United States: The Epic Buckyballs® Saga Settles

Last Updated: June 9 2014
Article by Erin M. Bosman, Julie Y. Park and Jeffrey M. David

May 2014 brought an ordinary end to a series of extraordinary events, with the Consumer Product Safety Commission (CPSC) settling an unprecedented proceeding against Craig Zucker, the former CEO of Buckyballs® manufacturer Maxfield and Oberton Holdings, LLC ("Maxfield and Oberton"). The CPSC had sought to hold Zucker personally liable for a product recall. In the Matter of Maxfield & Oberton Holdings, LLC, CPSC Docket Nos. 12-1, 12-2, 1302 (May 3, 2013). Zucker responded by suing the CPSC for injunctive relief and a declaration that the CPSC's actions violated his First and Fifth Amendment rights.

SOUND AND FURY, SIGNIFYING NOTHING?

Despite estimating the cost of recall to be $57 million, the CPSC settled with Zucker for $375,000—less than one percent of the estimated cost. Pursuant to the settlement, Zucker initiated a voluntary recall that offers a refund to consumers.1 Of the $375,000 settlement amount, $75,000 is to be used to publicize the recall and conduct a notice campaign pursuant to Section 15 of the Consumer Product Safety Act. The rest of the settlement will fund the consumer refunds. Zucker did not admit that Buckyballs® were defective, a substantial product hazard, or children's toys; or that the CPSC had jurisdiction over him as an individual.2 The settlement is only in Zucker's capacity as a responsible corporate officer, and not on behalf of Maxfield and Oberton.

Although the cases are now over, the underlying question of whether the CPSC could assert jurisdiction over Zucker and hold him responsible for the recall remains unanswered. In a public statement, CPSC Commissioner Ann Marie Buerkle noted that she was concerned "about how this case unfolded."3 Commissioner Buerkle wrote that she "believe[s] the case against Mr. Zucker should never have gotten started without an affirmative Commission vote approving the issuance of a complaint against him" because the CPSC "never approved the issuance of a complaint against Mr. Zucker" as required by 16 C.F.R. §§ 1025.11(a), 1025.11(b)(2), 1025.11(b)(3), and 1025.13. Despite her concerns, she supported the settlement because Zucker had stipulated to the CPSC's jurisdiction over him for purposes of the settlement. The commissioner did not address whether or not an individual could be held personally liable for a recall.

Commissioner Buerkle's comments may further fuel Cause of Action, Inc., Zucker's attorneys, who are not done with their fight against the CPSC. They plan to continue their FOIA litigation against the CPSC to determine what led to its action against Zucker in his individual capacity in their ongoing campaign against government overreach.4 Cause of Action has long alleged that Zucker was targeted by the CPSC for speaking out against what Zucker dubbed "CPSC bullying." Zucker was also supported by former CPSC Chair Nancy Nord, who wrote an op-ed in TheWall Street Journal on November 12, 2013, titled "The Irrational Federal War on Buckyballs."

SIGNIFYING . . . SOMETHING

Any message the CPSC intended to send with its pursuit of Zucker has been muddied by the settlement and Commissioner Buerkle's statement. Should individuals view administrative proceedings brought by the CPSC as an ordinary enforcement mechanism in the CPSC's toolbox, or was this case a result of Zucker's repeated intransigence and taking up arms against the CPSC? The answer is unclear. At least Commissioner Buerkle's statement provides comfort that naming an individual in an administrative proceeding cannot be as simple as filing an amended complaint. But the ultimate question—"when, if ever, an individual officer or director of a corporation can properly be made a Respondent in a contested recall case"—remains open.

THE SAGA BEGAN WHEN ZUCKER WAS NAMED BY THE CPSC

In its May 2013 filing, the CPSC sought to force Zucker, the former CEO of Maxfield and Oberton, to personally conduct recall and remedial efforts for Buckyballs®, the high-powered magnets that the CPSC ordered off the market due to injuries caused by ingestion of the magnets.5 Maxfield and Oberton dissolved in 2012. Despite apparent statutory limitations on the CPSC's enforcement authority, the CPSC was allowed to name Zucker under the responsible corporate officer doctrine as a proper respondent for the recall. This was the first time the CPSC attempted to hold an individual personally responsible for a company's recall.

INTERLOCUTORY APPEAL

On May 16, 2013, Zucker filed a "Motion for Determination that the Order Adding Craig Zucker as a Respondent Can Be Immediately Appealed." Zucker argued that the order adding him to the complaint involved a controlling question of law or policy for which there is substantial ground for differences of opinion, and that an interlocutory appeal would materially advance the ultimate determination of the litigation (the standard under 16 C.F.R. § 1025.24(b)(4)(i) for such a motion). On June 19, 2013, the Administrative Law Judge (ALJ) denied Zucker's motion, finding that the underlying substance of the litigation—whether or not Buckyballs® constitute a substantial product hazard under the CPSA—did not hinge on Zucker's inclusion as a respondent.

ZUCKER FOUGHT BACK

On November 12, 2013, Zucker took the unprecedented step of suing the CPSC in the U.S. Federal District Court for the District of Maryland.6 Zucker alleged that "[h]aving obliterated [Maxfield and Oberton], and having salted the earth by undermining the [liquidating trust's] ability to satisfy whatever claims that [Maxfield and Oberton] might have left, CPSC turned its sights on Mr. Zucker." Zucker sought declaratory and injunctive relief enjoining the CPSC from asserting adjudicative authority over him, and declaring that the CPSC acted arbitrarily and capriciously and that its actions violated the First and Fifth Amendments.

LOOKING AHEAD

Though the events leading to the Buckyballs® settlement raise more questions than they answer, few individuals are likely to find themselves in a situation where these questions arise. Most product manufacturers, even those that end up in adversarial negotiations with the CPSC as to whether a product should be recalled, can reach a resolution before the CSPC resorts to an administrative proceeding against the company, let alone against the individuals. In the unlikely event individuals find themselves in a similar situation, they can at least point to the Buckyballs® saga as setting a low bar for settlement.

Footnotes

1 In the Matter of Maxfield & Oberton Holdings, LLC, CPSC Docket No. 12-1, Consent Agreement (May 9, 2014), available at http://cdn.shopify.com/s/files/1/0282/4712/files/Consent_Agreement_Order_050914.pdf?1155.

2 Id. at ¶ 29.

3 Statement of Commissioner Buerkle on the Zucker Settlement Agreement, available at http://www.cpsc.gov/About-CPSC/Commissioners/Ann-Marie-Buerkle/Ann-Marie-Buerkle-Statements/Statement-of-Commissioner-Buerkle-on-the-Zucker-Settlement-Agreement/.

4 Cause of Action statement concerning Craig Zucker and the Consumer Product Safety Commission, available at http://causeofaction.org/cause-action-statement-concerning-craig-zucker-consumer-product-safety-commission/.

5 For further analysis of the CPSC administrative proceeding, please see our previous Client Alert, "CPSC Seeks to Hold Former CEO Responsible for Buckyballs® Recall," available at http://www.mofo.com/files/Uploads/Images/130509-CPSC-Buckyballs.pdf.

6 For further analysis of Zucker's complaint, please see our previous Client Alert, "Buckyballs® Strike Back: Former CEO Sues CPSC," available at http://media.mofo.com/files/Uploads/Images/131118-Buckyballs-Strike-Back.pdf.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Erin M. Bosman
Julie Y. Park
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions