w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

I suggest the following simple ten ways to avoid malpractice in litigation:

PRODUCT LIABILITY April 2009

IN THIS ISSUE

The Consumer Product Safety Improvement Act and its Liability Implications

ABOUT THE AUTHORS Frank Leone's broad litigation practice encompasses environmental law, toxic torts, consumer products liability, asbestos personal injury and property damage, and pharmaceutical products liability. Mr. Leone has special expertise in environmental litigation and counseling, including issues relating to Superfund, natural resource damages, hazardous waste, hazard communication, groundwater, surface water, wetlands, clean air, state environmental laws, and environmental auditing. He also litigates parallel tort actions seeking personal injury, property damage, and/or medical monitoring damages. Bruce J. Berger is a partner with Spriggs & Hollingsworth. Mr. Berger has expertise in pharmaceutical product liability defense, environmental litigation, and toxic tort defense. He represents manufacturers and industrial clients in a range of complex solvent and benzene-related cases. He has defended gasoline manufacturers and successfully obtained summary judgment in leukemia cases relating to alleged exposure to benzene in gasoline. He also has successfully advocated the causation defense relating to alleged benzene exposures in complex workplace settings involving contract laborers and by-standers. Mr. Berger also defends against claims that prescription and over-the-counter drugs have caused serious personal injury-including strokes, congestive heart failure, immune system dysregulation, and dermatological disorders.

ABOUT THE COMMITTEE The Product Liability Committee serves all members who defend manufacturers, product sellers and product designers. Committee members publish newsletters and Journal articles and present educational seminars for the IADC membership at large and mini-seminars for the committee membership. Opportunities for networking and business referral are plentiful. With one broadcast e-mail, members can obtain information on experts from the entire Committee membership. Learn more about the Committee at www.iadclaw.org. To contribute a newsletter article, contact:

Amy Sherry Fischer Vice Chair of Newsletters Foliart, Huff, Ottaway & Bottom (405) 232-4633

amyfischer@oklahomacounsel.com

The International Association of Defense Counsel serves a distinguished, invitation-only membership of corporate and

insurance defense lawyers. The IADC dedicates itself to enhancing the development of skills, professionalism and camaraderie in the practice of law in order to serve and benefit the civil justice system, the legal profession, society and our members.

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees@iadclaw.org

- 2 – International Association of Defense Counsel PRODUCT LIABILITY COMMITTEE NEWSLETTER April 2009

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

Although enacted before Election Day, the Consumer Product Safety Improvement Act of 2008 (CPSIA or the Act), Pub. L. No. 110-314, 122 Stat. 3016, may be the first of a series of new legislative initiatives that will strengthen federal regulatory power, increase funding for federal agencies, impose new requirements on businesses, and assist plaintiffs in pursuit of product and toxics liability lawsuits. This article (1) sets forth a brief overview of the CPSIA; (2) discusses the potentially broader impacts of provisions which address children’s products; and (3) discusses provisions which affect all consumer products. CPSIA OVERVIEW

The CPSIA implements the most sweeping revision of United States consumer product safety laws since 1972, when Congress enacted the original Consumer Product Safety Act (CPSA), 15 U.S.C. §§ 2051-2089 (1972).1 The Act expands the regulatory and enforcement powers of the Consumer Product Safety Commission (CPSC or Commission) and imposes new obligations on manufacturers, importers, and retailers of consumer products. Moreover, Congress has curbed CPSC’s discretion by enacting specific product standards and setting 42 deadlines for agency action over the next five years.

1 The CPSIA also amended other statutes that CPSC administers, notably the Federal Hazardous Substances Act, 15 U.S.C. §§1261–1276 (1960) (FHSA). CPSC also administers the Flammable Fabrics Act, 15 U.S.C. §§ 1191–1204 (1953) (FFA); the Poison Prevention Packaging Act of 1970, 15 U.S.C. §§ 1471–1476 (1970) (PPPA); the Refrigerator Safety Act, 15 U.S.C. §§ 1211–1214 (1956) (RSA); the Virginia Graeme Baker Pool and Spa Safety Act, 15 U.S.C. § 8003(a) (2007); and the Children’s Gasoline Burn Prevention Act § 2A, P.L. 110-278, 122 Stat. 2602 (July 17, 2008).

Congress drafted the CPSIA “in anger” resulting from a number of high-profile product safety recalls, most notably recalls of Chinese-manufactured jewelry and painted toys that contained excessive, and in some cases dangerous, amounts of lead.2 The Act addresses toys and children’s products, and, over a short time period, (1) lowers permissible lead levels in paint; (2) imposes maximum permissible limits for lead in product substrates and components; (3) bans certain uses of six phthalates (plasticizers); and (4) incorporates an ASTM (American Society for Testing and Materials) (toy) standard as a CPSC rule. Furthermore, the CPSIA added new requirements governing children’s products, including for testing and certification of compliance with regulations, use of tracking labels, and warnings in connection with advertisements. The CPSIA also imposes additional new requirements affecting all consumer products (not just children’s products), including greater CPSC recall authority, mandatory recall notice standards, broadened reporting requirements, adoption of a class-wide product hazard list, creation of a publicly accessible Consumer Product Safety Database identifying harmful products, weakened protections for preventing public disclosure of confidential business information, State Attorney General enforcement of standards through injunctive relief, increased civil and criminal penalties for violations, a requirement for a GAO (Government Accountability Office) study of

2 The CPSC website lists approximately 50 recalls involving lead-containing products between July 2007 and June 2008. See http://www.cpsc.gov/cgi-bin/haz.aspx. In March 2006, it was reported that a four-year-old boy died of acute lead poisoning after swallowing a lead charm sold with sneakers.

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

formaldehyde, and limitations on preemptive effects of consumer protection statutes. The numerous specific requirements and short deadlines the CPSIA imposed have placed a great burden on the CPSC staff, as well as on the regulated community. Although the CPSIA anticipates increased funding and staffing for the CPSC, Congress has been slow in adopting specific appropriations.3 In response to the CPSIA mandates, CPSC has engaged in a flurry of activity, including issuance of Office of General Counsel opinions, publication of guidance, accelerated rulemaking, and adoption of interim final rules.4 CPSC established a new CPSIA website, http://www.cpsc.gov/about/cpsia/cpsia.html, and provides almost daily e-mail notices of updates(https://www.cpsc.gov/about/cpsia/cpsialist.aspx). From a product liability and toxic tort defense perspective, the general argument can be made that much of this legislative and regulatory action is not scientifically based (and therefore not admissible under Daubert v. Merrell Dow Pharms., 509 U.S. 579 (1993)), is not determinative of chemical hazard or product defect, and may not even be relevant to products liability or toxics litigation. See, e.g., Glastetter v. Novartis Pharms. Corp., 252 F.3d 986, 991 (8th Cir. 2001) (FDA withdrawal of drug approval reflects lower threshold of proof than required in litigation and does not provide reliable evidence of causation under Daubert); Jones

3 The CPSIA authorizes increased CPSC funding starting at $118.2 million in FY 2010 to $136.783 million by FY 2013 and increases staffing levels from 420 to 500 FTEs, including more agents at ports to address consumer product imports. CPSIA Sec. 201. 4 Indeed, CPSIA Sec. 204 allows CPSC to issue product safety rules without first using an Advance Notice of Proposed Rulemaking (which would request pre-proposed rule comments) and without having to publish a proposed product safety rule in the Federal Register for 60 days. 15 U.S.C. § 2058.

v. Stegman, 625 N.Y.S.2d 934 (App. Div. 1995) (denying motion for new trial based on exclusion of subsequent regulatory action banning product); Conde v. Velsicol Chem. Corp., 804 F. Supp. 972 (S.D. Ohio 1992) (EPA listing of chemical as a carcinogen did not establish general causation), aff’d, 24 F.3d 809 (6th Cir. 1994). For example, although lead exposure can certainly be harmful, setting strict limits on lead content of components that do not actually release any lead is not scientifically sound. Likewise, debate continues about the potential health hazards of phthalates. Nevertheless, many of the provisions discussed below will be encountered in litigation and defense lawyers should be aware of them.5 CPSIA PROVISIONS RELATING TO CHILDREN’S PRODUCTS AND THEIR POTENTIAL BROADER IMPACT The CPSIA requirements for children’s products are of great interest to the manufacturers, importers, retailers, and distributors of such products.6 The provisions

5 Note that the CPSA provides for a private right of action for injuries resulting from a knowing violation of such a consumer product safety or other CPSC rule. 15 U.S.C. § 2072. Prior to amendment, CPSA also provided for private enforcement of consumer product safety rules and CPSA Sec. 15 corrective action orders through an action filed in a United States District Court, including award of attorneys’ fees. 15 U.S.C. § 2073. The CPSIA did not amend § 2072, but did amend § 2073 to authorize state attorney general enforcement actions. CPSIA Sec. 218 (discussed supra.). Courts have generally held that there is no private right of action under the CPSA itself absent a specific rule violation, and there is no private right of action under the FHSA. See, e.g., In re Mattel, 588 F. Supp. 2d 1111, 1117-18 (C.D. Cal. 2008). Most, but not all, courts have held that there is no private right of action for violation of the CPSA Sec. 15(b), 15 U.S.C. § 2064(b), substantial hazard reporting requirement. See, e.g., Kehr v. Yamaha Motor Corp., U.S.A., 2008 WL 5191210 (S.D.N.Y. Dec. 5, 2008). 6 CPSIA’s Sec. 101 lead standards apply to “children’s products;” the CPSA defines a children’s product as “a

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

also are of more general interest because plaintiffs in civil litigation may contend that agency findings regarding chemicals and standards of care in the context of children’s products may be relevant to other products. Moreover, Congress may extend legislative actions that begin with children’s products to other areas of chemical manufacture, use, and disposal. Lead Ban, CPSIA Sec. 101, 15 U.S.C. § 1278a The CPSIA greatly expands the universe of products subject to lead limitations and reduces acceptable levels of lead.7 Specifically, the Act applies the current lead paint standard of 600 parts-per-million (ppm) to children’s products for sale as of February 10, 2009.8 The standard will consumer product designed or intended primarily for a child 12 years of age or younger.” 15 U.S.C. § 2052(a)(2). The definition goes beyond toys and includes any products that are primarily marketed to children. Id.; see also 15 U.S.C. § 2052(a)(5) (generally defining “consumer products” as any products used in a residence, school, or for recreational or personal use (subject to enumerated exceptions). 7 Prior to the CPSIA, CPSC had banned paint with a lead content exceeding 600 ppm as a hazardous substance under the Federal Hazardous Substances Act (FHSA), 15 U.S.C. § 1261. See 16 C.F.R. §1303. The CPSIA lowers that limit to 0.009% (90 ppm) as of August 14, 2009. CPSIA Sec. 101(f). CPSC has issued a final rule implementing that change. 73 Fed. Reg. 77492 (Dec. 19, 2008). The CPSC regulations also ban toys, other children’s products, and furniture containing lead-containing paint. 16 C.F.R. § 1303. Congress also enacted the lead content ban as a provision of the FHSA, not the CPSA. CPSIA Sec. 101(a)(1). 8 The CPSC rejected industry entreaties to apply the 600 ppm lead limits only to products manufactured after the effective date of February 10, 2009, not to products in inventory as of that date. The CPSC Office of General Counsel (OGC) determined that the Act, in stating that the lead standard was an FHSA standard, intended that the ban on sale of products containing over 600 ppm of lead apply to any products sold after February 10, 2009, regardless of date of manufacture. OGC Letter (Sept. 12, 2008). The CPSC also rejected

be lowered to 300 ppm by August 14, 2009, and to as low as 100 ppm (if technologically feasible) by August 14, 2011. CPSIA Sec. 101(a)(2). The lead content limit applies to any component of a product, e.g., a metal button would be evaluated separately from a jacket. CPSIA Sec. 101(a)(2)(A) (imposing lead limit of “600 ppm total lead content by weight for any part of the product”). The Act does not apply risk assessment methodology that the agency would typically apply in determining the appropriate standards for protection of public health. See, e.g., 15 U.S.C. § 2058(f)(3) (CPSC required to find that consumer product safety rule is reasonably necessary to eliminate or reduce unreasonable risk of injury associated with product). Congress circumvented this risk assessment process and determined on its own that any product that contains over 600 ppm lead is banned (with a few exceptions) – regardless of the potential for exposure or ingestion or consideration of dose or risk.9 The Act imposes this ban despite the absence of scientific evidence that correlates lead content of product substrates with actual lead exposure, ingestion, and risk.10

an industry petition seeking non-retroactive application. See CPSC Statement (Feb. 5, 2009) www.cpsc.gov/library/foia/ballot/ballot09/nam.pdf. 9 This CPSIA provision thus may be viewed as an application of the “precautionary principle.” See, e.g., UN Rio Conference (2000) (“Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.”). This is “the preventive perspective that the agencies adopt in order to reduce public exposure to harmful substances.” Glastetter v. Novartis Pharms. Corp., 107 F. Supp. 2d 1015, 1036 (E.D. Mo. 2000), aff’d, 252 F.3d 986, 991 (8th Cir. 2001). Thus, manufacturers must prove that their products do not pose a risk by claiming an exemption from the regulations as discussed below. 10 The CPSC lead paint standard arose from the Lead-Based Paint Poisoning Prevention Act of 1973 which required CPSC to submit to Congress a recommendation regarding “the safe level of lead in residential paint products.” 42 U.S.C. § 4821(b). The

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

The Act provides for exceptions for component parts that are not accessible and for electronic products (e.g., those containing batteries) where elimination of lead is not technically feasible. CPSIA Sec. 101(b)(2).11 CPSC is currently evaluating the use of an “accessibility probe,” which is normally used to test products to see if children’s fingers will be exposed to sharp parts, to determine lead accessibility. See 16 CFR § 1500.48 and § 1500.49 (accessibility probe testing). Thus, consistent with the Act, the agency seeks to ensure that children cannot even touch components containing over 600 ppm of lead, even if there is no actual lead exposure from such touching and even though there are disputes as to whether lead is likely to be absorbed by the skin even if there were some contact.

statute defined “lead-based paint” as paint containing more than 0.5% lead by weight (5,000 ppm). The statute further provided that the limit for lead based paint would be lowered to 0.06% (600 ppm) unless CPSC determined that the 0.5% level was safe. In December 1974, CPSC reported to Congress that absolute safety could only be achieved by banning all lead, but the 0.5% limit provided “a reasonable assurance, with expected exposures, of the absence of toxic effect.” CPSC Release #74-086. In 1976, Congress amended the statute to lower the limit to 0.06% unless CPSC, after a hearing and consultation with other government agencies, determined that “another level of lead is safe.” 42 U.S.C. § 4841(3). In December 1976, CPSC announced that evidence, including the hearing, an NAS report, and other information was insufficient to determine that a level above 0.06% was safe. CPSC Release #76-087. CPSC then used the 0.06% level as a basis for banning lead-containing paint, toys and furniture that exceeded that level. See CPSC Release #77-096. 11 Until CPSC finalizes guidance on inaccessibility, the CPSC will accept a manufacturer’s determination that a part is inaccessible if it is based on a reasonable interpretation of CPSIA Sec. 101(b)(2). Thereafter, the staff will make its own determination of inaccessibility, following the approach the CPSC proposed. Proposed Interpretive Rule, 74 Fed. Reg. 2439 (Jan. 15, 2009).

