Yesterday the U.S. Senate confirmed Dana Baiocco (pronounced “Bee Awe Co”) as a Commissioner for the U.S. Consumer Product Safety Commission with a term that runs through October of 2024. The confirmation took over eight months from Baiocco’s initial nomination last September and came over sixteen months into the Trump administration. Baiocco’s confirmation signals the shift to an eventual Republican majority at the CPSC for the first time since 2006.

Baiocco, a Republican, is replacing Democratic Commissioner Marti Robinson whose term expired in October of 2017. Robinson has remained on the Commission in a hold-over year but will roll off once Baiocco is sworn in as a Commissioner.

Once Baiocco is sworn in, the CPSC will be balanced equally with two Republicans and two Democrats. The Republicans will be Baiocco and Acting Chairman Ann Marie Buerkle. The two Democrats will be Commissioner, and former Chairman, Elliot Kaye and Commissioner Bob Adler.

The Senate is also still considering President Trump’s nomination of Acting Chairman Buerkle for the permanent Chairman position and a second term as Commissioner. Because Buerkle’s nomination has been pending since last July and she has been in the minority as Acting Chairman since last February, there has been growing unrest among and mounting pressure from major industry groups to swiftly push her nomination through the Senate.

The fifth Commissioner position, which became vacant after the departure of former Commissioner Joe Mohorovic last October, still remains open. President Trump is expected to nominate a new Republican Commissioner to fill this position soon. Once the fifth Commissioner is confirmed, the agency will have a Republican majority for the first time during Buerkle’s tenure as Chairman.

The CPSC issued a press release about Baiocco’s confirmation in which Acting Chairman Buerkle said “Ms. Baiocco brings to the Commission strategic experience in product safety, extensive knowledge of public policy with consumer products and a deep understanding of how companies can be proactive in improving the safety of their products.”

Baiocco also included a statement in the CPSC’s press release, stating:

I am honored to be joining an agency with an enduring and proud legacy of protecting consumers. At a time of ever more complex and technically advanced products coming to market, I look forward to working with the leadership of Acting Chairman Buerkle and the Commission to meet emerging challenges in product safety as well as ensuring that CPSC’s core mission of protecting the public is done in the most responsive manner.”

Anticipating Baiocco’s confirmation, Commissioner Robinson sent an agency wide email on Monday afternoon saying thank you to CPSC staff. Notably, the email did not say goodbye and, in her final blog post, she closed by saying: “Although my term as CPSC Commissioner is now coming to a close, I am not done advocating for safe consumer products. I look forward to continuing this conversation about safety and working with all stakeholders in the future.”

Yesterday, CPSC Chairman Elliot Kaye and Commissioner Robert Adler issued a lengthy joint statement vigorously defending the Commission’s current approach to civil penalties against various criticisms voiced by Commissioners Joe Mohorovic and Ann Marie Buerkle as well as stakeholders in the business community.  Their overarching message: such criticisms are without merit and are, in reality, a call for lesser penalties; there will be no change in the Commission’s current approach.

Over the past few months, we have written extensively about the Commission’s approach to seeking civil penalties against companies for failure to report violations—and the ongoing debate surrounding that process.  Chuck Samuels even testified on the subject last month at the CPSC’s Annual Priorities Hearing (watch here).

According to Kaye and Adler, “agency critics have urged an enormous undertaking by the Commission to prioritize exploring and redesigning its civil penalty system, effectively displacing work intended to save lives and prevent injuries.”  They expressed disappointment at the “distortion” of Chairman Kaye’s remarks at the ICPHSO conference last year, and pushed back at the idea that the Commission somehow operates without transparency when assessing civil penalties.  Specifically, Kaye and Adler assert the following points in their joint statement against the common civil penalty criticisms:

  • critics of the Commission’s current policy want more information shared related to the facts and factors that enter civil penalty valuations, but hamstring the agency in doing so by seeking (or supporting) stringent Section 6(b) confidentiality protections;
  • there is ample regulatory guidance to determine when to file a Section 15(b) report;
  • both the Commission and companies need flexibility when negotiating a civil penalty settlement, thus counseling against a matrix or formulaic approach to applying the civil penalty factors;
  • companies are afforded full due process protections and procedures when the Commission seeks civil penalties including the opportunity to be heard; and
  • the Commission carefully tracks the information available to firms at each and every step in time and does not rely on hindsight regarding companies’ obligation to file.

