Morrison Foerster’s Class Dismissed blog provides insights, recommendations, and timely reports on the latest defense news, developments, and trends in the most current class actions lawsuits and product liability issues that affect consumer-facing companies. Through Class Dismissed, attorneys from our nationally recognized Consumer Class Action and Products Liability practices offer a real-time assessment of the developments in matters that are shaping the industry. This blog examines the full spectrum of consumer-related class action and product liability lawsuits ranging from false advertising, privacy, consumer product safety, ADA, food misbranding, TCPA, environment, retail, and government actions as well as nationwide and multidistrict litigation class actions.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Partner

Julie Park protects her clients’ products no matter what kind of product issue they face—whether it is planning for new product development, recalling an existing product, or defending clients against product liability or consumer class actions. Drawing on her deep technical and legal expertise, Julie counsels clients on consumer product safety regulation and pharmaceutical and medical device preemption while also managing complex and multijurisdictional litigation both in state and federal court.

Julie Y. Park

<div class="videoWrapper"><iframe frameborder="0" class="sticky-video" allowfullscreen="1" title="Meet Penny Preovolos, Litigation Partner" src="https://www.youtube-nocookie.com/embed/hv7hYn-Bl7c?rel=0&showinfo=0;vq=hd1080" title="iframe"></iframe></div>Penelope has served as lead counsel in major consumer class actions and antitrust cases for more than 35 years, successfully representing high-profile defendants in antitrust, consumer fraud, and product defect matters. Her clients span a range of industries, including consumer electronics, technology, retail, publishing, food and beverage, cosmetics, and household products. According to Chambers USA, Penelope has a “great reputation for antitrust and product liability work” and is a “superb all-around antitrust lawyer.”Penelope was named the 2019 Antitrust Lawyer of the Year by the Antitrust, UCL, and Privacy Section of the California Lawyers Association. She was co-chair of MoFo’s antitrust practice for 14 years. She has served as chair of the Antitrust and Trade Regulation Section of the State Bar of California and as a member of the Ninth Circuit Advisory Committee on Local Rules and Operations. She is an editor of and frequent contributor to Morrison & Foerster’s <a href="https://classdismissed.mofo.com/">Class Dismissed blog</a>, as well as a frequent speaker about class action and antitrust issues.More About PenelopePenelope clerked for the Honorable Charles M. Merrill, United States Court of Appeals for the Ninth Circuit. She graduated cum laude from Harvard Law School, where she was executive editor of the Harvard Civil Rights – Civil Liberties Law Review. Penelope was a member of Phi Beta Kappa at the University of California, Berkeley. She was awarded the University Medal, the highest undergraduate honor at the university, as well as the English Departmental Citation (awarded to the outstanding graduate in that department).

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Senior Counsel

Penelope has served as lead counsel in major consumer class actions and antitrust cases for more than 35 years, successfully representing high-profile defendants in antitrust, consumer fraud, and product defect matters. Her clients span a range of industries, including consumer electronics, technology, retail, publishing, food and beverage, cosmetics, and household products.

Penelope A. Preovolos

Claudia focuses her practice on the defense of consumer class actions and on complex commercial litigation, including unfair business competition, false advertising, product liability, and privacy matters. She is currently representing numerous consumer goods manufacturers and retailers in false advertising and mislabeling class action lawsuits. Claudia also regularly counsels clients in the food, cosmetics, retail, and technology industries. She represents companies in false advertising disputes before the National Advertising Division (NAD) of the Council of Better Business Bureaus, Inc.<h5>More about Claudia</h5>Claudia is active in MoFo’s pro bono efforts, and recently traveled to El Paso, Texas, to work with families separated and detained at the border. She is also supervising a pro bono collaboration with Equal Rights Advocates, a nonprofit fighting for gender justice in work places and schools across the country. The initiative will help students who have been victims of sexual assault, attempted assault, or harassment find support and seek justice. Claudia is also a board member of Bay Area Legal Aid and a former board member of Equal Rights Advocates. Claudia is an editor and frequent contributor to MoFo’s <a href="https://classdismissed.mofo.com/">Class Dismissed</a> blog, which provides reports about the latest defense news, developments, and trends in class action lawsuits and product liability issues that affect consumer-facing companies. Her perspectives are also respected in the larger legal community: Claudia has published articles about class action and false advertising issues, and is a co-author of Chapter 7 — “Unfair Competition in California Business Litigation 2016” — of The Recorder. She also regularly speaks at conferences on class action and advertising trends. Claudia is currently serving as a Lawyer Representative for the Northern District of California. She received her J.D. degree in 2004 from Berkeley Law (Boalt Hall School of Law), where she was an associate editor of the Berkeley Technology Law Journal.

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Claudia focuses her practice on the defense of consumer class actions and on complex commercial litigation, including unfair business competition, false advertising, product liability, and privacy matters. She is currently representing numerous consumer goods manufacturers and retailers in false advertising and mislabeling class actions.