CPSC also may, by regulation, exclude a specific product or material from the lead ban if, after notice and a hearing, it “determines on the basis of the best-available, objective, peer-reviewed, scientific evidence that lead in such product or material will neither (A) result in the absorption of any lead into the human body, taking into account normal and reasonably foreseeable use and abuse of such product by a child. . .; nor (B) have any other adverse impact on public health or safety.” CPSIA Sec. 101(b)(1). CPSC, again feeling bound by the legislative language, recently stated that “any lead” means “any lead” no matter how little. See Final Rule, 74 Fed. Reg. 10475 (March 11, 2009); see also Notice of Proposed Procedures and Requirements, 74 Fed. Reg. 2428 (Jan. 15, 2008) (proposing procedures for determination of exclusions). It will be challenging for a manufacturer to prove that an accessible lead component, not otherwise excluded, would not result in the absorption of “any lead.”12

On February 6, 2009, CPSC issued an

enforcement policy which, inter alia, stated that the following products were not likely to contain lead levels exceeding regulatory standards: (1) children’s products made of all natural materials, including wood, cotton, and certain fine metals and fine metal alloys; (2) children’s books printed after 1985; and (3) most dyed or undyed textiles, including non-metallic thread and trim on apparel, blankets, and other fabric products (without plastic or metal fasteners). CPSC stated that it would not bring enforcement actions against sellers

12 The specific product exclusion regulations do not specify test procedures or detection limits, but submissions to the agency must contain that information, which CPSC technical staff will likely scrutinize. The Test Method: Standard Operating Procedure for Determining Total Lead (Pb) in Children’s Metal Products (Including Children’s Metal Jewelry), CPSC-CH-E1001-08 (December 4, 2008), has a method detection limit of 0.01 ppm. Id. at 2.

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

of these products, even if they exceed lead limits, unless the seller had knowledge that the products did not comply with the ban. Id; see also Notice of Proposed Rulemaking, 74 Fed. Reg. 2433 (Jan.15, 2009) (codifying the list of materials and products as not exceeding lead levels). CPSC requested affected parties to provide data demonstrating that the listed materials and products simply would not be expected to contain excessive amounts of lead.

Although the CPSIA lead limits are based on legislative fiat, not scientific analysis, plaintiffs in civil litigation can be expected to invoke them in litigation as to classes of products primarily used by children. Moreover, Congress’ aggressive regulation of lead content, without regard to risk, may presage new chemical-specific legislative initiatives. As with the phthalate ban (for which there is far less scientific support), the Congressional approach is ban first, research later. In contrast to agencies, Congress acts without any formalized notice and comment process.13 13 Although CPSC may ban products under the CPSA, 15 U.S.C. § 2057, and the FHSA, 15 U.S.C. §§ 1261-1262, such bans may be adopted only through rulemaking processes, which carry certain procedural guarantees. In fact, courts have struck down product bans enacted by the CPSC (and other agencies) on grounds including failure to support the regulatory action with substantial evidence. See, e.g., Gulf South Insulation v. CPSC, 701 F. 2d 1137 (5th Cir. 1983) (invalidating CPSC urea-formaldehyde ban due to absence of substantial evidence supporting the ban, including evidence of unreasonable risk of injury, and quantification of that risk); see also Corrosion Proof Fittings v. Environmental Protection Agency, 947 F.2d 1201 (5th Cir. 1991) (court overturned EPA ban of asbestos-containing products issued under Toxic Substances Control Act because EPA lacked substantial evidence that it considered all necessary evidence and promulgated the least burdensome regulation necessary to protect the environment); Pactra Ind., Inc. v. CPSC, 555 F.2d 677 (9th Cir. 1977) (regulation banning vinyl-chloride monomer-containing spray cans invalidated due to failure to hold hearings and produce a formal record); Springs Mills, Inc. v. CPSC, 434 F. Supp. 416 (D.S.C. 1977) (CPSC

Moreover, Congressional enactments under the commerce clause to protect public health (and related findings) are subject to a very limited judicial review.14 Courts, likewise, may defer to Congressional findings in evaluating the constitutionality of legislation.15 In any specific case, however, it may be argued that these Congressional actions and findings are no more reliable or scientifically valid than administrative decisions. Therefore, Congressional findings may be subject to exclusion from product liability cases under Federal Rules of Evidence 402 (irrelevant), 403 (prejudicial, confusing or waste of time), 802 (hearsay), and 702 and Daubert v. Merrell Dow Pharms., 509 U.S. 579 (1993) (unscientific).16

ban on fire retardant in children’s sleepwear overturned due to agency’s failure to follow procedural safeguards, and provide a full rule-making hearing). But see X-Tra Art, Inc. v. CPSC, 1991 WL 405183 (N.D. Cal. June 12, 1991) (denying injunction against CPSC ban of allegedly flammable foam paint; manufacturer would be given procedural due process rights during enforcement action). 14 Congressional findings of fact in a statute are entitled to great deference and subject to rational basis review. See, e.g., Gonzales v. Carhart, 550 U.S. 124, 165 (2007) (“we review congressional fact-finding under a deferential standard,” although courts do not place dispositive weight on those findings “when constitutional rights are at stake”); Walters v. Nat'l Ass'n of Radiation Survivors, 473 U.S. 305, 321-22 (1985) (“This deference to Congressional judgment must be afforded even though the claim is that a statute . . . effects a denial of the procedural due process guaranteed by the Fifth Amendment.”). 15 See, e.g., United States v. Silverman, 132 F. Supp. 820, 830-31 (D. Conn. 1955) (congressional findings are entitled to great weight in considering the constitutionality of a statute, but do not establish essential elements of a case or relieve the government of the burden of proving those elements); see also United States v. Carolene Prods. Co., 304 U.S. 144, 152 (1938) (statutory characterization of a banned product as harmful is “no more than a declaration of the legislative findings deemed to support and justify the action taken as a constitutional exertion of the legislative power, aiding informed judicial review”). 16 See, e.g., In re School Asbestos Litigation, 1991 WL 175819 (E.D. Pa. Sept. 4, 1991) (Court refused to take

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

Phthalate Ban, CPSIA Sec. 108, 15 U.S.C. § 2057

Phthalates comprise a group of more than 50 compounds used to make vinyl, polyvinyl chloride (PVC), and other plastics soft and flexible, as a solvent in paint, adhesives, cosmetics, and fragrances, and in personal care products, detergents and surfactants, printing inks, coatings, food products, and textiles. The chemicals may leach from these materials and be absorbed by the skin, ingested, or adhere to inhalable dusts. Phthalates are suspected of being “endocrine disruptors” which allegedly can affect hormone levels and contribute to birth defects.17

