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Supreme Court Significantly Raises the Bar for Defined Benefit Plan Participants to File ERISA Fiduciary Breach Lawsuits, but the Risk of Lawsuit Remains

On June 1, 2020, the U.S. Supreme Court ruled in Thole v. U.S. Bank N.A. that participants of defined benefit plans lack standing under Article III of the U.S. Constitution to sue fiduciaries for alleged failures to satisfy their duties under ERISA, if the participants cannot establish that they have experienced individual financial loss or the imminent risk thereof. The Court held in a 5-4 opinion that the plaintiffs did not have a stake sufficient to bring a lawsuit because they had received all of their vested monthly pension benefits to date and had not shown how the alleged mismanagement of the pension plan substantially increased the risk that the plan would be unable to pay their future entitlements. As a practical matter, this should make it harder for plan participants to bring suits of this nature in the future.

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DOJ Intensifies Pressure against Corporate Executives in Off-Label Marketing Arena


Time to Read: 2 minutes Practices: Litigation, Government Enforcement / White Collar Crime

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With the May 10 announcement that three senior Purdue executives had pled guilty to misdemeanor violations of the Food Drug and Cosmetic Act under a doctrine of vicarious liability, DOJ revived a rarely used, 30-year-old theory of criminal liability to convict individuals who had done nothing wrong. This marks a significant escalation of DOJ’s tactics in the off-label marketing and misbranding arena.

The doctrine used to convict the Purdue executives was created by a pair of U.S. Supreme Court cases: U.S. v. Dotterweich and U.S. v. Park. Under the Park or “responsible corporate officer” doctrine, a corporate officer or manager can be convicted of a misdemeanor under the FDCA without proof of personal wrongdoing if, by virtue of his position in the company, he had the responsibility and authority either to prevent or promptly to correct the violation at issue.

While the doctrine is stated broadly in Park and Dotterweich, as a matter of policy and practice, FDA has limited its use to cases where the executive or corporate manager had warning from FDA or otherwise knew about the underlying violations and yet failed to take action. Despite this longstanding FDA policy, DOJ chose to prosecute the Purdue executives without evidence that the executives failed to act in the face of knowledge or warnings of FDCA violations. While this may technically fall within the scope of the principle announced in Park and Dotterweich, it goes well beyond the circumstances in which the doctrine had previously been applied.

DOJ’s revival and expansion of the responsible corporate officer doctrine has potentially serious consequences for the pharmaceutical and medical device industries.

  • The doctrine is not limited to officers and senior executives. Any corporate manager may face strict vicarious criminal liability under the FDCA if her position is one that gives her the responsibility and authority to prevent or correct violations of the statute.
  • An executive or manager facing prosecution under this doctrine may face not only criminal fines of up to $100,000 per violation, but also imprisonment for up to one year. While the Purdue executives will not be imprisoned under the terms of their plea agreements, they will pay over $34 million in disgorgement and criminal fines.
  • Finally, the responsible corporate officer doctrine is not limited to off-label marketing or misbranding violations. While Park and Dotterweich involved the FDCA’s adulterated food and misbranded drug provisions, the principle of strict vicarious liability that they announced was not limited to those provisions.

While it is difficult to protect adequately against this type of liability, pharmaceutical and medical device manufacturers may want to take a careful look at current compliance policies and practices in this area and address any issues that may exist in their structure or implementation

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If you have any questions about DOJ’s revival of the responsible corporate officer doctrine and its potential effect on your business activities, please do not hesitate to contact your regular Ropes & Gray contact.

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