CPSC Seeks To Hold Former CEO Responsible For Buckyballs® Recall

Last week the Consumer Product Safety Commission (CPSC) obtained an unprecedented ruling when Administrative Law Judge (ALJ) Dean Metry granted leave to name Craig Zucker in an administrative complaint against Maxfield and Oberton Holdings, LLC, the manufacturer of Buckyballs®. In the Matter of Maxfield & Oberton Holdings, LLC, CPSC Docket Nos. 12-1, 12-2, 13-2 (May 3, 2013). The complaint seeks an order forcing Zucker, the former CEO of Maxfield and Oberton, to conduct a recall and remedial efforts for Buckyballs®, the high-powered magnets that have been under stringent CPSC scrutiny since 2011 due to injuries caused by ingestion of the magnets. This order signals a new enforcement tool that the CPSC is willing to use to negotiate recalls and penalties with consumer product manufacturers.

AGAINST THE BACKDROP OF CPSC'S INCREASED ENFORCEMENT EFFORTS

Since the enactment of the Consumer Product Safety Improvement Act (CPSIA) of 2008, the CPSC has been very active in enforcement efforts and product recalls. The CPSIA increased the maximum civil penalties for failure to report from $8,000 per violation to $100,000 per violation. 21 U.S.C. § 2069. Maximum total penalties for a series of violations increased from $1.825 million to $15 million. Id. The CPSIA also increased criminal penalties, with the potential for up to five years in prison for "knowing and willful" violations. 21 U.S.C. § 2070. In the last year alone, the CPSC has announced eight settlements with civil penalties ranging from $400,000 to $1.5 million, levied against companies for failure to report.

Increased penalties represent only one "stick" in the CPSC's enforcement arsenal. As we just recently reported, the CPSC has also implemented extensive compliance program obligations, requiring companies in violation to maintain strict compliance policies and report to the CPSC on their implementation.

ADMINISTRATIVE COMPLAINT AS A LAST RESORT

Though the CPSC can seek penalties for violations, it can also seek injunctive relief in administrative law courts if a company fails to recall a product with a "substantial product hazard." See 21 U.S.C. § 2064. In the case of Buckyballs®, the CPSC chose to do just that.

In 2010, Maxfield and Oberton added warnings labels that the magnets were for adult use only, and recalled all Buckyballs® that had been sold without the new label. In 2011, the CPSC launched campaign warning users not to give Buckyballs® to children. Finally, in 2012, the CPSC...