March 14, 2011
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A special report
The return of the responsible corporate officer doctrine
The FDA increasingly uses it to attribute responsibility to corporate officers, even
without evidence they were aware of the problematic conduct.
By James S. Cohen and
Michael W. Peregrine
H
ealth lawyers should note the
aggressive re-emergence of a decadesold strict liability theory that targets
corporate officers and other individuals for
corporate noncompliance. The responsible
corporate officer doctrine (RCOD) is a U.S.
Supreme-Court based theory increasingly
used by the Food and Drug Administration
(FDA) and other federal agencies to attribute
responsibility to corporate officers for public
welfare-based crimes, without any evidence
that they may have been aware of, or
participated in, the underlying problematic
conduct.
The renewed application of the
RCOD reflects the interest of the Obama
administration in holding individuals
accountable for allegedly illegal conduct
when the facts and the law allow. Use of
RCOD theories — usually applied in the
context of “public welfare”-type laws —
has been prevalent of late in the health
care sector. For example, RCOD has been
used in several high-profile prosecutions
involving officers of medical device and
pharmaceutical companies. What is
particularly noteworthy is that FDA officials
have recently (and publicly) acknowledged
their interest in its application.
The Supreme Court has ruled that
a corporate officer may be convicted
of a misdemeanor under public welfare
laws such as the Federal Food, Drug, and
Cosmetic Act (FDCA) if the officer stood in
some form of “responsible relationship” to
a specific violation of the law, such that the
officer’s failure to exercise proper oversight
and supervision resulted in the underlying
noncompliance. By this interpretation,
the Supreme Court dispenses with the
conventional requirement of knowledge
or conduct-awareness of wrongdoing
and focuses on whether the officer had
the power to prevent the wrongdoing but
failed to do so. As applied, RCOD is a severe
and highly controversial doctrine. The
government’s perspective is that attributing
responsibility to those at the highest
corporate levels will have a significant
deterrent effect and in so doing increase
corporate compliance with the FDCA and
similar public welfare laws.
The theory behind the use of the RCOD
in FDA cases was set forth in U.S. v. Park,
421 U.S. 658 (1975), in which the Supreme
Court ruled that individuals who assume
positions of authority in businesses that
affect the public health are held to a strict
and rigorous standard of accountability
under the FDCA. Despite the historically
sporadic use of the Park doctrine by the
FDA, the current FDA leadership has shown
strong interest in reviving its use as part
of an aggressive and visible enforcement
strategy that focuses on “corporate
the national law journal
accountability.” This enforcement approach
was succinctly articulated by FDA
Commissioner Dr. Margaret Hamburg, early
in her tenure, when she advised members
of the food and drug bar and others that
“a strong FDA” is one that “enforces the
law” by being “vigilant” in its oversight,
“strategic” in its use of penalties, “quick”
to act and “visible” in publicizing its
enforcement actions. Food and Drug Law
Institute Speech, Aug. 6, 2009.
The agency’s aggressive approach has
repeatedly been reinforced by senior FDA
enforcement officials, such as Deborah
Autor, the director of the Office of
Compliance, Center for Drug Evaluation
and Research (“swift, aggressive action”
with focus on corporate accountability),
and Eric Blumberg, the FDA’s deputy chief
counsel for enforcement, who has warned
that industry should expect a Park-based
prosecution sometime this year. See Food
and Drug Law Institute Enforcement and
Litigation Conference (October 2009);
Food and Drug Law Institute Annual
Meeting (April 22, 2010). Blumberg has
long advocated a need for stronger, more
effective FDA enforcement. Since the
1980s, however, the FDA has had a difficult
time securing strict liability misdemeanor
prosecutions, with federal prosecutors facing
limited resources and focusing instead on
felony prosecutions.
Although it remains to be seen how
effective the FDA will be in pursuing
an aggressive Park agenda, one recent
development suggests that the FDA intends
to continue to pursue its RCOD strategy. In
response to a congressional inquiry from
Sen. Charles Grassley (R-Iowa) about the
agency’s Office of Criminal Investigations,
the FDA, in early February, amended its
Regulatory Procedures Manual (RPM) on
Inspections, Compliance, Enforcement
and Criminal Investigations to include
strict liability misdemeanor enforcement
“criteria” in a section entitled “Special
Procedures and Considerations for Park
Doctrine Prosecutions.” The RPM provides
direction to the FDA’s compliance and
enforcement officials, and is available to the
public as nonbinding “guidance.” Among
other things, the RPM says that, “[w]
hen considering whether to recommend
a misdemeanor prosecution against a
corporate official, consider the individual’s
position in the company and relationship
to the violation, and whether the official
March 14, 2011
had the authority to correct or prevent
the violation. Knowledge of and actual
participation in the violation are not a
prerequisite to a misdemeanor prosecution
but are factors that may be relevant
when deciding whether to recommend
charging a misdemeanor violation.”
RPM, § 6-5-3 (2011).
Although the publication of this
and other criteria are useful for defense
attorneys and for industry executives,
the criteria essentially repeat long-known
factors that a prosecutor considers for
potential misdemeanor prosecutions.
Nevertheless, as part of the overall agency
enforcement posture (swift, aggressive
action, corporate accountability), the
publication of these criteria is significant.
Based on recent FDA enforcement activity
and well-publicized product safety events,
a Park prosecution, were it to proceed,
could be against executives in the drug,
device and/or food industry. Furthermore,
continued congressional pressure on the
FDA to investigate and take action on
drug and food-product safety events may
increase the likelihood of the FDA’s pursuit
of a Park prosecution.
Of more interest and concern for
health lawyers are the recent government
efforts in extending the effect of FDCA
strict liability misdemeanor prosecutions
through the creative use of “debarment”
and “exclusion” authorities, as well as
prosecutorial efforts to use underlying
company “fraudulent activity” in the
post-plea, sentencing phase for RCOD
misdemeanors. These developments
suggests a crucial shift in the government’s
strategic use of its enforcement arsenal, and
serve as a cautionary tale of how the FDA
and the Department of Justice are using
strict liability prosecutions to essentially
“felonize” strict liability responsibility and
to enhance the scope of other statutory
penalties (debarment and exclusion).
The challenges associated with RCOD risk
are made worse by the lack of any clearly
identified guidelines from which officers
and directors may appropriately frame their
individual conduct. The Supreme Court
has recognized an “impossibility defense”
of sorts to RCOD liability, available when
the defendant introduces evidence that he
or she had exercised “extraordinary care”
yet was unable to prevent the underlying
FDCA (or other) violations. Unfortunately
for officers and directors, the availability of
this defense is frustratingly elusive. Neither
the Supreme Court nor other, lower, courts
ruling on RCOD prosecutions have usefully
defined the concepts of “extraordinary care”
or “the utmost care.” In the absence of such
definitions, corporate officers and directors
may well be advised to focus their energy
on the adoption of enhancements to the
corporate compliance program aimed at
making it “state of the art.”
Yet there is no certainty that such
enhancements will serve as a successful
defense to RCOD allegations. In addition,
the failure to adopt such enhancements
cannot fairly be perceived as proof of less
than extraordinary care (or anything else,
for that matter). Nevertheless, the more that
officers and directors are informed about
RCOD risks, and exercise their Caremarkstyle compliance oversight obligations (In
re Caremark Int’l Inc. Derivative Litigation,
698 A.2d 959 (New Castle Co., Del., Ch.
1996)), the more likely they are to support
measures to improve the effectiveness of
the corporate compliance program — and,
it is hoped, to reduce RCOD risk.
James S. Cohen is a Washington partner and
head of the FDA practice at McDermott Will &
Emery. He represents clients in all aspects of FDA
product regulation and specializes in the defense
of compliance and enforcement actions. Michael
W. Peregrine is a partner in the firm’s Chicago
office. He represents organizations in connection
with governance, corporate-structure, executivecompensation, tax and change-in-control matters.
The authors can be reached, respectively, at
[email protected] and [email protected].
Reprinted with permission from the March 14, 2011 edition of THE
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