Do Consumers Have Private Remedies for Violations of the Reporting Requirements Under the Rules of the Consumer Product Safety Act?
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1 Illinois Association of Defense Trial Counsel Springfield, Illinois IDC Quarterly Volume 19, Number 4 ( ) Product Liability By: James W. Ozog and Staci A. Williamson* Wiedner & McAuliffe, Ltd. Do Consumers Have Private Remedies for Violations of the Reporting Requirements Under the Rules of the Consumer Product Safety Act? In 2007, a wave of high-profile product recalls, including recalls of toys and children s products, impacted the marketplace. In response, Congress passed the Consumer Product Safety Improvement Act. Pub. L. No , 122 Stat ( CPSIA ). The CPSIA broadens the scope and authority of the Consumer Product Safety Commission ( CPSC ) and its ability to make rules governing the safety and distribution of consumer products within the United States. Whether the expanded rules give rise to increased private causes of action under 2072(a) of the Consumer Product Safety Act ( CPSA ) is of concern to manufacturers, distributors and sellers of consumer products. The Consumer Product Safety Act and the Recent Berry Decision Section 2072(a) of the CPSA provides a private cause of action for damages for any person injured due to a knowing violation of its rules. The statute provides: Any person who shall sustain injury by reason of any knowing (including willful) violation of a consumer product safety rule, or any other rule or order issued by the [CPSC] may sue any person who knowingly (including willfully) violated any such rule or order in any district court of the United States in the district in which the defendant resides or is found or has an agent, shall recover damages sustained, and may, if the court determines it to be in the interest of justice, recover the costs of suit, including reasonable attorneys fees and reasonable expert witnesses fees U.S.C. 2072(a) (emphasis added). In addition, 2064(b) of the CPSA, 15 U.S.C. 2064(b), requires any manufacturer, distributor or retailer to notify the CPSC if it learns of information reasonably supporting the conclusion that its product has a defect that could create a substantial product hazard. In order to execute its responsibilities efficiently and effectively, the CPSC has issued both consumer product safety rules and administrative rules. Consumer product safety rules are rules that the CPSC has developed to regulate or bar the sale or manufacture of unreasonably dangerous consumer products to the public. Butcher v. Robertshaw Controls Co., 550 F. Supp. 692, 695 (D. Md. 1981). Administrative rules, on the other hand, are rules that the CPSC has devised in order to facilitate the administration of... its statutory duties. Id. Whether a consumer has a private remedy for violation of the product safety reporting requirements issued under the CPSA has been a continuing controversy among the federal courts. A majority of circuits have held Page 1 of 5
2 that a private right of action does not exist when a manufacturer, supplier or distributor violates a reporting requirement under the CPSA. Nonetheless, a minority of district courts have disagreed and held that a private cause of action exists when a reporting requirement is violated. Importantly, each of the cases that have allowed a plaintiff to pursue a private cause of action under the CPSA has limited recovery solely to compensatory damages. The following is a survey of the case law debating the existence of a private consumer remedy under 2072(a). The most recent case to interpret 2072(a) is Berry v. Mega Brands Inc., No , 2009 U.S. Dist. LEXIS 6761 (D.N.J. Jan. 30, 2009). In Berry, the plaintiffs filed a class action suit against the defendant toy manufacturer for a breach of the CSPA s reporting requirements. The plaintiffs alleged that the [d]efendants knowingly sold hazardous toys and that the plaintiffs relied on the defendants knowingly false statements which resulted in... [their] payment for hazardous toys... and their children being exposed to adverse health effects. Berry, 2009 U.S. Dist. LEXIS 6761, at *2-6. The defendants moved to dismiss the plaintiffs CPSA claims, asserting that a private right of action does not exist for violations of the CPSA s reporting requirements. The court, after noting that the Third Circuit has yet to rule on this issue, denied the defendants motion and held that a private right of action exists for a violation of the CPSA s reporting requirements. The court found that 16 C.F.R requires a party to report [to the CPSC] any known instances of injury or death resulting from the ingestion of small parts or attachments of a toy. Berry, 2009 U.S. Dist. LEXIS, at *15. Accordingly, because the plaintiffs pled that the defendants knew of their toys defects, knew that children were being hurt and dying from ingesting attachments, and did not report [them] to the CPSC, the statute s requirements to bring a private cause of action were met. Id. at * The Drake Majority View In Drake v. Honeywell, Inc., 797 F.2d 603 (8th Cir. 1986), the Eighth Circuit was the first federal circuit to interpret 2072(a) and continues to be the leading authority for the majority viewpoint. In Drake, the plaintiff brought a private cause of action under 2072(a) of the CPSA after being injured when a water heater manufactured by the defendant exploded. Drake, 797 F.2d at 604. The plaintiff alleged that a defect in the water heater s control knob caused the explosion, and further alleged that the defendant was aware of this