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Consumer Protection Alert

Date: May 15, 2014

Product Safety Edition

CPSC Settles with Buckyballs’ Maker and Former CEO

The Consumer Product Safety Commission (CPSC), Maxfield & Oberton Holdings LLC, and the company’s former chief executive officer agreed to settle the agency’s lawsuit seeking to force a mandatory recall of the company’s Buckyballs and Buckycubes magnetic desk toys. Craig Zucker, the former CEO, will pay $375,000 to fund a trust to conduct a recall of the subject products. This ends the years-long legal battle that drew national attention over the company’s steadfast position that its products were not unsafe if used properly. The CPSC’s staff also advanced a legal argument that is novel in the CPSC context: that the agency can seek to force a company’s corporate officer to conduct a mandatory recall under the so-called “responsible corporate officer” doctrine, as discussed in this background piece.

The Commission voted 2 to 1 to accept the settlement, with Commissioners Marietta Robinson and Ann Marie Buerkle voting to approve the settlement and Acting Chairman Robert Adler voting against it. All members of the Commission had something to critique in the agreement and the procedure leading up to its approval. Chairman Adler criticized the recall trust’s size, structure, and the potential future return of much of the trust to Zucker. Commissioner Robinson was not satisfied with the information provided to the Commission for its consideration regarding the settlement. Commissioner Buerkle disagreed with the addition of Zucker to the complaint without a Commission vote. For his part, Zucker expressed satisfaction that the complaint had been settled and noted that he spent more on legal fees than he would spend on the settlement.

The settlement here leaves unanswered the question of what an administrative law judge thinks of the CPSC’s theory of liability.  It also leaves for another day the resolution of arguments about the ability of the CPSC to pursue executives (current or former) at companies that it argues should be required to recall their products under the responsible corporate officer doctrine. Given the support of a majority of the Commission for action as least as aggressive as occurred here, consumer product companies should not be surprised to see similar efforts to target companies and company officials for the foreseeable future.

CPSC Seeks Greater Input on Proposed Amendment to Its Certificate of Compliance Rule

The CPSC said it would reconsider a proposed amendment to its “Certificate of Compliance” rule (Certificate Rule) as part of its regular mid-year adjustment to its operating plan (the staff’s proposed revision to the Fiscal Year 2014 Operating Plan is here). As part of this reconsideration, the CPSC will re-open the comment period and conduct a public workshop with stakeholders to discuss how to improve the Certificate Rule.

The amendment, initially proposed in May 2013, would have made significant reporting changes, including changing the burden of responsibility for providing certificates of compliance from the manufacturer to the private labeler. In an effort to streamline the import process, the amendment also would have required importers of consumer products to file certificates electronically with the U.S. Customs and Border Protection (CBP) at the time of entry or when filing the entry or entry summary. The amendment also would have required manufacturers, importers, and private labelers to produce certificates demonstrating that their products are not subject to a CPSC ban.

The CPSC originally planned to approve a final rule by September 2014. After receiving criticism from 32 trade associations and 58 public comments regarding the proposed amendment, however, the CPSC notice announces the Commission’s intent to delay finalizing the rule and to seek broader stakeholder input. Among the concerns that triggered the CPSC’s decision to reconsider the amendment were:

  • changing the responsibility for providing certificates to private labelers from domestic manufactures, as previously required;
  • requiring certificates demonstrating that a product does not fall under a CPSC ban;
  • requiring names of foreign manufactures to be listed on certificates;
  • requiring certificates for products subject to exemptions; and
  • prohibiting password protection for certificates posted on the Internet.

The CPSC has not announced the details of the workshop, but it will undoubtedly attract wide participation from manufacturers, importers, shipping interests, and consumer advocacy groups.

Adler Nominated for Second CPSC Term

CPSC Commissioner Robert S. Adler will be nominated to serve a second seven-year term, the White House announced on May 14, 2014. He has served on the Commission since 2009, and previously worked as an attorney-advisor for two former Commissioners over a decade from 1973 to 1984. As the current Acting Chairman since last fall, Adler has maintained the course set by his predecessor Inez M. Tenenbaum, including a more vigorous pursuit of alleged violators and support for Consumer Product Safety Improvement Act-era (CPSIA) regulatory reforms. His current term ends in October 2014. He joins Elliot F. Kaye and Joseph P. Mohorovic as nominees, the former for the post of Chairman, the latter for a Commissioner slot (more details here).

For more information about product safety and other consumer protection–related issues, contact Sheila A. Millar at millar@khlaw.com or 202 434-4143; or JC Walker at walker@khlaw.com or 202 434-4181.