The Act makes it unlawful for any

person to manufacture for sale, distribute in commerce, or import into the U.S. any children’s toy or child care article18 that

judicial notice under Fed. R. Evid. 201 of Congressional findings of asbestos hazard and rule that “asbestos is hazardous as a matter of law”); Johnson v. Mayor & City Council of Baltimore, 472 U.S. 353, 369 (1985) (Congressional requirement that federal firefighters retire at age 55 under federal civil service provision, absent any indication that Congress grounded the age limit on occupational qualifications, did not articulate that age is a bona fide occupational qualification for non-federal firefighters under the ADEA and was not an absolute defense to age discrimination lawsuit); see also Presbyterian Church of Sudan v. Talisman Energy, Inc., 453 F. Supp. 2d 633, 669-70 (S.D.N.Y. 2006) (Congressional finding of genocide in the Sudan Peace Act, unsupported by factual investigation, was excluded as inadmissible hearsay in case alleging that defendant aided and abetted genocide). 17 See Bruce J. Berger, et al., Alleged Endocrine Disruptors: An Update on Legislation, Science, and Litigation concerning Bisphenol-A and Phthalate, IADC Product Liability Committee Newsletter, July 2008.http://www.iadclaw.org/pdfs/ProductLiab-July2008-1of2.pdf 18 As defined by the CPSIA (phthalate section), the term “children’s toy” means “a consumer product designed or intended by the manufacturer for a child 12

contains concentrations of more than 0.1% of three phthalates, DEHP (di-(2-ethylhexyl) phthalate), DBP (dibutyl phthalate), or BBP (benzyl butyl phthalate).19 The Act also prohibits use of three other phthalates, DINP (diisononyl phthalate), DIDP (diisodecyl phthalate), or DnOP (di-n-octyl phthalate) in any children’s toy that can be placed in a child’s mouth or child care article (presumably that also can be placed in the mouth, but the Act is unclear).20 The CPSIA authorizes CPSC to undertake rulemaking re these phthalates. CPSC staff currently takes the view – contrary to the CPSIA directives with respect to lead – that the percentage of phthalates is to be determined based on the

years of age or younger for use by the child when the child plays” and the term “child care article” means “a consumer product designed or intended by the manufacturer to facilitate sleep or the feeding of children age 3 and younger, or to help such children with sucking or teething.” CPSIA Sec. 108(e)(1). 19 These provisions became effective on February 10, 2009. Congress enacted the phthalate prohibition as a consumer product safety rule, pursuant to CPSA Sec. 8, 15 U.S.C. 2057. The CPSC’s General Counsel issued an Opinion Letter on November 17, 2008, stating that, unlike the CPSIA’s lead content restrictions, its phthalate prohibitions would not apply to a company’s existing inventory. The CPSC OGC determined that the phthalate ban should not apply retroactively because it was a consumer product safety rule which under the CPSA does not apply to existing inventory, not a federal hazardous substances ban under the FHSA, which typically prohibits all sales as of the effective date. OGC Opinion Letter (Nov. 17, 2008). The CPSC reversed this position on February 6, 2009, based on a decision issued in National Resources Defense Council, Inc. v. CPSC, 2009 WL 297708 (S.D.N.Y. Feb. 5, 2009) (holding that CPSIA clearly prohibited sales of products containing phthalates as of the effective date, even if manufactured prior to that date, and restrictions on CPSC rules did not apply to consumer product safety standards “enacted by Congress”). Consequently, the CPSIA’s phthalate prohibitions applied to existing inventory as of February 10, 2009. 20 See Draft Guidance re which children’s products are subject to CPSIA Sec. 108. 74 Fed. Reg. 8058 (Feb. 23, 2009).

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

mass of the entire product, not phthalate components.21

The Act requires CPSC to appoint a

Chronic Hazard Advisory Panel (CHAP) to “study the effects on children’s health of all phthalates and phthalate alternatives as used in children’s toys and child care articles.” CPSIA Sec. 108(b). The CHAP must evaluate all potential effects on children’s health, individual and cumulative risks, routes and levels of exposure, and phthalate alternatives. CPSC initiated this process by requesting nominees from the National Academy of Sciences on February 10, 2009; the panel has 24 months to prepare a report and CPSC has another six months to issue a rule.

CPSC has previously considered

phthalate issues. In 1985, it convened a CHAP that resulted in a voluntary ban of DEHP for teethers, rattles and pacifiers, a ban that the ASTM F963 toy standard (discussed below) now incorporates. Later, in response to a petition by environmental groups to ban PVC in children’s products, a CHAP Report (June 2001) concluded that DINP in toys, teethers, and rattles was not hazardous to children, and CPSC denied the petition in 2003. Todd Stevenson (CPSC Secretary) Letter (Feb. 26, 2003).

Mandatory Adoption of ASTM Toy Safety Standard, CPSIA Sec. 106, 15 U.S.C. § 2058 Section 106 of the CPSIA required CPSC to adopt by February 2009 the ASTM F963-07 consumer safety specification for toy

21 See “Lead, Phthalates, and the CPSIA, CPSC Staff Presentation Slides, Prepared by CPSC staff for presentation at the 2009 Annual Meeting of the International Consumer Product Health and Safety Organization (ICPHSO), February 26, 2009, Orlando, Florida,” available at CPSIA website, at 20.

safety. The ASTM standard generally sets forth material and design requirements and testing procedures, as well as warning and labeling requirements for toy safety.22 The standard also addresses hazardous substances, typically by incorporating CPSC and other regulatory standards. ¶ 4.3. The standard, however, also provides specific limitations of concentrations in “surface-coating materials” of metals, including compounds of antimony, arsenic, barium, cadmium, chromium, lead, mercury, or selenium. ¶ 4.3.5.2. Compliance with the limits (ranging from 25 to 1,000 ppm) is determined by use of a testing procedure that dissolves the contained solids (including pigments, film solids, and driers) and then determines levels of the soluble materials.

CPSIA Section 104 requires CPSC to review the ASTM standard within one year and determine if stricter standards are needed. In fact, F963-07 has already been superseded by F963-08. The new ASTM standard becomes the mandatory standard in 180 days if CPSC does not disapprove. Thus, through legislative action, Congress is making a voluntary industry standard, promulgated by an independent testing group, a mandatory federal standard. As such, compliance with the standard is subject to testing, certification, reporting, and other requirements discussed in this article.23 Moreover, plaintiffs in products

22 For example, the Standard sets forth or incorporates safety requirements for material flammability, cleanliness of materials used, volumes of sound emitted from sound-producing objects, minimum sizes of parts, sharp edges, folding mechanisms, cords and straps, stability of objects to sit on, ventilation, closures, holes and clearances, moving parts, and toys with batteries, as well as requirements for labeling, instructions, markings, test methods, packaging, and shipping. 23 The Act also provides that existing state standards will remain in effect as long as the state files such requirements and that states may petition CPSC to allow them to impose stricter standards. CPSIA Sec. 106(h). Thus, despite the CPSA preemption provisions

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

liability litigation could contend that failure to comply with the standard could be viewed as negligence per se.

Other CPSIA Provisions Currently Affecting Only Children’s Products

Third-Party Product Testing: CPSIA Sec. 102, 15 U.S.C. § 2063(1)(2), requires testing and certification of all children’s products (e.g., cribs and pacifiers, metal jewelry, baby bouncers, walkers, and jumpers) by accredited independent testing laboratories. The testing is required to ensure compliance with all applicable standards including lead and phthalate requirements and will provide a basis for the compliance with the certificate of conformity requirement (discussed below).24

Product Tracking Labels: CPSIA Sec. 103, 15 U.S.C. § 2065(a)(5), requires manufacturers to place a “tracking label” or other permanent distinguishing mark on children’s products “to the extent possible” identifying the source of the product, the date of manufacture, and additional data regarding the manufacturing process, such as the batch number. The tracking requirement is intended is to facilitate recalls.

Advertising “Labeling”

Requirements: CPSIA Sec. 105, 15 U.S.C. § 1278(c), amends the FHSA to require that advertisements (including those on Internet websites or in catalogues) provide warnings that also are required to be included on the product labels.

