CPSC Legislation and Litigation
The Consumer Product Safety Improvement Act (CPSIA), signed into law on August 14, 2008, greatly increases the litigation risks and potential penalties facing manufacturers, importers, distributors and retailers of allegedly defective consumer products. The CPSIA dramatically multiplies the maximum civil penalties the Consumer Product Safety Commission (CPSC) may impose for violations of the Act and heightens the possibility of criminal penalties. It also expands the ability of the CPSC to order and control product recalls.
For example, the CPSIA
- Increases civil penalties for failure to timely report possible product hazards to the CPSC from $5,000 per violation (with a cap of $1,825,000) to $100,000 per violation (with a cap of $15 million)
- Increases criminal penalties for various prohibited acts to include forfeiture of assets and imprisonment for up to five years, and eliminates the requirement that the CPSC first notify a company of "noncompliance" before seeking criminal penalties
- Requires CPSC approval of the remedy offered in a recall, rather than giving the recalling party its choice of repair, replace or refund
Increased Governmental Scrutiny
The CPSIA not only increases the penalties for violations, it also increases the likelihood that such violations will be discovered and prosecuted by significantly increasing the funding and staffing of the CPSC. More importantly, however, the CPSIA actively encourages parties beyond the CPSC to pursue product defect claims by authorizing state attorneys general to sue to enforce federal safety standards if the CPSC has not done so, providing additional protection for whistle-blowers and creating a public database that invites the airing of complaints by consumers and their lawyers.
Thus, the CPSIA
- Increases the CPSC's budget from $80 million to $136 million with the addition of 100 new employees
- Authorizes state attorneys general to sue to stop the sale of recalled products, products that violate a federal safety standard, or products which lack proper certification or labeling or which make unauthorized use of a safety symbol
- Encourages whistle-blowing employees by providing job protection enforced by the U.S. Department of Labor
- Creates a public database of consumer complaints, searchable on the Internet, that indexes complaints of injury or death relating to the use of a product and any corporate response to those complaints
What Companies Must Do
Improve compliance to reduce litigation, including:
- Instituting internal information-gathering and compliance procedures to ensure the timely submission of required reports to the CPSC
- Compliance with new third-party testing and certification procedures for all children's products
- Compliance with new requirements for tracking labels on all children's products
- Compliance with new requirements for registration cards for durable infant and toddler products
- Compliance with new warning rules for children's toys sold through the Internet or catalogs
- Compliance with new rules for permissible lead content in children's products
- Compliance with new rules prohibiting the use of phthalates in toys and child care products
Negotiate with the CSPC when the CPSC alleges its rules have been violated and/or that a product needs to be recalled; this may involve:
- Negotiating the nature of the remedy; can the product be repaired or replaced, or must a refund be offered?
- Negotiating the scope of the recall and terms of the recall notice and the type of publicity to be given to it
- Reducing or eliminating the amount of any civil penalties the CPSC seeks to impose
- Preventing the imposition of any criminal penalties
Limit the potential damage of a posting on the CPSC consumer complaint database by:
- Objecting promptly to the disclosure of any confidential or trade secret information
- Seeking the removal or correction of inaccurate information
- Providing an appropriate response to be posted in the database
Litigating with State Attorneys General and Private Plaintiffs
State Attorneys General
Addressing the concerns of the CPSC is a necessary, but no longer sufficient, corporate strategy. The CPSIA authorizes state attorneys general to sue on behalf of the residents of their states to:
- Stop the sale of products that violate CPSC-issued safety standards
- Stop the sale of certain recalled products
- Stop the sale of products lacking required testing certification or tracking labels or that have unauthorized safety marks
- Enforce the penalties imposed by the CPSIA for failure to report purportedly hazardous products to the CPSC
Private Plaintiffs
Even if the CPSC and state attorneys general determine that no action is warranted in any particular instance, the database of consumer complaints will prove to be an irresistible lure for plaintiffs' lawyers. The database will identify potential defects in products, name customers allegedly injured by those products, and describe any remedial measures required by the CPSC or taken by the company that made or sold the product. To deal effectively with these problems, companies must
- Monitor and address the information available in the database
- Have a proactive strategy for negotiating with or litigating against plaintiffs' lawyers who file lawsuits based on information obtained from the database
How Schiff Hardin Can Help
Schiff Hardin attorneys have extensive experience advising clients on how and when to report potentially hazardous products to the CPSC and on addressing the litigation, regulatory and public relations issues encountered in that process. We regularly assist clients with internal compliance programs, evaluating product risks and reporting requirements.
Schiff Hardin's CPSC Experience
Schiff Hardin attorneys have worked with the CPSC on matters ranging from rule-making to reporting requirements to recalls. We advise clients on product labeling, instructions, testing and design in order to reduce their product liability exposure. We have worked with clients and the CPSC to formulate and implement nationwide product recalls and other corrective action plans for various consumer products, including home appliances and electronics, lighting devices and recreational equipment. We also have assisted clients who wanted to take advantage of the CPSC's "Fast Track Corrective Action Program."
Schiff Hardin Clients
Schiff Hardin attorneys represent a diverse group of clients, including major manufacturers of juvenile products, who confront CPSC recalls and class action and catastrophic injury litigation. We have extensive experience protecting our clients' interests at the CPSC and helping them anticipate and avoid product liability litigation. We handle the cases that are filed in a cost-effective manner through the use of specialized small-team staffing and, where appropriate, computerized case management and budgeting systems. The core strength of our product liability group is trial experience. Our lawyers have handled complex product liability matters in 48 states and have tried major product liability jury cases in 40 different jurisdictions.