During this time, the public database faced its first significant legal challenge from a company that fought, based on a material inaccuracy claim, the CPSC's decision to publish a report involving one of its products. What started as a report submitted by a local government agency turned into a legal challenge that exposed the CPSC's rationale (or lack thereof) for publishing incident reports in the public database. The resultant legal opinion, issued on October 9, 2012 (though not released until October 22), is informative and instructive on the procedure for contesting publication of a report, and more importantly, with regard to what the court found to be arbitrary, capricious and impermissible behavior on the part of the CPSC.
Aside from the decision being a clear-cut win for the company (the incident report will not be made public), it's a win for the product safety community as a whole because it forced the CPSC to explain its reasoning for deciding which reports get published and which don't. There are a number of lessons to be learned, both for the CPSC and for the manufacturers, importers and distributors whose products are subject to the CPSC's regulations.
The Reported Incident:
Because Company Doe filed its case under seal and the court's decision regarding its challenge was heavily redacted, the actual incident report at issue has never been made public. We don't know the product involved, the reported harm, what happened to the consumer or the facts of the scenario.
After receiving notice of the report, Company Doe timely lodged a "materially inaccurate information" objection with the CPSC, indicating that the report contained confusing and contradictory statements and made no connection between the product involved and the alleged harm suffered. The CPSC responded, indicating that it agreed with parts of the material inaccuracy claim and sent the company a second, redacted version of the complaint that it intended to publish. Company Doe again objected to this second version based on material inaccuracy, and again the CPSC agreed with part of the material inaccuracy claim, but sent a further redacted, third version that it intended to publish. At this point, seeing no rational resolution to the back-and-forth, the company filed suit in U.S. District Court to enjoin the CPSC from publishing the report.
Company Doe's Lawsuit:
The focal point of Company Doe's legal challenge is the CPSIA's mandate that the public database contain "reports of harm relating to the use of consumer products." 15 U.S.C. § 2055a(b)(1), emphasis added. Company Doe argued that the report at issue didn't make a connection between the consumer's use of the product and the harm the consumer suffered, and was therefore materially inaccurate. In its lawsuit, Company Doe made the legal arguments that: (1) to publish the complaint would be an abuse of the CPSC's discretion; (2) the CPSC's decision to publish the complaint is arbitrary and capricious conduct; (3) the CPSC's actions exceeded its authority; and (4) the CPSC's actions amount to a due process violation and an unlawful taking prohibited by the Fifth Amendment.
The CPSC, in response, argued that its interpretation of the CPSIA warranted deference and, procedurally, that the decision to publish the report was not a "final agency action" appealable under the Administrative Procedures Act.
In the end, the court ruled in favor of Company Doe, concluding that the CPSC's actions constituted "erratic behavior, beyond being a gross abuse of discretion, emblematiz[ing] the arbitrary and capricious standard that [other landmark court decisions] embody. ... [T]he Commission's decision is unmoored to the CPSIA's public safety purposes and runs afoul of bedrock principles of administrative law and the sound policies that buoy them."
The focal point of Company Doe's argument was that the incident report did not contain sufficient information to link the product at issue to the alleged harm suffered by the consumer. Putting that into the terms of the controlling statute, the CPSIA, the reported harm was not related to the consumer's use of the product. The court looked at a number of ways of defining "related to," including the statutory language, dictionary definitions and the Commission's own regulations. It concluded that "related to" in this context means that there must be a showing of connection in lieu of causation. That being the standard, it found that the CPSC failed to show a connection between the product at issue and the harm suffered by the consumer. Accordingly, it was impermissible to publish the report.
To the Court, the definition and conclusion seemed easy to arrive at, and much of its 73-page opinion was spent excoriating the CPSC for its behavior in trying to back-door justify publishing the report seemingly only after that decision had already been made. The Court delved into the reasons the CPSC posited for publishing the report and found them wholly unconvincing, if not offensive to the Court in some instances. Among the transgressions for which the court admonished the CPSC were:
• Essentially ignoring the conclusions of its own expert, an engineering psychologist who reviewed the incident report as well as the CPSC's own investigative report on the incident. This expert's conclusion, as much of it as was revealed by the redacted opinion, was in concurrence with that of Plaintiff's expert, who concluded that the product at issue was not the cause of the reported harm.