These requirements are currently

limited to children’s products but set in place (discussed below), manufacturers may be subjected to conflicting federal and state obligations. 24 On January 30, 2009, the CPSC granted a one-year stay of enforcement for testing and certification of its new lead and phthalate limits, until February 10, 2010, with the exception of lead paint and lead jewelry. 74 Fed. Reg. 6396 (Feb. 9, 2009).

systems that could easily be expanded to any other category of consumer products. Such expansion could increase business costs and potential exposures. A requirement of “independent” third-party testing would increase costs, but also lead to questioning as to the actual independence of the laboratories. For example, in the pharmaceutical arena, corporate contributions to researchers have been the subject of extensive media and legislative scrutiny and the focus of plaintiffs’ discovery in private litigation. The requirement for product tracking labels may presage an era of increased product responsibility under which manufacturers are increasingly accountable for their products once sold, and could give rise to increased obligations for post-sale warnings, retrofits, and recalls. Advertising of some products, like pharmaceuticals, is already extensively regulated with requirements that advertisements have fair balance discussing potential adverse effects of the drugs. See 21 C.F.R. § 202.1. Pharmaceutical companies are subject to FDA warning, civil penalties, and claims of alleged fraud or misrepresentation in connection with such advertising. The CPSIA children’s products advertising provisions may signal expansion of federal requirements for inclusion of warnings in advertising of consumer products.

PROVISIONS APPLICABLE TO ALL CONSUMER PRODUCTS General Certification Requirements, CPSIA Sec. 102, 15 U.S.C. § 2063

Prior to amendment, the CPSA required that manufacturers of products subject to CPSA standards issue certificates of compliance stating that the products met the standards. 15 U.S.C. § 2063(a)(1). The CPSIA broadens this requirement to apply to all consumer products that are subject to any rule, standard, ban, or regulation under the CPSA, as well as any other act CPSC

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

enforces or administers (e.g., the FHSA). The manufacturer must certify, based on a test of each product or upon a reasonable testing program, that its product complies with all rules, bans, standards, or regulations applicable to the product under any provision CPSC enforces. 15 U.S.C. § 2063(a)(1).25

The certification requirement extends

beyond the lead and phthalate rule to all CPSC-administered rules governing consumer products. As noted above, CPSC has granted a stay of enforcement as to new certification requirements (except for lead jewelry and paint). Although manufacturers are excused from testing and certification requirements for a year, the products they sell must still comply with the new lead and phthalate standards. Thus, manufacturers of products potentially containing lead or phthalates are relieved of the costs of testing and the paperwork burden of certification, but without testing they may risk violation of the Act. Moreover, retailers will want the assurance of compliance that comes with a conformity certificate. Thus, as a practical matter, many manufacturers will comply with the stayed requirements as part of a quality assurance program.

Recalls, CPSIA Sec. 214, 15 U.S.C. § 2064 (CPSA Section 15) Prior to amendment, the CPSA gave CPSC the authority to require the manufacturer, distributor, or retailer of a

25 The certificate must accompany the product and be provided to each distributor and retailer. The certificate must be made available to CPSC officials upon request, although CPSC is evaluating use of electronic certificates. CPSC issued an immediate final rule in November 2008 assigning responsibility to domestic manufacturers for certification, except importers logically are responsible for imported products and the certificate need not name the manufacturer. Final Rule, 73 Fed. Reg. 68328 (Nov. 18, 2008).

consumer product that poses a “substantial product hazard” to give public notice of such hazard and repair, replace, or refund the purchase price of the product. 15 U.S.C. § 2064. The statute defines “substantial product hazard” as a failure to comply with a CPSA product safety rule or a product defect that poses a substantial risk of injury.26 The CPSIA expands this provision to provide for recalls of products that fail to comply with other rules, regulations, standards, or bans CPSC enforces under other statutes, e.g., the FHSA (and therefore the lead ban). The Act gives CPSC other enhanced recall authority, including power to require recalls of “imminently hazardous consumer products.”27 CPSC may also require manufacturers to cease distribution of the subject product and provide notice to appropriate state and local public health officials. CPSC can order corrective actions of recall, repair, or refund, and the manufacturer no longer has an option to choose among those actions. CPSC also can withdraw its approval of a corrective action plan or order amendments to that plan.

26 CPSC has issued interpretive regulations regarding whether a product contains a defect that poses a substantial risk of injury: “In determining whether the risk of injury associated with a product is the type of risk which will render the product defective, the CPSC and staff will consider, as appropriate: The utility of the product involved; the nature of the risk of injury which the product presents; the necessity for the product; the population exposed to the product and its risk of injury; the obviousness of such risk; the adequacy of warnings and instructions to mitigate such risk; the role of consumer misuse of the product and the foreseeability of such misuse; the Commission’s own experience and expertise; the case law interpreting Federal and State public health and safety statutes; the case law in the area of products liability; and other factors relevant to the determination.” 16 C.F.R. § 1115.5. 27 An imminently hazardous consumer product is one that “presents imminent and unreasonable risk of death, serious illness, or severe personal injury.” 15 U.S.C. § 2061(a).

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

CPSIA Sec. 214(b). Finally, the CPSIA prohibits the sale and export of recalled products. CPSIA Sec. 216, 15 U.S.C. § 2068(a). Thus, if a product is recalled because it fails to meet the lead standard in this country, it cannot be exported to another country with less stringent requirements, even if it meets those requirements. The Act gives CPSC greater authority and flexibility regarding product recalls. It can now require recalls for products that violate FHSA or other CPSC-administered standards and has more power as to the details of mandatory corrective action plans. As a practical matter, the vast majority of recalls have been, and will likely continue to be, “voluntary,” but CPSC will be in a stronger position to carry out negotiations concerning corrective action plans for such recalls. From a litigation perspective, companies are likely to see more recalls, with attendant litigation risks. Recall Notice Requirements, CPSIA Sec. 214(i), 15 U.S.C. § 2064(i) This provision of the Act, introduced by then-Senator Barack Obama, sets forth notice requirements for mandatory CPSC recalls. Although most recalls are voluntary, the notice provisions are likely to be required for future voluntary recalls and may become the standards for exercise of reasonable care in connection with a recall.28 28 Restatement (Third) of Torts, Products Liability (1998), Sec. 11, sets forth a theory of liability for “negligent recall.” Specifically, it suggests that a seller could be held liable for harm resulting from failure to recall a product if the government requires a recall or a seller voluntarily undertakes a recall, and the seller “fails to act as a reasonable person in recalling the product.” Courts thus far generally have not embraced a separate negligent recall theory. See, e.g., Eberts v. Kawasaksi Motors Corp., 2004 WL 224683 (D.N.D. Feb. 2, 2004) (no duty to recall). Courts, have, however, found that when a manufacturer assumes a post-sale duty to remedy defects, it has an obligation to

The Act states that notices should include: (A) description of the product, including the product’s model number or stock keeping unit (SKU) number of the product; the names by which the product is commonly known and a photograph of the product; (B) description of the action being taken with respect to the product; (C) number of units of the product with respect to which the action is being taken; (D) description of the substantial product hazard and the reasons for the action; (E) identification of the manufacturers and significant retailers of the product; (F) dates between which the product was manufactured and sold; (G) number and a description of any injuries or deaths associated with the product, the ages of any individuals injured or killed, and the dates on which CPSC received information about such injuries or deaths; (H) description of any remedy available to a consumer, any action a consumer must take to obtain a remedy, and any information a consumer needs in order to obtain a remedy or information about a remedy, such as mailing addresses, telephone

complete the remedy using reasonable means. See, e.g., Bell Helicopter Co. v. Bradshaw, 594 S.W. 519, 532 (Tex. App. 1979). Some courts evaluated negligent recall claims within the framework of Restatement (Second) of Torts § 324A (1965), which imposes liability on parties who voluntarily perform services, fail to exercise reasonable care, and cause harm as a result. See Tabieros v. Clark Equip. Co., 944 P.2d 1279 (Hawaii 1997) (no liability under § 324A because manufacturer had no independent duty to retrofit products and did not undertake such duty); Blossman Gas Co. v. Williams, 375 S.E.2d 117 (Ga. Ct. App. 1988) (once a gas company assumed the duty to inform its customers of gas-water-heater thermostat recall, it was liable for negligence in performance of that duty, citing § 324A); see also Santiago v. Group Brasil, Inc., 830 F.2d 413 (1st Cir. 1987) (Puerto Rico law, negligence claim could be brought for failure to comply with CPSC recall order, although under facts of case defendant was not responsible for recall); John Deere Co. v. May, 773 S.W.2d 369, 377 (Tex. App. 1989) (upholding award of punitive damages for gross negligence in conducting recall and failing to notify plaintiff’s decedent).

