Corporate Accountability Food Safety Felony Conviction

Corporate Executive Liability Food Safety—Felony Conviction

Peanut Corporation of America Background

The former owner of Peanut Corporation of America Peanut Corp.) Stewart Parnell was convicted on September 19, 2014 of conspiracy and other charges in connection with a deadly salmonella outbreak that occurred in 2008-2009. According to the Centers for Disease Control and Prevention, nine people died and over 700 others became ill in 2008-09 after eating peanut butter or other products prepared at the company’s plant in Georgia. Mr. Parnell, was found guilty on several counts, including wire fraud and obstruction of justice. The indictment was centered on a conspiracy to conceal that several of Peanut Corp.’s products were contaminated with salmonella. Others involved and convicted included the brother of Stewart Parnell, Michael Parnell, a food broker who worked on behalf of Peanut Corp. and the quality assurance manager, Mary Wilkerson, for obstruction of justice. Two other former Peanut Corp. employees has previously pled guilty to multiple charges.

Prosecutors alleged that Peanut Corp. not only defrauded customers but also defrauded several national food companies by failing to inform them about the presence of food-borne pathogens in laboratory tests, including salmonella. According to prosecutors, in some instances, despite these results, Peanut Corp. officials totally falsified lab results, maintaining peanut products were safe for consumption. Further, at times, the Peanut Corp. failed to even perform testing.

Corporate Liability Significance

Although for years, corporate executives have been charged with misdemeanor offenses under the strict criminal liability theory known as the Park doctrine, this case is distinguishable. The Peanut Corp. case represents a felony prosecution under the Federal Food, Drug and Cosmetic Act. The Peanut Corp. prosecution serves as a wake up call to the regulated food safety industry.

Outcome and Sentencing

Peanut Corp. filed for Chapter 7 bankruptcy protection weeks after the outbreak began. The felony convictions mean the possibility of a extensive prison sentence and fines.

Is Your FDA Regulated Product a Drug, Device or Combination?

Prevor v. United States Food and Drug Administration

Primary Mode of Action Determination is Critical in Combination Product

Introduction: At times, the United States Food and Drug Administration struggles with proper product classification. The case of Prevor v. Food and Drug Administration , D.D.C., No. 1:13-cv-01177 (September 9, 2014) provides a prime example. The major complex issue is whether the product should be classified as a drug, medical device or combination.

About the Product: The form of Diphoterine® Skin Wash (DSW) is a liquid substance in a canister propelled by pressurized gas. Intent is critical in the determination of product classification.

Background:  The drug, device and combination product classification issues stem back to 2009. Originally, back in 2009, FDA’s Office of Combination Products classified Prevor’s skin wash product, DSW as a drug primary mode of action rather than as a device as a primary mode of action. See 21 C.F.R. § 3.2(m).  FDA found the product had two primary intended purposes using the reasoning “to wash the chemical off the skin and neutralize the chemical that is on the skin.”

Prevor I: In 2012, the District Court found the FDA’s action classifying the DSW product as a drug primary mode rather than a device as a primary mode was both arbitrary and capricious.  The District Court vacated the FDA’s decision to classify  DSW as a drug-device combination product with a “drug” primary mode of action.  Yet, Prevor, a device maker,  has vigorously argued that the product is a device and not a drug. Alternatively, if deemed  a combination product, the primary mode of action according to Prevor would be a device. Prevor v. Food and Drug Administration (Prevor I ), 895 F.Supp.2d 90 (D.D.C.2012)

Prevor II: Fast forward to 2014 and this time, the District Court for the District of Columbia again vacated FDA’s decision to designate Prevor’s DSW as a drug-device combination product with a “drug” primary mode of action. Ultimately FDA reached the same conclusion, yet found only one primary purpose: “to help prevent and minimize accidental chemical burn injuries.” The Court clarified that “as the record now stands, the Court cannot affirm FDA’s classification decision because it was based on an erroneous and unreasonable interpretation of the law.” . The Court rejected Prevor’s argument to classify the product as a medical device and or a combination product with a medical device as the primary mode. Yet, the District Court found that FDA action arbitrary and capricious.

Court Leaves Door Open:   FDA must consider the issue yet again. In essence, the  Court left the door open for FDA to reconsider the issues again; that is, the court stated that the FDA “could find that DSW should be classified as a drug-device combination product with a drug mode of action if it also adopts a plausible construction of the relevant statutory language.”  Chemical action and intent remain critical as the court set forth that classification is dependent on whether its chemical action will prevent and minimize chemical burns. Therefore, the court “left open” and remanded the designation decision to the FDA.

Next Steps: There is no definite conclusion nor is there finality. FDA will need to reconsider the issue and provide a basis in accordance with what the District Court stated about a “plausible construction of the statutory language”. No doubt the legal saga will continue.