Congress today questioned the president of the peanut company blamed for the salmonella outbreak that has thus far sickened at least 600 people, more than half of them children, and may have killed at least 8 people (while the congressional hearing was taking place, a possible 9th death was reported). Peanut Corporation of America President Stewart Parnell refused to answer questions from the House of Representatives’ Subcommittee on Oversight and Investigations, citing his right against self-incrimination under the 5th Amendment of the Constitution. Based on the internal company documents the Subcommittee members showed him during the hearing, it appears there is plenty of incriminating evidence out there.
One particularly egregious e-mail shows Parnell complaining about lost profits while the federal government investigated the peanut-related salmonella outbreak. The e-mail said the time required to deal with contaminated products, some of which had been shipped, was "costing us huge $$$$." In another e-mail, sent on Jan. 19, Parnell sent a message to the U.S. Food and Drug Administration, pleading with the agency to let it stay in business. He wrote that company executives "desperately at least need to turn the raw peanuts on our floor into money."
It is certainly an outrage and a tragedy that people have lost their lives or been sickened because executives cared more about putting peanut products into the market for profit than ensuring their food products were safe. At the hearing today, Jeffrey Almer of Savage, Minn., described how his elderly mother survived lung cancer, a brain tumor, and other illnesses—and then she died from salmonella poisoning. "Cancer couldn’t claim her but peanut butter did," said Almer.
Adding insult to this horrible injury, a recent judicial opinion raises the possibility that American tax dollars may be used to compensate Peanut Corp. for the profits it lost in (eventually) complying with the recalls and other restrictions placed on its products as a result of the salmonella scare. As I have discussed here, the Federal Circuit is currently considering the Rose Acre Farms v. United States appeal, which presents the question of whether the United States must compensate Rose Acre Farms more than $5.4 million under the Takings Clause due to temporary food safety restrictions imposed after Rose Acre’s eggs caused hundreds of people to suffer salmonella poisoning.
It sounds crazy, but the lower court in Rose Acre actually concluded that, "[o]n balance, plaintiff’s severe economic loss and reasonable investment expectation outweigh government’s attempt to prevent the spread of salmonella," and found that the government was required to compensate Rose Acre. To borrow from a Saturday Night Live sketch: really?
No doubt, Peanut Corp is losing profits from the recall of products containing its peanuts and its temporary inability to continue to sell these peanut products, as Rose Acre lost some profits when the government sought to prevent its salmonella-tainted eggs from poisoning more Americans. And sure, peanut butter sales are down 25%, but that’s because Americans, understandably enough, don’t want to risk sending their kids off to school with a peanut-butter-and-salmonella sandwich in their lunch box. But is it really the point of the Takings Clause, which provides that private property shall not "be taken for public use, without just compensation," to force the government to compensate companies for profits lost as a result of complying with valid federal food safety regulations?
I hope the Federal Circuit will have the good sense not to take Takings Clause jurisprudence down that path. As the ongoing peanut product health scare has shown, we need the government to focus even more on protecting public health and safety, not worry about whether a necessary food recall will create a compensable taking for lost profits. It’s also past time for corporate America to take responsibility for its actions, instead of looking for the government to pay up every time corporate misconduct causes profits to go down.