The consumer product safety community is rarely provided guidance by federal court decisions. On Tuesday, however, Judge R. Brooke Jackson of the Federal District Court for the District of Colorado issued an opinion in the never-ending saga of Zen Magnets, LLC v. CPSC.

Ultimately, the court held that Zen Magnets’ due process rights were violated because the company was denied a fair and impartial tribunal in its appeal of an Administrative Law Judge’s Initial Decision and Order. Judge Jackson remanded the case to the Commission for a re-hearing without Commissioner Bob Adler’s participation. The purported violation stems from Commissioner Adler’s comments in the course of a rulemaking for magnet sets that raised a question of his impartiality with respect to the enforcement action against Zen Magnets.

Zen Magnets’ Founder, Shihan Qu, was quick to announce the victory, and it may ultimately be a victory for Zen Magnets. However, for the most part, Judge Jackson’s decision is actually a substantive victory for the Commission with respect to the agency’s authority to declare products substantial product hazards and order mandatory recalls. Continue Reading CPSC’s Zen Magnets Mandatory Recall Reversed: A Mixed District Court Decision Gives Zen Magnets a New Life and the CPSC Favorable Precedent for Mandatory Recalls

On March 25, 2016, Administrative Law Judge Dean Metry found that the U.S. Consumer Product Safety Commission (“CPSC”) case counsel did not prove that high powered, small rare earth magnets (“SREMs”) (1) are defective as sold by Zen Magnets (“Zen”); and (2) constitute a substantial product hazard when sold with appropriate warnings, including proper age recommendations (click here for decision and order).  Judge Metry concluded that because the SREMs are not designed, manufactured, or marketed for play to children under fourteen, the proper and intended use of Zen creates no exposure to danger, such as ingestion by small children.  Judge Metry did rule, however, that Zen needed to recall a small number of magnets that did not contain sufficient warnings or were marketed for ages twelve years and older.

In response to the decision, Shihan Qu, Zen’s founder said:

“The outcome of the administrative adjudication . . . is in, and common sense has prevailed. This represents first and only administrative review of the merits of the CPSC’s claims regarding SREMs. [This] represents 90% victory, and 10% recall. For the CPSC, this is a huge loss: it’s the first time a CPSC administrative action has been challenged in court since 2001.”

Continue Reading Zen Magnets Claims “90% Victory” Against CPSC in Magnet Recall Litigation

There have been many twists and turns over the past four years concerning the CPSC’s regulation of certain high powered, rare-earth magnet sets and its litigation against various entities selling these magnets.  In the latest chapter of the magnets saga, a federal court in Colorado has permanently enjoined Zen Magnets (Zen) from selling magnets purchased from another distributor, Star Networks USA (Star Networks) who later recalled them to settle administrative litigation with the CPSC.

It is illegal to resell previously recalled products under the Consumer Product Safety Act (CPSA).  Zen asserted the products were “fungible commodities” and it had taken them out of the scope of the prohibition by repackaging and rebranding them.  In a victory for the CPSC, the court disagreed vehemently and ordered Zen to recall the magnets.  The court reasoned as follows: Continue Reading Federal Court Makes No Exceptions for “Commodity Products” and Orders Zen Magnets to Stop Selling Previously Recalled Magnets

zen-magnetsAs we wrote about earlier this month, on April 1, 2015, the U.S. Court of Appeals for the Tenth Circuit (“Tenth Circuit”) temporarily stayed the effective date of “the enforcement and effect” of the CPSC’s safety standard for certain high-powered magnet sets.  Specifically, the Court stayed the safety rule pending consideration of the CPSC’s response to plaintiff Zen Magnets’ (“Zen” or “the Company”) motion to stay the rule pending judicial review.  While the temporary stay ordered by the Tenth Circuit was widely reported in the media, what followed soon thereafter – the lifting of that stay – has received scant attention.

On April 14, CPSC Responded to Zen’s Stay Motion.  The Government argued that the rule should not be stayed pending judicial review because Zen could not demonstrate: Continue Reading Tenth Circuit Lifts Stay on CPSC’s Magnets Rule

rare earth magnets consumer product safetyOver the past year, we have blogged about the CPSC’s rulemaking process to regulate high-powered magnet sets via a safety standard as well as the administrative complaints brought by the agency to force multiple companies (e.g., Buckyballs and Zen Magnets) to recall certain magnetic products deemed to be defective by CPSC staff. In a major development that could potentially affect both, last Wednesday (April 1), the U.S. Court of Appeals for Tenth Circuit (“Tenth Circuit”) issued an order temporarily staying the “enforcement and effect of the Safety Standard for Magnet Sets…until further order of the court.” Given the infrequency of such stays, and publicity surrounding both the regulation of these magnets and administrative litigation over whether the magnets should be recalled, this recent news is very noteworthy.

