Groundhog Day at the CPSC

In the 1993 classic movie, Groundhog Day, the protagonist is caught in a time loop and forced to repeat things over and over again.  This year, on February 2, the CPSC celebrated Groundhog Day by agreeing to settle a timeliness action brought against Michaels Stores.  For the CPSC, in true Groundhog Day-style, the Michaels’ settlement represents a situation that seems to repeat over and over again.

As I have written before, the pre-2017 political management of the agency was pressuring its staff to insist on large penalties that often seemed detached from the seriousness of the underlying violation.  The underlying policy driving penalties was nothing more sophisticated than “bigger is better” with escalating penalty demands that were not linked to more egregious behavior.  However, in September 2017, a court called out this behavior, (in the Spectrum Brands case involving coffee makers) refusing the agency’s demand for maximum penalties ($15+ million) and instead imposed a penalty just shy of $2 million.  Basically, the court found that the agency did not prove its case that such penalties were warranted.

Now comes the settlement in the Michaels Stores case.  Here the agency alleged that Michaels did not report in a timely manner the fact that nine glass vases, out of almost 300,000 in inventory, over the course of a year, broke causing lacerations.[1]  The agency demanded $7.1 million as an appropriate penalty and the company countered with an offer to pay $ 1.5 million to settle the case.  When the company did not cave to the agency’s insistent demands, the Commissioners agreed to send the matter to the Department of Justice to begin litigation.  After several years of hearings, discovery and the expenditure of who-knows-how-much resource by both the government and the company, the parties have now agreed to a settlement—of $1.5 million.

Both the Michaels settlement and the court’s decision in the Spectrum case illustrate the need for the CPSC to reassess how it imposes penalties.  The arrogant posture of demanding the maximum (or close to it) and curtailing negotiations when a company objects needs to change.  Trying to peg the amount demanded to the seriousness of the conduct would be a good place to start and is what the statute and the regulations demand.

The CPSC plays a critical and central role in assuring that American consumers are not harmed by the products they use every day. The CPSC staff does important and very hard work to carry out the agency’s safety mission.  Unfortunately, the agency’s political leadership has made this job more difficult by imposing policies that are often arbitrary and seem to be motivated by headlines to be garnered or records to be broken.  The agency’s mission cannot be realized without the cooperation of all parties in the marketplace, including product manufacturers.  Marquis penalties, imposed for their own sake, in the end do not engender the collaboration needed for effective compliance and, instead, consign the agency to more Groundhog Days.

 

[1] The agency also alleged that Michaels mislead it by not acknowledging it was the importer of the vases even though the supplier of the vases publicly agreed that it was the importer, labeled the vases with its name as the importer and agreed to recall the vases.

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A Wish for the Holidays

 

I have been reading with growing dismay articles that question the commitment of CPSC Acting Chairman Ann Marie Buerkle to protect consumer safety.  Those articles are ill-informed, mean-spirited personal attacks that push an agenda that has more to do with partisan politics than it has to do with consumer safety.

What is especially distressing is that some of this is coming from within the Commission itself.  Consumer safety has always—and it should—engender deep emotion and strong commitment. However, it is critical to the formation of good public policy that differences in points of view are listened to and respected.  Civil and respectful debate must be a part of our process for formulating public policy.  I worry that some, in their zeal to push a position, have forgotten that civil discourse and honest disagreement are the foundation of our government.

Some have accused Acting Chairman Buerkle of being an “extreme outlier” and “very extreme”.  They say that she represents a “radical departure” from the agency’s safety mission.  They also accused her of voting with industry 100% of the time. What silliness!

An analysis of her votes and the statements explaining them shows that she has taken principled positions that are fully appropriate. Most of her votes diverging from her colleagues have been on procedural and process grounds.  For example, she has opposed certain civil penalties, not because she believed the company should get a pass but because of the lack of rigor and consistency in the way the agency imposes penalties. She has been critical of the commission’s penalty policy that seems to be based only on “bigger is better” and not on helping regulated entities understand how to comply with a statue that is judgement-laden and whose interpretation it seems changes with the political winds.   In no way can her positions be equated with “dismantling consumer protection,” but that is what critics say.  She criticized the commission’s rule on phthalates not because she wants to support chemical companies (oh, come on. . .) but because she is rightly concerned by the direction and willingness of earlier political leadership to ignore current data.  The portable generator rule raises real questions of jurisdiction and resources.  If a majority of commissioners wish to ignore these issues, so be it, but why is it wrong to point out the problem? Her critics have either not read her statements or do not wish to hear facts that get in the way of predetermined political views.

