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From Products Liability Law Daily, November 14, 2013

Creator of Buckyballs® sues CPSC for free speech violations and abuse of authority claims

By Pamela C. Maloney, J.D.

Craig Zucker, the creator of Buckyballs® and Buckycubes®, has filed a lawsuit against the U.S. Consumer Product Safety Commission (CPSC) in a Maryland federal district court, charging the agency with violating his First and Fifth Amendment rights by initiating an administrative action against him in his individual capacity. According to the complaint, Zucker alleged that CPSC’s actions single him out for selective administrative adjudication to deter him and other corporate officers from exercising their freedom of speech and their right to petition government officials for redress, and/or wrongly predetermined the outcome of the administrative adjudicatory process (Zucker v. U.S Consumer Product Safety CommissionNovember 12, 2013).

Background. Buckyballs® are small magnetic spheres, a few millimeters in diameter that when placed together can be formed into innumerable shapes and patterns. Zucker and a friend formed Maxfield and Oberton Holdings, Inc. LLC (M&O) with the sole purpose of importing and selling these magnets, which quickly became one of the most popular adult executive desk toys on the market. Zucker contends that Buckyballs® are completely safe when used as intended but acknowledges that, like many products, Buckyballs® cause harm if ingested. Thus, M&O never marketed these products toward children.

However, as stated in Zucker’s complaint, M&O initially marketed its products for ages 13+ because the Consumer Product Safety Improvement Act of 2008 (CPSIA) defined a “children’s toy” as a consumer product intended by the manufacturer for use by a child 12 years of age or younger for play. A year later, a voluntary toy standard, ASTM F963, was made a mandatory standard enforced by CPSC. The ASTM standard defined a “toy” as any object designed, manufactured, or marketed as a plaything for children under age 14.

Working with CPSC. Despite its belief that Buckyballs® were not toys, M&O changed the label grading from 13+ to 14+ and worked with CPSC to conduct a voluntary recall of all of its products labeled 13+. M&O also created a comprehensive safety program to make it clear that its products should not fall into children’s hands, including changing the warnings, applying additional warnings, developing a Responsible Seller Agreement, and sending letters to all of its retailers reminding them not to sell the products to children under the age of 14 or to adults buying them for children under the age of 14. These same precautions were taken when the company added Buckycubes® and Buckyballs® Chromatics to its product offerings. M&O also joined with CPSC in a joint press release and video news release that reinforced the importance of keeping the products away from children and the consequences of misuse. The company developed a new website, to raise awareness and educate the public about the risks of letting high-powered magnets get into the hands of children. M&O representatives met with CPSC commissioners and staff in spring of 2012 to discuss the safety program. Following the meeting, M&O expanded its safety program.

CPSC administrative actions. Despite these cooperative efforts, CPSC’s Office of compliance issued a preliminary determination that the company’s products were defective and that its safety programs would not work. CPSC contacted many of M&O’s major retailers telling them that the products were unsafe and requesting them to stop selling the products. CPSC also filed an administrative complaint against M&O to determine whether M&O’s products were defective or hazardous and to order the company to stop selling all of its products and to conduct a total recall of all products already sold. After M&O went out of business, CPSC amended its administrative complaint to add Zucker as a respondent and sought an order requiring him to personally conduct a full recall of M&O’s products, at an estimated cost of $57 million. CPSC did not amend its complaint to add MOH Trust, the only entity with any legal responsibility to pay the claims of M&O

Allegations against CPSC. The complaint alleged that CPSC’s jurisdiction is over a manufacturer or any distributor or a retailer of the product and that because Zucker was neither a manufacturer nor a distributor, the agency exceeded its jurisdiction. According to the complaint, CPSC asserted the “responsible corporate officer doctrine,” also known as the Park doctrine as the basis for the administrative law judge’s decision affirming the agency’s authority over Zucker. However, Zucker argued that this amounted to an unprecedented expansion of a doctrine that had no bearing in this case because: (1) federal law does not authorize imposition of liability on employees of a corporate entity; (2) there has never been a case in which a corporate officer was held personally liable for corporate activity that was lawful when conducted; (3) the remedial action CPSC is authorized to impose is not a criminal sentence of fine; and (4) the exercise of adjudicative authority over an individual officer of a company whom the CPSC conceded engaged in no illegal activity improperly rewrites the Consumer Product Safety Act.

Zucker further claimed that CPSC’s actions in targeting him in his individual capacity, even though there was another entity—M&O Trust, that was responsible for paying claims against M&O—were meant to punish him and to deter other corporate officers from exercising their First Amendment rights and that its administrative process denied him due process under the Fifth Amendment to the U.S. Constitution.

Relief requested. In his prayer for relief, Zucker asked the court to declare CPSC’s actions arbitrary and capricious, an abuse of discretion, and in excess of CPSC’s statutory authority. Zucker also sought injunctive relief to prevent the CPSC from asserting or exercising adjudicative authority over him.

The case number is 8:13-cv-03355-DKC.

Attorneys: Daniel Z. Epstein (Cause of Action, Inc.) and Reed D. Robinson (Dinsmore & Shohl, LLP) for Craig Zucker

Companies: Maxfield and Oberton Holdings, LLC

MainStory: TopStory IndustryNewsStory CPSCNews HouseholdProductsNews ChildrensProductsNews

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