With an apology to J.K. Rowling, I note with some awe that Shihan Qu and Zen Magnets has once again bested the dementors at the CPSC to live another day. Yesterday, the United States District Court for the District of Colorado reversed and remanded the Commission’s Final Decision and Order (FDO) ordering Zen to stop sale of its small rare earth magnets (SREMs).
To review, the CPSC brought an administrative complaint against Zen in 2012 to force a mandatory recall of its SREMs product. In tandem with this administrative action, in 2014, the Commission finalized a rule banning the future sale of SREMs. Zen challenged the rule and in 2016, the Tenth Circuit vacated and remanded the rule, finding that the evidence the Commission relied on did not support the rule.
Also in 2016, the Administrative Law Judge in the Zen administrative complaint found that the agency had not proved that the magnets were a hazard when accompanied with proper warnings and allowed Zen to continue sale. The agency lawyers appealed this decision to the Commissioners. Given the public statements three of the Commissioners had made about the merits of the case, it was no surprise that the Commission overturned the ALJ’s decision and issued the FDO to force Zen to stop sale of its SREMs. Zen appealed this decision, and the court has now ruled in Zen’s favor.
The court’s decision was a curious one. First, the court considered the substantive rationale offered by the Commission in its FDO and concluded that the agency did not act in an arbitrary and capricious manner—the standard for overturning the agency’s decision. After an analysis of the Commission’s reasoning, the court found, among other things, that “[T]hough a court might come to a different conclusion if it were in the Commission’s role, that does not render the Commission’s finding arbitrary and capricious.”
However, the court then went on to consider whether the due process afforded Zen met constitutional standards. Here the court found that the Commission fell short, stating that “Zen’s due process rights were violated because Zen was deprived a fair and impartial tribunal” in its appeal from the ALJ’s decision. Specifically, the court found that the public statements of certain Commissioners prior to the FDO decision demonstrated such a closed mind by decision makers that it was clear that Zen was not provided an impartial tribunal. The court then, strangely, concludes that while the Commission’s decision was not arbitrary and capricious, it was nevertheless unconstitutionaly tainted by the obvious prejudgment of certain Commissioners. The result is that Zen wins and the CPSC loses.
I will leave to others to debate the nuances of the court’s decision. What bothers me greatly are the safety implications of the CPSC’s actions here. Zen has made clear from the get-go that it does not oppose reasonable safety regulations of its product. Indeed, it has petitioned the CPSC to issue a regulation with rigorous requirements for packaging and labeling. Instead, the agency has petulantly insisted that it will accept nothing less than the complete capitulation of the company to the agency’s demands that it cease sale of its only product. This insistence has led to repeated “slap-downs” by those judicial bodies that have looked at the issue.
From a safety standpoint, the CPSC’s ineffectual regulatory and litigation strategy has resulted in opening the marketplace to companies who, unlike Zen, have no interest in promoting safe use of SREMs. Because the agency’s position on both the regulation and the recall of the Zen product have been overruled, the market is now wide open, with no requirements for safety precautions applicable to the product in place. This result is on the agency. If any injuries involving this product occur in the future, the agency must look internally for the cause. Their incoherent policies, in large part, bear the blame.
In 2012, Zen was viewed by most as a small company making a principled but quixotic stand against the overreach of the federal government. Like a phoenix, Zen has prevailed against overwhelming odds. But, beyond the story of a small company prevailing against the federal government, is the concern that, in this case, the federal government is not effectively protecting the safety of consumers. Because of the CPSC’s actions, the marketplace is less safe. That is on the agency and they need to answer for this result.
Tell CPSC What You Think
Published June 30, 2017 Burden Reduction , Comment Request , Consumer Product Safety , Nancy Nord , Recalls , regulation , safety Leave a CommentTags: CPSC, Nancy Nord, OFW, Recalls, regulation, safety
One of the very positive hallmarks of the new leadership at the CPSC is a desire to hear from all interested stakeholders on how to more effectively push forward the agency’s safety mission. The agency has offered several opportunities for input and for those of us who share that goal, these opportunities should not be ignored.
First, the agency will be conducting a workshop on ways to improve the recall process, including the effectiveness of recalls. Recall effectiveness is a perennial topic of conversation at the agency so it is gratifying that the agency is again looking at this topic, but hopefully from a new perspective. Both as a Commissioner and now, in private law practice, I often hear complaints about the opaqueness of the process. Participation in the workshop offers an opportunity to give real suggestions on how to make the recall process work better. The workshop will be held on July 26, 2017 at the agency headquarters in Bethesda. Those interested in participating must sign up with the agency no later than July 3. Here is more information about the workshop.
Second, the agency is requesting comments on ways to reduce the regulatory burden imposed by agency rules in ways that do not diminish safety. This effort is especially welcome since many of the regulations issued by the agency over the past eight years did not consider ways to accomplish safety goals in less burdensome ways. When Congress told the agency to try to find ways to reduce the burden of testing, the agency went through a fantasy effort to comply and, not surprisingly, came up with very little. Indeed, about the best it could do was exempt from testing toys made entirely from untreated wood from the trunks of trees (but not the branches—who knows what could be in branches!). (See here.)
Reducing unnecessary regulatory burden is important since this engenders respect and support for the agency. Rules that are outdated, overly complex, or impose requirements without regard to real and measurable safety results should be identified and either changed or repealed. The agency’s effort to collect information on burdens imposed by its regulations is a welcome first step in this process.