The War On Buckyballs: 'Park' Doctrine Gone Awry

This article examines a federal regulatory agency and administrative law judge's (ALJ) recent and unprecedented expansion of the responsible corporate officer (RCO) doctrine, also known as the Park doctrine.

Under an expanded formulation of the RCO doctrine, the founder of a now defunct company, which the U.S. Consumer Product Safety Commission (CPSC) drove out of business by effectively banning its main product, could have been held personally responsible for the cost of a $57 million product recall, even though no one contended that any underlying crime or other violation had been committed by the company or its founder.

In limited circumstances, the Park doctrine allows for criminal prosecution of an individual for a corporate violation without proof of the individual's knowledge or participation in the wrongdoing. We have previously argued that application of this doctrine should be reserved for cases involving, at a minimum, serious harm to the public and proof of the individual's negligence in failing to prevent that harm.1 In this article, we argue that applying the doctrine where there is no allegation of wrongdoing and in an effort to make an individual former corporate officer responsible for an alarmingly high product-recall cost represents an unwarranted case of regulatory overreach.

Park Doctrine: Responsible Corporate Officer

The Park doctrine allows for criminal prosecution of individuals, typically high-ranking corporate executives of pharmaceutical companies, for violations of the Food, Drug, and Cosmetic Act (FDCA), even absent any proof of the individual defendant's knowledge of or participation in the violation.

The seminal U.S. Supreme Court cases of United States v. Dotterweich2 (1943) and United States v. Park3 (reaffirming Dotterweich in 1975) established the RCO/ Park doctrine, providing that a corporate agent who stands in a ''responsible relation'' to misconduct may be held criminally liable even without having played any direct role in the misconduct.4 Standing in such a ''responsible relation'' means the corporate agent must have had, ''by reason of his position in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of, and that he failed to do so.''5

Park liability provides a mechanism for holding corporate executives vicariously responsible for violations that occurred under their watch, even if they were not aware of and did not personally participate in those violations. The first occurrence is a misdemeanor (albeit one that, in the pharmaceutical context, is often accompanied by the career-ending consequence of exclusion from participation in federal health care programs by the Office of Inspector General of the U.S. Department of Health and Human Services), with subsequent felony liability for a reoccurrence.

Although this doctrine originated in the food and drug context, it also has been applied in the context of other public health and welfare statutes. For example, the Clean Water Act provides that a ''responsible corporate officer'' may be held liable for violations of the Act.6 The same is true of the Clean Air Act7 and the Radiation Control for Health and Safety Act.8 At the heart of the limited cases in which a corporate officer has been held individually responsible under the Park doctrine is a predicate violation of law by a corporate entity. The Buckyballs case, however, involved no such violation.

CPSC vs. Buckyballs

In 2009, entrepreneur Craig Zucker and a friend formed a small start-up company called Maxfield & Oberton Holdings, LLC for the purpose of importing tiny, powerful, rare-earth, spherical magnets known as Buckyballs (and later, their cubical offshoots, Buckycubes) to be packaged and sold as adult executive desk toys.9 Buckyballs, each only a few millimeters in diameter, can be placed together to form infinitely many shapes and patterns—an activity that, judging by how quickly the product gained traction, is a welcome diversion for many.10

What began as a small internet business in 2009 quickly grew into an overwhelming success story. In 2011, Buckyballs were named one of People Magazine's five hottest trends of the year.11 By 2012, Maxfield & Oberton had established a distribution network of 5,000 stores and was doing $10 million in annual sales.12 Before the company's demise in 2012, more than 2.5 million sets of Buckyballs had been sold.13

In its first few years of existence, Maxfield & Oberton seemingly had...