Hunton Retail Law Resource

The Recall Roundup is a monthly survey of regulatory activity affecting the manufacture, distribution, and sale of consumer products.  Subject matter may include the latest product recalls, major federal agency developments, and proposed or new federal rules.  The blog’s goal is to provide an overview, rather than a comprehensive report on every development that could potentially affect businesses or consumers.  Nothing herein constitutes legal advice.  If you have questions or comments about the blog, please reach out to the authors.

The CPSC’s nine-year saga over magnet sets has finally concluded.  Magnet sets are clusters of small, separable, magnetic balls that a consumer can rearrange into countless shapes.  In 2012, a distributor refused to voluntarily recall the magnet sets, forcing the CPSC to file an administrative complaint alleging that the magnet sets were defective and presented a substantial ingestion hazard to young children.  In 2017, the CPSC concluded that the magnet sets posed a substantial product hazard that cannot be mitigated by package warnings and ordered the distributor to recall the magnet sets.  The distributor sued in federal court to block the CPSC’s order.  After multiple appeals, the Tenth Circuit Court of Appeals ultimately agreed with the CPSC.  Thus, this month the CPSC issued a rare mandatory recall of 10 million magnet sets.  The recall noted that two children who had ingested the magnets from the magnet sets required surgery to remove them and a 19-month-old child died after ingesting similar high-powered magnets.  The CPSC also issued a warning to consumers about the dangers of high-powered magnets, noting that from 2009 to 2018, there was an estimated 4,500 cases of children from 11 months old to 16 years old who were treated in US hospitals for ingestion of high-powered magnets.

The CPSC has recently focused its enforcement efforts on children’s products.  Fisher-Price recalled two of its infant sleep products—Rock ‘n Glide Soothers and Soothe ‘n Play Gliders—after four infant deaths were reported involving the first product.  All four infants were placed in the products unrestrained on their backs and were later found on their stomachs deceased.  This news comes after the CPSC’s actions last month to approve a new federal standard for infant sleep products and to recall two more products related to infant sleep.

The CPSC recently announced its first civil penalty of 2021.  Cybex International, Inc. (Cybex) agreed to pay $7.95 million after the workout equipment manufacturer allegedly failed to immediately report to the CPSC the defects in two of its products.

The CPSC recently posted guidance on its website for consumer products related to COVID-19, including personal protective equipment. The guidance covers four categories of products: (a) face coverings, (b) gowns, (c) gloves, and (d) disinfectant and cleaning products. The guidance emphasizes that personal protective equipment sold to consumers must comply with all CPSC regulations, which include testing, certification, labeling, and recordkeeping requirements. The guidance drew sharp criticism from CPSC Commissioner Dana Baiocco in a statement:

The CPSC took proactive steps in October to address recent concerns with infant sleep products that pose suffocation hazards and could lead to Sudden Infant Death (SID).  This month the agency made a rare proposal for a mandatory consumer product safety standard to address the risks associated with crib mattresses.  The safety standard would incorporate by reference the voluntary standard ASTM F2933-19 (Standard Consumer Safety Specification for Crib Mattresses) with modifications to make the standard even more stringent.  These modifications include increased product performance testing to cover crib mattress firmness, coil spring issues, and face-in-mattress scenarios.  The new rule would also update the product’s warning labels, instructions, and packaging to remove unnecessary wording and emphasize the importance of positioning infants on their backs to sleep.  For example, the proposal compares the voluntary standard’s warning label to the proposed mandatory standard’s warning label:

Should you have to pay to see CPSC’s adopted safety standards?  That is the question raised by a lawsuit filed in the Third Circuit this month, which challenges the CPSC’s adoption of mandatory safety standards for consumer products that are not available for free to the public.  The American Society for Testing and Materials (“ASTM”) is a well-recognized independent organization that develops consensus-based, voluntary standards for children’s products.  In 2019, ASTM updated its safety specifications for infant bath seats, which includes changes to labeling, product performance, and safety testing (ASTM F1967-19).  The CPSC later promulgated an agency rule adopting the updated ASTM standard as legally binding on infant bath seat manufacturers (16 C.F.R. § 1215).  On behalf of a new mother, a civil rights group filed a petition with the U.S. Court of Appeals for the Third Circuit pursuant to 15 U.S.C. § 2060 challenging the CPSC’s rule.  The mother claims that she asked the CPSC for a copy of the standard and the CPSC instead directed her to buy a copy from ASTM.  ASTM charges $56 for a copy of the standard—almost double the price of an infant bath seat.  The petition asks the Third Circuit to vacate the rule, order the CPSC to make any binding standard freely accessible to the public whenever the CPSC proposes to promulgate a new rule, and order the CPSC to make any binding standard freely accessible to the public permanently after the CPSC adopts it in a final rule.

The new year ushered in a series of warnings from the CPSC about inclined infant sleepers posing suffocation risks and dressers posing tip-over risks to consumers. Both products have been under scrutiny by the CPSC over the past year.

With Acting Chairman Ann Marie Buerkle’s earlier announcement  that she will leave the CPSC this fall, this month the commissioners elected Commissioner Robert Adler as the new acting chairman. Adler has been affiliated with the CPSC for more than 40 years. He has served as a commissioner since 2009 and previously served as the acting chairman from December 2013 through July 2014.

This month serves as a reminder to manufacturers, distributors, retailers and importers that consumer products carry strong liability risks when they pose risks of serious injury or death. Steps should be taken to reduce that liability, including the issuance of alerts and recalls to remove the products from the stream of commerce.

In a recent article in the ABA Business Law Section publication Business Law Today, Hunton Andrews Kurth insurance attorneys Syed Ahmad and Geoffrey Fehling discuss several important D&O insurance coverage issues that can have far-reaching implications with retailers and other businesses involved in mergers, acquisitions, and other M&A deals. In the article, the authors discuss the intersection of M&A and insurance and how those transactions can impact the potential risks and protections afforded by D&O and other insurance policies. A copy of the article can be found here

A federal court in Pennsylvania has held that Liberty Mutual must defend its insured, Hershey Creamery Company, in an intellectual property infringement lawsuit because the suit raises claims that potentially implicate coverage under the policies’ personal and advertising injury coverages. The court further found that the alleged wrongful conduct was not subject to the policies’ IP infringement exclusion.

December was a quiet month in the world of recalls for two reasons. First, there were only 19 product recalls—the second lowest number of monthly recalls in 2019. Second, the partial federal government shutdown has forced the CPSC along with other agencies to close until President Trump and Congress can resolve their well-publicized funding dispute.

With a new commissioner confirmed in September, the Commission once again has five commissioners. A philosophical divide along party lines surfaced this month in two decisions.

The first decision involved the settlement of an administrative lawsuit filed by the CPSC in February. The lawsuit alleged that a distributor refused to recall three-wheeled jogging strollers after consumer complaints that the front wheel can detach suddenly during use, causing injuries to at least 50 children and 47 adults. To settle the lawsuit, the distributor agreed to notify dealers and retailers and to “develop and launch an information campaign that will include an instructional video demonstrating how to safely and correctly operate” the stroller.  Eligible consumers who participate in this campaign can receive “incentives,” such as hardware to repair the stroller or a 20% discount towards the purchase of a new stroller from the same distributor.

October began with a CPSC announcement that a major retailer agreed to pay a $3.85M civil penalty for failing to report that a trash can it sold contained a defect or created an unreasonable risk of serious injury. The retailer sold 367,000 of the trash cans nationwide between December 2013 and May 2015. Allegedly the trash can’s plastic collar may dislodge, exposing a sharp edge and posing a laceration hazard to consumers. The retailer received 92 consumer complaints about this alleged defect but did not immediately notify the CPSC of the defect. The CPSC announced a recall of the trash can in July 2015. In addition to the civil penalty, the retailer agreed to maintain a compliance program and a system of internal controls and procedures to ensure it discloses information to the CPSC in accordance with applicable law. The Commission voted unanimously (4-0) to accept the settlement.

