In this episode, host Jonathan Havens, co-chair of Saul Ewing Arnstein & Lehr’s Food, Beverage and Agribusiness (FBA) Practice, speaks with colleague Justin Danilewitz, a litigator in the Firm’s White Collar and Government Enforcement Practice and a former federal prosecutor, about the Responsible Corporate Officer (RCO) doctrine, also known as the Park doctrine, and how it impacts the FBA industry. Justin addresses how under the federal Food, Drug and Cosmetic Act (FDCA), the RCO doctrine can result in strict criminal liability for an individual who stands in a position of responsibility with respect to lower-level employees as a result of the conduct of those employees, even without knowledge of that conduct. Although strict liability for a criminal offense – without knowing participation in the conduct – is rare, the U.S. Supreme Court has recognized this exceptional approach in the public welfare context, since public health and safety is paramount in the FBA industry. Jonathan and Justin discuss the practical applications of the doctrine, how the U.S. Food and Drug Administration (FDA) partners with the Department of Justice (DOJ) on enforcement of the RCO doctrine, how federal prosecutors tend to look for evidence, and how companies can implement rigorous policies, procedures and training programs to help maintain compliance.
Episode: “The Responsible Corporate Officer Doctrine and the Food, Beverage and Agribusiness Industry — What You Need to Know”
Jonathan Havens and Justin Danilewitz January 2021
Jonathan Havens: Hi, everyone. This is Jonathan Havens, co-chair of Saul Ewing Arnstein & Lehr's Food, Beverage and Agribusiness Practice. We're thrilled that you've joined us for another episode of our podcast, "Don't Miss a Beet." So we are very honored to be joined today by my partner and friend, Justin Danilewitz, who's a practitioner out of our Philadelphia office. Justin is a litigator who practices in the area of white collar, but for this conversation, most notably, Justin is a former Assistant U.S. Attorney from the U.S. Department of Justice. And the reason that that is important is what we're going to be talking about today is a concept and a topic that those of us who have been practicing in the food, beverage and agribusiness space or those of our audience members who have been a member of this industry for even a bit of time, probably have heard rumblings about something called the Responsible Corporate Officer doctrine. You might even remember, maybe not so lovingly from your law school days talking about the Park doctrine. So essentially what we're going to be talking about today is corporate officers and their responsibility for the goings-on of the organizations that they lead or that they oversee. It can be a scary topic and we completely acknowledge that, but I assure you that there is no better voice on this topic ,than Justin, and it's going to be a great conversation. So with that, Justin, I want to welcome you to the podcast. Thanks so much for joining us. And if you want to introduce yourself a bit and then just tee up the conversation, that would be great.
Justin Danilewitz: Perfect Jonathan. And thank you so much for having me on the podcast. It's a real pleasure and privilege to join you today. I don't think there's much more to say by way of background about myself. I appreciate the intro. I'm happy to just dive into the topic today, which as you mentioned is the Responsible Corporate Officer doctrine, also known as the Park doctrine and that comes from a case that is now nearly half a century old. United States v. Park was a U.S. Supreme court case from 1975 and it involved criminal charges against the president of Acme, a well-known shopping retail chain that had a warehouse in Baltimore. I feel like this is so appropriate because I'm in the Philadelphia area today and you're in Baltimore, so it's kind of our two worlds coming together. But the Acme chain that had its headquarters in the Philadelphia area and Mr. Park was its president. He was charged under a provision of the federal Food, Drug and Cosmetic Act, section 331 and it's criminal provision 333, because there was a rodent infestation in the warehouse in Baltimore. And due to that infestation, the food that was in storage became in the words of the statute "adulterated," meaning contaminated. And so as a result of that the United States government charged Mr. Park with violations of the FDCA. As people will know from the podcast, what it held, following from an earlier Supreme Court case, is that an individual who stands in a position of responsibility with respect to lower level employees in an organization incurs responsibility and legal liability for the conduct of those other employees and that can include criminal liability, including misdemeanor criminal liability, with strict liability. And the meaning of that is, as folks will know who are lawyers, no fault liability. In other words, even without knowing of the underlying conduct that was going on, an executive of a company, in this particular space under the federal Food, Drug and Cosmetic Act in the statutes that I reference can be held strictly liable for the conduct of lower-level employees. That is highly unusual, I would say, in criminal law, particularly in federal criminal law. We see some other examples of it in local and state criminal law. We can talk about that a little bit later. But it does arise in this context where you have a general public welfare statute and the concern for the public welfare is so great that courts and interpreting the legislation of Congress have said we are going to hold you criminally liable for failing to prevent the conduct of other employees, even if you were completely unaware of that conduct taking place. And so what it does in effect, Jonathan, is it imposes an incredibly high responsibility and burden on corporate executives to ensure that this kind of conduct does not take place.
Jonathan Havens: That's great that you mentioned that at the tail of your introductory remarks. One of my questions relates to this, which might come as a surprise to our listeners, that a CEO who's not involved in the day-to-day operations of a warehouse -- this CEO of Acme, Park, probably had never seen this warehouse before. And so this thought of how can I be criminally responsible for something that I might not even know about? But you started to address this in your comments, so it's a two-part question: one -- is this unique to the food, drug and cosmetic space? And assuming it's not, do we see this kind of phenomenon elsewhere in the bar, so to speak? Can this type of liability attach elsewhere? And of course our audience are food, beverage and agribusiness folks so we want to keep it kind of tightly narrow, but is there any sort of precedent for this or any sort of application in other fields?
Justin Danilewitz: Yeah, absolutely. And let me first start off before getting to where we see it in other areas, to just note that in the podcast itself, the plot actually was a little bit thicker than the brief description I've given you. And in fact, Mr. Park's company had received a warning letter from the FDA and that was evidence introduced at trial. It was so called "404(b) evidence" that's under federal rule of evidence 404(b), where you can introduce evidence of uncharged conduct or other acts in order to demonstrate some permissible issue in the case. And in that instance, it was to prove that Mr. Park was on notice of the poor state of this warehouse in Baltimore. So he may not have visited, may not have known much about it, but he was in effect put on notice. And that's where I think things become really interesting because to say that he had no knowledge whatsoever would be a little bit of a stretch. And this is a topic that I think is so fascinating because we can talk a little bit later about the practical application of the doctrine and how prosecutors tend to look for evidence where in fact there is knowledge even though under the strict terms of the statute, they would be permitted under the Park case to proceed without that kind of knowledge. So that's just one small clarification I wanted to make. And we can talk about it later. To respond to your question directly of where do we see those kinds of strict criminal liability elsewhere? I think most significantly we see this on a daily basis in corporate criminal liability. The standard for liability for a corporate entity in the United States is pretty simple. It is: if you have an employee, any individual employee, who was acting within the scope of their employment, and engaged in conduct, at least in part for the benefit of their employer, and commits a crime while doing those things , the company itself is criminally liable. Now you can say that sounds incredibly unfair. The company might have undertaken enormous due diligence efforts and compliance programs in order to prevent that kind of conduct by an employee. But the strict liability aspect of this vicarious corporate criminal liability says too bad so sad the company is going to be on the hook for that. So I think that's probably the most prominent manifestation we have of it in the federal criminal system. In state and local law, you also see it an environmental context. You see it for example in a situation that I'm most familiar with in Pennsylvania, we have an environmental statute called the Solid Waste Management Act. It imposes strict liability for companies who engage in violations of that environmental statute. And so there again, I think you see a common theme between the environmental law and the federal Food, Drug and Cosmetic Act. They are statutes that sort of protect and regulate general welfare. And where you have issues that are of such great public health, public welfare concern, what the courts have said, and this comes from a case that preceded Park, is that, and I'm quoting: "In the interest of the larger good, it puts the burden of acting at hazard upon a person otherwise innocent, but standing in responsible relation to a public danger." And that's sort of the genesis of this concept of the Responsible Corporate Officer doctrine and that the strict liability that flows from that.
