THE BOSS IS ONLY GUILTY IF HE’S REALLY IN CHARGE
US v. Park
(421 U.S. 65, JUNE 1975

Briefed by: Anna Longwell, Esq., 1998

Summary

The US Supreme Court reversed the decision of an Appeals Court and upheld the decision of a District Court in finding criminal liability for a corporation president whose company had pleaded guilty to producing and selling adulterated food.

History

Acme Markets was a large national food chain (36,000 employees, 874 retail outlets, and 16 warehouses), and John R. Park was the president. During 1971 FDA inspectors observed instances of rodent contamination in the Acme Baltimore warehouse. FDA sent a letter to Mr. Park. While a 1972 re-inspection found some improvement, there was continuing evidence of infestation. FDA filed charges against both the company and Mr. Park in Federal District Court, alleging violation of the adulteration provisions of the FDC Act. Acme pleaded guilty to all counts. Mr. Park pleaded not guilty, by reason of no personal involvement in the violative activities. FDA brought evidence of the president’s job description as written in the corporate bylaws. Mr. Park testified that while all Acme’s employees were under his general direction, different phases of operation were assigned to individuals, who in turn have staff under them. He assigned Sanitation responsibility to dependable subordinates. Upon receipt of the second letter, Park had conferred with his VP of legal affairs, who had advised him that his Baltimore division VP “was investigating the situation immediately” and would be taking corrective action and would be preparing a reply to FDA. . FDA also brought into evidence a 1970 letter, sent by FDA to Mr. Park, advising him of unsanitary conditions in his Philadelphia warehouse (defense objected to admitting the earlier letter). Upon cross-examination, Mr. Park admitted receiving the earlier letter as well and admitted that the Baltimore problem indicated a systemic defect in the sanitation handling system. He also admitted that as Acme’s CEO, he was responsible for “any result which occurs in our company”. The judge’s instructions to the jury included a description of a “responsible relationship”, and told the jury that if they found Mr. Park to have a responsible relationship to the warehouse condition, they must find him guilty. Jury did find him guilty of misdemeanor violations of the FDCA. Park appealed. On appeal, the decision was reversed for two reasons. Appeals Court thought that the judge should instruct the jury that they had to find evidence of wrongful action, even if such action be negligence, and they thought that introducing the 1970 letter was unnecessarily prejudicial. The S. Ct. granted cert. because of differing interpretations of the standard for liability of corporate officers under FDCA. They wanted to set the matter straight.

Findings

  • The FDC Act dispenses with the conventional requirement for criminal conduct-awareness of some wrongdoing. This is because the activities regulated by the Act “touch phases of the lives and health of people which, in the circumstances of modern industrialism, are largely beyond self-protection.” It puts the burden…”upon a person otherwise innocent but standing in a responsible relation to a public danger.”
  • Responsibility depends on the evidence submitted at the trial, and its submission to the jury under appropriate guidance.
  • Failure to exercise the authority and supervisory responsibility reposed in them by the business organization, resulting in a violation makes the person failing to exercise his/her authority liable for the violation.
  • The Act imposes a positive duty to “seek out and remedy violations” AND “a duty to implement measures that will ensure that violations will not occur”
  • If D is in fact powerless to prevent the violation, there is no criminal liability. Since this is a criminal case, the FDA must prove, beyond a reasonable doubt, Ds power to prevent the situation.
  • The Appeals Court was not correct concluding the District Court had to instruct the jury to find a ‘wrongful action”. What the jury must find is that the D had, by reason of his position in the company, responsibility and authority to prevent or promptly correct the violation, and that he failed to do so.
  • Guilt cannot be predicated on corporate position alone. The S. Ct. did not find that the District judge’s instruction could have been interpreted to mean this. They found the instruction not as clear as one they would have given (!), but OK.
  • The 1970 letter was admissible as evidence that D was on notice that his system of delegation was not reliable to prevent violations.

Results

Appeals reversed. Park’s conviction upheld. (3/6-but the dissenters just didn’t like the judge’s instruction; they didn’t disagree with the law as explained by the majority.)

Conclusions

If you are CEO of a large corporation in trouble with FDA, your best defense is that you were not able to remedy the situation complained of. It is possible to do this (say you were defrauded by staff-happens!), but not easy. This case also shows how hard it is to prepare a CEO to testify.