Claudia M. Vetesi

Alexandra Barlow is a partner in the Litigation Department of Morrison Foerster’s San Diego office.Alexandra litigates product liability matters involving medical devices, pharmaceuticals, consumer products, automobiles, and AI. Alexandra's litigation expertise spans the entire case life cycle in both state and federal courts. She handles all phases of discovery, including fact investigation and expert discovery. Alexandra has taken over twenty-five depositions, including experts, plaintiffs, treating physicians, and third-party witnesses. She drafts and argues motions of all types, including motions for summary judgment, motions to quash, and motions for preliminary injunction.Alexandra has significant trial experience. She has first-chaired a one-week jury trial and second-chaired a five‑week jury trial, both involving multiple claims and witnesses. She also has extensive experience in alternative dispute resolution, representing clients at mediations, mandatory settlement conferences, and early neutral evaluations.Alexandra enjoys tracking developments and keeping her clients updated on product liability and personal injury claims, frequently writing or presenting on emerging areas such as autonomous vehicles and smart devices. Alexandra’s experience also extends to professional liability, warranty claims, eminent domain, and construction law.Alexandra earned her J.D. from the University of San Diego School of Law. While in law school, the San Diego Law Review published her comment on the recovery of damages by plaintiffs in a persistent vegetative state, and she also served as a comment editor. She received her B.A. from the University of California, Los Angeles, where she majored in Political Science and minored in Spanish. A San Diego native, she attended a Spanish immersion school through the eighth grade. Alexandra is active in the San Diego community, advising students at a local college. She is also a member of several legal organizations in San Diego, including Lawyer’s Club, the Association of Business Trial Lawyers, and Wallace Inn of Court.

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Alexandra Barlow is a partner in the Litigation Department of Morrison Foerster’s San Diego office. Alexandra litigates product liability matters involving medical devices, pharmaceuticals, consumer products, automobiles, and AI. Alexandra’s litigation expertise spans the entire case life cycle in both state and federal courts. She handles all phases of discovery, including fact investigation and expert discovery. Alexandra has taken over twenty-five depositions, including experts, plaintiffs, treating physicians, and third-party witnesses. She drafts and argues motions of all types, including motions for summary judgment, motions to quash, and motions for preliminary injunction.

Alexandra Barlow is a partner in the Litigation Department of Morrison Foerster’s San Diego office. Alexandra litigates product liability matters involving medical devices, pharmaceuticals, automobiles, AI, and robotics. Alexandra's litigation expertise spans the entire case life cycle in both state and federal courts. She handles all phases of discovery, including fact investigation and expert discovery. Alexandra has taken over twenty-five depositions, including experts, plaintiffs, treating physicians, and third-party witnesses. She drafts and argues motions of all types, including motions for summary judgment, motions to quash, and motions for preliminary injunction.

Alexandra Barlow

Adam J. Hunt is a partner in the Litigation Department of Morrison Foerster’s New York office. His practice focuses on complex litigation, with an emphasis on class action and commercial litigation.Mr. Hunt has extensive experience representing consumer products companies, financial institutions, and technology firms in class action cases and complex commercial disputes before state and federal trial courts, as well as in arbitrations. Clients seek Mr. Hunt’s counsel for his creative, strategic thinking in high-stakes, high-profile matters. He has represented clients facing claims under false advertising, antitrust, and privacy laws throughout the country, securing wins at the pleading stage, summary judgment, and trial, in addition to negotiating favorable settlements, often early in the case. Representative experience includes successfully securing rulings dismissing two putative false advertising class action cases against one of the best-known consumer electronics companies in the world; obtaining a complete win on summary judgment for a major shipping and logistics company in a multimillion-dollar commercial dispute; appearing as counsel at trial for a leading financial institution in a $100 million commercial dispute, winning a bench trial verdict; and prevailing on motions to dismiss false advertising class actions against a leading Greek yogurt company.Mr. Hunt is also an editor of the firm’s <a href="https://classdismissed.mofo.com/" target="_self">Class Dismissed blog</a>, which provides insights, recommendations, and timely reports on the latest defense news, developments, and trends in the most current class action lawsuits that affect consumer-facing companies.Mr. Hunt maintains an active pro bono practice and is the recipient of the New York State Bar Association’s 2017 President’s Pro Bono Service Award for the First Judicial Department, the 2018 Public Service Award from New York University School of Law, and Morrison Foerster’s Kathi Pugh Award for Pro Bono Services.Mr. Hunt received his B.A. with honors from Swarthmore College and his J.D. cum laude from New York University.

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Adam Hunt is a partner in the Litigation Department of Morrison Foerster’s New York office. His practice focuses on complex litigation, with an emphasis on class action and commercial litigation.

Adam Hunt

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Alexandra Preece Barlow

Adam J. Hunt

The Future of Section 230: Protection Against Product Liability Claims?

