Six years into its battle, tiny-magnet maker Zen Magnets has won another key round against the Consumer Product Safety Commission in court, persuading a Colorado federal court to reverse a Commission order ordering a halt to its sales [Nancy Nord] A larger and at the time better known maker of tiny magnet sets, Buckyballs, folded under the Commission’s pressure. More on Zen Magnets’ fight here and here.
A Tenth Circuit panel has sent the Consumer Product Safety Commission back to the drawing board in its attempt to ban tiny magnet sets intended for adult use as a desk toy or creative outlet accessory. It ruled that the commission had not conducted an adequate cost-benefit analysis of the ban in line with the requirements of its enabling statute. We covered the CPSC’s legal vendetta against the defiant maker of BuckyBalls; the last surviving company to sell the product is Zen Magnets, which now is allowed to resume operations while the Commission goes back to the drawing board, assuming it decides to do so. [Nancy Nord] And: Nov. 29 statement from Zen Magnets; Abby Schachter, Weekly Standard; Brian Doherty, Reason.
Last year the Tenth Circuit struck down the CPSC’s ban on tiny desk magnet sets. Pursuing the legal consequences of an earlier recall order, however, the CPSC has required the destruction of $40,000 worth of rare-earth magnets from the inventory of defiant manufacturer Zen Magnets. You can watch the resulting “funeral” at my new Cato post.
According to the Consumer Product Safety Commission:
The U.S. Consumer Product Safety Commission (CPSC) is announcing a voluntary recall of all Buckyballs and Buckycubes. … Refunds will be processed through a Recall Trust that will be funded by Mr. Zucker, but created and controlled by CPSC.
According to Zucker in a press release:
The settlement amount is less than 1% of the original $57 million that the CPSC estimated a recall to cost and is not a fine or penalty….
In February of 2013, the CPSC took unprecedented action by naming Zucker personally under the controversial Park Doctrine as an officer of the company that sold Buckyballs®.
This happened after Zucker, in what was itself an unusual if not unprecedented stand for an executive at a firm subject to CPSC regulation, took a vigorous public stand defending his product against the commission’s recall demands and even employed jokes and caricatures to make fun of CPSC commissioners. Earlier coverage here. More: Nancy Nord.
A year ago, I wrote: “It’s rare for a regulated company to mount open and disrespectful resistance to a federal regulatory agency, but that’s what the maker of BuckyBalls, the popular desktop magnetic toy, is doing in response to the Consumer Product Safety Commission’s effort to ban its product.” The maker in question had devised cheeky, sarcastic ads asking why other products with injurious potential (coconuts, hot dogs) weren’t banned on the CPSC’s logic.
One reason it’s rare to mount open and disrespectful resistance to a federal agency is that agencies have so many ways to make businesspeople’s lives unhappy. This spring, breaking new legal ground, the CPSC reached out and named CEO Craig Zucker personally as a respondent in its recall proceeding. According to a Gibson Dunn commentary,
For the first time, the CPSC is pursuing individual and personal liability against an executive for a company’s alleged violations of the Consumer Product Safety Act. Although it remains to be seen whether the CPSC will adopt this approach in other cases, at minimum, this demonstrates just how far the CPSC is willing to push the envelope.
It’s just the latest example, the law firm says, of a pattern in which “the CPSC has aggressively enforced its governing statute and regulations, repeatedly pushing the limits of its expanded authority.”
As Morrison & Foerster says in its client alert:
Despite [Buckyballs maker] Maxfield and Oberton’s aggressive publicity campaign against the CPSC, the CPSC continued to pursue its complaint. Maxfield and Oberton folded and the company dissolved in December 2012, making the complaint moot. In February 2013, the CPSC moved for leave to file a second amended complaint naming the former CEO, Craig Zucker, both individually and as an officer of Maxfield and Oberton. The CPSC requested the same relief against Zucker as it had against Maxfield and Oberton—i.e., recall, refund, and compliance reports.
While Zucker has “argued that he could not be liable as he did not personally manufacture, distribute, or sell the product at issue,” CPSC has invoked something called the responsible corporate officer doctrine, approved by the Supreme Court in U.S. v. Dotterweich (1943) and U.S. v. Park (1975), which “permits responsible corporate officers to be held liable for the actions of the corporation, even in the absence of personal guilt on the part of the individual.”
P.S. Zen Magnets LLC of Denver, which markets a similar product which it says has not been linked to injury reports, and which has refused to withdraw its product from the market despite CPSC’s demands, is calling attention to a poll that it says shows the U.S. public overwhelmingly in favor of leaving recreational rare earth magnets on the market labeled for adult use (& Brian Doherty, Reason, Joe Patrice/Above the Law, Alexander Cohen/Atlas; cross-posted in slightly different form at Cato at Liberty).
P.P.S. Noted at the Cato version: “If the move succeeds, Zucker could be ordered to foot the bill personally for offering consumers full refunds for all products sold, reimbursing retailers for recall costs, and various other expenses potentially reaching into the millions.”
Buckyballs are highly popular supermagnetic desktop toys for adults and labeled against use by kids. Nonetheless, some kids obtain the tiny balls and swallow them, with harmful or even lethal results. The Consumer Product Safety Commission has responded with an unusually aggressive show of legal muscle to force the product off the market: while suing the manufacturer, it strong-armed retailers into suspending Buckyball sales, thus cutting off the manufacturer’s revenue while a court decides whether the commission had an adequate basis in law and fact for its action. [Nick Farr, Abnormal Use; manufacturer statement; Time; ABA Journal; Michelle Malkin; Point of Law]
More: “CPSC wants to put a child-proof cap on your life.” [@radleybalko]
- “Special economic zones can be anything from tools of crony capitalism to seeds of a freer world order.” [Tom W. Bell on The Political Economy of Special Economic Zones by Lotta Moberg]
- 33 state constitutions have “baby Ninths,” which like federal version suggest existence and protection of some unenumerated individual rights. Potential there [Anthony B. Sanders, Rutgers Law Review forthcoming/SSRN]
- Judge hears argument on Seattle law ordering landlords to accept first otherwise qualified tenant who applies [Heidi Groover/The Stranger, earlier]
- Labeling of food, other products as “natural” helps keep class action lawyers in business [Julie Creswell, New York Times]
- SESTA, FOSTA, and trafficking: L.A. Times editorial warns on dangers of abridging Section 230 protections for Internet freedom [earlier here, here, etc.]
- Saga of Zen Magnets versus the CPSC, told in detail [Alan Prendergast, Westword (Denver); earlier; related, Nancy Nord]
- Elected-official governance of how state university law centers sue local governments = “interference”? [J. Clara Chan, Chronicle of Higher Education; Jane Stancill, News and Observer; Ana Irizarry, UNC Daily Tarheel; James G. Martin Center for Academic Renewal, Jesse Saffron, Alex Contarino, Frank Pray]
- Zen Magnets update: “How One Man’s Quest To Save His Magnets Became A Massive Regulatory Battle” [Jeremy Kutner, Huffington Post, earlier]
- “The solar eclipse is no longer mysterious, supernatural, foreboding, or ominous.” Or cause to delay a trial [court order in U.S. v. Bishop, M.D. Fla.]
- Trump vs. business: “His recurring message is that any executive who doesn’t do as Trump wishes can expect retribution from the most powerful man on earth.” [Steve Chapman, Chicago Tribune/syndicated]
- Wales: “Mute and autistic girl was seized from family and locked up after false abuse claims” [Lucy Johnston, Express] On “facilitated communication” and the like, see earlier posts here and here;
- California bill would extend pre-litigation subpoena power, a powerful tool in inflicting cost and loss of privacy on targets, from current holders (state AG, county DAs) to city attorneys in San Francisco, L.A., San Diego, and San Jose [Civil Justice Association of California Bulletin; Amanda Robert, Legal NewsLine]