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From Products Liability Law Daily, May 6, 2015

DOJ steps-in to stop continuing sales of recalled Zen magnets

By Pamela C. Maloney, J.D.

The U.S. Department of Justice has asked the federal court in Colorado to enjoin Zen Magnets from selling, offering for sale, manufacturing, distributing, or importing small, high-powered magnets generally marketed as desk toys or sculpture sets. The continued sale of these magnets, many of which were recalled by the manufacturer, Star Networks, USA LLC, in August 2014, violates several provisions of the Consumer Product Safety Act (15 U.S.C. §§2051-2089), the DOJ charged (United States v. Zen Magnets, LLC, Filed May 5, 2015).

Background. Zen Magnets purchased approximately 917,000 magnets from Star in July 2014. The purchase agreement included magnet cubes sold by Star under the brand name Magnicube Magnet Cubes and magnet spheres sold under the brand name Magnicube Magnet Balls. About a week after the sale, Star entered into a Consent Agreement with the Consumer Product Safety Agreement to settle an administrative complaint that Star’s Magnicube Spheres and Magnicube Cubes created a substantial product hazard. According to CPSC staff, when more than one of these high-powered magnets is swallowed by a child or an adult, the magnets rapidly clamp together and can cause serious internal damage. The Consent Agreement required Star to implement a voluntary corrective action plan in which the company would recall the magnets, issue refunds to consumers who returned the magnets, and to destroy the magnets still in the company’s possession.

Allegations of wrongdoing. In its complaint, DOJ charged that Zen Magnets had placed the Star magnet cubes and magnet balls in different packaging, had comingled them with similar magnets obtained independently of Star, and had sold them on its website under the brand names “NewbCubes” and “Neoballs.” Zen Magnets continues to offer these products for sale on its website despite CPSC written warnings that selling the recalled magnets purchased from Star is unlawful.

Relief sought. Based on Zen Magnets’ past and present conduct, DOJ alleged that there was a substantial likelihood the company would continue to violate the CPSA unless restrained by court order. In addition to injunctive relief, DOJ asked the court to order Zen Magnets to conduct a recall of the recalled magnets obtained from Star and later sold and to assess civil penalties against Zen for each separate violation of the CPSA.

Tenth Circuit’s review of regulatory ban. On April 20, 2015, the U.S. Court of Appeals for the Tenth Circuit lifted the ban on enforcement of CPSC’s Safety Standard for Magnets (see Products Liability Law Daily’s April 6, 2015 analysis). The Tenth Circuit had imposed the ban on April 1, the scheduled effective date of the standard which established requirements for magnet sets and individual magnets that are marketed or intended for use with or as magnet sets. Under the new safety standard, an individual magnet from a magnet set must be either large enough so that it does not fit into a CPSC small parts cylinder or the power of the magnetic force must be lower than a specified measure. The Commission has reported that some hazardous magnet sets on the market had a magnetic force that was 37 times greater than what the new performance standard permits. Magnets manufactured or imported on or after the effective date of the new standard must meet the new performance standard. Once the safety standard becomes effective, the manufacture, importation, distribution or sale of high-powered magnet sets that are subject to the federal standard and do not comply will be illegal. The standard, in effects, bans the magnet sets manufactured by Zen Magnets, Inc. According to reports, Zen and CPSC currently are briefing the court on Zen’s challenge to the standard.

The case is No. 15-cv-00955.

Attorneys: Jamie L. Mendelson, U.S. Attorney's Office, for USA.

Companies: Zen Magnets, LLC

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