New Wave of PFAS Legislation Aimed at Consumer Products

CPSC Releases Annual Report on Deaths and Injuries Involving Nursery Products

CPSC Proposes New Safety Rules for Infant Rockers

CPSC Commissioners Abstain from Retracting Infant Sleep Product Statements

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In a recent decision regarding the scope of personal jurisdiction, the Tenth Circuit Court of Appeals extended the recent trend of limiting the reach of personal jurisdiction over out-of-state defendants. Old Republic Insurance Co. v. Continental Motors, Case No. 16-1408, (10th Cir. Dec. 15, 2017).In Old Republic, plaintiff insurance company sued after one of its insured aircraft crashed in Colorado.  Plaintiff alleged that the crash was the result of a negligent or otherwise faulty repair of the aircraft’s engine.  Plaintiff further alleged that the maintenance company that repaired the engine followed the guidance provided by the engine manufacturer, Alabama-based Continental Motors.

Old Republic – Personal Jurisdiction Trending Defendant Friendly

In a recent decision regarding the scope of personal jurisdiction, the Tenth Circuit Court of Appeals extended the recent trend of limiting the reach of persona

Old Republic – Personal Jurisdiction Trending Defendant Friendly

On December 4, 2017, a panel of the California Court of Appeal unanimously affirmed a trial court’s denial of class certification for alleged violations of California’s unfair competition, consumer protection, and false advertising laws.  In so doing, the court upheld the lower court’s conclusions that the proposed class for Plaintiff’s UCL and FAL claims was not ascertainable and that common questions did not predominate among class members for the CLRA claim.Case background.  Plaintiff James Noel alleged that an inflatable kid’s swimming pool purchased at Defendant’s drugstore was smaller than it appeared on the pool’s packaging box.  The box also displayed the pool’s dimensions, which Noel did not contend were inaccurate.  He sued the drugstore on behalf of all consumers who had purchased the pool, claiming violations of California’s unfair competition, consumer protection, and false advertising laws.The trial court denied Noel’s motion for class certification, finding that the proposed class for the UCL and FAL claims was not ascertainable because Noel failed to establish that the other purchasers of the pool could be identified.  The court further concluded that common questions did not predominate as to the CLRA claim.  The court reasoned that some members of the class may not have relied on the picture of the pool on the packaging box but instead looked to the advertised pool dimensions.  This prevented the questions of reliance and causation from being litigated on a classwide basis.Absent class members not ascertainable under UCL and FAL classes.  On appeal, Noel insisted the proposed class was ascertainable because his class definition was clear: “All persons who purchased the Ready Set Pool at a Rite Aid store located in California within the four years preceding the date of the filing of this action.”  But the court explained that the class definition was “beside the point”; the problem was that Noel adduced no evidence of records through which to identify class members, as required by Sotelo v. Medianews Group, Inc., 207 Cal. App. 4th 639 (2012).  “While Noel was not required to actually identify the 20,000-plus individuals who bought pools,” the panel explained, “his failure to come up with any means of identifying them was a legitimate basis for denying class certification.”  The court attributed this failure to Noel’s premature filing of the class certification motion without first taking sufficient discovery to learn what records could be used to identify the purchasers.The court recognized that its reasoning existed in tension with another recent Court of Appeal decision, Aguirre v. Amscan Holdings, Inc., 234 Cal.App.4th 1290 (2015).  According to the court, Aguirre held that a class plaintiff need not establish a means of identifying absent class members at the class certification stage; rather, the method for identifying class members need only be set forth at the remedial stage when it becomes necessary to prove class membership or damages.  The court disagreed with Aguirre: “To ignore the issue of identifying class members for notice purposes gives short shrift to due process considerations in play at the certification stage.”  While recognizing that some class actions must ultimately dispense with personal notice, the court preferred a “more pragmatic and flexible approach” to class certification that leaves the trial court discretion to determine whether a method for identifying absent class members must be established during class certification proceedings.Common issues did not predominate for CLRA class.  Noel next argued that the trial court erred in finding that class issues did not predominate over individual issues for the CLRA claim.  In affirming the trial court’s denial of class certification, the Court of Appeal explained that Noel had to establish that the misrepresentation would have been material to any reasonable person; otherwise, the issues of reliance and causation would vary among consumers and thus would not be subject to common proof.  The court found reasonable the trial court’s conclusion that some consumers may have relied on the advertised dimensions instead of on the pictures on the pool’s packaging.Denial of a continuance.  At the class certification hearing, Noel’s counsel requested the opportunity to conduct further discovery so that he could more fully develop facts to support his motion.  On appeal, Noel argued the trial court erred in denying his request, citing the general rule that continuances should be liberally granted.  The court rejected this argument, succinctly explaining that “Noel’s counsel was in control of the litigation; no one forced him to file a premature class certification motion.”Takeaways.  The Court of Appeal summarized the case’s takeaway: “What occurred here provides an object lesson in the risks of brushing the issue [of ascertainability] aside in connection with class certification and leaving it to be addressed at the conclusion of the proceedings.”  A plaintiff who fails to take sufficient discovery prior to moving for class certification may be unable to show how absent class members can be identified.

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California Appellate Court Upholds Denial of Class Certification on Ascertainability Grounds

California Appellate Court Upholds Denial of Class Certification on Ascertainability Grounds

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On December 4, 2017, a panel of the California Court of Appeal unanimously affirmed a trial court’s denial of class certification for alleged violations of Cali

“The rise of powerful AI will be either the best or the worst thing ever to happen to humanity. We do not know which.” –Stephen HawkingArtificial Intelligence (AI) and autonomous technology will shape the future, affect how people live and do business, and impact the legal landscape. While the scope of these technologies remains uncertain, numerous industries are already feeling their impact, including drones, autonomous vehicles and consumer products.AI has tremendous potential to simplify our lives by shortening various decision trees, but consumer product companies ceding control to technology should weigh efficiencies against the risks posed by such novel movements.Please see our full article as published on <a href="https://media2.mofo.com/v3/assets/blt5775cc69c999c255/blt24aa34e7b9841dc7/627315554886af2aa2be1036/171208-company-ready-artificial-intelligence.pdf">Law360</a>.

Fertility Center Litigation

Fitbit

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Leading Healthcare, Pharmaceutical, and Medical Device Company

Lethal Injection Matters – Major Pharmaceutical Company

Pain Pump Matters – Large Pharmaceutical Company

Major Technology Company

Leading Chemical Company

Security Device Company

In re Air Crash Near Peixoto de Azevedo, Brazil

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Erin Bosman is chair of MoFo’s Class Actions and Mass Torts Practice Group and is a founder and co-head of the Artificial Intelligence Group. Clients value her business strategy, seeking her comprehensive counsel throughout the product life cycle, especially in high-stakes litigation and product recalls.

Erin M. Bosman

Erin Bosman is chair of MoFo’s Class Actions and Mass Torts Practice Group and is a founder and co-head of the Artificial Intelligence Group. Clients value her business strategy, seeking her comprehensive counsel throughout the product life cycle, especially in high-stakes litigation and product recalls.

Erin Bosman

An orthopedic implant company

A children&rsquo;s monthly subscription service product

A fertility company

A major technology company

A smart fitness equipment company

Julie Park provides analytic and strategic counsel for issues in product life cycle, product liability and defective products, consumer class actions, and more.

Julie Park

Julie Park | Product Liability Lawyer

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Is Your Company Ready For Artificial Intelligence?

Digital Single Market Update: Technology Standardization in the EU

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“The rise of powerful AI will be either the best or the worst thing ever to happen to humanity. We do not know which.” –Stephen Hawking Artificial Intelligence 

Is Your Company Ready For Artificial Intelligence?

Nearly ten years after the first three phthalates were banned from children’s toys by Congress, the U.S. Consumer Product Safety Commission (CPSC) <a href="https://www.federalregister.gov/documents/2017/10/27/2017-23267/prohibition-of-childrens-toys-and-child-care-articles-containing-specified-phthalates">issued a final rule</a> on October 27 prohibiting five more.  The rule bans the manufacture for sale, offer for sale, distribution in commerce, or importation of children’s toys and products containing more than 0.1% of five phthalate chemicals.  Phthalates are a group of chemicals used to soften plastics and make them pliable and easier to grip and are found in numerous household products, including children’s toys.  The long-awaited final rule continues to face significant controversy regarding its scope and the data used to support it.Years in the making Due to concerns that phthalates can act as endocrine disruptors, Congress originally prohibited certain phthalates in the Consumer Product Safety Improvement Act of 2008 (CPSIA).  The CPSIA permanently banned three phthalates (DEHP, DBP, and BBP) and imposed an interim ban on an additional three (DINP, DNOP, and DIDP).  Section 108 of the CPSIA then required CPSC to convene a group of experts called the Chronic Hazard Advisory Panel (CHAP) to assess the risks of phthalates and phthalate alternatives.Thereafter, CHAP convened and ultimately recommended banning five additional phthalates in a July 2014 final report.  In addition to recommending that the interim ban on DINP be made permanent, CHAP recommended banning DIBP, DPENP, DHEXP, and DCHP.  According to the CPSIA, CPSC was required to issue a final rule addressing whether to make the interim ban permanent and whether to add any more phthalates to the ban no later than 180 days after the CHAP report was issued.  However, no rule was issued before the deadline and the final rule did not follow until this October—over two years and nine months later.The rule also ends litigation against CPSC for its delay in issuing the final rule.  The Natural Resources Defense Council and other groups had sued CPSC in December 2016 for failing to meet its January 14, 2015 deadline.  On October 31, 2017, that suit was dismissed with prejudice in light of CPSC’s issuance of the final rule.The final rulePredictably, the U.S. will now permanently ban toys containing the eight phthalates identified by CPSC in the proposed rule from 2014— DEHP, DBP, BBP (the three originally prohibited in the CPSIA) and DINP, DIBP, DPENP, DHEXP, DCHP (the five recommended by CHAP for a ban).  The rule takes effect on April 25, 2018.Controversy about the rule The final rule passed by a vote of three to two commissioners, reflecting the political divide on the Commission as well as the contentiousness surrounding a ban on phthalates.  Sensing the likelihood of litigation, CPSC Commissioner Elliot F. Kaye <a href="https://www.cpsc.gov/s3fs-public/CommissionerKayeStatementonPhthalatesFR10.18.17.pdf?jRKlsAV2JN8BremnAWRku2vzRlvmYn56">issued a statement</a> defending the rule and highlighting “how thorough the CHAP was and how its methods and conclusions were validated by a substantial peer review.”  He implored “judges and law clerks who may look over this record” to study Congress’s directive to the CPSC in the CPSIA, the science, and how the CPSC reviewed public comments during the rulemaking.Then-CPSC Commissioner Joseph P. Mohorovic, who voted against the rule, <a href="https://www.cpsc.gov/about-cpsc/commissioner/joseph-mohorovic/statements/statement-of-commissioner-joseph-p-mohorovic-2">issued a statement</a> that the Commission “missed [an] opportunity to pass a reasoned, evidence-based rule prohibiting the phthalates that pose actual risk to consumers.”  He stated that the standard for a phthalate to survive the ban—“reasonable certainty of no harm”—was inconsistently applied by CPSC throughout the rulemaking process.  Additionally, he noted that there is “scant evidence showing that the products covered by the Final Rule—toys and child care articles—contribute in any measureable way to overall phthalate exposure for the vulnerable population.”  Instead, he pointed to dietary sources as contributing “the most to overall phthalate exposure.”  Acting CPSC Chairman Anne Marie Buerkle <a href="https://www.cpsc.gov/s3fs-public/ACHBuerklesPhthalatesfinalrulestatement10302017.pdf?1N0bigFnYyn_CGtgCEGQZJrjTnsjv3RO">also published a statement</a> agreeing with some of the criticisms raised by Commissioner Mohorovic.  Their criticisms echo those raised by phthalate manufacturers that the CHAP report, and now the final rule, relied on outdated data from 2005.Challenges ahead Litigation and industry challenges are certain to follow.  The Toy Association issued a statement that it does not believe the rule is fully supported by scientific evidence.  Other industries may be subject to scrutiny for phthalate use in the future, including cosmetics and dietary sources, as raised by Commissioner Mohorovic.  Manufacturers outside of the toy and child product industries should monitor the controversy and seek counsel to determine whether their products may be at issue.

