (8th Cir. 2016). Jack DeCoster owned Quality Egg, LLC and Jack’s son Peter served as the company’s Chief Operating Officer.

[14] Id.

[15] Imposing prison time in RCO liability cases is not unprecedented. The DOJ has recently secured incarceration in United States v. Huggins (nine months) and United States v. Hermelin (one month) for similar violations of FDCA section 333(a)(1).

[16] Morissette v. United States, 342 U.S. 246, 251–53 (1952).

[17] Id.

[18] Applicant’s Brief. DeCoster v. United States of America, 2017 WL 105831 (U.S., Jan. 10, 2017).

[19] Government’s Brief. DeCoster v. United States of America, 2017 WL 1353292 (U.S., Apr. 12, 2017).

[20] Letter from Margaret Hamburg, FDA Comm’r, to the Honorable Charles E. Grassley, Ranking Member of the Senate Fin. Comm. 2 (Mar. 4, 2010) available at http://grassley.senate.gov/about/upload/FDA-3-4-10-Hamburg-letter-to-Grassley-re-GAO-report-on-OCI.pdf (last accessed Aug. 13, 2013).

Jason A. Driscoll is a J.D. Candidate at New York University School of Law, Class of 2018 and a Student Fellow with the Program on Corporate Compliance and Enforcement.

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