Question

Case Study: To recall or not to recall? That is the question

You are part of the executive team of Nature Only, LLC, a small business that manufactures wholesome organic snacks, such as granola bars, trail mix, and popcorn. One of your suppliers sent an email to your CEO stating that the last stock of oats sent to Nature Only may have been contaminated with Listeria, which can either be completely harmless or cause serious and sometimes fatal infections in young children, the elderly, and those with weakened immune systems. Your CEO is now faced with the dilemma of recalling all of the granola bars that could be impacted by the tainted oats. A recall would cost potentially $200,000 and could cause negative public relations but could also save lives and mitigate liability for Nature Only.

Instructions: Your CEO has come to you for advice. Your task is to present a well-argued case as to why the company should or should not recall the granola bars. Use the materials provided in the downloaded case study and the textbook to support your case. Be sure to include your legal conclusion (whether the company should or should not recall the granola bars and why).

Responses should be a minimum of 300 words.

Note: This case is based off of real-life situations that occur in businesses. Here is one example:

Peanut Exec Gets 28 Years In Prison For Deadly Salmonella Outbreak

A former corporate CEO has been sentenced to 28 years in prison for selling food that made people sick. Two other executives face jail time as well. These jail terms are by far the harshest sentences the U.S. authorities have handed down in connection with an outbreak of foodborne illness.

The outbreak, in this case, happened seven years ago. More than 700 cases of salmonella poisoning were linked to contaminated peanut products. Nine people died.

Investigators traced the contaminated food to a factory in Georgia operated by the Peanut Corporation of America.

The outbreak, by itself, was not unprecedented. There have been bigger, and deadlier, outbreaks of foodborne illness.

But the emails that investigators found at the Peanut Corporation of America set this case apart. Some of the emails came from the company's CEO, Stewart Parnell.

"Stewart Parnell absolutely knew that they were shipping salmonella-tainted peanut butter. They knew it, and they covered it up," says Bill Marler, a food safety lawyer who represented some of the victims.

Before and during the outbreak, company executives assured customers that their products were free of salmonella when no tests had been carried out.

When tests did turn up salmonella, company executives sometimes just retested that batch, and when it came up clean, they sold it.

In one memorable email exchange, when Parnell was told that a shipment was delayed because results of salmonella tests weren't yet available, he wrote back, "Just ship it."

Last year, Parnell and two other people involved in PCA's peanut business were convicted of criminal charges that included fraud, obstruction of justice and selling adulterated food.

These were almost unprecedented charges in the food industry, and Marler says that executives in other companies are paying close attention. "The arrest of Stewart Parnell, his conviction on these felony counts and his sentence have put a very big chill in the boardrooms of corporate America," he says.

The Peanut Corporation of America is no longer in business.

At the sentencing hearing for Parnell and his colleagues, relatives of some of the victims confronted Parnell with stories of their suffering. Parnell, for his part, asked for forgiveness and mercy, and said that he never intended to harm anyone. His daughter said that he sometimes brought his company's peanut butter home for his family to eat.

Parnell's 28-year sentence wasn't the only penalty. His brother Michael Parnell was sentenced to 20 years in prison, and another former executive was sentenced to five years.

All of these sentences are the harshest ever imposed in connection with an outbreak of foodborne illness.

In some other recent cases, companies sold contaminated eggs and cantaloupes that also were linked to multiple deaths. Executives in those companies were sentenced to probation and a few months in prison.

Stewart Parnell's lawyers have indicated they will file an appeal.

Case Study: To recall or not to recall? That is the question

You are part of the executive team of Nature Only, LLC, a small business that manufactures wholesome organic snacks, such as granola bars, trail mix, and popcorn. One of your suppliers sent an email to your CEO stating that the last stock of oats sent to Nature Only may have been contaminated with Listeria, which can either be completely harmless or cause serious and sometimes fatal infections in young children, the elderly, and those with weakened immune systems. Your CEO is now faced with the dilemma of recalling all of the granola bars that could be impacted by the tainted oats. A recall would cost potentially $200,000 and could cause negative public relations but could also save lives and mitigate liability for Nature Only.

Instructions: Your CEO has come to you for advice. Your task is to present a well-argued case as to why the company should or should not recall the granola bars. Use the materials provided and the textbook to support your case. Be sure to include your legal conclusion (whether the company should or should not recall the granola bars and why). Responses should be a minimum of 300 words.