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CPSC Issues Final Rule Expanding Phthalate Ban

CPSC Issues Final Rule Expanding Phthalate Ban

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Nearly ten years after the first three phthalates were banned from children’s toys by Congress, the U.S. Consumer Product Safety Commission (CPSC) issued a fina

With the holidays and end of the year quickly approaching, here is what food and beverage manufacturers and sellers need to know before the temporary Proposition 65 safe harbor warning for Bisphenol A (BPA) exposures expires on December 30, 2017.Read our <a href="https://media2.mofo.com/v3/assets/blt5775cc69c999c255/bltb25a3161dc0c3b74/627315568e09542a15b7de57/171128-prop-65-safe-harbor.pdf" target="_blank" rel="noopener noreferrer">Law360 article</a>.

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Expiring Soon: Temporary BPA Warning Regs Under Prop. 65

Expiring Soon: Temporary BPA Warning Regs Under Prop. 65

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With the holidays and end of the year quickly approaching, here is what food and beverage manufacturers and sellers need to know before the temporary Propositio

A federal district court in Wisconsin recently hit Spectrum Brands Inc. (Spectrum) with civil penalties of $1.9 million for violations of the Consumer Products Safety Act (CPSA).<a href="#_ftn1" name="_ftnref1">[1]</a>  The court’s 23-page opinion is a strong reminder of how devastating the impact can be for waiting to report violations and also shows the consequences of failing to implement robust CPSA compliance and recall programs.This judgment provides insight into the costs and benefits of litigation versus settlement following a CPSC civil penalties investigation.  Companies may benefit from the court’s analysis of effective compliance programs when attempting to shore up their own product safety compliance and product recall procedures.  And for companies looking to acquire another company or its product line, this decision also provides strong incentives to double down on CPSA due diligence to make sure they are not acquiring a significant liability.Case BackgroundIn November 2014, Spectrum, a consumer products company, merged with Applica Consumer Products, Inc., which owned and sold a Black & Decker SpaceMaker line of coffee machines.  Applica began selling the SpaceMaker in 2008.  About a year later, customers started complaining to Applica that the SpaceMaker’s carafe handle was suddenly cracking and breaking.  By May 2009, Applica had received 60 reports of broken handles and 4 reports of burns.  CPSC contended that this triggered Applica’s obligation to “immediately” report a product hazard to CPSC within 24 hours.  16 C.F.R. § 1115.14(e).  Applica did not report for almost three years, until April 2012.  By that time, they had been sued in a consumer class action and had received over five dozen reports of injury.  In addition, Applica inadvertently sold an additional 641 units after recalling the SpaceMakers.So where does Spectrum fit into all of this?  In the 2014 merger, Spectrum assumed all of Applica’s assets and liabilities.  So when CPSC and DOJ teamed up in 2015 to file an enforcement action against Applica, Spectrum was on the hook.During the enforcement litigation, Spectrum admitted liability for the sale of recalled products but contested liability for failure to report timely. As we <a href="http://classdismissed.mofo.com/consumer-products/court-decision-cpsc-enforcement-action">reported previously</a>, the court ruled against Spectrum on the government’s failure-to-report claim, holding it liable for failing to submit a timely report to CPSC.  On September 29, 2017, after holding a hearing to determine the appropriate amount of civil penalties and injunctive relief for these reporting and sale violations, the Wisconsin federal court ordered Spectrum to pay the government $1.9 million in civil penalties and granted the government injunctive relief.  Here we walk through the court’s penalty calculation for key takeaways.Penalty CalculationPenalty Cap: $15 Million, Post-CPSIA Statutory Maximum AppliedThe CPSA’s current statutory maximum penalty for “any related series of violations” is $15 million.  15 U.S.C. § 2069(a)(1).  And because Spectrum’s violations (late reporting to CPSC and sale of recalled products) counted as two separate “related series of violations,” the court held that the maximum penalty could not exceed $30 million (adjusted for inflation).Notably, Spectrum did not persuade the court that the much lower $1.25 million penalty cap—which existed before the Consumer Product Safety Improvement Act of 2008 (CPSIA), and was in effect when Spectrum’s obligation to report arose—applied to the reporting violation.  The court dismissed this as a “thinly recast version of [Spectrum’s] unsuccessful argument” (<a href="http://classdismissed.mofo.com/consumer-products/statute-of-limitations-taking-the-steam-out-of-cpsc-backed-enforcement-action/" target="_blank" rel="noopener">which we covered previously</a>) that the government’s claims were time barred.  Because Spectrum did not actually report until 2012, long after CPSIA was enacted, the post-CPSIA $15 million penalty cap applied.Art, Not Science: CPSA and Regulatory Factors AppliedThe court next considered the CPSA’s guidance to CPSC regarding an appropriate civil penalty.  