While many could find much to dispute in the joint statement, the Commission’s majority has made their view clear.

Companies should take a very close read of this policy statement.  It is now evident that the Commission will not change—or even revisit—its current approach to civil penalties in the coming fiscal year, as urged by some stakeholders in the product safety community.  Barring a change in CPSC personnel, Congressional action, or judicial involvement through the litigation process, the ongoing “debate” over civil penalties has effectively ended for now.

This article originally appeared on Law360 on June 14, 2016 and provides additional analysis to our prior posts on civil penalties.

This past March, while speaking at a Consumer Federation of America luncheon, U.S. Consumer Product Safety Commission Chairman Elliot Kaye stated that he “was pleased to announce” that the agency had secured a $15.45 million civil penalty. Commissioner Joe Mohorovic, who voted in favor of the penalty, issued a statement expressing reservations that “too few of the compelling facts” were reflected in the public facing settlement documents for the regulated community to draw conclusions and lessons.

He has since issued two strongly worded dissents raising concerns about the overall transparency of the civil penalty demand process (here and here).  Commissioner Ann Marie Buerkle has recently stated that “consumers will be safer if we help companies prevent violations rather than celebrate marquee penalties,” while Commissioner Marietta Robinson has defended the CPSC’s approach to civil penalties against such criticisms calling them “unwarranted” and “misguided.”

These four perspectives represent some of the dueling philosophies within the CPSC leadership about the role and purpose of civil penalties.  The differences of opinion as to the commission’s approach to civil penalties have never been more pronounced.  Over the past two weeks, the CPSC announced civil penalty settlement agreements with Teavana Corporation and Sunbeam Products (d/b/a Jarden Consumer Solutions) for $3.75 million and $4.5 million, respectively.  These recent penalties come on the heels of the CPSC’s obtainment in March of the record-breaking $15.45 million civil penalty referred to above against various Gree Electric Appliances entities.

It is no secret that over the past two years the CPSC has sought higher civil penalties against companies for alleged violations of the requirement to report product safety issues to the agency in a timely manner — and has notably achieved that goal as announced penalties creep higher and higher into the millions of dollars.  However, in pursuing such civil penalties, the commission’s approach has increasingly divided along partisan lines.

Since last May, the commission has accepted nine civil penalty settlement agreements presented to it by the agency’s professional staff that ranged from $2 million to $15.45 million.  Five of those penalties received a 4-1 vote with Commissioner Buerkle dissenting, while four penalties received a 3-2 vote with Commissioners Mohorovic and Buerkle dissenting.

Approach of the Chairman and Commission’s Democratic Majority 

Chairman Elliot Kaye

Last year, CPSC Chairman Elliot Kaye made waves in the product safety world when he remarked at the 2015 annual International Consumer Product Health and Safety Organization product safety conference that he was directing staff to seek significantly higher civil penalties against companies for violations of the CPSC’s product safety statutes.  Chairman Kaye doubled down — literally — on those remarks earlier this year when, at the same conference, he stated that he wanted to see “double digit” civil penalties based on certain fact patterns that he was seeing.  Kaye reasoned that Congress had intended such increases when it significantly raised the civil penalty ceiling in the Consumer Product Safety Improvement Act of 2008 (CPSIA) from $1.825 million to $15 million.  A few weeks later, Chairman Kaye announced the $15.45 million civil penalty against the Gree entities.

Most recently, after the CPSC announced the Teavana civil penalty, Chairman Kaye made the following remarks regarding Section 15(b) reporting obligations and civil penalties:

All companies who do business before the CPSC must understand that they cannot withhold information from the commission that impacts public safety.  If consumers are suffering product-associated cuts by broken glass and burns by hot liquid then that type of information needs to be reported to the CPSC — immediately.  The $3.75 million penalty agreed to by Teavana is appropriate and is another sign that the CPSC will consistently hold companies accountable when they do not comply with the law …

In short, it is evident from his remarks that Chairman Kaye believes that companies have a heightened duty to report potential defects to the commission, intends to pursue higher civil penalties against companies who violate their obligations and responsibilities under the product safety laws, and supports the general process and procedures currently followed by the Commission and its staff in prosecuting civil penalty demands.