Federal Statute 21 U.S. Code §331. Prohibited acts

The following acts and the causing thereof are prohibited:

(a) The introduction or delivery for introduction into interstate commerce of any food, drug, device, tobacco product, or cosmetic that is adulterated* or misbranded.

(b) The adulteration or misbranding of any food, drug, device or cosmetic in interstate commerce.

*Adulteration usually refers to mixing other matter of an inferior and sometimes harmful quality with food or drink intended to be sold. As a result of adulteration, food or drink becomes impure and unfit for human consumption.

Federal Statute 21 U.S. Code §333. Penalties

(a) Violation of section 331 of this title; second violation; intent to defraud or mislead

(1) Any person who violates a provision of section 331 of this title shall be imprisoned for not more than one year or fined not more than $1,000, or both.

(2) Notwithstanding the provisions of paragraph (1) of this section,1 if any person commits such a violation after a conviction of him under this section has become final, or commits such a violation with the intent to defraud or mislead, such person shall be imprisoned for not more than three years or fined not more than $10,000, or both.

Arizona Revised Statute 13-2202. Deceptive business practices; classification

A. A person commits deceptive business practices if in the course of engaging in a business, occupation or profession such person recklessly:

1. Uses or possesses for use a false weight or measure or any other device for falsely determining or recording any quality or quantity; or

2. Sells, offers or exposes for sale or delivers less than the represented quantity of any commodity or service; or

3. Takes or attempts to take more than the represented quantity of any goods or service when as buyer such person furnishes the weight or measure; or

4. Sells, offers or exposes for sale adulterated goods or services; or

5. Sells, offers or exposes for sale mislabeled goods or services.

B. Deceptive business practices is a class 1 misdemeanor.

Arizona Revised Statute 13-707. Misdemeanors; sentencing

A. A sentence of imprisonment for a misdemeanor shall be for a definite term to be served other than a place within custody of the state department of corrections. The court shall fix the term of imprisonment within the following maximum limitations:

1. For a class 1 misdemeanor, six months.

2. For a class 2 misdemeanor, four months.

3. For a class 3 misdemeanor, thirty days.

A Bit(e) of history of outbreak criminal prosecutions

By Bill Marler, May 3, 2016

I thought it might be helpful to see a few cases where a food borne outbreak brought the attention of the U.S. Attorney’s office.

Odwalla: In 1998, in what was the first criminal conviction in a large-scale food-poisoning outbreak, Odwalla Inc., pleaded guilty to violating Federal food safety laws and agreed to pay a $1.5 million fine for selling tainted apple juice that killed a 16-month-old girl and sickened 70 other people in several states in 1996.

Odwalla, based in Half Moon Bay, CA, pleaded guilty to 16 counts of unknowingly delivering “adulterated food products for introduction into interstate commerce” in relation to the October 1996 outbreak. A batch of its juice infected with the toxic E. coli bacteria sickened people in Colorado, California, Washington and Canada. Fourteen children developed a life-threatening disease that ravages kidneys.

At the time, the $1.5 million penalty was the largest criminal penalty in a food poisoning case. Odwalla also was on court-supervised probation for five years. As part of the probation, the company had to submit a detailed plan to the food and drug agency demonstrating its food safety precautions and any subsequent violations could have resulted in more serious charges.

Jensen Farms: In 2012 Eric Jensen, age 37, and Ryan Jensen, age 33, brothers who owned and operated Jensen Farms, a fourth-generation cantaloupe operation in Colorado, presented themselves to U.S. marshals in Denver and were taken into custody on federal charges brought by the U.S. Attorney’s Office with the Food and Drug Administration – Office of Criminal Investigation.

According to the six-count indictment, Eric and Ryan Jensen unknowingly introduced adulterated (Listeria-tainted) cantaloupe into interstate commerce. The indictment further stated that the cantaloupe was prepared, packed and held under conditions that rendered it injurious to health. The outbreak sickened more than 147 in the fall of 2011, killing more than 33 people in 28 states. The Jensen’s faced up to six years in jail and $1.5 million each in fines. The eventually pleaded guilty and were sentenced to five years of probation.

Jack DeCoster: In 2013, Austin “Jack” DeCoster and his son, Peter DeCoster, both faced charges stemming from a Salmonella outbreak caused by their Iowa egg farms in 2010. The Salmonella outbreak ran from May 1 to Nov. 30, 2010, and prompted the recall of more than a half-billion eggs. And, while there were 1,939 confirmed infections, statistical models used to account for Salmonella illnesses in the U.S. suggested that the eggs may have sickened more than 62,000 people.