Jonathan Havens: You know one thing I want to go back to for a moment, and call it a practice point or call it a nugget that you can take away, but the things we always talk to clients about when they receive a warning letter from FDA are -- one -- open your mail, the simplest of things. And it sounds simple, but during COVID, we know a lot of people aren't in their physical offices. And one of the things we've talked to clients about is making sure that mail is either forwarded or you have a skeletal staff or someone who's reading your mail, but your comments really underlie even more so than we were telling clients previously, the importance of reading those warning letters and responding to them and furthermore having a process or a procedure in place so that those issues are being communicated up the chain appropriately. Right? You don't want a situation where someone is reading a warning letter and no offense to anybody, but a low-level clerk at your company is making a decision whether or not it's a serious issue. If you have allegations of insanitary conditions at a warehouse and you're a food company, or you have allegations that there's cross-contamination between your processing lines and you could have an allergen exposure issue, things like that, you want to make sure that those are reported up the chain, perhaps not to the CEO. With some of these larger companies, that sounds a little bit absurd, but you want to be able to say, look, if the government's going to be able to put on this evidence and say that the company was caught on notice, right under that 404(b) rule that you talked about, it's important that we can't just bury this letter and say that it wasn't important and we didn't receive it. FDA tracks these warning letters. They send a lot of this stuff either via email with read-receipt and certified mail or certified mail alone. The bottom line is what you were saying about the ability of the government to put on evidence of what was the language you used, uncharged conduct, which is the whole notion of an FDA warning letter to begin with. It's an allegation from FDA that you could have violated a law or regulation, not proof necessarily. So in any event, I just wanted to kind of sidebar that and say, look, Justin's information here on the Park doctrine and Responsible Corporate Officer doctrine that makes it all the more important that you are actually routing these warning letters and allegations of misconduct from regulatory agencies, whether they're FDA or otherwise appropriately.
Justin Danilewitz: Just got to say you're absolutely right. This is an area of heightened concern so all the kind of good housekeeping that companies ordinarily want to ensure they have is so much more important in this kind of context where you're dealing with the strict liability statute to begin with and bear in mind that the government is sending you that warning letter not only most obviously because they want you to remedy the issue, but there's also a secondary purpose and that is to make proof of intent much easier down the road. If it comes to an enforcement action, what better evidence do you want to have to present to a jury then here's the date of the letter that was sent certified mail to the company and signed for and received. Why was nothing done?
Jonathan Havens: Sure. Yeah, that makes a lot of sense. I mean, it's keep it simple, right? If you don't open your mail and don't respond to your mail that can have grave consequences down the road. And not to say that just responding to a warning letter is going to be enough, but it's a good first step and making sure that it is routed appropriately. We've probably sufficiently scared some members of our audience. Let's put this into context, right? We talked about how this presents in the FDA realm. And we've talked about how it presents in the non-FDA realm, but how common is this? How common is it for DOJ to bring these charges? And there's this interesting phenomenon where you'll have DOJ and FDA kind of co-chairing these actions, right? DOJ on the prosecutorial side and FDA on the merits of the statutory issues. But how common is it that we're going to see DOJ bringing these RCO cases? And then also, depending on that, what do companies do about this, what are some practice pointers? We've talked about some of them, but if you could offer some others that would be fantastic.