Zen Magnets (“Zen” or “the Company”), who has refused to voluntarily recall its spherical rare-earth magnet sets (“SREMs”) at the request of the CPSC, filed with the Tenth Circuit last December a petition for the court to review the final magnets rule. The CPSC’s final rule establishes safety requirements for these rare earth magnets. However, the practical effect of the rule is a ban on the sale and/or distribution of these products. Last week, on April 1, the date the rule went into effect, the Company filed a Motion to Stay (“Motion”) the enactment and enforcement of the agency’s rule.  Three hours later, the court granted the Motion.

The Tenth Circuit’s stay of enforcement of the rule pending review is significant. Courts typically do not grant motions to stay the enforcement of a final agency rule while reviewing challenges to the rule itself. In fact, litigants seeking a stay of a final agency rule must convince the court that the following factors considered weigh in their favor: Continue Reading Tenth Circuit Stays April 1 Effective Date of CPSC’s Magnets Safety Rule

rare earth magnets consumer product safetyWe do not typically take positions on product specific issues pending before the U.S. Consumer Product Safety Commission (“CPSC”), but the CPSC’s new safety standard for magnet sets demonstrates both why the agency exists and how it can use its regulatory authority to protect consumers. In enacting the safety standard, the agency did not eradicate what are commonly referred to as “rare earth magnets” from the marketplace. Instead, the CPSC set a minimum level of safety for certain types of magnet sets based on the data necessary to take such action under the Consumer Product Safety Act (CPSA), the CPSC’s organic statute.

The practical effect of the CPSC’s action will be to prohibit the sale of magnet sets composed of small but very powerful magnets that have proven both extremely attractive and hazardous to children. Although these types of magnet sets were marketed to adults to manipulate into various shapes for entertainment or stress relief, the individual magnets found their way into the hands, and ultimately, the mouths of children. When accidentally swallowed, the magnets can bond and become trapped within the digestive system in a manner that can cause severe internal damage.

Summarizing the rationale for his vote, Commissioner Mohorovic said in his closing statement at the CPSC’s decisional meeting: Continue Reading CPSC Gets it Right: Unanimously Regulates High-Powered Magnet Sets Through New Safety Standard

magnet balls consumer product safety concernAlthough the final rule currently under consideration by the CPSC sets a performance standard for magnet sets, the practical effect of the new safety standard will be a ban on the future sale or distribution of powerful rare earth magnet sets like Buckyballs and Zen Magnets. During the height of their popularity, these types of magnet sets were commonly marketed to adults for purposes of entertainment, mental stimulation, and stress relief. The Commission will hold a public briefing on September 10th and is scheduled to vote on September 24th.

The briefing package states the risk of injury to consumers (primarily children) is internal damage caused when a person ingests more than one high-powered magnet from a magnet set and the magnets are attracted to each other within the digestive system. This results in intestinal tissue becoming trapped between the magnets and often requires surgery.

The briefing package outlined the following injury and cost/benefit data related to these types of magnet sets and the new safety standard: Continue Reading CPSC Poised to Ban High-Powered Magnet Sets

Two years ago, the U.S. Consumer Product Safety Commission (CPSC) took the uncommon step of filing administrative complaints against multiple rare-earth magnet companies who refused to voluntarily recall magnetic adult desk toy products deemed to be defective by CPSC staff. Specifically, the agency alleged that these companies sold products containing small, but high powered, rare-earth magnets, which pose a “substantial product hazard” to children.

To date, nearly all of the magnet companies have reached a settlement with the CPSC over the government’s claims regarding the magnetic products.  In fact, earlier this year, we wrote about the settlement reached between the CPSC and the maker of Buckyballs and Buckycubes. However, there is one notable exception to those companies who have settled their litigation – Zen Magnets.

After the CPSC announced its most recent settlement with Star Networks, Zen Magnets issued a strongly worded press release stating, in part: Continue Reading CPSC Magnets Trial in December? Zen Magnets Throws Down the Gauntlet; Vows to “Fight Until the End”

This week, the Consumer Product Safety Commission (“CPSC”) will decide whether to hold a full Commission hearing to receive oral comments on a notice of proposed rulemaking on magnet set safety.  If the meeting notice is approved as drafted, the hearing will take place at 10 AM EST on October 22, 2013 and will provide stakeholders the opportunity to present additional comments to the CPSC on the proposed magnet set standard prior to agency staff finalizing the rule.  In August 2012, the CPSC voted to begin a rulemaking process to address safety risks posed by certain high powered magnet sets.  The CPSC published a notice of proposed rulemaking on September 4, 2012.

Many agency stakeholders were expecting this rule to be finalized prior to the end of this fiscal year (September 30, 2013) based on the dates listed in the agency’s recent Spring Regulatory Agenda and projections listed in its 2013 Operating Plan.  However, this meeting notice indicates that likely will not be the case.  Interestingly, the week of October 22 will be Commissioner Nord’s last week at the Commission before the expiration of her holdover year and the last week before Chairman Tenenbaum’s natural term expires and holdover year begins—meaning that Commissioner Adler may be the only Commissioner remaining that voted on the proposed rule when the final rule is eventually presented to the Commission.

Continue Reading CPSC Likely to Proceed with October Hearing on Magnet Rule