The family business, known as Quality Egg LLC, pleaded guilty in 2015 to a federal felony count of bribing a USDA egg inspector and to two misdemeanors of unknowingly introducing adulterated food into interstate commerce. As part of the plea agreement, Quality Egg paid a $6.8 million fine and the DeCosters $100,000 each, for a total of $7 million. Both DeCosters were sentenced to three months in jail. They are appealing the jail sentence.

ConAgra: In 2015 ConAgra Foods agreed to plead guilty and pay $11.2 million in connection with the shipment of Salmonella contaminated peanut butter linked to a 2006 through 2007 nationwide outbreak of that sickened more than 700. ConAgra signed a plea agreement admitting that it unknowingly introduced Peter Pan and private label peanut butter contaminated with Salmonella into interstate commerce during the outbreak.

PCA: In 2015 former Peanut Corporation of America owner Stewart Parnell, his brother and one-time peanut broker Michael Parnell, and Mary Wilkerson, former quality control manager at the company’s Blakely, GA, plant, faced a federal jury in Albany, GA.

The 12-member jury found Stewart Parnell guilty on 67 federal felony counts. Michael Parnell was found guilty on 30 counts. Wilkerson was found guilty of one of the two counts of obstruction of justice fined against her. Two other PCA employees earlier pleaded guilty to charges related to the outbreak. The felony charges of introducing adulterated food into interstate commerce, “with the intent to defraud or mislead,” stemmed from a 2008 to 2009 Salmonella outbreak that sickened 714 and left nine dead. All defendants were sentenced in July of 2015. Stewart and Michael are facing decades in jail.

Molly Moon’s ice cream shops reopen after dairy recall

By Stephanie Klein, January 2, 2015

After a dairy recall, Molly Moon’s Homemade Ice Cream opened Friday.

Molly Moon’s closed shop Dec. 23, after its dairy partner, Snoqualmie Ice Cream, issued a voluntary recall of all their ice cream, gelato, custard and sorbet products. Molly Moon’s had its milk and cream pasteurized at Snoqualmie Ice Cream.

The recall included all flavors and container sizes produced on or after January 1, 2014 until December 21, 2014 because they said the products have the potential to be contaminated with Listeria monocytogenes.

Owner Molly Moon Neitzel told KIRO Radio, for now, the dairy in Lynden, Wash. is pasteurizing the milk and cream.

She doesn’t have the final tally, but estimates the loss to be somewhere around $57,000. “I’m hoping our community will come back and support us, as usual, and by the end of the year, we will have forgotten about it.” Neitzel said they paid all their employees for the shifts they would have worked and potential tips.

Molly Moon’s, with six locations in Seattle, is touting its seasonal flavors: eggnog ice cream, chocolate orange ice cream, clementine sorbet, and vegan salted caramel ice cream.

Answer 1

The company should recall all of the granola bar from the market on social ground and also in-order to mitigate legal and financial implications of it. The company apart from withdrawing its product should also send a clear message to its customers, to not consume its granola bar product but other products are safe for consumption. They should emphasize that for the company, there customer’s health and well-being is of significant importance and would take proactive measure for ensuring such incidents do not happen in the future. Though, this might create temporarily dent in sales figure and a bad name for the company but this would save the company from the aftermath of selling adulterated product even after knowing about it. Eventually customers would also understand the high standards of social responsibility set by a small company like nature only, where they went step ahead taking financial hit just for safeguarding its customer from consuming adulterated product.

We have seen cases in the past where the company CEO and the management has been held responsible and prisoned for years for not taking any action even after being aware of the contamination. The companies had to pay out hefty fines as penalty and settlement, which for nature only could be more than 200,000 US dollars (estimated cost if product is withdrawn from the market). We have also seen many of the companies had to shut down because of this. Under federal statue US code 331 (prohibited act) and 331 (penalties) introduction or delivery of any contaminated product with an intent to mislead or conceal information shall be considered federal law violation and could be subjected to severe penalty and jail term. Also under Arizona revised statue 13-2202 (deceptive business practices) and 13-707 (Misdemeanors) this is a punishable offence. This could lead to imprisonment and penalties, in some severe cases the company might have to shut down its operations also.