Acting Chairman Buerkle is perhaps the most qualified person ever to be nominated to be chairman of the CPSC.  While she brings solid legal skills to the office, notably, she is also a trained health professional—a skill set never before on the commission—and so brings a point of view that is essential to the important issues the agency must deal with.  Finally, she is the mom of six kids.  If there was ever a real consumer—as opposed to a political partisan—it is her.

My holiday wish is that the debate over the direction of the CPSC can be conducted honestly at a policy level.  Questioning the character of a dedicated public servant in order to advance a political agenda is dispiriting.  With respect to the CPSC, many have deserved coal in their stockings for too long.  It’s time to say these tactics are not right.

 

 

 

 

 

 

 

Not Knowing When to Quit

Recently I had the great honor of being appointed a fellow at the University of Pennsylvania Law School.  As part of those responsibilities, last month I spoke to the administrative law class on how regulators balance competing priorities, using the CPSC’s actions on Zen Magnets[1] as one example.

The Zen Magnets case is especially relevant since it dramatically illustrates how regulators, acting in the first instance with the best of intentions, can pursue their regulatory and enforcement goals with such fervor as to distort and pervert the consumer safety objectives central to the agency’s mission.  I have written extensively (see here and here) about the procedural and due process issues that the agency threw to the winds in pursuing Zen Magnets.[2]  As a result of the agency’s zealousness, expansive reading of the statute, and lack of care, it lost the administrative recall case, with the Administrative Law Judge finding, in part, that Zen’s warnings were sufficient and that the agency did not prove that a defect existed. When the related regulation banning all small powerful magnets was challenged, the 10th Circuit Court of Appeals found that the administrative record showing injury from the product and considering benefits of the product was deficient.

Nevertheless, the battle rages on.  In a move that surprised no one, a majority of the commissioners recently voted to overturn the ALJ’s findings that SREMs are not defective and ordered Zen to immediately stop sale of the product.  The parties agreed to delay the effective date of that stop sale order to allow for an appeal to be filed.

What is especially interesting about the majority’s opinion overturning the ALJ’s decision is its breadth in determining that consumer misuse of the product, standing alone, can form the basis for a product defect determination. However, the regulations do not support this conclusion as clearly as the majority contends.  The regulations discuss consumer misuse in two contexts.  First, the regulations present an example of a defect when product instructions or safety warnings are inadequate and this inadequacy contributes to the misuse of the product. (See 16 USC §1115.4 (d)) Obviously, this is not the situation with Zen Magnets.  Second, the foreseeability of consumer misuse is listed as one factor to be considered and balanced with other appropriate factors in determining whether the risk of injury rises to the level of making the product defective.  (See 16 USC §1115.4)

However, it is a stretch to say that injuries occurring solely from consumer misuse of a product makes a product defective, especially in the presence of strong package warnings.  One need not look very far to find examples of products where the commission has come out the other way.  For example, small button batteries present a similar ingestion hazard to magnets but with even more severe injuries, many more incidents and a number of child deaths.  Yet the commission has determined that package warnings and consumer education adequately address this more significant risk.  Choking hazards from small parts in toys are well-established risks.  Every year children choke on small parts in toys found in the family toy chest.  Yet the commission has determined that package warnings are sufficient for toys designed for children older than three, even knowing that many households have children of varying age groups and that the toy with the small part may be accessible to younger children.

Finally, the commission opinion provides no boundaries that can be applied beyond this case between foreseeable consumer misuse and obviously risky behavior.  The take-away is that if a child is injured, even though the injury occurs because an adult negligently misuses the product or disregards warnings and instructions, then the product may well be deemed defective. The regulations do not necessarily lead to that conclusion but the current commission’s reading of them suggests that.

From a safety standpoint, the problem is that all this has led to a perverse result where safety considerations take a second chair to winning the case.  The CPSC has devoted a significant amount of public resource to forcing Zen Magnets off the market. So far Zen’s record in court is much better than is that of the agency.  With all its guns trained on Zen, the agency has allowed magnets without warnings to enter the country and be sold freely.

Zen has approached the agency to find a solution that would allow magnets to be sold but with aggressive restrictions on packaging, warnings, age restrictions and sales channels. In fact, Zen recently petitioned the CPSC to issue such a regulation.  With little fanfare (and without even notifying the petitioner), the agency has requested comment on the petition and the deadline for comments expires next week.  It almost seems like the agency does not want to hear what the public thinks of this idea.  Yet such a rule may provide the agency with a mechanism for policing the marketplace while still allowing the product to be sold with a strong safety message.