Those congressionally identified factors are:  the nature, circumstances, extent, and gravity of the violation, including the nature of the product defect; the severity of the risk of injury; the occurrence or absence of injury; the number of defective products distributed; and the appropriateness of such penalty in relation to the size of the business.The court also looked to the CPSA’s regulatory guidance about civil penalties, which exist to promote policies of deterring violations, providing just punishment, promoting respect for the law, and protecting the public, among others.Finally, the court considered four specific regulatory factors:  (1) safety/compliance program and/or system relating to a violation; (2) history of noncompliance; (3) economic gain from noncompliance, and (4) failure to timely respond to CPSC’s requests for information or remedial action.Limited Evidence on Penalty Factors Mitigated DamagesInterestingly, the court found that most of the factors weighed in Spectrum’s favor, due to the lack of sufficient evidence to substantiate the government’s position.For example, although the carafe handles were clearly defective, the severity of the defect was unclear.  The government did not show how far the broken handles separated from the carafe, making it difficult to assess the risk of “catastrophic failure” that could lead to severe injuries from broken glass or hot coffee.On injury, the government also provided “no evidence regarding any injuries that a customer actually sustained by virtue of a failed handle (as opposed to those self-reported by customers),” and the court pointed out that only “one customer indicated receipt of medical attention.”Similarly, the government provided “no evidence” on whether Spectrum had a history of failing to comply with the CPSA or whether it responded appropriately to CPSC correspondence.No Robust Compliance Program a Big Factor in the Penalty PhaseThe biggest  issue for Spectrum related to its safety and CPSA compliance programs.  The court found that although Spectrum had systems in place, they were inadequate.  The court noted that those systems failed to (a) flag the defect, (b) prompt Spectrum to report timely that information was accumulating on failed coffee makers, and (c) identify “the dangerous trend emerging from the sale of the defective carafes over time.”The court specifically pointed out the disconnect between information being gathered by Spectrum’s engineers about quality, and the information being gathered by consumer complaint specialists about safety.Penalties for Selling Recalled Products Exceed Those for Untimely ReportingFor untimely reporting, the court imposed a graduated penalty scale, with higher penalties per complaint received as time went on and complaints mounted.  For each complaint received in the first six months after Spectrum’s reporting obligation arose, the court set the per-complaint penalty at $10, which represented the “rough profit on the sale of [each of] those defective products.”  For complaints received in the next six months, the court increased the per-complaint penalty to $75, representing the defective product’s purchase price.  And for each six-month period after that, the per-complaint penalty doubled ($150 per complaint, then $300, then $600, and so on) to reflect the “increasingly egregious failure to report.” All told, the final penalty for the reporting violation was $821,675.For selling recalled products—which the court found to be the more egregious violation—the court imposed a $1,000 and $2,000 per-unit-sold penalty (the more expensive one for later shipments).  The final penalty for selling recalled products was $1,115,000, or 56% of the total penalty.  This more punitive per-unit amount was justified, the court said, given “Spectrum’s size and sophistication,” its lack of “defined procedures for executing the recall,” lack of “pro-active material oversight on recalled product,” and lack of “automation to prevent outbound shipments” of recalled coffee makers.Injunctive Relief Focused on Compliance Programs and Education Spectrum was also ordered by the court to maintain “sufficient systems, programs, and internal controls to ensure compliance with the CPSA” and its regulations, including reporting requirements.  Spectrum was required to file a notice with the court indicating the improvements implemented.Additionally, the court ordered Spectrum to send a copy of its civil penalty and summary judgment opinions and orders to its directors, officers, management-level employees, and in-house attorneys involved in the sale, manufacture, distribution, or importation of consumer products.ConclusionSpectrum’s $1.9 million penalty and injunctive order highlight the need for consumer products companies to regularly audit their safety, compliance, and recall procedures to ensure they quickly identify, escalate, report, and remediate potential consumer hazards.  This case also underscores the need for high-level company management and in-house counsel to be familiar and comfortable with CPSA requirements so they can quickly mobilize if the company identifies a product hazard, triggering a reporting obligation or recall.  Finally, Spectrum serves as a warning to consumer products companies involved in mergers or product line acquisitions.  Performing robust due diligence on a target product or company regarding CPSA compliance can prevent acquisition of a significant liability down the road in the event of a CPSC investigation and increasingly common enforcement action.<a href="#_ftnref1" name="_ftn1">[1]</a> United States v. Spectrum Brands, Inc., No. 15-CV-371-WMC, 2017 WL 4339677, at *9 (W.D. Wis. Sept. 29, 2017).

