Source: http://www.accdigitaldocket.com/accdocket/november_2017?pg=38
Timestamp: 2018-09-25 17:16:04
Document Index: 248886443

Matched Legal Cases: ['§ 2069', '§ 2069', '§ 2069', '§ 2069', '§ 217', 'art 1119']

sponsored content graciously presented by Miles & Stockbridge 3
CIVIL PENALTIES UNDER THE CONSUMER PRODUCT SAFETY ACT — IS A CHANGE COMING?
Section 217 of the Consumer Product Safety Improvement Act of
2008 (CPSIA), Public Law 110-314,
122 Stat. 3016 (August 14, 2008) significantly increased the amount of penalties that could be imposed.
Prior to its passage, the penalty was US$8,000 per violation, with a maximum penalty of US$1.825 million for a related series of violations. The CPSIA raised these amounts to US$100,000 per violation, with a maximum penalty of US$15 million for a related series of violations. 15 U.S.C. § 2069(a)( 1).
The maximum penalty is adjusted for inflation, id. § 2069(a)( 3)(A), and is currently US$110,000 per violation and US$16,025,000 for a related series of violations. 81 Fed. Reg. 84559 (November 23, 2016).
Although the commission is authorized to compromise any civil penalty, 15 U.S.C. § 2069(c), in order to obtain a penalty without a compromise, the CPSC is required to file an action in US District Court.
Advance Machine Co. v. Consumer Product Safety Commission, 666 F.2d
1166 (8th Cir. 1981).
Factors for assessing a penalty
The penalties that can be assessed under the CPSA are substantial, and raise the important question of how the amount is determined.
The CPSA itself, as amended by the CPSIA, sets forth several factors to be considered:
The appropriateness of such penalty to
the size of the business of the person
charged, including how to mitigate undue
adverse impacts on small businesses,
the nature, circumstances, extent, and
gravity of the violation, including, the
nature of the product defect, the severity
of the risk of injury, the occurrence or
absence of injury, and the number of
defective products distributed, and such
15 U.S.C. § 2069(c). The CPSIA also mandated that the CPSC issue a regulation providing its own interpretation of these penalty factors. CPSIA § 217(b)( 2). In addition to the statutory factors found in the CPSA, the commission’s rule includes as factors whether or not a company has a safety compliance program, a history of non-compliance or economic gain from non-compliance, and whether the company responded to the CPSC’s inquiry in a timely and complete manner. See 16 CFR Part 1119.
Rising penalty settlements
Since the maximum penalty amounts were raised by the CPSIA in 2009, penalty settlements have been rising significantly. In calendar year 2009, when all of the penalty settlements involved conduct subject to the pre-CPSIA maximum penalty cap, the average settlement amount was about US$275,000, with the largest penalty being US$2.3 million. After 2009, the average penalty settlement increased as depicted in the chart below. Even accounting for the fact that most penalties settled before 2014 dealt with conduct occurring before the maximum penalty increased under the CPSIA, the increase is dramatic.
In 2016, the CPSC obtained its first penalty settlement in the maximum amount permitted under the CPSIA amendments, increasing the penalties (then US$15,450,000).
Partly as a result, the average pen-
alty settlement in 2016 soared to
over US$6.2 million. In addition, in
2016 CPSC initiated two suits seek-
ing penalties, the first such suits
The Tenenbaum and
Kaye chairmanships
The most recent Democratic chairs of the CPSC used the CPSIA amendments to usher in this increase in penalties. Inez M. Tenenbaum served as chair of the CPSC from June 23, 2009, to November 30, 2013, and thus led the commission when enhanced CPSIA penalties were first available. On January 23, 2012, the CPSC announced a civil penalty settlement with Hewlett-Packard Company in the amount of US$425,000, a penalty subject to the lower maximum amounts prior to the CPSIA. Although CPSC Chair Tenenbaum voted to approve the settlement, she indicated that her vote was “not without significant reservation.” (Statement of Chairman Inez Tenenbaum, January 19, 2012, available at www.cpsc.gov/s3fs-public/ pdfs/tenenbaum01192012.pdf.) In a statement explaining her vote, she clearly signaled that an increase in penalties was coming:
[I]t is my strong hope and expectation that future enforcement actions, particularly those that arise under our enhanced authorities, will (as Congress intended)
The penalties that can be
assessed under the CPSA
are substantial, and raise the
important question of how