CASE ANALYSIS: United States v.

Park

MGMT520 - Legal Political and Ethical Dimensions of Business

 United States v. Park

United States Supreme Court 421 U.S. 658 (1975)

Facts

Acme Markets, Inc., WAs a national food retail chain headquartered in Philadelphia,

Pennsylvania. The current president of Acme, John R. Park, who had employed 36,000 people

and had operations of 16 warehouses. In 1970, The Food and Drug Administration (FDA)

provided a letter to Parks following the first inspection of Acme’s warehouse where they found

rodent entryways, rodent nesting, rodent pellets, and rodent-gnawed holes among bales of flower

in the warehouse. In the following year of 1971 in December, and January of 1972 the same

persistent conditions were found to be similar. In the same month the FDA sent another letter

stating that the rodent infestation was of a major concern to the public. As the CEO, Parks is

responsible to insure process are in place to address the issues and when notified through the

follow up inspections that the rodent infestation is still present and a health risk, he has the

responsibility to his company and customer to follow up on inspection findings, implement

process improvement and ensure standards are being met. In the month of March 1972, another

FDA inspection with some improvement but the presence of a rodent infestation was still

transparent. The U.S. District Court Decision was that Acme was found and pleaded guilty under

the Federal Food, Drug, and Cosmetic Act of the FDA. Mr. Park was fined $500. The U.S

Circuit Court of Appeals decision was based on the Court’s decision on United States v.

Dotterweich, 320 U.S. 277, on how the statutory provisions under which the respondent had been
tried to dispense with the element of awareness of some wrongdoing. The court had not

construed them as dispensing with the element of wrongful action. The Court said "might well

have left the jury with the erroneous impression that [respondent] could be found guilty in the

absence of 'wrongful action' on his part,” The court also held that the admission in evidence of

the 1970 FDA warning to respondent was reversible error. Because of the reversible error the

U.S Circuit Court of Appeals reversed the Mr. Parks conviction; however, the government

appealed.

Procedure

The defendant in this case is a CEO of a national food-chain operated by Acme Markets

is being charge for violations Federal Food, Drug and Cosmetic Act (FDA regulations) by

keeping food stored in a rodent infested warehouse. As CEO, Parks has the ability to prevent the

issue or the opportunity to correct the problem after first notification. The trial court found Parks

guilty and the court of appeals reversed this decision, stating that the convictions was reversed on

appellate review because the court felt that the prosecution needed to show affirmative

wrongdoing to sustain a charge of a strict liability offense. The case was then appealed to the

U.S. Supreme Court where on June 9, 1997 they reversed the overturn and issued a 6-3 verdict

that Parks was in violation of the Federal Food, Drug and Cosmetic Act in relation to food purity

on five accounts.
 Issue

A corporate officer can be held criminally liable when his subordinates had been ordered

to remedy any situation, because of the corporate officers knowledge and association of the

sanitary problems and how they had put their trust with his subordinates

Applicable law

A CEO is liable as the responsible corporate officer for violations of law committed by

the corporation, which he either had the ability to prevent before the fact, or the opportunity to

promptly correct after the fact.

Top-level corporate executives, as a group, have tremendous power through their control

over national corporations. When these corporations earn record-setting profits, top-level

executives rush forward to take credit for their corporations’ successes. These same executives,

however, do not rush forward to take responsibility for their corporations’ criminal violations. In

fact, very few corporate officials are held liable by law enforcement for the actions of their

companies. This lack of liability is believed to occur because of the delegation of responsibility

to lower tiers of management and reliance on unwritten orders, which frequently allow top-level

management to protect itself from liability for the results of its policy decisions. (Kubasek,

Brennan, & Browne, 156)

Traditionally, imposing liability on executives has been difficult because the criminal law

usually requires an unlawful act to be accompanied by an unlawful intent. In cases of violations

of federal regulations, corporate executives often argue that they are not the ones directly

responsible for filing the documents or conducting the studies. They certainly never explicitly

ordered that such regulations be disregarded. In response to recent high-profile corporate

scandals, Congress and the Securities and Exchange Commission have created more stringent

certification requirements for CEOs, CFOs, and other corporate officials. For example, the

Sarbanes-Oxley Act of 2002 holds high-ranking corporate officials responsible for the validity

and accuracy of their companies’ financial statements. Failure to comply with the financial

statement certification or certification of false information is a corporate fraud under the act,

punishable with fines that range from $1 million to $5 million and prison sentences from 10 to

20 years. (Kubasek, Brennan, & Browne, 156)

Holding

The United States Supreme Court’s decision was that [the rebuttal] evidence was not

offered to show that the respondent had a propensity to commit criminal acts, and the the crime

charged has been committed. The reason why was because of how an officer or respondent had a

notice on a problem but cannot rely on a “system of delegations on their subordinates to prevent

or correct unsanitary conditions at Acme’s Warehouses,” also including how Mr. Park should

have been aware of the complications before the FDA investigation in the Baltimore location that

breached violations on sanitary standards were discovered. The evidence however was indeed

relevant since it served to contradict and falsify Park’s defense that he was justified because of

how he relied upon subordinates to handle sanitary operations. The case was reversed.

Reasoning

The standard for conviction articulated by the majority is that of negligence that

defendant had a duty to maintain the sanitary quality of the food warehoused by the corporation
and that, in light of evidence that the food was in unsanitary conditions, the duty was breached

and defendant was criminally responsible. However, the instructions to the jury were much

broader and permitted a verdict of guilty upon a finding that defendant was responsible for the

condition of the food insomuch as he was the CEO of the corporation, while cautioning that that

fact alone did not require a finding of guilt. In the end, the instructions failed to counsel jurors

with respect to negligence, but instead left it to them to determine under what rationale defendant

might be responsible. The theory of liability announced by the majority in this case is known as

the responsible corporate officer doctrine. Under the doctrine, there must be evidence that

defendant had, by virtue of his position in the corporation, the responsibility and authority to

prevent a corporate violation of law, or to promptly correct a violation.

References

Kubasek, N. K., Brennan, B. A., & Browne, M. N. (2017). The legal environment of business: A

critical thinking approach. Boston: Pearson.

FindLaw's United States Supreme Court case and opinions. (n.d.). Retrieved from

https://caselaw.findlaw.com/us-supreme-court/421/658.html