Date: Sep 23, 2010
A U.S. Environmental Protection Agency (EPA) Administrative Law Judge (ALJ) has ordered a California retailer, "99 Cents Only Stores," to pay a civil penalty of $409,490 for distributing and selling three unregistered or misbranded pesticide products manufactured and branded by other companies in violation of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA). Specifically, the ALJ found the retailer liable for one count of selling an unregistered cleaning product bearing pesticidal claims, one count of selling a registered pest control product bearing labels that were "inside out, upside down, and/or misaligned," and 164 counts of selling a common, bleach-containing household cleaner called "Bref" that was unregistered and bore the claim "disinfectant."
This penalty, described by EPA as "the largest contested penalty ever ordered by an EPA [ALJ] against a product retailer under [FIFRA]," represents a new phase of EPA enforcement efforts aimed at retailers. The 99 Cents Only Stores civil penalty is one of a handful of penalties that EPA has levied in recent history against retailers. The ALJ imposed the penalty despite:
(1) the vendor's warranty that it would furnish goods "produced, labeled and identified in compliance with all applicable [laws]"; and (2) the retailer's conclusion that Bref was FIFRA-compliant after inspecting a product sample prior to purchase.
The ALJ rejected these defense and penalty mitigation efforts. Applying a strict interpretation of the FIFRA § 12(b) "guaranty" exemption from liability, the ALJ found that "hypertechnical" deficiencies in the vendor's warranty prevented the creation of a valid guaranty that could release the retailer from liability. For example, the warranty did not contain the address of the vendor, and the retailer did not prove that it received the goods in unbroken packages, as required under section 12(b).
Addressing the retailer's due care argument under § 14(a)(4), the ALJ held that "for such [an argument] to carry the day, this Tribunal would have to find that Respondent was not negligent and, in fact, undertook such measures as may be held reasonably required of it to avoid distributing the unregistered pesticide." The ALJ suggested that such measures could include implementing a policy requiring product labels to be examined and, in fact, examining the delivered products and comparing them to samples previously inspected and approved to ensure that new labels have not been substituted. In the ALJ's opinion, such measures are "rather nominal."
It appears the real basis for the Agency's imposition of this staggering penalty was that 99 Cents Only Stores sold over 650 bottles of Bref after receiving Notices of Violation, notwithstanding the retailer's issuance of product recall notices to all of its stores.
The 99 Cents Only Stores civil penalty is consistent with other EPA enforcement efforts we have seen where investigators have looked broadly at all pesticide (and potentially) products on sale at a retailer rather than focusing efforts on products in a particular category. Retailers must ensure that a vendor guaranty precisely complies with the § 12(b)(1) exemption requirements and then vigilantly monitor incoming product to ensure it is as represented. EPA's enhanced efforts to impose liability on retailers will ensure that retailers in turn will increase their guaranty and indemnity demands from vendors and generate disputes as to the extent of vendor responsibility for retailer liability.
 See In re 99 Cents Only Stores, Docket No. FIFRA-09-2008-0027 (June 24, 2010).
 7 U.S.C. § 136 et seq.
 Although bleach is known to have a pesticidal effect, bleach products are not considered pesticides under FIFRA unless a "pesticidal claim is made on their labeling in connection with their sale and distribution." 40 C.F.R. § 152.10(a).
 In 2007, EPA ordered Safeway, Inc. to pay a civil penalty of $675,000 for allegedly selling unregistered household cleaning products bearing labels claiming that the products disinfect and remove mold and mildew. See http://yosemite.epa.gov/opa/admpress.nsf/9e50770d29adb32685257018004d06fd/26c57e54158f90618525730f006bec14!OpenDocument. The Safeway case is distinguishable from 99 Cents Only Stores in that the Safeway products at issue carried the Safeway brand name rather than another company's brand name.