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January 18, 2013 Articles

Court Enjoins CPSC from Publishing Materially Inaccurate Report

By Tonya G. Newman

In a highly anticipated decision, the US District Court for the District of Maryland recently enjoined the Consumer Product Safety Commission  ( CPSC) from publicly publishing a report implicating a consumer product.  Company Doe v. Tenenbaum, No. 8:11-cv-02958-AW, slip op. (D. Md. Oct. 9, 2012).  Notably, this is the first instance in which any court has prohibited the CPSC from posting a report on the controversial CPSC website, which was mandated by the Consumer Products Safety Improvement Act of 2008 (CPSIA). The decision clarifies the standards the CPSC must meet before publishing reports on the database, when an agency decision becomes final for purposes of the Administrative Procedure Act (APA), and when an agency decision is entitled to either Auer or Chevron deference (rejecting the commission's claimed entitlement to both).

Congress enacted the CPSIA to "establish consumer product safety standards and other safety requirements for children's products and to reauthorize and modernize the Consumer Product Safety Commission."  CPSIA, 122 Stat. at 3016.  To that end, Section 212 of the CPSIA establishes the consumer product safety database, which must include "[r]eports of harm relating to the use of consumer products" received from consumers, local government agencies, and others.  15 U.S.C. § 2055a(b)(1).  The statute permits manufacturers and private labelers to contest the posting of any report containing "materially inaccurate" information.  Id. at § 2055(c).  In Company Doe, the manufacturer repeatedly sought to prevent the publication of a report that contained "materially inaccurate" information because the report did not "relate to" the use of the product at issue. The manufacturer sought to enjoin the CPSC from publishing the "baseless and inflammatory" report arguing, among other things, that the CPSC's publication of the report would amount to arbitrary and capricious conduct and would be an abuse of discretion under the APA. After a somewhat arduous procedural history, the parties filed cross-motions for summary judgment.

The court concluded that the CPSC's decision to publish the report violated the APA and was, in fact, "beyond . . . a gross abuse of discretion, [and instead] emblematize[d] the arbitrary and capricious standard that Chevron [U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)] and the APA embody."  Company Doe, slip op. at 54; see also id. at 44.  One of the key questions was whether the harm alleged in the report was "related to" the use of the product, as required of any report of harm that is to be published pursuant to the CPSIA and its implementing regulations.  Id. at 22, 26; 15 U.S.C. § 2055(a)(b)(2)(B)(iii); 16 C.F.R. § 1102.10(d)(3); id. § 1102.10(f)(9)(3); id. § 1102.20(b)(3) – (4); id. § 1102.26(a)(1)(iii), (2)(iii).  Company Doe, slip op. at 26-27.If the harm did not "relate to" the use of the product, the commission's decision to publish the report would contradict its regulations which would, in turn, "tend to establish that the commission's conduct [was] arbitrary and capricious."  Id.

After finding the phrase "relate to" to be ambiguous, the court ultimately concluded that to be "related to" a product, an event must be "connected with" or "associated with" the product.  Id. at 26.  The CPSC argued that the court should defer under Auer v. Robbins, 519 U.S. 452 (1997) to the Commission's proposed definition of the phrase, which would require only the existence of some loose connection or association between the product and claimed harm, "however attenuated."  Id. at 28-30.  Declining to do so, the court reasoned that the phrase "relate to" in the commission's regulations simply mirrored or restated the phrase found in the statute itself and therefore the agency's interpretation was not entitled to deference.  Id. at 28 (quoting Gonzales v. Oregon, 546 U.S. 243, 257 (2006)).

The court next considered whether to defer to the commission's decision under Chevron, which first requires courts to evaluate whether Congress has directly spoken to the question at issue (and if it has, to give effect to unambiguously expressed congressional intent). If Congress has not spoken to the question, the court must consider whether the agency's answer is based on a permissible statutory construction.  Id. at 30-31 (quoting Chevron , 467 U.S. at 842-43).Noting that it had previously found the definition of "relating to" to be ambiguous in both the CPSIA and the regulations, the court found the CPSC's decision to publish the report to be arbitrary and capricious because there was no rational relationship between the decision to publish the report and the public-safety purposes promoted by the CPSIA.  Id. at 43-44.

The court further found that the CPSC's interpretation of its own regulations in this instance were inconsistent with previous agency determinations. In particular, the commission had previously approved five material inaccuracy claims because "the evidence in the report of harm did not show that the product was the source of the problem." Id. at 44. The CPSC failed to explain the inconsistency between its present and previous positions.Id. Moreover, the court noted that the CPSC decision was contrary to its own definition of material inaccuracy, which provides that information is materially inaccurate if it "is false or misleading, and . . .  is so substantial and important as to affect a consumer's decision about the product."  Id. at 46 (quoting 16 C.F.R. § 1102.26(a)(1) (2011)). The court concluded that the report satisfied this definition, finding the report at issue misleading because it created a false impression that the product played a role in the harm and finding that "common sense says" a consumer "would be dissuaded from purchasing it."  Id. at 47. 

Rejecting the CPSC's "doomsday" predictions that a ruling against it would interfere with its ability to expeditiously publish reports of harm, which would contravene the remedial purpose of the CPSIA, the court reasoned that not every manufacturer whose products are identified in reports would challenge the accuracy of the claims.  Even those who did file such claims might not continually contest the CPSC's determination that the report is suitable for publication (for example, following a correction).  Id. at 53.

Finally, the court clarified when an agency decision becomes final (and reviewable) under the APA.  In particular, the court found the decision to publish the report was a "final agency action" because it "marked the consummation of its decision-making process" and determined rights and obligations.  Id. at 55-56.  The court rejected the CPSC's arguments that the decision was not final because it did not confer on the manufacturer any rights or obligations; because it did not carry any legal consequences for the manufacturers; and because it was only a preliminary step that might lead to further fact-finding and administrative action.  Id. at 57. Rejecting the first argument, the court explained that agency action need not confer rights or obligations on a plaintiff to be final, but rather must merely "be one by which rights or obligations have been determined." Id. Here, the decision that the report did not contain materially inaccurate information established the CPSC's obligation to publish the report and, at the same time, established the manufacturer's right to keep a materially inaccurate report off of the database.  Id. at 57-58. 

The court rejected the second argument, reasoning that the CPSC's "decision to publish the report marked the consummation of an adversarial process that involved providing evidence with a view to meeting the burden of proof."  Id. at 60 (quoting 16 C.F.R. § 1102.26(b) (2011)).  Because the CPSC's decision was a "mixed question of law and fact culminating an adjudicatory process," it was the "hallmark of final agency action."  Id. Finally, rejecting as a red herring the CPSC's argument that its decision was preliminary, the court reasoned that while the CPSC "may" or "could" take future action in connection with the report, publication really is the final step in the decision-making process called for under the CPSIA.  Id. at 65. 

Rejecting each of the CPSC's arguments in turn, the court clearly took issue with the CPSC's apparent rejection of its previous decisions and its failure to recognize the lack of any correlation between the reported harm and the product at issue. The decision offers useful guidance to manufactures and others regarding how to challenge the commission's decisions to publish reports containing materially inaccurate information, including when such decisions are final and/or entitled to deference. 

Keywords: litigation, products liability, Consumer Product Safety Commission, report, materially inaccurate, deference, standards, Administrative Procedure Act, CPSIA

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