• To refute its own expert's report, the CPSC submitted a declaration of its Assistant Deputy Director of the Office of Hazard Identification and Reduction, agreeing with the facts of the CPSC expert's report, but substituting his own conclusion that the product at issue was the cause of the harm. The court found that the Deputy Director, a mechanical engineer, was unqualified to render such an opinion, and called his conclusion "rank speculation" and "post hoc rationalization that warrants no weight."
• The court found the CPSC's decision to publish this report incongruous with previous decisions it had made, citing a Government Accountability Office ("GAO") report on the CPSC. The GAO report found that the CPSC had routinely determined that reports of harm were materially inaccurate (and therefore not fit to be published) where the evidence in the report did not show that the product was the source of the problem. Agreeing that the report involving Company Doe's products fit that very description, the Court was perplexed as to why "the Commission has utterly failed to explain the inconsistency between its conduct in this case and its prior conduct." The Court seemed beyond perplexed, and perhaps even insulted, that the CPSC raised what the Court described as a "facile" and "astonishing argument" that the CPSC did not need to explain itself because the GAO report was not part of the administrative record.
• The CPSC attempted to make a "self-serving and unsubstantiated assertion" that Company Doe's products carry certain risks in a failed attempt to establish that the product and harm were related in the report at issue.
• The CPSC did not explain or provide any rationale for rejecting Company Doe's claims of material inaccuracy. Only with the fifth version did the CPSC provide an explanation, one that amounted to circular logic: "The identified information was determined not to be materially inaccurate because you failed to meet your burden of proof that the information in the Report is materially inaccurate."
• The court hinted at improper collusion between the CPSC and outside consumer groups when it noted that the consumer groups managed to file objections in the litigation before the docket had been unsealed, and that the consumer groups' arguments parroted those of the CPSC.
• In a nutshell, the court found that the CPSC "predicated publication [of the report at issue] on an admixture of post-hoc rationalization and speculation."
Until this decision, manufacturers, importers, distributors, retailers, consumers – essentially everyone outside the agency – had no insight into the CPSC's rationale when it came to publishing reports in the public database. The court found this case to be an instance where the CPSC decided, for reasons unknown, that it wanted to publish this report and wasn't going to listen to reason, the facts, or even its own experts, who all pointed to not publishing this report. Only when it was called to answer for its decision in U.S. District Court did the CPSC begin to flesh out its reasons for wanting to publish it, and the court quickly saw through what was nothing more than after-the-fact justification that fell well short of the requisite legal standards.
There are troubling and encouraging parts of the court's decision. The troubling part - it shows that the CPSC was playing fast and loose with, if not completely ignoring, its own governing statute, regulations, policies, procedures and staff opinions. While it was scolded and criticized in this court case and in the end justice prevailed, how many other instances have there been where the CPSC published reports over a company's legitimate objections? How many other challenges were ignored or dismissed by the CPSC because someone at the Commission decided they wanted this report published, regardless of what the facts and law were? How many other times was a company bullied into allowing a report to be published because it didn't want, or couldn't afford, to fight the CPSC?
On the other hand, we're encouraged by this decision because it proved that the safeguards that are in place to prevent such over-reaching and bullying by the CPSC work – but only because Company Doe spoke up and fought to defend its rights. There are provisions in the CPSA and CPSIA that serve to protect companies from this kind of government misconduct, but unless a company or its attorneys know them and are willing to use them, they're just words on paper. That's where the right counsel can make a world of difference.
As product safety attorneys with years of experience – both inside and outside the CPSC – we have the knowledge, skills and expertise to prepare you in dealing with the CPSC. We've seen the development of the public database from both sides and know how valuable it can be, but only if it contains accurate information. It's incumbent upon the CPSC and those of us on the outside to make sure that's the case.
We invite you to contact us with your concerns, comments and questions regarding this decision and what it means to you and your company in working with the CPSC going forward.