Over the past few weeks, there have been many key goings-on related to the CPSC and its Commissioners.

Chairman Buerkle’s Confirmation Hearing and Committee Vote

First, on September 27, 2017, Acting Chairman Ann Marie Buerkle sat for a confirmation hearing before the Senate Committee on Commerce, Science, and Transportation. At the beginning of the hearing, Buerkle faced tough questions, particularly from ranking member, Senator Bill Nelson of Florida. In the wake of Hurricane Irma, and subsequent 11 deaths due to carbon monoxide poisoning from portable generators, Ms. Buerkle was repeatedly asked to defend her position that the CPSC should not undertake mandatory rulemaking on portable generator emissions. She explained that she believed the EPA has primary jurisdiction over carbon monoxide emissions from portable generators, but by working with industry on a voluntary standard involving an automatic shut-off mechanism within CPSC’s jurisdiction, it was her hope that a solution can be developed by the end of the year. Under CPSA, CPSC is required to rely on consensus standards instead of mandatory regulations where they are effective and compliance is widespread.

On October 4, 2017, the Committee cleared Chairman Buerkle’s nomination as Chair by voice vote but presumably because of the portable generators issue, her nomination for a second seven-year term as a CPSC Commissioner was not unanimous and voting followed party lines. Ms. Buerkle’s final hurdle will be a confirmation by the full Senate, which could take place quickly or take a couple of months depending on any further opposition to one or both of her nominations.

Continue Reading CPSC Round-Up: Buerkle Confirmation Hearing, Landmark Civil Penalty Ruling, and Partisan Action on Flame Retardants

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.

coffee-pot-cpscThe 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.

Continue Reading BREAKING: COURT RULES POSITIVELY FOR CPSC IN FEDERAL CIVIL PENALTY CASE AGAINST SPECTRUM BRANDS

Teavana Record of Commission ActionOn May 26, 2016 the U.S. Consumer Product Safety Commission (“CPSC”) announced through a Record of Commission Action (“RCA”) that Teavana Corporation (“Teavana”) has agreed to pay a $3.75 million civil penalty to resolve charges that it knowingly failed to immediately report that certain glass tea tumblers could “explode, shatter or break during normal use.”  While the Commission has not yet published the provisional Settlement Agreement and Final Order in the Federal Register, or issued a press release as is customary, the RCA indicates that the vote was 3-2 in favor of accepting the settlement.

Notably, Commissioner Joe Mohorovic, who has voted for some civil penalties in the past, issued a strongly worded dissent explaining his vote against acceptance of this civil penalty and outlining his concerns about how the agency “calculates, imposes, and settles civil penalty demands for alleged violations” of CPSC statutes.  Mohorovic’s dissent comes on the heels of a statement by Commissioner Ann Marie Buerkle, which expresses similar sentiment over how the Commission pursues civil penalties against firms.

Mohorovic’s dissent further explains many of the concerns that he has vocalized regarding civil penalties during his tenure on the Commission.  The overarching theme of his statement can 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 statutory and regulatory framework.  Mohorovic asserts that the Commission continues to miss opportunities by failing to meet such a standard, and he worries that the Commission’s “growing opacity” in its approach to civil penalties will create distrust between the CPSC and its stakeholders—resulting in an increase in litigation when companies refuse to settle the Commission’s civil penalty demands (see our previous posts on the CPSC’s civil penalty litigation against Michaels Craft Stores and Spectrum Brands).

Commissioner Buerkle’s statement sets forth her own concerns with civil penalties and the Commission’s approach in pursuing them.  Although more general in nature and not directly related to the Teavana settlement, its timing and purpose was clear.  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.

These thoughtful statements regarding civil penalties offered by Commissioners Mohorovic and Buerkle are helpful in encouraging a robust, public debate on the role of civil penalties in CPSC enforcement, how they are calculated, the ability of stakeholders to be guided by previous settlements, and how the CPSC and the regulated community interact with respect to reporting and certain violations.

Last year, CPSC Chairman Elliot Kaye issued a statement regarding the CPSC’s civil penalty agreement with Office Depot (see here).  Kaye also shared his perspective regarding civil penalties at ICPHSO earlier this year, in which he stated his desire to seek significantly higher civil penalties for some of the fact patterns that he has been seeing.  Kaye also asserted that higher penalties were what Congress intended to see when it raised the penalty cap from $1.825 million to $15 million in the CPSIA of 2008.

We will certainly share any written statements offered by the Commission’s majority members regarding the Teavana settlement or in response to Commissioner Mohorovic’s dissent or Commissioner Buerkle’s statement.

Howsare CohenThis article originally appeared on Law360 on May 12, 2016 and provides additional analysis to our prior post on this subject.

After filing a Section 15(b) report and conducting a recall with the U.S. Consumer Product Safety Commission (CPSC), companies frequently ponder whether the CPSC believes the company timely filed its report under Section 15(b) of the Consumer Product Safety Act (CPSA) and, if not, whether the CPSC will launch an investigation that could lead to a civil penalty action. Unlike the experience of negotiating a recall where there is frequent contact with the CPSC within a defined time frame, the agency is usually silent and takes more time (sometimes years) to decide whether it will investigate whether a company met the statutory time deadline for filing the underlying Section 15(b) report.

In many cases, determining that a report was filed in such a manner to where the CPSC likely would not find reason for a timeliness investigation or civil penalty is relatively straightforward. In other cases where the timeliness of a report is more uncertain, however, only the CPSC’s statute of limitations for pursuing a civil penalty can provide similar comfort.

So what is the CPSC’s statute of limitations? The answer is not as straightforward as it may appear.

Continue Reading When Does A CPSC Late Reporting Violation First Accrue?

DOJ Failure to Timely ReportOn Wednesday of last week, the Department of Justice (DOJ) and Consumer Product Safety Commission (CPSC) announced that a complaint has been filed in federal court against Spectrum Brands, Inc. (Spectrum).  Notably, this is the second case in the past three months brought by the government in federal court against a company for an alleged failure to timely report (see our earlier post on the Michaels Stores litigation).  These cases are not typical because most companies settle civil penalty claims rather than litigate against the government.  As a result, there is precious little case law precedent as to how these lawsuits might play out in court, and close attention is being paid to them in the product safety community.

In this case, the government alleges that Spectrum and a former subsidiary (Applica Consumer Products) failed to timely report under Section 15(b) of the Consumer Product Safety Act (CPSA) a hazardous defect relating to certain Black and Decker brand SpaceMaker coffee pot handles.  Specifically, the Complaint claims that the companies knowingly violated the reporting requirements of the CPSA with respect to allegedly defective carafe handles that could detach and cause hot coffee to spill onto consumers and burn them.  According to the government, over a three year period, hundreds of consumers reported incidents involving the detached handle to the CPSC before the companies notified the agency of the potential problem and later recalled the product.  The Complaint alleges that the companies themselves received approximately 1,600 consumer complaints regarding the same issue over the three year period (early 2009 through April 2012).  The Complaint further alleges that the companies distributed a small number of the allegedly defective coffee pots to retailers even after the recall was announced, which is also prohibited by the CPSA.

The government is seeking an undisclosed monetary civil penalty under Section 20 of the CPSA and injunctive relief, including the enactment of a stringent compliance program to ensure future compliance with CPSC reporting obligations.

Notably, in response to the filing of the complaint, Spectrum Brands has stated, in part, that “the Commission is taking a position that is inconsistent and irreconcilable with its conclusions concerning the nature and degree of risk associated with similar products and similar quality issues” and that it is “compelled to defend its conduct in court” in the face of the Commission’s “inconsistent positions and arbitrary civil penalty demand.”  The Company further stated that that it “has a long history of proactive communications with the [CPSC]” including in this case after “Spectrum Brands determined that it had distributed a small number of recalled coffeemakers…”

As we have previously commented, we expect the Commission to remain active in brining enforcement actions against companies for violations of Section 15(b) of the CPSA and other provisions of the CPSA (and statutes enforced by the Commission).  We will continue to follow this litigation, and the Michaels Stores case, and update our readers on notable latest developments given the importance of these recent cases.