7th Circuit Affirms CPSA Penalties Against Spectrum Brands, Inc.

7th Circuit Affirms CPSA Penalties Against Spectrum Brands, Inc.

On May 9, 2019, the 7th Circuit upheld the government’s Consumer Product Safety Act (CPSA) claims against Spectrum Brands, Inc. stemming from its failure to immediately notify the Consumer Product Safety Commission (CPSC) of a potential defect in coffee pots distributed by one of Spectrum’s affiliates.

On appeal, Spectrum argued that the district court lacked authority to impose a fine against it for violations of section 15(b) of the CPSA because the government’s suit was barred by the statute of limitations on civil penalty enforcement.  Section 15(b) of the CPSA requires manufacturers, retailers, and distributors to self-report information to the CPSC that reasonably supports a conclusion that a consumer product has a defect that may create a “substantial product hazard” or an unreasonable risk of serious injury or death.  Spectrum’s position has been that the statute of limitations started to run when it first learned of a potential defect in May 2009 and failed to timely report it at that time.

The government argued that Spectrum had a continuing obligation to report the defect and that this obligation did not end until Spectrum submitted a section 15(b) report to the CPSC in 2012.  The government also reiterated that by 2012, Spectrum had received more than 1,600 complaints and instituted two recalls before a class action prompted it to file the 15(b) report.

The 7th Circuit rejected Spectrum’s argument in affirming that the statute of limitations began to run in 2012 when Spectrum filed its 15(b) report.  It was only at that time that the CPSC was “adequately informed” of the defect to move forward with civil penalties.  The Court further noted that Spectrum’s position on the statute of limitations would only encourage companies with reporting violations to keep withholding information until the statute of limitations ran out, undermining the purpose behind the CPSA.  The 7th Circuit’s opinion also made a point of stating that the filing of a 15(b) report “entails minimal time and effort” and can be completed online in a matter of minutes.

In a concurring opinion, Circuit Judge Daniel Anthony Manion wrote that Spectrum kept receiving complaints right up until the filing of its report, and that each subsequent complaint triggered the reporting obligation again – thereby extending any accrual of the limitations period.

Takeaways:

  • The Majority held that there is a continuing obligation to report potential defects to the CPSC under Section 15(b) of the CPSA, and the government’s cause of action did not first accrue until the company complied with its section 15(b) reporting obligation.
  • Companies should file timely and accurate reports. This will best position them to avoid significant civil penalties, and will also start the clock on the statute of limitations for section 15(b) violations.
  • Importantly, companies should be aware that the filing of a report with the CPSC does not automatically mean a recall or other corrective action will be necessary. In fact, many reports filed with the CPSC do not result in recalls or corrective actions.

For inquiries regarding this issue, please contact DJ Warden or Brandie Morgenroth.

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