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

numbers, fax numbers, and e-mail addresses; and (I) other information CPSC deems appropriate.29 Substantial Product Hazard Reporting, CPSIA Sec. 214(a), 15 U.S.C. §§ 2064(b) (CPSA Sec. 15(b))

Prior to the CPSIA, Section 15(b) of the CPSA required manufacturers, importers, distributors and retailers to notify CPSC immediately if they obtained information that reasonably supported the conclusion that a consumer product distributed in commerce (1) failed to comply with an applicable consumer product safety rule or with a voluntary consumer product safety standard upon which CPSC has relied as a consumer product safety rule; (2) contained a defect which could create a substantial product hazard; or (3) created an unreasonable risk of serious injury or death. 15 U.S.C. § 2064(b).30

CPSIA Sec. 214 amended CPSA section 15(b) to add a requirement for reporting of products which “fail to comply with any other rule, regulation, standard, or

29 Some states have previously enacted requirements for recalls and recall notices. The Illinois Children’s Product Safety Act, 430 Ill. Comp. Stat. 125/17 (2005) requires that when children’s products are recalled, merchants remove the products from the shelves of their stores or program their cash registers to ensure that the item cannot be sold and post in a prominent location the recall or warning notice for 120 days. If a merchant recalls a children’s product sold on its web site, the merchant must remove the product from its web site or block the ability to purchase the children’s product and post on its home page a link to the specific recall notice or warning information that was issued for the product, and attempt to contact the purchaser via the purchaser’s e-mail or shipping address, if provided. 30 CPSA Sec. 37, 15 U.S.C. § 2084, also requires manufacturers to report products that have been the subject of three civil actions filed in federal or state court alleging death or grievous bodily injury over a 24-month period, which result in settlement or plaintiffs’ verdicts. The manufacturer must report within 30 days of the third judgment. The CPSIA did not amend CPSA Section 37.

ban under this Act or any other Act enforced by the CPSC.”31 For example, sellers must report if they become aware of a children’s product that exceeds the CPSIA applicable lead limits (which are a FHSA ban). As a practical matter, the incorporation of voluntary standards also imposes broader reporting obligations. Note that the agency has taken the position that products that fail to comply with voluntary standards are defective for that reason.

Substantial Product Hazard List, CPSIA Sec. 223, 15 U.S.C. § 2064(j)(1) CPSIA also amends CPSA Section 15 by adding Section 15(j)(1), which allows CPSC to adopt a rule that will identify a consumer product or class of consumer products as a substantial product hazard under CPSA Sec. 15(a)(2). CPSC must determine that the hazardous characteristics of the product are readily observable and have been addressed by voluntary standards, such standards have been effective in reducing injury, and there is substantial compliance with such standards. Thus, CPSC can now identify, through rulemaking, class-wide defects that constitute substantial product hazards (if the defects are subject to voluntary standards). The provision essentially allows the agency to say, from its perspective, that a class of products that do not comply with specific voluntary standards are defective, thereby essentially making those standards mandatory.32 For example, CPSC has been concerned about certain children’s clothing

31 The CPSIA also provides, however, that a report provided pursuant to new Section 15(b)(2) may not be used as a basis for criminal prosecution under FHSA Sec. 5, 15 U.S.C. § 1264, unless there is a showing of intent to defraud or mislead. CPSIA Sec. 214. 32 Note that this provision is essentially subject only to pre-enforcement review, because to obtain judicial review, any person adversely affected by such rule must file a petition for review (under CPSA Sec.11) within 60 days after adoption of the rule.

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

with neck drawstrings that may pose a choking hazard. CPSC may now issue a rule finding that any such products are defective if it determines that effective voluntary standards that address this type of danger are already in place. Consumer Product Safety Database, CPSIA Sec. 212, 15 U.S.C. § 2055A (CPSA Sec. 6A)

CPSIA Sec. 212, 15 U.S.C. § 2055A, creates a public, internet-accessible Consumer Product Safety Database, which can be used by consumers and public agencies to report information about harm allegedly caused by specific consumer products.33 Manufacturers will have a very limited time period to respond to these reports, but may seek to correct or redact them based on inaccuracies, trade secrets, or confidential business information. The names of the reporters will not be published, so plaintiffs’ counsel could not contact consumers directly, but the Database could easily be mined by aggressive plaintiffs’ attorneys seeking new products about which to file lawsuits, and thus have a significant litigation effect. CPSC has not yet established guidelines for operation of the Database.34 The Database will contain “reports of harm related to the use of consumer products” submitted by consumers, local, state or

33 “Harm” means injury, illness, death, or risk of any of these, as the CPSC will determine. 15 U.S.C. § 2055A(g). 34 CPSC was to submit a detailed plan to Congress for establishing, maintaining, and publicizing the Database by February 10, 2009. CPSIA Sec. 212(a), 15 U.S.C. § 2055A(a)(2). In the absence of any funding for this project, however, CPSC did not prepare such a plan. It apparently will do so when it receives funding. (Note that the Act states that the establishment of the Database is “subject to the availability of appropriations.” CPSIA Sec. 6A(a)(1).) Assuming that there is funding, the Database is to be operational no later than 18 months after the date of the plan submission. 15 U.S.C. § 2055A(a)(3).

federal agencies, health care professionals, child service providers, and public safety entities. CPSA Sec. 6(b)(1)(A). The list of submitters does not include “plaintiffs’ lawyers,” but it is not clear whether CPSC will routinely post information contained in product liability lawsuit complaints or other information provided by plaintiffs’ counsel. It is clear that the Database will not include information that manufacturers or retailers provided to CPSC in CPSA Section 15(b) or 37 reports. 15 U.S.C. § 2055A(f)(2)(A), (B).

The Act requires the Database to include: (1) reports of harm it receives related to the use of consumer products; (2) information regarding voluntary corrective action; and (3) comments from the manufacturer addressing the risk of harm.35 Pursuant to CPSA Sec. 6A, when CPSC receives a report, it will, “to the extent practicable,” transmit the report to the manufacturer identified in the report within five days. 15 U.S.C. § 2055A(c)(1). The manufacturer must then identify any inaccuracies, as well as any confidential information or trade secrets contained in the report. The manufacturer may then request that CPSC include its comments in the Database or request that portions of the report be designated as confidential. Id. § 2055A(c)(2)(B), (C). If CPSC determines that the designated information is a trade secret, it will redact the designated information before including the report in the Database. Id. § 2055A(c)(2)(C)(ii). If CPSC disagrees with the confidentiality request, it will include the report in the Database and so notify the manufacturer. Id. § 2055A(c)(2)(C)(iii). The manufacturer then 35 CPSC will provide “clear and conspicuous notice” to Database users that CPSC does not guarantee the accuracy, completeness, or adequacy of the contents of the Database. Id. § 2055A(b)(5). Thus CPSC’s inclusion in the Database of a product that caused certain harm should not be taken as an agency finding of causation.

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

may bring an action in federal court to seek removal of the information from the Database. Id.36 As a practical matter, the burden of demonstrating the confidentiality or inaccuracy is likely to fall on the manufacturer.