The Zen case is an example of the agency, in its zeal to address a real safety concern, losing sight of the ultimate safety goal.  In terms of regulatory priorities, the agency is putting winning above safety—since on its current course, it may put out of business a company trying to address the safety of its products while it ignores the many other magnet products that are being sold with no warnings or safety information.  In this case, if the agency wins, consumers loose.  It’s time to quit.

 

 

 

[1] Zen is a very small Colorado based company that sells small rare earth magnets (SREMs) primarily on the internet.  Its packaging is difficult to open and the product has multiple warnings of ingestion hazards.

[2] Among other things, the CPSC wrote to magnet retailors urging stop sales prior to negotiating recalls, thereby destroying retail market rather than seeking an injunction against sale as provided by the statute.  Individual commissioners made public statements about the safety of the product prior to voting indicating a predetermination of the issues.  When the agency voted to sue for a recall, the staff amended the complaint to add counts and the company principal without a vote of the Commission.

Commissioner Mohorovic Will Be Missed

Commissioner Joseph P. Mohorovic has announced that he will be resigning from the CPSC effective Friday, October 20.

Much has been said – and will continue to be – about Commissioner Mohorovic’s service on the Commission. He brought an extraordinary intellect, a mountain of practical experience, a great sense of humor, and an unreserved eagerness to hear from all sides on all issues. The Commission was better for his presence, and it will be diminished by his absence.
What won’t be diminished is the marked tendency of a majority of the current  Commission to impose its political will regardless of what anyone else – Congress, consumers, data, or CPSC’s own staff – has to say on any given matter. We’ve seen that hubris on display on two notable recent occasions. First, the Commission voted to convene a Chronic Hazard Advisory Panel (CHAP) to look into organohalogen flame retardants, while clearly telling the CHAP what opinion they expect it to form, not only through Commissioners’ rhetoric but also through a pre-judgment conclusory “guidance” document published in the Federal Register–all of this contradicting advice from the agency staff. Second, just this week, the Commission majority decided to ignore clear scientific evidence that demonstrated that not all phthalates are the same and to ban even the most innocuous ones because chemicals sound scary and because they are politically compelled to be angry at Exxon (a maker of phthalates) all the time.
I suspect that now, with a 3-1 majority and lock-step voting, what comes out of the CPSC in the next weeks or months will advance a particular political agenda but will have little to do with science, data, or even safety.   But we’ve also seen CPSC’s hubris come back to bite it, as I wrote a couple weeks ago.  I sincerely hope that Commissioner Mohorovic’s departure gives the White House and the Senate some added impetus in not only nominating and confirming his replacement, but also in confirming the current well-qualified nominee and a permanent chairman.
New blood brings new ideas and points of view.  As we have seen from the dogmatic and politically driven but not very thoughtful decisions of the last few weeks, the CPSC is is desperate need of a transfusion.

The Price of Hubris

Late last week, the CPSC community received one of its rarest gifts: A judicial opinion in a litigated civil penalty case. Judge William Conley of the U.S. District Court for the Western District of Wisconsin calculated the penalty Spectrum Brands owed for failing to report handles breaking off of Black & Decker SpaceMaker coffee pots and for selling 641 units after they had been recalled. The time Judge Conley took (over seven months) was surprising; the result was stunning. While the government argued that the maximum penalty of $30.30 million could be assessed for the two separate violations, Judge Conley determined that a much smaller number was appropriate: $821,675 for the failure to report and $1.115 million for the sale of recalled goods.

Pundits of CPSC enforcement policy will devour every morsel of the Spectrum case and I’ll be eager to read their work. But what I find most compelling is the extent to which this result highlights what, for the last eight years, has been the defining characteristic of CPSC’s attitude toward the companies it regulates: Hubris.

Judge Conley wrote that CPSC “failed to establish” the severity of the alleged defect, “introduced no admissible evidence regarding any injuries that a consumer actually sustained,” and “offered no evidence with respect to either [a history of non-compliance or a failure to respond to inquiries],” two factors CPSC calls out in its penalty rules. In short, CPSC phoned in its argument. The agency was so persuaded by the merits of its own position that it assumed Judge Conley would defer to its inherent – and, presumably, inerrant – wisdom.  Instead the trier of fact put the agency through its paces and demanded proof that the other side was as guilty as CPSC asserted it to be.

The agency’s arrogance is hardly new. In 2009, the CPSIA’s ten-fold penalty cap increase kicked in. Since then, CPSC’s political leaders have urged staff to drive penalty settlement totals ever higher, with little regard for tethering any penalty to the merits of the case. Last year, at the annual symposium of the International Consumer Product Health and Safety Organization (ICPHSO), then-Chairman Elliott Kaye called for a “double-digit millions” penalty. Mere weeks later, his attorneys delivered a $15.45 million settlement with Gree Electric Appliances, Inc. It is hard to escape the narrative of the then-Chairman driving for bigger numbers for the sake of bigger numbers.

