We do not get many court decisions in the CPSC world, but yesterday we received one. Last evening, a Wisconsin federal district court essentially held in the Government’s case against Spectrum Brands, Inc. (Spectrum) that (1) Spectrum failed to timely report defective coffee pots in violation of Section 15(b) of the Consumer Product Safety Act (CPSA) because they could create a substantial product hazard, and (2) the Government’s imposition of a civil penalty pursuant to the CPSA was not in violation of Spectrum’s statutory or constitutional due process rights. In doing so, the Court rejected Spectrum’s procedural and substantive arguments, including that the CPSC’s claims were time barred and that the CPSA’s reporting requirements are unconstitutionally vague.
The Department of Justice and CPSC alleged that a company acquired by Spectrum (Applica Consumer Products) knowingly failed to timely report under Section 15(b) of the CPSA a hazardous defect relating to certain coffee pot handles. The Complaint alleged that the Company had received approximately 1,600 consumer complaints over a four year period (2008-2012) related to the breakage of the pots’ handle resulting in coffee spillage and burns on consumers.
In response to the filing of the lawsuit, Spectrum asserted, among other arguments, that (1) the Commission’s claims against it were time barred under the so-called Gabelli doctrine; (2) the CPSA’s reporting requirements are unconstitutionally vague; (3) the CPSC failed to provide fair notice that a report was required in light of its finding that other Spectrum coffeemakers with similar issues did not present a substantial product hazard; (4) the CPSC’s late-reporting determination was arbitrary and capricious; (5) Spectrum had no duty to report because the CPSC had already been “adequately informed” of the handle failures and (6) the CPSA did not authorize the CPSC to seek certain forms of injunctive relief including the establishment of a compliance program and prospective liquidated damages in the event of noncompliance.
The Court rejected all of these arguments and handed almost a total victory to the CPSC that may have future ramifications in the product safety community. For example, the decision certainly lends new credence to the CPSC’s common refrain to regulated entities “when in doubt, report” when deciding whether a product defect could present a substantial product hazard. The Court even went so far as to cite this common CPSC advice in the opinion. It’s also noteworthy that the Court concluded that the CPSC does not need to articulate its reasoning for a civil penalty amount in writing and provide more transparency in the process generally—a complaint often raised by industry defendants.