Restrictions on Information Disclosure, CPSIA Sec. 211, 15 U.S.C. § 2055 (CPSA Sec. 6)

CPSA Sec. 6(b) prohibits CPSC from disclosing information about a consumer product that identifies a manufacturer unless CPSC has taken “reasonable steps” to assure that (1) the information is accurate; 2) disclosure of the information is fair in the circumstances; and 3) disclosure of the information is reasonably related to effectuating the purposes of the CPSA and of the other laws CPSC administers. 15 U.S.C. § 2055(b)(1).

CPSIA Section 211 amends CPSA

Section 6(b) and will require increased diligence by manufacturers to prevent the release of inaccurate information or the publication of trade secrets and other confidential information.37 The CPSIA shortens the time from 30 to 15 days for notice and opportunity to comment on

36 If CPSC determines that the information in a proposed report or a manufacturer’s comment is “materially inaccurate,” it may decline to add such information, correct such information, or add information to correct inaccurate information. Id. § 2055A(c)(4)(A). If CPSC determines that an existing report or comment already posted in the Database is “materially inaccurate or duplicative of information,” CPSC has seven business days after such determination to remove or correct the information or add information to correct the inaccurate information in the Database. Id. § 2055A(c). 37 After the CPSIA amended CPSA Section 6(b), the CPSC amended the regulatory provisions implementing Section 6 to reflect the statutory changes. 73 Fed. Reg. 72334 (Nov. 28, 2008) (to be codified at 16 C.F.R. Part 1101).

information prior to CPSC’s disclosure to the public of certain product-specific information. 15 U.S.C. § 2055(b)(1). It also shortens the time from 10 to 5 days in which CPSC must notify a company of its intention to disclose information over the company’s objection. Id. The CPSIA further shortens the time for notice and opportunity to comment under section 6(b) where CPSC publishes a finding that the public health and safety requires public disclosure in less than 15 days, and no longer requires publication of such a notice in the Federal Register. See 16 C.F.R. § 1101.22(a).

Prior to amendment, CPSA Sec.

6(b)(4) stated that CPSC does not have to provide a manufacturer with an opportunity to comment on disclosure if CPSC has filed an action under CPSA Sec. 12, 15 U.S.C. § 2061 (action in federal court relating to “imminently hazardous products”), or is in the course of a rulemaking or other administrative or judicial proceeding. CPSIA Sec. 211(9) now additionally relieves CPSC of obtaining manufacturer comments when it has reasonable cause to believe the product is in violation of any consumer product safety rule or provision under the CPSA or similar rule or provision of any other act CPSC enforces. 15 U.S.C. § 2055(b)(4).

CPSC Sec. 6(b)(5) states that CPSC

will not disclose information to the public that companies submit with Section 15(b) substantial product hazard reports (discussed above), subject to certain exceptions.38 The CPSIA broadens the scope of the exceptions

38 Prior to the CPSIA, CPSC was not required to keep information manufacturers submitted in Section 15(b) reports confidential if CPSC had ordered a corrective action regarding a product that presents a substantial product hazard (under 15 U.S.C. § 2064(c) or (d)); CPSC has accepted in writing a remedial settlement agreement dealing with the product at issue; or when the person who submitted the Section 15(b) report agreed to public disclosure. 15 U.S.C. § 2055(b)(5).

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

and thus allows greater disclosure of information. Specifically, CPSIA Sec. 207 provides that CPSC can share these reports’ information with any federal, state, local, or foreign government agency with which CPSC has adopted information sharing agreements (subject to CPSA Sec. 29(f), 15 U.S.C. § 2078(f)).39 Thus, CPSC can share information with governments, at home and abroad, to facilitate taking actions against consumer product companies.

State Attorney General Enforcement, CPSIA Sec. 218, 15 U.S.C. § 2073(b)

The CPSIA provides that a State Attorney General who has reason to believe that a company has violated any consumer product safety rule, regulation, standard, certification, or labeling requirement, may bring an action to obtain injunctive relief in federal District Court (in the district where the defendant is found or transacts business). 15 U.S.C. § 2073(b). CPSC must receive notice of the action and has the right to intervene. Attorneys General may not bring such actions if CPSC is pursuing civil or criminal actions for the same alleged violation. 15 U.S.C. § 2073(b)(5) (except for CPSIA Sec. 219 whistleblower protection).

State Attorneys General do not have a

right to sue for damages or penalties and this fact, plus the current limitations on stated budgets, may make such state actions less likely. Note however that state Attorneys General have pursued actions under state consumer protection, deceptive trade practices, unfair trade practices and other

39 At the same time, the CPSIA prohibits CPSC from disclosing to manufacturers or others product safety-related information provided by a foreign government, unless the information is subpoenaed in an action the bought by the U.S. government. CPSIA 207, 15 U.S.C. § 2078 (f)(3).

similar state statutes.40 For example, in 2007, 38 states sued toy manufacturers, which had already recalled lead-containing toys, under state consumer protection statutes; California filed an action also claiming a violation of Proposition 65.41 Many of the defendants settled the cases in December 2008, with the manufacturers agreeing to pay $12 million to the states and accelerate their compliance with the CPSIA lead deadlines. See, e.g., Mass. Attorney General Press Release (Dec. 15, 2008). Attorneys General may be expected to include actions for injunctive relief concerning alleged CPSA violations in future consumer production actions. Currently, there does not appear to be a coordinated CPSC-state Attorney General forum to address the role of state Attorneys General actions in connection with CPSC’s enforcement scheme, and manufacturers may be faced with legal actions on various fronts.42

40 Moreover, Attorneys General may be able to link such state claims to the injunctive relief provided by the CPSIA under the doctrine of pendent jurisdiction. 41 Proposition 65 (California Safe Drinking Water and Toxic Enforcement Act, Cal. Health & Safety Code §§ 17200 et seq.) requires businesses to provide a “clear and reasonable” warning if their products contain 750 chemicals that allegedly pose a significant risk of causing cancer, birth defects, or reproductive toxicity. No warning is required if exposure to the chemical is low enough to pose no significant risk of cancer or is significantly below levels observed to cause birth defects or other reproductive harm. Proposition 65 may be enforced by consumer groups and private litigants as well as district attorneys and the California Attorney General. 42 Congress has indicated that it would like to see CPSC take the lead in enforcement actions and coordinate with State Attorneys General. Other than requiring states to give notice, however, the Act does set up any mechanism for avoiding conflict. The CPSIA Conference Report nevertheless contains helpful language for defendants seeking stays or consolidation. “To ensure the efficient operation of enforcement efforts, along with the consistent interpretation and application of commission regulations, the Conferees expect cooperation and consultation to occur between the attorneys general and

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

Civil and Criminal Penalties, CPSIA Sec. 217, 15 U.S.C. §§ 2069, 2070

The CPSIA increases civil penalties for violations of the CPSA with fines increased from $5,000 per violation to $100,000, and the maximum fine for a related series of violations increased from $1.25 million to $15 million. There are similar penalty increases for violations of the FHSA and other CPSC-administrated statutes. CPSIA Sec. 217(c) provides criminal penalties for knowing violations of up to five years in jail and deletes the requirement that CPSC provide notice before criminally prosecuting a company’s officers, directors, or agents or individual for noncompliance.