Commissioner Marietta Robinson

One of Chairman Kaye’s Democratic colleagues, Marietta Robinson, has supported the commission’s general approach to civil penalties and has voted in favor of all of the recent civil penalties levied against companies.  In a recent statement, Robinson stated that the following criticisms against the commission’s current approach — the settlement was too high, the CPSC is penalizing a company that made an honest mistake, and too little information was provided to the public on precisely how the CPSC calculated the civil penalty demand — are “unwarranted, misguided and belied by the facts.”  According to Robinson, the commission is using an important tool given to it by Congress to do something about those “rare occasions” when the agency determines that a company has failed to report a potentially hazardous product in a timely manner, and is “hardly pursuing an overzealous enforcement agenda.” Commissioner Robinson’s full statement can be found here.

Commissioner Robert Adler

Although Commissioner Adler has not made any official statements regarding civil penalties recently, he has shared some insight of his thinking on civil penalties in prior years.  For example, in 2012, Adler voted against a civil penalty agreement with Hewlett-Packard.  In a dissenting opinion, Adler stated that the size of the penalty ($425,000) was “infinitesimal” in relation to the size and revenues of the company.  He also rejected the idea that the amount of the penalty could serve as precedent in future cases, specifically citing the new $15 million civil penalty ceiling authorized in the CPSIA.

Approach of the Agency’s Republican Commissioners

While the Commission’s Republican members, Joe Mohorovic and Ann Marie Buerkle, have some differences in their respective approaches to civil penalties, both have expressed concerns over how the agency calculates, imposes and settles civil penalty demands for alleged violations of CPSC statutes, such as Section 15(b) of the CPSA.

Commissioner Joe Mohorovic

Commissioner Mohorovic has voted for some civil penalties in the past, including Gree, although he has consistently and repeatedly expressed concerns over the way by which the commission seeks and then publicizes such penalties.  Recently, Mohorovic voted against the Teavana and Sunbeam civil penalties and issued strongly worded dissents setting forth his perspective on civil penalties in greater detail (see Teavana statement here and Sunbeam statement here).

In the Teavana case, for example, Mohorovic stated that he is “unpersuaded by any of the facts … that [the] settlement amount is appropriate or that a penalty is justified at all,” and that he believes the commission is “failing in [its] duty to tell people why [it is] imposing the penalty [it is] imposing.”  Mohorovic’s perspective could be summarized as follows: settlements of civil penalty demands are teachable moments to educate the regulated community, yet that can only be accomplished through public facing settlement documents that provide sufficient case facts and the commission’s analysis of how those facts are applied to its civil penalty framework.  The commission, according to Mohorovic, is not doing so and missing an important opportunity.

Most recently, Mohorovic has asked the commission to add to its annual agenda and priorities hearing some potential elements of a way forward on “what should be our highest priority: the fair, just, and orderly calculation and imposition of civil penalties for alleged violations of our rules.”  Such steps include, among others, directing the CPSC’s Office of General Counsel to produce a publicly available report comparing the CPSC’s statutory and regulatory penalty constructs with those of peer agencies and holding one or more open meetings or workshops on “CPSC penalties, their purposes and their ideal function and present dysfunction.”  This statement can be found here.

Commissioner Anne Marie Buerkle

Finally, Commissioner Buerkle has been, perhaps, the most strident critic of civil penalties generally and the commission’s approach to pursuing such penalties against companies.  According to Buerkle, she does not oppose civil penalties as a “matter of course;” rather, her opposition has “been for a variety of reasons.”  From Buerkle’s viewpoint, the defect reporting requirements of Section 15 are vague, civil penalties for failure to immediately report are difficult to evaluate and value, and, like Mohorovic, Buerkle has concerns with the CPSC’s lack of transparency throughout the civil penalty process.  Commissioner Buerkle’s recent statement on civil penalties can be found here.

