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New England Compounding Center (NECC) Case Study

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New England Compounding Center (NECC) Case Study

Introduction

In 2012, the New England Compounding Center (NECC) was responsible for a fungal

meningitis outbreak that affected more than 14,000 people in 23 states, leading to 64 fatalities.

This case has raised questions about the role of whistleblowing and bankruptcy in such

situations, and the answers to these questions are important considerations for anyone facing

similar situations. This essay will look at whistleblowing, its advantages and disadvantages,

generally and specifically in the NECC case, whether bankruptcy should be considered, and what

happens when a defendant files for bankruptcy.

Whistleblowing

Whistleblowing is the act of a person or persons calling attention to illegal or unethical

behavior by those in positions of power. While whistleblowing can often be a difficult and

dangerous process, it can also be a powerful tool for combatting wrongdoing. Generally, there

are benefits to whistleblowing, such as the possibility of exposing and deterring unethical

conduct and the potential for a reward if the whistleblower is successful. However, there are also

drawbacks, such as the risk of retaliation or the possibility that the whistleblower may be wrong

or misinterpret the situation. The whistleblower may risk retaliation from those in power or find

themselves in legal trouble if their information is false or misinterpreted.

Furthermore, whistleblowing can also lead to decreased productivity and morale among

workers and distrust between management and employees. All of these risks must be weighed

before deciding to whistleblow. Ultimately, the decision to whistleblow should be made case-by-

case basis, assessing the potential risks and rewards to determine whether it is the right course of

action.
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In the case of NECC, whistleblowing could have alerted authorities to potential risks

associated with the company's practices and prevented the outbreak of fungal meningitis and the

resulting fatalities. However, the risks associated with whistleblowing could also have prevented

potential whistleblowers from coming forward and raising the alarm. Additionally,

whistleblowers may have feared that their warnings would be ignored or dismissed, leading to

potential harm for those affected. Additionally, those who spoke up could have been seen as

disloyal or untrustworthy, potentially leading to personal and professional repercussions.

Case Laws Regarding the Advantages or Disadvantages of Whistleblowing, Whistleblower

Protections.

1. United States v. Davis, 583 F.3d 1261 (9th Cir. 2009)

This case discusses the protections afforded to a whistleblower who provided evidence to the

government concerning violating the False Claims Act (United States v. Davis). The court

concluded that the whistleblower was entitled to a portion of the funds recovered by the

government. The court emphasized the importance of incentivizing individuals to come forward

with evidence of fraud and wrongdoing.

2. Daley v. Koch, 793 F.3d 292 (2d Cir. 2015)

This case involves a former employee of the City of New York who was terminated after he

blew the whistle on alleged corruption and mismanagement (Daley v. Koch). The court held that

the employee was entitled to protection under the First Amendment and the whistleblower

provisions in the New York City Charter. The court also noted that public policy favored the

protection of whistleblowers and their important role in exposing wrongdoing.

3. United States ex rel. Wang v. FMC Corp., 975 F.2d 1412 (9th Cir. 1992)
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In this case, the court held that a whistleblower was entitled to protection under the False

Claims Act, even though he was not the first to report the frau (United States ex rel. Wang v.

FMC Corp). The court noted that the Act's purpose was to encourage whistleblowers to come

forward with evidence of fraud and wrongdoing; thus, the whistleblower should not be penalized

for not being the first to report the fraud.

4. United States ex rel. Hopper v. Anton, 91 F.3d 1261 (9th Cir. 1996)

This case discusses the scope of the False Claims Act and the protections afforded to

whistleblowers (United States ex rel. Hopper v. Anton). The court held that the Act did not

require a whistleblower to be personally involved in the fraud to be eligible for a portion of the

funds recovered by the government. The court noted that the Act's purpose was to encourage

whistleblowers to come forward with evidence of fraud; thus, the whistleblower should not be

penalized for not knowing all the details of the fraud.

Bankruptcy

Bankruptcy is a legal process that allows an individual or business to declare their

inability to pay their debts and enter into a repayment plan or discharge their debts entirely

(Melcarne & Ramello, 2020). In the case of NECC, it may be a viable option for some entities or

individuals, as it would allow them to discharge their debts entirely and avoid further legal

action. However, filing for bankruptcy is not always an effective way to avoid lawsuits, claims,

or liability, as creditors may still be able to pursue legal action against the debtor. Furthermore,

filing for bankruptcy may also have negative consequences, including the loss of assets and a

negative impact on an individual's credit rating.

What Happens to An Injured Plaintiff's Claims When a Defendant Files for

Bankruptcy
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When a defendant files for bankruptcy, the injured plaintiff's claims will be processed

through bankruptcy court and subject to bankruptcy laws. The plaintiff's claims may be paid out

through the bankruptcy court in the form of a cash payment or a restructuring of the defendant's

assets. Depending on the circumstances, the plaintiff may also be able to pursue a claim against

the defendant's creditors to recover damages. In some cases, the plaintiff's claims may not be

able to be resolved through the bankruptcy court, so the plaintiff can still pursue their claims

through the civil court system.

Case Laws Regarding Bankruptcy

In the case of In re Parker, a bankruptcy court found that the debtors had filed for Chapter

7 bankruptcy protection to discharge their consumer debt. The court noted that the debtors had

used their home equity loan to pay off consumer credit cards and had no other assets to pay the

debts. The court found that the debtors had acted in good faith and with the intent to discharge

their consumer debts, and the court granted the debtors a discharge order (Yvonne Gonzalez

Rogers United States District Court Judge, 2021). The court also noted that the debtors had made

good faith payments on their home equity loan and had no other assets to use to pay the debt.

The court found that the debtors had acted in their best interests and granted the discharge order.

Conclusion

Whistleblowing and bankruptcy are two potential solutions to situations like the one

faced by the New England Compounding Center. While whistleblowing can be a powerful tool

for combatting unethical conduct, it can also be risky, and the potential drawbacks should not be

underestimated. Bankruptcy is also a viable option for some entities or individuals, as it allows

them to discharge their debts and avoid further legal action. However, it is important to be aware
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of the potential consequences of filing for bankruptcy, as it may have negative effects.

Ultimately, it is important to consider all factors before deciding on the best course of action.
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References

Daley v. Koch, 793 F.3d 292 (2d Cir. 2015) (n.d.).

Latan, H., Chiappetta Jabbour, C. J., & Lopes de Sousa Jabbour, A. B. (2019). ‘Whistleblowing

triangle’: Framework and empirical evidence. Journal of Business Ethics, 160(1), 189-

204.

Lennane, K. J. (1993). " Whistleblowing": a health issue. British Medical Journal, 307(6905),

667-670.

Melcarne, A., & Ramello, G. B. (2020). Bankruptcy delay and firms’ dynamics. Small Business

Economics, 54(2), 405-419.

United States ex rel. Hopper v. Anton, 91 F.3d 1261 (9th Cir. 1996) (n.d.).

United States ex rel. Wang v. FMC Corp., 975 F.2d 1412 (9th Cir. 1992) (n.d.).

United States v. Davis, 583 F.3d 1261 (9th Cir. 2009) (n.d.).

Yvonne Gonzalez Rogers United States District Court Judge. (2021, March 22). In re Parker.

Legal research tools from Case text. Retrieved December 18, 2022, from

https://casetext.com/case/in-re-parker-13120