flaw prior to the accident but failed to disclose it as required by the CPSC s administrative reporting rule. The defendant moved to dismiss the plaintiff s claim, arguing that a private cause of action cannot arise from noncompliance with the CPSC s reporting rules because such rules were not expressly imposed by Congress, but rather were the CPSC s interpretation of Congress intent under 2064(b) of the CPSA. On appeal, the Eighth Circuit held that Congress did not intend to create a private action for noncompliance with the CPSC s reporting rules under 2072(a) because although the section states that a private action may flow from a violation of a rule, it does not similarly provide for private actions based on the statute itself. Id. at 606. The court reasoned that [o]rdinarily, when a federal statute explicitly creates a private cause of action, it does so for violations of its own provisions, not just for violations of rules that may be issued pursuant to those provisions. Id. Accordingly, because such language was omitted from 2072(a), and because the court s review of its legislative history revealed no intent by Congress to allow private enforcement of the CPSC s reporting rules, it reasoned that Congress intended to bar private actions for damages based on a violation of the statute. Since the Eighth Circuit s ruling in Drake, five other circuits the First, Sixth, Seventh, Ninth and Tenth have ruled that a private cause of action does not arise for a violation of the CPSA s reporting requirements. Benitez-Allende v. Alcan Aluminio Do Brasil, S.A., 857 F.2d 26 (1st Cir. 1988) (denying plaintiff consumers appeal from the dismissal of their CSPA claim against the defendant manufacturer for allegedly violating the CPSA s reporting requirements and adopting the Drake court s reasoning in its totality); Copley v. Heil-Quaker Corp.,1987 U.S. App. LEXIS 6578 (6th Cir. 1987) (upholding the dismissal of plaintiff s complaint for damages against the defendant manufacturer for its failure to report product defects of which it Page 2 of 5
3 was allegedly aware, as required under the CPSA, and finding the reasoning in Drake to be controlling); In re All Terrain Vehicle Litigation, 979 F.2d 755 (9th Cir. 1992) (holding that the CPSA does not provide either an express or implied private right of action for violations of its reporting provisions); and Kloepfer v. Honda Motor Co., 898 F.2d 1452 (10th Cir. 1990) (adopting the 8th Circuit s reasoning of Drake and upholding the district court s ruling dismissing the plaintiffs cause of action under the CPSA against a defendant manufacturer for allegedly failing to report certain product defects to the CPSC, as required pursuant to 16 C.F.R. 1115). The Seventh Circuit Expands the Drake Court s Rationale Although the Seventh Circuit concurred with the outcome in Drake, it found additional reasons to bar a private cause of action for a violation of the CSPA s reporting requirements. In Zepik v. Tidewater Midwest, Inc., 856 F.2d 936 (7th Cir. 1988), the court upheld the dismissal of the plaintiff s CPSA claims and held that 2072(a) s requirement that plaintiffs show that they incurred injury by reason of a violation of a [CPSC] rule or order... should be roughly equivalent to the causal connection required to establish common law tort liability. Zepik, 856 F.2d at 942 (citing 15 U.S.C. 2072(a) (1982)). Specifically, the court reasoned that [t]he causal connection between a defendant s reporting violation and a plaintiff s injury is too attenuated and speculative to satisfy generally applicable standards of causation in fact or proximate causation. Id. Accordingly, the Seventh Circuit found such an interpretation of section 2072(a) to be too broad, absent strong support from the CPSA s legislative history or structure. District Court Cases Holding that a Private Cause of Action Exists for Violations of the CPSA s Reporting Requirements The first case to hold that a private cause of action does exist under the CPSA for a violation of its reporting requirements was Butcher v. Robertshaw Controls Co., 550 F. Supp. 692, 700 (D. Md. 1981). In Butcher, the plaintiff was injured when a gas-run hot water heater manufactured by the defendant exploded. Butcher, 550 F. Supp. at 694. The plaintiff brought suit against the defendant for damages and claimed that the defendant manufacturer violated 2072(a) of the CPSA by failing to report to the CPSC a product defect of which it was aware, as required pursuant to 16 C.F.R The defendant moved to dismiss the complaint contending that the CPSA provides no express private right of action for a consumer absent a violation of a consumer product safety rule. Id. at 694. The defendant argued that 16 C.F.R is an administrative rule... issued to facilitate the operation of the [CPSC and, therefore, is] not enforceable by... members of the general public, only the CPSC. Id. at 699. The court denied the defendant s motion and found that the term consumer product safety rule is a term of art and that the defendant s interpretation ignore[d] 2072 s emphasized language which permit[s] any person injured by reason of a knowing violation of a consumer product safety rule or any other rule to file suit in federal district court. Id. (emphasis in original). The court further reasoned that if Congress wished to limit the cause of action to violations of only safety rules, it could have easily done so, but the inclusion of the phrase or any other rule belies any such intention. Id. at 698. In 1983, a New York district court also held that a private right of action exists for a violation of the CPSA s reporting requirements. In Young v. Robertshaw Controls Co., 560 F. Supp. 288 (N.D.N.Y 1983), the plaintiff brought suit against the defendant manufacturer after her husband was killed in a water heater explosion which she alleged was caused by a defective control device. The plaintiff claimed that the defendant was aware of the defect and made modifications to subsequent models to correct the problem, but failed to timely disclose to the CPSC the number of injuries and deaths which occurred as a result of the defect in violation of the CPSC s reporting requirements. The defendant moved to dismiss, arguing that the seemingly broad language of section 2072 is not intended to encompass the violation of a mere disclosure rule of the [CPSC]. Id. at 291. Page 3 of 5