Conclusion

These recent civil penalty settlement agreements illustrate the commission’s desire to increase the amount of penalties assessed against companies for late reporting violations.  But they also illustrate another trend: a commission increasingly divided along party lines with respect to civil penalties. This division, however, is not focused on “whether” the agency will impose multi-million dollar civil penalties.  At least four commissioners have recently supported multi-million dollar civil penalties in cases where they thought a penalty was warranted.  Rather, the major policy divide on civil penalties relates to the role of such penalties in CPSC enforcement, how they are calculated, and the ability of stakeholders to be guided by previous settlements.

Based on the current dynamic, it seems that a robust public debate on the role of civil penalties will continue to unfold at the commission over the next few months.  Although this commission has found middle ground more consistently than in recent years, it remains to be seen whether the various sides of the debate will reach a middle ground on these questions.  In the meantime, companies should expect the CPSC’s current practices for civil penalties to remain much of the same.

USCPSC RecallThe U.S. Consumer Product Safety Commission (CPSC) is set to announce yet another civil penalty settlement.  Sunbeam Products d/b/a Jarden Consumer Solutions (Sunbeam or the Company) has agreed to pay a $4.5 million civil penalty to resolve charges that it knowingly failed to immediately report certain defects and an unreasonably risk of serious injury involving some of the company’s coffeemakers.  The monetary amount of this civil penalty continues to illustrate the Commission’s desire to increase the amount penalties levied against companies for late reporting violations of product safety statutes.

In this case, CPSC staff alleged that Sunbeam failed to report immediately to the Commission that it had information which reasonably supported that certain of its coffeemakers could experience a build-up of steam pressure forcing the brewing chamber to open and expel hot water and coffee.  Such a situation, according to staff, could (and allegedly did) create a burn risk to consumers.  In response to the CPSC’s allegations, Sunbeam asserted that after an extensive investigation, the Company determined that these incidents were related to circumstances that it had not anticipated and not within the subject product’s instructions, and that it did voluntarily report to the Commission after its investigation.

Along with paying the $4.5 million civil penalty, Sunbeam has agreed to “maintain” a product safety compliance program with the common program elements to ensure that the Company complies with product safety standards and regulations enforced by the Commission.  Interestingly, it appears from Paragraphs 20 and 21 of the agreement that the Company already has such a program in place.

As has been the case recently, the Commission voted 3-2 to provisionally accept the settlement with the Commission’s Democratic majority (Kaye, Adler, and Robinson) voting to approve the agreement and Republican Commissioners Mohorovic and Buerkle voting against it.  As he did last week in the Teavana case, Commissioner Joe Mohorovic filed a statement explaining his dissent stating “[w]here I fail to agree is in the calculation of the amount the company will pay in punishment for its tardiness.  That amount, in my view, is far too high.”

Companies in the consumer products arena should remain mindful of and attentive to their Section 15(b) reporting obligations under the Consumer Product Safety Act.  This is particularly true after CPSC Chairman Kaye’s most recent statements on Section 15(b) reporting and civil penalties.  Last week, in connection with the CPSC-Teavana civil penalty settlement, the Product Safety Letter and BNA reported the following Kaye statement:

“All companies who do business before CPSC must understand that they cannot withhold information from us that impacts the safety of the public.  If consumers are suffering product-associated cuts by broken glass and burns by hot liquid then that type of information needs to be reported to CPSC – immediately.  The $3.75 million penalty agreed to by Teavana is appropriate and is another sign that CPSC will consistently hold companies accountable when they do not comply with the law – a law intended to minimize harm to consumers.”

2015 Budget CPSC

Update: After some uncertainty, Congress passed and the President is expected to sign the 2015 Omnibus bill into law.

The report language of the Omnibus bill incorporated by reference House Report 113-508, which accompanied a previous appropriations bill passed by the House earlier this year. This additional report language addresses several key CPSC issues, including: import safety, the phthalates Chronic Hazard Advisory Panel, window coverings, and the agency’s proposed amendments to its regulations on voluntary recalls, 6(b) information disclosure, and certificates of compliance.

For further details about this additional report language, please read our previous post from earlier this year.