This month marks the 10th anniversary of the Consumer Product Safety Improvement Act (“CPSIA”), which was signed into law on August 14, 2008. CPSIA was a bipartisan response to unsettling events in the world of consumer products that occurred in 2007. During that landmark year, reports emerged about lead contamination in a wide range of consumer products—including children’s toys—that forced the CPSC into the national spotlight and facilitated over 400 recalls. The CPSIA aimed to significantly enhance the CPSC’s regulatory and enforcement power by doubling its budget, increasing its staff levels, prohibiting the sale of recalled products and increasing its civil penalties. For example, before CPSIA, the CPSC could impose civil penalties in the amount of $8,000 per violation, with a maximum of $1.825 million. But in 2008, CPSIA increased significantly the amount of civil penalties to $100,000 per violation, with a maximum of $15 million, adjusted for inflation.

The CPSC experienced a political shake-up this month when the U.S. Senate confirmed Dana Baiocco as the newest commissioner. In September, President Trump nominated Baiocco, a Republican and former partner at Jones Day, but the Senate did not act on the nomination by the end of the 2017 calendar year. So President Trump resubmitted his nomination of Baiocco in January. On May 22, 2018, the Senate confirmed Baiocco by a vote of 50-45, mostly along party lines. Her seven-year term will run through October of 2024.

On the heels of a recent $5 million civil penalty, the CPSC recently secured a $1.5 million civil penalty with help from the U.S. Department of Justice (“DOJ”). The civil penalty concludes a long saga between the CPSC and a large arts and crafts retailer about vases with allegedly defective thin glass that rendered them prone to shattering.

The CPSC has flexed its regulatory muscle during the first months of 2018 with respect to products that pose risks to children. With the U.S. Department of Justice’s (“DOJ’s”) help, the CPSC secured a $5 million civil penalty against a drug company for its allegedly deficient child-resistant packaging. In December, the DOJ filed a complaint in federal court against the drug company alleging that it knowingly violated the Poison Prevention Packaging Act and the Consumer Product Safety Act by distributing five household prescription drugs with non-compliant child-resistant packaging and failing to report the noncompliance to the CPSC. The complaint alleges that the drug company’s engineers drafted a “risk analysis” memo identifying the packaging as non-compliant. Rather than halt distribution and immediately report the non-compliance to the CPSC, the drug company continued distribution with non-compliant packaging while concurrently developing compliant packaging. The company also waited nearly 15 months before notifying the CPSC of its non-compliant packaging. In January, the federal court entered a consent decree for the matter. The drug company agreed to pay a $5 million civil penalty, implement and maintain a compliance program, and maintain and enforce a system of internal controls and procedures.

With the arrival of 2018, President Trump resubmitted his nominations for CPSC leadership vacancies to the Senate. In 2017, Trump nominated Commissioner Ann Marie Buerkle to serve as CPSC Chair and Dana Baiocco to serve as a commissioner replacing Democrat Commissioner Marietta Robinson, whose term expired. But, under Senate rules, nominations not acted on are returned to the President. At the end of the Senate’s 2017 session, this meant that roughly 120 nominations were returned to Trump. Both nominees—Buerkle and Baiocco—are expected to receive Senate confirmation this year.

Earlier this month, Canada’s transport minister announced that a drone had collided with a commercial aircraft, the first confirmed collision of its kind in North America. Thankfully, the aircraft sustained only minor damage and was able to land safely. But this recent incident, which many commentators believed was inevitable given the proliferation of consumer and commercial drones, highlights the potential risks associated with drone operations.

August was a busy month in the world of recalls. First, the end of August ushered in a hefty $5.7 million civil penalty against a major retailer in the United States. The retailer was allegedly selling and distributing recalled products and has agreed, in addition to the civil penalty, to maintain a compliance program and a system of internal controls and procedures. The CPSC voted 4 to 1 to accept the settlement, with Acting Chairman Buerkle voting to accept a lower civil penalty.