Justin Danilewitz: Absolutely. With respect to how common is this? It's exceedingly common. These prosecutions happen frequently. I think the District of Massachusetts, as one prominent example I can think of, that's had at least a couple over the last couple of years or so. Northern District of Texas had one. They don't always arise in a food context per se, under the federal Food, Drug and Cosmetic Act, obviously as you know and your listeners will know very well, it also regulates medical devices and other things, so there's been some interesting cases involving med devices. In addition, there was a very prominent case where there was a cert petition, petition of certiorari, to the U.S. Supreme Court called DeCoster involving adulteration of eggs and a salmonella problem that was a pretty big issue across the country some time ago. So these cases happen frequently. What I would say though, as a bit of reassurance, is that very, very often what you find is that prosecutors are not pushing the envelope to the point of a true lack of knowledge, complete lack of intent kind of case, which in its strictest form, the Park doctrine would allow. More commonly, what you see is there is evidence of some kind of knowledge and intent. And so if you find a felony charge along with a misdemeanor charge, the misdemeanor charge under the FDCA is the one that does not require intent of strict liability. The felony counterpart comes into play where there's a repeated offense or there's an intent to defraud or mislead that can arise in a felony charge. And so you frequently see that the statute is charged with both the felony and misdemeanor counterparts. Even if a jury acquits on the felony and convicts on the misdemeanor, what you have is obviously a conviction on a misdemeanor, but what people may not be seeing is additional evidence of knowing conduct, intentional conduct. And so in that DeCoster case that I mentioned, the petition for certiorari sort of wants to portray the two defendants in that case to family members as innocent parties without any knowledge of the salmonella outbreak. The Solicitor General's office in response in their brief and opposition says not so fast. There was actually some evidence of their awareness of the problem. So that sort of harshness of the doctrine in its black letter law kind of sense is blunted a little bit by prosecutorial discretion. And so what we hope for is fair-minded prosecutors, who are going to be diligent about exercising their power and authority in an appropriate way. And where that doesn't happen, then there's room for persuasive advocacy by counsel to go in and meet with the government, prosecutors, FDA lawyers, the Consumer Protection branch in main Justice in D.C., which is part of the Department of Justice, brings these cases as well, and to sit down with them and to make that argument for the kinds of compliance programs that a company hopefully has in place. And so that's really the message at the end of the day is this can be harsh. It can be a sharp instrument, but we don't need to throw up our hands and give up. There's a lot that can be done preemptively. Companies should be super cautious about implementing rigorous compliance policies and procedures, and that'll have a benefit for the corporation of course, most obviously. It'll also benefit employees, individual employees who are very much in the spotlight as a result of that so-called Yates memo by former Deputy Attorney General Sally Yates, which really prioritized individual criminal prosecutions by DOJ. But I think that you can still sleep well at night if you've made every effort to train employees well, to adopt good compliance policies and procedures, if companies have hired you, Jonathan, to come in and implement those kinds of compliance programs. It doesn't guarantee that there will never be an inquiry, but it'll certainly make for much smoother sledding if there is one.
Jonathan Havens: Right. It's a lot easier of a conversation when the government says, show me your procedure on recalls and you have a document to show them, even if it's not fully baked. It's a better conversation starter to say, "Oh, here's our policy and it was updated last January," then "we don't have that policy." One observation with my question about how common is this, and you mentioned how much FDA regulates, a statistic that I like to throw out there, it's probably a self-serving statistic that only FDA lawyers will tell you, is 25 cents out of every dollar spent in the United States is spent on a product that is regulated by the FDA, which when you think about it, what does the FDA regulate? Foods, beverages, dietary supplements, drugs, medical devices, biologics. These are, some of them, are bigger ticket items to begin with, but think about food that we're eating and beverages we're drinking and medical products that we're using, and so it's not surprising that given the policy aims behind the responsible corporate doctrine in protecting consumers from unscrupulous companies, who are asleep at the wheel, so to speak, to put it bluntly, it makes sense. Obviously the repercussions can be great, but as Justin pointed out, there are a number of things that companies can do both pre and post obviously pre is preferred. But if companies only came to us as lawyers pre, I think things would be a little bit duller for everybody, but the lesson is, there are things that you can do wherever you are in the lifecycle of your company to help mitigate risk and mitigate exposures. So, Justin, I promised you that the 20 minutes would go fast. I think you would probably agree that it went very fast. We could talk about this all day. I'm not sure our audience members would find it as interesting as Justin and I talking about it all day, but I know you and I would have a nerd-fest about it at least, but this was tremendously helpful, very interesting, breaking it down into the essential components for our audience members. And, we thank you for joining us. And again, as we always say, we love your feedback. If there's a topic you haven't heard us cover yet, you want to hear us cover, please send us that feedback. Let us know what you liked, what you didn't like, what we could do better, or just that you're out there and you're listening and giving us the thumbs up. We appreciate it. So, Justin, really want to say thank you again, always a pleasure to spend time with you. I always learn something and today was no exception so thank you so much.
Justin Danilewitz: Thank you, Jonathan. It was a lot of fun. I really appreciate the opportunity.
Jonathan Havens: Thanks, everyone. Please be sure to join us next time.