At the same conference as Kaye’s “double-digit millions,” CPSC’s Office of General Counsel asserted that, because any product sold in any quantity could technically be subject to a maximum penalty, any demand below that already represented a magnanimous compromise on the agency’s part. Of course, if that had been Congress’ intent, there would have been no need for either statutory factors or a requirement for CPSC to interpret them, but this wasn’t enough to keep CPSC from expecting companies to be grateful any time it didn’t kick them quite as hard as it could. Bottom line is that the penalty amounts demanded by the agency have been steadily going up, with no attempt to link each higher penalty to more egregious behavior.

Chairman Buerkle and Commissioner Mohorovic consistently, but so far unsuccessfully, have been arguing for a penalty policy that is something more than “bigger is better.”  Now the court in Spectrum has agreed, going through a rigorous analysis of how the statute and the regulations should be applied to come up with a penalty amount.  Of course, this analysis is what the agency should have been doing all along but was not. Instead the agency seems to be convinced that its word is gospel, any penalty number it might choose to name is justifiable, and the only ones complaining are the companies who care nothing about their safety obligations.

The CPSC expects everyone else to accept this caricature without question. And for some time, that assumption has been correct. Companies have been quick to settle and slow to criticize, calculating that the fight isn’t worth winning.  However, CPSC’s blinkered compulsion to squeeze harder is encouraging more resistance. As one example, CPSC is currently litigating another failure-to-report penalty case against Michaels Stores–for not rushing to inform the agency that glass breaks.

Spectrum and Michaels may well see themselves members of a growing club of companies who are pushing back against the CPSC’s imperiousness. They are reminding us that, sometimes, the only way to deal with a bully is to punch back. If it doesn’t sincerely examine its own flawed, self-important assumptions, CPSC can expect to take more punches from companies and from courts. And, like all victims of hubris, it will have only itself to blame.

Remembering John Byington

It was with real sorrow that I learned of the passing earlier this month of S. John Byington, the former chairman of the CPSC.  Like many others in the product safety world, I counted John as a true friend who was always ready to provide valued advice and counsel.

A pharmacist and a lawyer by training, John brought a respect for both law and science to the agency.  As chairman from 1976 through 1978, during the early years of the agency when it was easy to demagogue issues, he insisted that the agency have a strong basis in both science and the law before tackling the important issues before it.

John was a man of many interests.  After leaving the CPSC, his career included not only traditional law practice but also a number of entrepreneurial pursuits as varied as starting a microbrewery and a leading legal recruiting firm, LegalLeaders.  I had lunch with John earlier this year and, as always, marveled at his enthusiasm for life and his willingness to reach out with friendship and caring to those around him.  He made important contributions to product safety and will be missed.

A Few More Bites at the Apple

Next week the CPSC Commissioners will hold a hearing on whether to grant a petition to ban a wide range of consumer products containing organohalogen flame retardants (OFRs).  The petition, filed in 2015, is overly board and seeks to treat in the same way a wide class of chemicals that differ one from another. It seeks to ban a broad range of consumer products with OFRs that vary in use and exposure patterns. It seeks a ban in spite of the fact that the scientific data to justify this action is, charitably, sketchy at best. For these and many other reasons, the petition, on its face, presents sufficient reason for denial.  (See here.)

Nevertheless, the agency held a hearing on the petition in late 2015, put it out for public comment, and has devoted a considerable amount of staff resource to considering the issues presented by the petition.  After a thorough examination of the data in the petition, the hearing record and the public comments, in May the agency staff recommended that the petition be denied for a variety of reasons.  In spite of all this, the Commissioners apparently do not believe that they have sufficient information to make up their minds on the matter and so are having yet another hearing.

It is not clear what this hearing is intended to accomplish, other than to give the petitioners another chance to explain why the agency staff was in error in its conclusions. Presumably some Commissioners will offer helpful hints on how to recast the petition to avoid the shortcomings identified.  Perhaps there will be some conversation about why the petitioners brought the issue to the CPSC when it is more properly before the EPA.  No doubt some on the dais will decry the statutory requirement to balance risks with costs, a requirement the petitioners cannot come close to meeting.

While the hearing will be interesting, one wonders why the agency has devoted such a significant level of resource to this activity.  If the Commissioners vote to overrule their staff and grant the petition, then the level of activity required for rulemaking would have the agency busy for years to come.  If the Commissioners agree with the staff and vote to deny the petition, then what was the point of the hearing?  Among other things, it certainly raises questions about the stewardship of public resources.

 


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