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Fortune Favors the Quick (to Report): Judge Slaps Spectrum Brands with $1.9 Million Penalty in DOJ/CPSC Tag-Team Enforcement Action

Fortune Favors the Quick (to Report): Judge Slaps Spectrum Brands with $1.9 Million Penalty in DOJ/CPSC Tag-Team Enforcement Action

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A federal district court in Wisconsin recently hit Spectrum Brands Inc. (Spectrum) with civil penalties of $1.9 million for violations of the Consumer Products 

Nail polish, household cleaners, carpets, upholstery, lead acid batteries and other products may be targeted for regulation under California’s Safer Consumer Products Program. The Program, also known as the California Green Chemistry Initiative, is an innovative regulatory scheme to evaluate and seek safer substitutes for hazardous chemicals in consumer products.

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Consumer Product Update – California’s Green Chemistry Initiative Looks for New Products to Regulate

California Proposes Next Group of Priority Products Under Its Green Chemistry Initiative

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Nail polish, household cleaners, carpets, upholstery, lead acid batteries and other products may be targeted for regulation under California’s Safer Consumer Pr

Consumer Product Update – California’s Green Chemistry Initiative Looks for New Products to Regulate

In a split across party lines, the U.S. Consumer Product Safety Commission (CPSC or the “Commission”) recently voted on a largely unprecedented course of action: to ban an entire class of chemicals from popular consumer products.  Specifically, CPSC adopted a petition for rulemaking that sought to prohibit a highly popular flame retardant from certain consumer products.  Although this decision is noteworthy because of its potential reach, it is still possible that the vote could end up having no impact on manufacturers once the political balance on the Commission shifts under President Trump.The origins of this vote go back to 2015, when a group of ten non-governmental organizations (NGOs) filed a petition for rulemaking with CPSC.  In their petition, the NGOs argued that non-polymeric organohalogen flame retardants should be banned from four categories of consumer products—children’s products, mattresses, electronic casings, and furniture—because the flame retardants migrate from those products and put consumers at risk of harm.<a href="#_ftn1" name="_ftnref1">[1]</a>Concern about flame retardants in consumer products is not new.  Virtually every major constituent—i.e., the federal government, state governments, and manufacturers—has voiced an opinion about it in the past.  For example, CPSC banned a class of flame retardants from children’s clothing in 1977;<a href="#_ftn2" name="_ftnref2">[2]</a> California began requiring labels on upholstered furniture in 2014 if the product included a flame retardant;<a href="#_ftn3" name="_ftnref3">[3]</a> and the nation’s largest furniture manufacturer stopped adding flame retardants to its foam cushions in 2015.<a href="#_ftn4" name="_ftnref4">[4]</a>  This petition nonetheless remains rare because of its application to an entire class of chemicals rather than specific chemicals shown to have particular risks of harm.Indeed, CPSC staff issued a brief on May 24, 2017, recommending that the Commission deny the petition because of its breadth.  Based on the research that was available, the staff wrote that organohalogen flame retardants demonstrated varying degrees of toxicity and exposure potential.  Therefore, the staff found that “under the [Federal Hazardous Substances Act] . . . one cannot conclude that all products in the four categories containing any [organohalogen flame retardants] are ‘hazardous substances.’”<a href="#_ftn5" name="_ftnref5">[5]</a>Despite the staff’s recommendation, CPSC voted on September 20, 2017 to adopt and begin the rulemaking process described in the petition.<a href="#_ftn6" name="_ftnref6">[6]</a>  The vote was strictly along party lines:  the three Democratic-appointed commissioners voted in favor of the petition while the two Republican-appointed commissioners voted against the petition.<a href="#_ftn7" name="_ftnref7">[7]</a>  In addition, the same Democratic majority voted to issue a sweeping guidance letter directed towards manufacturers, importers, distributors, retailers, and consumers.  The message was very clear:  one should not use, make, or sell children’s products, furniture, mattresses, or electronic casings with organohalogen flame retardants during the pendency of the rulemaking process.