4 The court denied the defendant s motion and held that recognizing the defendant s interpretation of 2072 would fl[y] in the face of [the statute s] unambiguous language because violations of interpretive rules such as 16 C.F.R were meant to be encompassed within the statute s provisions and create a private right of action. Id. at 292. The court reasoned that the Administrative Procedure Act s interpretation of the term rule, combined with the absence of any indication in the statute s legislative history that Congress intended to exclude interpretive rules from the operation of its provision, were sufficient to find the defendant s arguments unpersuasive. The court did, however, grant the defendant s motion to limit the plaintiff s right of recovery to compensatory damages. Since Young, only three other cases have held that a private right of action exists for a violation of the CPSA s reporting requirements. Payne v. A.O. Smith Corp., 578 F. Supp. 733, 738 (S.D. Ohio 1983); Wilson v. Robertshaw Controls Co., 600 F. Supp. 671 (N.D. Ind. 1985) (overturned by Zepik, discussed supra); and Berry v. Mega Brands Inc., 2009 U.S. Dist. LEXIS 6761 (D.N.J. Jan. 30, 2009) (discussed supra). Conclusion Six circuits the First, Sixth, Seventh, Eighth, Ninth and Tenth and the majority of federal district courts have held that a private right of action does not exist under the CPSA for violations of its reporting rules. Plaintiffs from the leading appellate cases in the First, Second and Sixth Circuits each attempted to appeal to the U.S. Supreme Court, but were denied certiorari. Benitez-Allende v. Alcan Aluminio Do Brasil, S.A., 857 F.2d 26 (1st Cir. 1988); Kelsey v. Muskin, Inc., 848 F.2d 39 (2d Cir. 1988), and Copley v. Heil-Quaker Corp., 818 F.2d 866 (6th Cir. 1987). Despite this, a minority of district courts in the Second, Third and Fourth Circuits have disagreed with the reasoning of Drake, Zepik and their progeny and have held that a private cause of action exists under the CPSA when its reporting rules are violated. In the absence of a controlling decision from the U.S. Supreme Court, the litigation concerning a private remedy is bound to continue as the Consumer Product Safety Commission continues to promulgate new rules and regulations under the recent amendments of the CPSA. About the Authors James W. Ozog is a partner in the Chicago firm of Wiedner & McAuliffe, Ltd. He received his undergraduate degree from Northwestern University and law degree from Washington University in Mr. Ozog concentrates his practice in product liability defense matters and commercial litigation. In addition to his Illinois defense practice, he is National Trial Counsel for several product manufacturers. He has appeared as lead defense counsel in over twenty states and tried cases to verdict in seven states besides Illinois. He also represents clients on a regular basis in matters before the United States Consumer Products Safety Commission. He is a member of the American Bar Association, DRI, IDC and the Propane Gas Defense Association. Staci A. Williamson is an associate in Wiedner & McAuliffe s Chicago office. Ms. Williamson is a member of the Firm s Civil Litigation Practice. Ms. Williamson focuses in Products Liability Defense. Ms. Williamson earned a J.D. from Loyola University Chicago School of Law in 2006, graduating cum laude. While attending Loyola University, Ms. Williamson served as a member of the Loyola University Chicago Law Review. Ms. Williamson is a member of the American Bar Association, the Illinois State Bar Association, and the Chicago Bar Association. She is also a licensed member of the Illinois Bar and is admitted to the United States District Court for the Northern District of Illinois. Ms. Williamson is also an active member of the Illinois Association of Defense Trial Counsel and the Defense Research Institute. *The authors wish to express appreciation for the assistance of Michael Sitrick, Loyola University Law School in preparing this column. About the IDC The Illinois Association Defense Trial Counsel (IDC) is the premier association of attorneys in Illinois who devote a substantial portion their practice to the representation of business, corporate, insurance, professional and other individual defendants in civil litigation. For more information on the IDC, visit us on the web at Statements or expression of opinions in this publication are those of the authors and not necessarily those of the association. Page 4 of 5
5 IDC Quarterly, Volume 19, Number Illinois Association of Defense Trial Counsel. All Rights Reserved. Reproduction in whole or in part without permission is prohibited. Illinois Association of Defense Trial Counsel, PO Box 3144, Springfield, IL , , Page 5 of 5
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