Class Action and Product Insights for Your Business
May 11, 2016 - Consumer Products, CPSC

Statute of Limitations Taking the Steam out of CPSC-Backed Enforcement Action?

It is no secret that the U.S. Consumer Product Safety Commission (CPSC) is ramping up its efforts to enforce various aspects of the Consumer Product Safety Act (CPSA), especially the provisions about a company’s failure to timely report substantial product hazards.  An ongoing case against Spectrum Brands, Inc. (“Spectrum”)[1] may shed light on whether certain CPSC enforcement efforts would be time-barred and limit the penalties available under the CPSA.

Under the CPSA, it is clear that companies must “immediately” report such hazards; this means within 24 hours, with certain exceptions.  What is not clear is how long CPSC has to bring suit seeking civil penalties for a company’s failure to report.  As these CPSC-backed actions become more frequent and costly, one company—Spectrum Brands, Inc. (Spectrum)—has cried foul.  Specifically, Spectrum has moved for partial summary judgment based on the relevant statute of limitations, arguing that CPSC’s claims for civil penalties stemming from delayed reporting are untimely.

Spectrum began importing and distributing coffeemakers in early 2008.  Over the next four years Spectrum received approximately 1,600 consumer complaints alleging the handles of these coffeemakers were breaking, causing hot coffee to spill on consumers.  Spectrum did not report the alleged hazard to CPSC until April 2012.  In June 2015, the government filed its complaint against Spectrum, seeking civil penalties and other relief for Spectrum’s failure to timely report the product hazard.  Significantly, the government alleges that Spectrum violated the CPSA’s reporting requirements by “no later than” May 2009.  According to the government’s motion for summary judgment, filed last week, Spectrum had received 60 reports by the end of May 2009, and more than 300 by the end of 2009.  By that time, according to the government, Spectrum had sufficient information in the form of consumer complaints to trigger the relevant reporting requirements.

Central to the parties’ dispute is when CPSC’s clock began running on certain claims.  Neither party disputes that claims under the CPSA are subject to a general statute of limitations regulating government enforcement actions.  Specifically, 28 U.S.C. § 2462 provides that “an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued.”  Accordingly, the government must bring an action for civil penalties within five years of when the claim “first accrued,” but what that means is unclear.

The government argues that the claim for a company’s failure to timely report is a “continuing violation” that accrues anew each day the violation occurs, and that the five-year statute of limitations commences only when the company actually reports to CPSC.  Under this “continuing violation” argument, the government would have had five years to file its suit after Spectrum finally reported (April 2012), making the government’s claims timely.  Spectrum disagrees, pointing to the government’s own allegations that Spectrum’s duty to report the alleged hazard arose “no later than” May 2009.  Accordingly, Spectrum argues the claim “first accrued” in May 2009, over six years before the government filed suit and therefore the claims seeking penalties relating to delayed reporting are time-barred.

The court’s ruling on Spectrum’s motion could have a dramatic impact on consumer product companies as it is the first time a court will decide the amount of time CPSC has to initiate an action for failure to report.  If the court rules in favor of Spectrum and finds the government should have brought its claims within five years after Spectrum should have reported, the civil penalties claims against Spectrum will be dismissed and other companies facing potential penalties may find relief based on a statute of limitations defense.  On the other hand, if the government prevails, the clock to seek civil penalties against companies for failure to report claims will only start after the company reports the hazard at issue.  This could significantly increase the amount of time the government has to seek such penalties, and could affect both reporting and document retention obligations.  We will continue to provide updates on this important matter.

[1] United States of America v. Spectrum Brands, Inc., No. 3:15-CV-00371-WMC (W.D. Wis. 2015).