U.S. Supreme Court denies DeCosters’ prison sentence appeals

By: Rox Laird on May 22nd, 2017

Two executives of an Iowa-based egg production company apparently will serve time in federal prison for their part in the 2010 salmonella outbreak that resulted in nearly 2,000 reported illnesses and the recall of a half-million eggs.

The U.S. Supreme Court on Monday denied appeals of their federal prison sentences by Austin (“Jack”) DeCoster, the owner of Quality Egg, and his son Peter, the company’s chief operating officer.

Both DeCosters were sentenced to three months in federal prison and ordered to pay a $100,000 fine after they pleaded guilty in U.S. District Court in Sioux City to misdemeanor violations as “responsible corporate officers” under the federal Food, Drug & Cosmetic Act.

The DeCosters appealed their sentences to the U.S. Court of Appeals for the Eighth Circuit, arguing it would violate due process and be cruel and unusual to send them to prison.

While they acknowledged the company’s criminal violations for wrongdoing by employees, including falsifying inspection records, mislabeling expiration dates, and bribing a USDA inspector, the DeCosters argued that prison sentences were unconstitutional without evidence that they personally participated in the criminal violations or intended to violate the law.

A three-judge panel of the St. Louis-based Court of Appeals rejected those arguments. The panel (with one dissent) held that as responsible corporate officers the DeCosters were liable, not for the acts or omissions of other company employees, but rather for their own failure to act to prevent or remedy violations of the federal food-safety law.

On Monday the U.S. Supreme Court upheld the Eighth Circuit without comment.

Amicus curiae (friend of the court) briefs were filed with the Supreme Court in support of the DeCosters by the National Association of Criminal Defense Lawyers, the National Association of Manufacturers, and the Washington Legal Foundation.

(See our earlier posts for more background on the DeCosters appeal.)


Split Eighth Circuit panel affirms the DeCoster’s prison sentence

By: Rox Laird on July 7th, 2016

The U.S. Court of Appeals for the Eighth Circuit ruled Wednesday that corporate executives can be sentenced to prison when their companies violate federal food-safety laws.

A three-judge panel of the St. Louis-based Court of Appeals, by a 2-1 vote, rejected the appeal by Austin (“Jack”) DeCoster and his son, Peter, who argued they should not have been sentenced to serve prison terms.

The prospect of sending a company executive to prison for what arguably is beyond his or her control raised alarms among national business groups concerned that the DeCoster case could lead to increased risks for business executives in regulated industries. (See our earlier post for more background.)

The DeCosters pled guilty in U.S. District Court in Sioux City last year to violating the federal Food Drug & Cosmetic Act following a 2010 outbreak of food poisoning traced to their Iowa-based egg business. Jack and Peter each pled guilty to misdemeanor violations as “responsible corporate officers” under the food and drug act. Each was sentenced to serve three months in federal prison and ordered to pay a $100,000 fine.

The Eighth Circuit Wednesday rejected the DeCosters’ arguments that their prison sentences violated the Eighth Amendment to the U.S. Constitution, due process of law and were procedurally and substantively unreasonable.

The panel held that as responsible corporate officers the DeCosters were liable, not for the acts or omissions of other company employees, but rather for their own failure to act to prevent or remedy violations of the federal food-safety law.

“Neither of the DeCosters claim to have been ‘powerless’ to prevent Quality Egg from violating” the Food Drug & Cosmetic Act, Judge Diana Murphy wrote for herself and Judge Raymond Gruender. “We conclude that the record here shows that the DeCosters are liable for negligently failing to prevent the salmonella outbreak.”

The panel also rejected the DeCosters’ contention that their prison sentences were “grossly disproportional” to the crime under the Eighth Amendment. “The 2010 salmonella outbreak may have affected up to 56,000 victims,” Murphy wrote, “some of whom were hospitalized or suffered long term injuries. For one example, a child hospitalized in an intensive care unit for eight days was saved by antibiotics which damaged his teeth, causing them to be capped in stainless steel.”

Judge Arlen Beam issued a dissenting opinion in which he argued that the defendants should not be sentenced to prison “without establishing some measure of a guilty mind on the part of these two individuals, and none is established in this case.”

