United States: CPSC Recommends Carve-Outs In Protective Orders, Settlement Agreements

Last Updated: December 15 2016
Article by Kathleen M. Sanzo, Franco A. Corrado and Karl A. Schweitzer

A recently issued notice encourages litigants to ensure that they are free to share product defect information with the US Consumer Product Safety Commission.

The US Consumer Product Safety Commission (CPSC) published a novel notice on December 2 in the Federal Register titled "Litigation Guidance and Recommended Best Practices for Protective Orders and Settlement Agreements in Private Civil Litigation."

In the notice, the CPSC recommends the inclusion of exemptions in protective orders and settlement agreements governing the treatment of confidential information that allow "any party to report consumer product safety information, incidents, injuries and deaths to the CPSC"—notwithstanding limitations otherwise imposed on the dissemination of such information. The guidance in the CPSC notice is largely modeled after recent guidance issued by the National Highway Transportation Safety Administration.

Although Section 15(b) of the Consumer Product Safety Act (CPSA) requires manufacturers, retailers, importers, and distributors (Industry Stakeholders) to report product-related information on standards violations, substantial product hazards, and/or unreasonable risks of serious injury or death, the CPSC believes that Industry Stakeholders do not always comply with these requirements.

The CPSC has identified information exchanged in private litigation as a potential "key resource" for situations where reportable information was not disclosed by an Industry Stakeholder. According to the CPSC, "blanket" or "umbrella" protective orders in private litigation could prevent access to this "key resource," prompting the CPSC to assert that "the best way to protect public health and safety is to preemptively exclude or exempt the reporting of relevant consumer product safety information to the CPSC (and other government public health and safety agencies) from all confidentiality provisions."

Exemption Language

The CPSC does not endorse any particular wording to create the exemption, choosing instead to leave the precise language to the parties who, in the CPSC's view, "are in the best position to determine how that might be accomplished." However, the CPSC does provide suggested language for two alternative provisions that can be included in such exemptions:

  • "[N]othing herein shall be construed to prohibit any party from disclosing relevant consumer product safety information to the Consumer Product Safety Commission."
  • "[N]othing herein shall be construed to prohibit any party from disclosing relevant safety information to a regulatory agency or government entity that has an interest in the subject matter of the underlying suit."

Considerations for Industry Stakeholders

Industry Stakeholders should be aware that adverse parties in product liability and similar cases may now seek to include exemptions permitting the disclosure of confidential information to the CPSC when negotiating protective orders or settlements. Such provisions raise a number of considerations, including whether the private litigant's lawyers receiving information from an Industry Stakeholder should be given the unilateral right to determine what constitutes a relevant product safety disclosure or whether, for instance, the parties should include a mechanism requiring a "meet and confer" process before disclosure similar to those commonly utilized for resolving disputes over confidentiality. Moreover, the parties might consider whether the Industry Stakeholder should be given the right to control the submission to CPSC of any information that is identified by a litigation adversary as reportable, or at least have the right to assert that the information should be considered confidential to receive public disclosure protection under Section 6(b) of the CPSA.

While admittedly not a "binding or enforceable rule," the CPSC's guidance will create new issues during the negotiation of protective orders and settlement agreements in private litigation. It is also possible that the guidance could be withdrawn as a result of potential changes to Commission leadership as a result of the incoming Trump administration, as the issuance of the notice was controversial. The Commission vote to publish it was along party lines, with Commissioner Ann Marie Buerkle objecting to publication without public input.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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