Other Chemical or Product Specific Provisions CPSIA Sec. 234 requires the Comptroller General, in consultation with CPSC, to conduct a study on the use of formaldehyde in the manufacture of textile and apparel articles and their components “to identify any risks to consumers caused by the use of formaldehyde in the manufacturing of such articles, or components of such articles.” The General Accountability Office is to complete the study by August 2010. Formaldehyde is sometimes used in apparel manufacture (permanent press), and recent analyses disclosed measurable levels in clothing. This analysis led Sen. Robert Casey (D-Pa) to call for formaldehyde testing and standards in the CPSIA, but the Act’s final

the Commission in the normal course of business in implementing and carrying out this authority. H.R. 4040 Joint Explanatory Statement at 72. Moreover, “the Conferees do not intend . . . to allow unlimited lawsuits against the same defendant in various jurisdictions across the country. Multiple lawsuits involving the same facts and the same defendants could delay the prosecution of injunction suits filed by the Commission adding pretrial procedural issues, such as consolidation or transfer.” Id.

version merely called for a study. This provision is another example of concern about a specific chemical being addressed in legislation, prior to agency action. It is also interesting that the study is to be conducted by GAO, an agency that carries out and publishes analysis of other agency actions regarding chemicals, but does not typically perform independent risk assessments.43 Preemption, CPSIA Sec. 231, 15 U.S.C. §§ 2074 and 2075, 1261n

CPSA standards have preemptive effect over different state standards that apply to the “same risk of injury” associated with the same consumer product. 15 U.S.C. § 2075(a). Note, however, that states may obtain approval from CPSC to enact stricter standards. 15 U.S.C. § 2075(b), (c). Regulations enacted under the FHSA, such as the CPSIA Sec. 101 lead limits, are also preemptive. FHSA Sec. 18, 15 U.S.C. § 1261n. The adoption of the ASTM toy standard is also preemptive, but states may seek exemptions. CPSIA Sec. 106(4)(1). Courts have found that CPSA’s preemptive effect, at least as it relates to tort litigation, is weakened by a “saving clause,” which states that compliance with consumer product safety rules “shall not relieve any person from liability at common law or under state statutory law to any other person.” 15 U.S.C. § 2074(a).

Courts have given the CPSA limited

preemptive effect. For example, in Moe v. MTD Prods., 73 F.2d 179 (8th Cir. 1995), the

43 Although not included in the final Act, the Conference Report identifies issues which “require heightened regulatory scrutiny and greater attention” from CPSC, specifically, carbon monoxide poisoning (portable generators, charcoal briquettes, and CO detectors), cigarette lighters, equestrian helmets, garage door openers, lead-containing ceramic products, pet toys, and appliances that can tip over. H.R. 4040 Joint Explanatory Statement at 75-77.

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

court held that a CPSC labeling standard involving a lawn mower expressly preempted plaintiff’s failure-to-warn claims, but plaintiff could pursue a design defect claim that would not create a different standard. In Colon v. Bic, USA, Inc., 136 F. Supp. 2d 196 (S.D.N.Y. 2000), the court held that the savings clause prevented CPSC cigarette lighter standards from expressly preempting common law product liability claims and that the “minimum” CPSC standards did not impliedly preempt state liability claims.44 Finally, in In re Mattel, 599 F. Supp. 2d 1111, 1115-16 (C.D. Cal. 2008), the court rejected the argument that a voluntary recall conducted pursuant to a CPSC-approved corrective action plan preempted a tort action seeking reimbursement for allegedly hazardous products.

The CPSIA specifically addresses two

preemption issues. First, section 231(a) provides that CPSC rules, regulations, regulatory preambles may not expand, contract, limit, modify or extend the preemptive effect of the statutes that CPSC administers. At first glance, this might appear self evident, but Congress appears to be stating its disapproval of the Bush Administration practice of having agencies set forth the anticipated preemptive effect of regulations in their preambles. This practice

44 Courts have also held that state tort claims are not preempted when they rely on different, and higher, standards of care for design, manufacture and distribution of products than those imposed by applicable CPSC safety standards where there was no conflict with those standards. In Leipart v. Guardian Ind., Inc., 234 F.3d 1063, 1069-70 (9th Cir. 2000), the court held that common law tort requirements were not “regulations” and therefore did not conflict with CPSC standards; more broadly the court considered the CPSC standards to be a floor – a minimum safety standard upon which state common law could impose further duties. The court also held that common law claims premised on violations of CPSC standards were not preempted. Id. at 1068.

was more notable with the FDA,45 but CPSC also stated in at least one a preamble that its standards preempted state regulations and civil lawsuits. See CPSC Mattress Open Flame Standard, 71 Fed. Reg. 13472, 13496 (March 15, 2006) (“The Commission intends and expects that the new mattress flammability standard will preempt inconsistent state standards and requirements, whether in the form of positive enactments or court created requirements.”). The CPSIA says that such statements should not have any effect.

Second, CPSIA Sect. 231(b) states

that: “Nothing in this Act or the Federal Hazardous Substances Act shall be construed to preempt or otherwise affect any warning requirement relating to consumer products or substances that is established pursuant to State law that was in effect on August 31, 2003.” 15 U.S.C. § 2051. Because California’s Proposition 65, discussed supra, was in effect on that date, it is not preempted.

In general, the CPSA does not prevent

states from adopting more aggressive regulatory schemes and states are not waiting for federal action. California, in addition to Proposition 65, has an expanded lead jewelry regulatory system, adopted its own phthalate ban (prior to CPSIA), imposed limits on formaldehyde release from composite wood products, and is evaluating a comprehensive “Green Chemistry Initiative.”46 The 45 See, e.g., FDA 2006 Physician Labeling Rule 71 Fed. Reg. 3922, 3934 (Jan. 24, 2006) (“under existing pre-emption principles, FDA approval of labeling under the act . . . pre-empts conflicting or contrary state law” including failure to warn claims based on omission of labeling information). 46 The California Green Chemistry Initiative seeks to establish a “cradle to cradle” regulatory process for potentially hazardous chemicals. The process consists of first identifying chemicals of concern and then taking actions including obtaining more information from manufacturers, requiring labeling, restricting or prohibiting use, controlling access or limiting

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

California phthalate ban (AB 1108, adopted Oct. 2007, effective Jan. 1, 2009) addresses the same six phthalates as CPSIA and imposes the same limits. The California statute also covers toys and child care articles, but there are some differences in how such products are defined (i.e., California includes products used for “relaxation” as well as feeding and sleeping), and testing procedures and protocols may not be identical. The CPSIA expressly provides that states can impose additional requirements on “phthalate alternatives” that are not specifically regulated under the CPSIA, but this provision seems to support preemption of state standards as to the six regulated phthalates. Whether the federal phthalate regulations actually preempt California standards, and their effect on products liability litigation has yet to be resolved.

exposure, requiring recycling or responsible disposal, funding challenge grants, or taking no action. See generally http://www.dtsc.ca.gov/PollutionPrevention/GreenChemistryInitiative/index.cfm.

- 19 – International Association of Defense Counsel PRODUCT LIABILITY COMMITTEE NEWSLETTER April 2009

w: www.iadclaw.org p: 312.368.1494 f: 312.368.1854 e: committees @iadclaw.org

PAST COMMITTEE NEWSLETTERS

Visit the Committee’s newsletter archive online at www.iadclaw.org to read other articles published by the Committee. Prior articles include:

MARCH 2009 Defending the Punitive Damages Claim: How to Use Philip Morris v. Williams and Exxon Shipping Co. v. Baker Kristen E. Dennison and William J. Conroy

FEBRUARY 2009 Made in China: Consumer Product Lawsuits Imported to the United States Gregory Shelton JANUARY 2009 The Potentially Dangerous Intersection of New York Labor Laws and Product Liability and Toxic Tort Cases Roy Allen Cohen and Allen I. Young DECEMBER 2008 Witness Manipulation in Product Liability Litigation Creighton (Chip) Magid and Joseph Perkovich

DECEMBER 2008 The “Sophisticated User” Defense in Product Liability Actions Brian P. Heermance and Kevin A. Hickman DECEMBER 2008 The Fifth Circuit Shuts the Door to Economic Loss Doctrine Exceptions Daryl G. Dursum NOVEMBER 2008 Civil Law – Common Law: Face To Face Emmanuèle Lutfalla