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Yesterday congressional leaders announced that they reached a deal on an omnibus bill that will fund the federal government through September 30, 2015. Included in this bill is $123 million in funding for the CPSC, which is the amount the agency requested in its 2015 Budget Request and an increase of $5 million from what the agency received in 2014.

Not included in the omnibus or other 2015 legislation, however, is statutory language authorizing the agency to collect user fees from importers of consumer products. As a part of its 2015 Budget Request released in March, the agency sought the statutory authority to collect user fees to fund an estimated $36 million in annual costs for a full-scale national import surveillance program. Currently, the CPSC’s import surveillance program is in its pilot stage and limited in scope. In May, the National Association of Manufacturers (NAM) and 40+ other trade associations wrote a letter to then Acting-Chairman Adler raising concerns about this type of user fee authorization.

Additional items of note that Congress outlined in its report language accompanying the Omnibus included: Continue Reading 2015 Omnibus Provides $123 Million in Funding for the CPSC with No User Fee Authorization; Report Language Focuses on Test Burden Reduction, Import Surveillance, and Report on “Auto-Update” Mechanism for CPSC Safety Standards

Senate Confirms Bob Adler USCPSCLate this afternoon the U.S. Senate confirmed current Commissioner and former Acting-Chairman Robert S. Adler to a second 7 year term as a CPSC Commissioner by a 53-44 vote. With Commissioner Adler’s confirmation, the five-member Commission will remain composed of 3 Democratic and 2 Republican Commissioners until at least October 2017—even if a Republican wins the 2016 Presidential election.

Continue Reading Senate Confirms Adler; Locks Democratic Majority at CPSC until at least October 2017

Commissioner of the Consumer Product Safety CommissionYesterday evening, Senate Majority Leader Harry Reid (D-NV) filed cloture on the re-nomination of Robert Adler to be a Commissioner of the Consumer Product Safety Commission (CPSC).  If cloture is invoked—meaning three-fifths of the full Senate, or 60 votes, supports the attempt for cloture (assuming the “nuclear option” is not used)—the Senate will proceed to vote on the Adler nomination on or about Tuesday, December 2.  The nominee is then confirmed by a majority vote.  It is worth noting that the invocation of cloture and confirmation of Commissioner Adler is not a given in the current post-election political climate and after the President’s speech on immigration reform last night.  As our readers will recall from a previous blog post, while the Senate Commerce, Science and Transportation Committee voted Commissioner Adler’s nomination out of committee in July, seven Republican Senators reportedly voted no. Continue Reading Cloture Filed on Adler Nomination; Burgess Named Subcommittee Chairman

Consumer product safety testingAt their April Senate confirmation hearing, both incoming CPSC Chairman Elliot Kaye and Commissioner Joe Mohorovic pledged to Senator John Thune (R-SD) to submit plans for reducing third party testing burdens within 60 days of confirmation. Rather than send separate plans, Kaye and Mohorovic submitted a joint letter to Senator Thune recently made public on the website for the U.S. Senate Committee on Commerce, Science, and Transportation.

The letter outlines three areas of focus for the agency to reduce testing burdens: Continue Reading CPSC Focusing on Three Areas for Reduction of CPSIA Testing Burdens

Yesterday, Senate Majority Leader Harry Reid (D-NV) announced on the Senate Floor (video clip below) that the Senate will consider and vote on the nominations of Elliot Kaye and Joe Mohorovic on Monday, July 28th. President Obama nominated Kaye to serve as the next Chairman and as a Commissioner of the CPSC in March and Mohorovic to serve as a Commissioner last November. Regarding the confirmation votes, Senator Reid stated:

Today the Senate Commerce, Science, and Transportation Committee approved three pending nominations for the Consumer Product Safety Commission (CPSC). The Committee approved Elliot Kaye as Chairman and Joe Mohorovic and Bob Adler as Commissioners to the CPSC. Although the Committee approved his nomination, seven Republican Senators reportedly voted no on the reappointment of current Acting Chairman Adler. Those Senators included: Continue Reading CPSC Nominees Kaye, Mohorovic, and Adler Sent to Senate Floor for Confirmation Vote