Buckyballs® CEO Files Action Against CPSC
On November 12, 2013, Craig Zucker, co-founder of Maxfield & Oberton Holdings, LLC (M&O), filed suit in the U.S. District Court in Maryland against the U.S. Consumer Product Safety Commission (CPSC) and CPSC Chairman Inez Tenenbaum. See Zucker v. Consumer Prod. Safety Comm'n, et al., No. 8:13-cv-03355-DKC. Zucker seeks declaratory and injunctive relief to avoid being held personally liable in the Commission's ongoing administrative action seeking a mandatory recall of high-powered magnet products, including Buckyballs® and Buckycubes™, which were sold by M&O.
M&O was dissolved following the CPSC's filing of the administrative complaint against the company. On May 3, 2013, the presiding Administrative Law Judge granted the Commission's motion to amend its complaint, naming Zucker personally as a respondent. On June 19, 2013, the ALJ denied Zucker's motion to immediately appeal the ruling. If the CPSC prevails, Zucker, in his individual capacity, would be required to pay for all of the costs associated with the recall, which have been estimated to be as much as $57 million. As the Zucker complaint notes, this is the first time the Commission has taken action against "an officer or former officer of a company to personally conduct a recall." (Compl. at ¶ 62.)
Zucker alleges that naming him personally in the administrative action violates the Administrative Procedure Act (APA) as well as his constitutional rights under the First and Fifth Amendments. The complaint alleges that the Commission acted arbitrarily and capriciously and outside the scope of its authority, in violation of the APA, because Zucker is not a manufacturer, distributor, or retailer as those terms are defined in the Consumer Product Safety Act (CPSA). The CPSA authorizes the Commission may to "order the manufacturer or any distributor or retailer of the product" to conduct a recall. 15 U.S.C. § 2064(c) (CPSA Sec. 15(c)). In pleading this claim, the complaint criticizes the ALJ's application of United States v. Park, 421 U.S. 658 (1975), as an "unprecedented expansion" of the responsible corporate officer doctrine.
Zucker further alleges that the CPSC's actions infringed on his First Amendment right to free speech and denied his Fifth Amendment due process rights. The complaint states that the Commission has named Zucker in order "to punish him and to chill and deter him and other corporate officers from exercising their Constitutional rights to free speech, to free association, to publicly advocate for their companies, and to petition government officials for redress of their grievances." (Compl. at ¶ 108.)
These claims are made against a backdrop of purported interactions between Zucker and the Commission. The complaint describes M&O and Zucker's history of cooperation with the Commission with regards to Buckyballs® and Buckycubes™, which included a voluntary recall to relabel the products in May 2010; adding warnings to the product, packaging, and displays; instituting a program to control the sale and marketing of the products to adults only; starting and maintaining a website devoted to spreading the word about magnet safety; as well as taking other steps in consultation with the CPSC. Zucker maintains that he has been singled out by the Commission for punishment here, and that those efforts have been an attempt to "bleed first M&O and then Mr. Zucker to death." (Compl. at ¶ 86.) The complaint slams the CPSC as an "out-of-control bureaucracy" and their actions as unprecedented and an abuse of power. (Compl. at ¶¶ 65, 91.)
The Zucker complaint is only the latest in a string of actions that M&O and Zucker have taken to pressure the Commission. Following the filing of the administrative complaint, a press release was issued defending M&O's products, and the "Save Our Balls" campaign was launched. That effort was highly critical of the CPSC, prominently appeared across social media, and attempted to sell off the remaining inventory of Buckyballs® and Buckycubes™. On November 12, 2013, counsel for Zucker filed a Freedom of Information Act (FOIA) request, asking that the Commission disclose all materials related to M&O or referencing Mr. Zucker, among other things. Zucker also currently runs a new site, "United We Ball," which sells products and accepts donations to fund his legal battle against the CPSC.
It is not known whether the Commission will bow to this pressure, particularly in light of personnel changes at the Commissioner level, including the pending departure of Chairman Tenenbaum. Former CPSC Chairman and Commissioner Nancy Nord authored an op-ed in the Wall Street Journal on the same day as the Zucker case filing, supporting Zucker's efforts and dismissing the Commission for having "adopted the philosophy that any action, no matter how heavy-handed and outside established practice, is warranted if it achieves the desired result." Mr. Zucker's unprecedented attempt to fight back against the Commission's aggressive tactics will have significant ramifications for businesses regulated by the CPSC and the individual liability of their officers.
A copy of the Zucker complaint, with attachments, is available here.
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