<a href="#_ftn8" name="_ftnref8">[8]</a>  And “consumers, especially those who are pregnant or with young children, [should] inquire and obtain assurances from retailers that such products do not contain” organohalogen flame retardants.<a href="#_ftn9" name="_ftnref9">[9]</a>Although the guidance letter is broad and forceful, it is not a binding or enforceable rule.  Nor does CPSC’s vote on the petition mean that the ban has taken place or necessarily will take place.  Rather, an advisory panel will begin to gather data and draft proposed regulations, and any final rule would need to pass through the customary notice and comment period.  In addition to those customary procedural hurdles, this particular rule’s fate faces a stern test from the political arena.As we wrote last week, President Trump has nominated Dana Baiocco to replace current CPSC Commissioner Marietta Robinson, who had been appointed by President Obama.<a href="#_ftn10" name="_ftnref10">[10]</a>  If Ms. Baiocco is confirmed, the makeup of the CPSC will shift from Democratic majority to Republican, making promulgation of the proposed rule unlikely given the breakdown of the vote.  Accordingly, this episode likely represents a last stand by the Democratic-appointed commissioners in the face of change, rather than a signal that this class of flame retardants will be banned in the near future.<a href="#_ftnref1" name="_ftn1">[1]</a> Earthjustice, Consumer Fed’n of Am., Petition HP15-1 Requesting Rulemaking on Certain Products Containing Organohalogen Flame Retardants (June 30, 2015), http://earthjustice.org/sites/default/files/files/FHSA-Petition%20_revised_6-30-15.pdf.<a href="#_ftnref2" name="_ftn2">[2]</a> Press Release, Consumer Prod. Safety Comm’n, CPSC Bans TRIS-Treated Children’s Garments (Apr. 7, 1977), <a href="https://www.cpsc.gov/Newsroom/News-Releases/1977/CPSC-Bans-TRIS-Treated-Childrens-Garments/">https://www.cpsc.gov/Newsroom/News-Releases/1977/CPSC-Bans-TRIS-Treated-Childrens-Garments/</a>.<a href="#_ftnref3" name="_ftn3">[3]</a> Jennifer 8. Lee, California to Ban Chemicals Used as Flame Retardants, New York Times (Aug. 10, 2003), <a href="http://www.nytimes.com/2003/08/10/us/california-to-ban-chemicals-used-as-flame-retardants.html?mcubz=0">http://www.nytimes.com/2003/08/10/us/california-to-ban-chemicals-used-as-flame-retardants.html?mcubz=0</a>.<a href="#_ftnref4" name="_ftn4">[4]</a> Michael Hawthorne, Watchdog update: Nation’s biggest furniture retailer drops flame retardants, Chicago Tribune (Mar. 6, 2015, 8:14 p.m.).<a href="#_ftnref5" name="_ftn5">[5]</a> U.S. Consumer Prod. Safety Comm’n, Staff Briefing Package in Response to Petition HP15-1, Requesting Rulemaking on Certain Products Containing Organohalogen Flame Retardants, p. 6 (May 24, 2017).<a href="#_ftnref6" name="_ftn6">[6]</a> Contrary to President Trump’s “one in, two out” directive, CPSC did not also repeal two prior regulations.<a href="#_ftnref7" name="_ftn7">[7]</a> U.S. Consumer Prod. Safety Comm’n, Minutes of Commission Meeting (Sept. 20, 2017), <a href="https://www.cpsc.gov/s3fs-public/Minutes_of_Commission-Meeting_September-20-2017-Petition_HP_15-1_Organohalogen_Flame_Retardants.pdf?vBwPee3oztjVKAWUq1k4QLtEJMPJCFL2">https://www.cpsc.gov/s3fs-public/Minutes_of_Commission-Meeting_September-20-2017-Petition_HP_15-1_Organohalogen_Flame_Retardants.pdf?vBwPee3oztjVKAWUq1k4QLtEJMPJCFL2</a>.<a href="#_ftnref8" name="_ftn8">[8]</a> Alberta E. Mills, U.S. Consumer Prod. Safety Comm’n, Guidance Document on Hazardous Additive, Non-Polymeric Organohalogen Flame Retardants in Certain Consumer Products, CPSC Docket No. CPSC-2015-0022 (Sept. 27, 2017), <a href="https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-20733.pdf">https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-20733.pdf</a>.<a href="#_ftnref9" name="_ftn9">[9]</a> Id.<a href="#_ftnref10" name="_ftn10">[10]</a> Erin M. Bosman, Julie Y. Park, Trump to Nominate New Commissioner to CPSC, Class Dismissed (Sept. 22, 2017), <a href="http://classdismissed.mofo.com/cpsc/trump-to-nominate-new-commissioner-to-cpsc/">http://classdismissed.mofo.com/cpsc/trump-to-nominate-new-commissioner-to-cpsc/</a>.

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CPSC Heating Up Before New Commissioner Appointed: Approves a Petition for Rulemaking to Ban an Entire Class of Flame-Retardants

CPSC Heating Up Before New Commissioner Appointed: Approves a Petition for Rulemaking to Ban an Entire Class of Flame-Retardants

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In a split across party lines, the U.S. Consumer Product Safety Commission (CPSC or the “Commission”) recently voted on a largely unprecedented course of action