Beam wrote that the DeCoster egg-production facilities are “large, diverse, and labor-intensive agricultural operations requiring several levels and areas of management, as well as a substantial number of ‘hands-on’ production workers.”  The DeCosters were not individually culpable for the company’s actions that led to criminal violations, he said, and thus lacked the necessary “guilty mind” (mens rea) required by federal law.

In any case, the DeCosters are not likely going to federal prison anytime soon. Given the issues involved, and the fact that the panel was split, they likely will ask for a rehearing before the full 11-member Court of Appeals. Depending on the outcome there, the case could be appealed to the U.S. Supreme Court.


Eighth Circuit to decide whether company executives can be jailed under a “responsible corporate officer” theory

By: Rox Laird on March 14th, 2016

National business groups are keeping a nervous eye on two Iowa egg company executives’ appeal to be heard Thursday by the U.S. Court of Appeals for the Eighth Circuit in St Paul.

A federal trial judge in Sioux City last April sentenced the top two executives of an egg-production company to three-month prison terms following a massive salmonella outbreak that sickened thousands of consumers.

The central question in the appeal is whether top executives of a corporation can be sentenced to prison for a crime that the company committed but that the executives did not “personally participate” in.  Five national business associations, including the National Association of Manufacturers and the U.S. Chamber of Commerce, submitted briefs to the federal appeals court saying that sending executives to prison under the so-called “responsible corporate officer” theory would have a “chilling effect” on businesses because  it “dramatically increases the risks of being a business executive in a regulated industry.”

Austin (“Jack”) DeCoster, the owner of Quality Egg that operates several egg-producing facilities in Iowa, and his son Peter, the company’s chief operating officer, pleaded guilty last year to criminal charges related to a salmonella outbreak across the country in 2010. That outbreak caused nearly 2,000 reported illnesses and the recall of 500 million eggs.

In addition to levying fines of $100,000 each and other financial penalties, U.S. District Judge Mark Bennett in Sioux City sentenced each DeCoster to three months in federal prison, and both men have now appealed.

Both sides called in big legal guns: The DeCosters retained Washington, D.C. attorney Peter Keisler from Sidley Austin LLP; the U.S. Justice Department’s civil appellate division and consumer protection branch are assisting the U.S. Attorney for the Northern District of Iowa.

The DeCosters acknowledge the company’s criminal violations for wrongdoing by employees that included falsifying inspection records, mislabeling expiration dates, and bribing a USDA inspector, but they argue that prison sentences are unconstitutional without evidence that they (the two executives) personally participated in the criminal violations or intended to violate the law.

“For more than a century, crimes like these have been punished by fines, occasionally probation, and above all the serious stigma and collateral consequences of criminal conviction,” their lawyers argue in a brief submitted to the appeals court. “Considered against that backdrop,”  it would violate due process and be “cruel and unusual” to send the DeCosters to prison, they argue.

Lawyers for the government contend that the constitution does not prohibit courts from sending an executive to jail, even if he did not “personally participate in the company’s violation.” But they also argue that there’s no reason to address that issue here, because, they say, the DeCosters were directly responsible for wrongdoing by their employees in Iowa: They had knowledge of what was going on at the egg production facilities and what was necessary to prevent the spread of salmonella.

The evidence, the government argues, showed that the DeCosters not only did nothing to prevent the contamination but sought to prevent the government from knowing of the extent of the problem in Iowa: “As the DeCosters themselves emphasize, they were aware for many years that their facilities—and the laying hens themselves—had tested positive for Salmonella, thus putting them on notice of the risk of egg contamination.  Yet defendants, who were indisputably responsible for managing the business, did not take the steps necessary to ensure that Salmonella-contaminated eggs were not shipped in interstate commerce.”

So the case could simply come down to the facts–what did the DeCosters know and when, and what actions did they take, if any.  But if three three-judge panel (Judges Murphy, Beam, and Gruender) decides in the DeCosters’ favor on the factual issue, then they will go on to address the broader legal question: whether district court can send executives to prison under a “buck stops here” theory, or whether punishment for these kinds of strict-liability crimes are limited to fines.


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