United States: CPSC To Consider New Magnet Set Safety Standards Following 10th Circuit Decision In Zen Magnets

Last Updated: March 31 2017
Article by Erin M. Bosman, Julie Y. Park, Austin Marsh and Janet Kim

We have entered the next chapter in the ongoing saga of the Consumer Product Safety Commission's ("CPSC") regulation of high-powered, small, rare earth magnet sets ("SREMS").1 On March 1, 2017, CPSC met and unanimously approved removing the Magnet Sets Safety Standard from the Code of Federal Regulations.2 On separate motion, the Commissioners split 3-2 along partisan lines in favor of revisiting rulemaking for magnet sets.  This decision follows the United States Court of Appeals for the Tenth Circuit's November 2016 decision to vacate and remand to the Commission its earlier standard that effectively banned SREMS from sale in the U.S.3

Fight Over Safety Standard for Magnet Sets

As defined by CPSC, magnet sets are "[a]ny aggregation of separable magnetic objects that is a consumer product intended, marketed or commonly used as a manipulative or construction item for entertainment, such as puzzle working, sculpture building, mental stimulation, or stress relief."  16 C.F.R. § 1240.2.  In 2014, CPSC issued a Final Rule on Safety Standard for Magnet Sets restricting the size and strength of the individual magnets in these sets.  Id. §§ 1240.1-1240.5.  While not categorically banned under the 2014 Safety Standard, SREMS could not be sold due to the standard's severe size and strength restrictions.4 Last November, Zen Magnets, LLC ("Zen")5 successfully challenged CPSC's regulation in the Tenth Circuit.  Zen Magnets, LLC v. Consumer Prod. Safety Comm'n, 841 F.3d 1141, 1155 (10th Cir. 2016).  The Tenth Circuit vacated and remanded CPSC's 2014 Safety Standard for further proceedings consistent with the court's finding that CPSC failed to meet the Consumer Product Safety Act's requirements.  The court based its ruling on CPSC's incomplete and inadequately explained factual findings.  Id. at 1144.

Removal of Standard Following Court's Vacatur

CPSC's vote to remove the 2014 Safety Standard was a procedural formality needed to remove the vacated magnet set standard from the Federal Register.  82 Fed. Reg. 12716-01 (Mar. 7, 2017).  Regardless of CPSC's action or response, the Tenth Circuit's decision vacating the standard had the force of law immediately after the court filed its order on November 22, 2016.  Id.

Motion to Revisit Magnet Set Safety Standard Rulemaking

During the March 1st decisional meeting, Commissioner Elliot Kaye separately moved to direct staff to prepare a draft notice of proposed rulemaking addressing the issues raised in the Tenth Circuit's holding.6 Commissioner Kaye's motion directed CPSC staff to utilize CPSC's existing data, as opposed to conducting further fact-finding.7 During questions on the motion, Commissioner Robert Adler identified the issues in the Tenth Circuit opinion that needed to be addressed in the draft notice:  (1) CPSC's use of an incorrect time frame for the data set in its cost-benefit analysis, Zen Magnets, 841 F.3d at 1149; (2) CPSC's reliance on injury reports that only "possibly" involved magnet sets, id. at 1152; and (3) CPSC's failure to consider the utility of magnet sets, id. at 1152-53.8 CPSC estimated that it will take 11 staff months to prepare the draft notice.9

The Future of SREMS Regulation in Light of Shifting Tides at CPSC

This reshaping of magnet set regulation comes during an interesting time at CPSC.  As previously reported, CPSC's political makeup has recently shifted following CPSC's February 9, 2017 announcement of Republican Ann Marie Buerkle as Acting Chairman.  Although the partisan balance of CPSC is likely to shift to the Republicans later this year, Acting Chairman Buerkle currently heads a Commission with three Democrat Commissioners.  At the March 1st meeting, the two Republicans, Acting Chairman Buerkle and Commissioner Joseph Mohorovic, cast the two votes against revisiting rulemaking for magnet sets.  Commissioner Mohorovic strongly opposed new safety standards, stating:

I think this has gotten so personal with this agency of having a rule being . . . thrown out that we are ready to hurl ourselves headlong back into rulemaking. . . . We're doing this without taking the time to either learn the lessons about why we failed the first time or to figure out if there's still any need for the rule. . . . I think this is a factor of pure ego and this agency has taken the thoughtful opinion of the Tenth Circuit personally and we just want to win for winning's sake.9

When Democrat Commissioner Marietta Robinson's term ends in October 2017, President Trump will appoint a new commissioner, and Acting Chairman Buerkle and Commissioner Mohorovic's position on magnet sets likely will become the majority view at CPSC.

We will continue to monitor CPSC's actions with regard to magnet sets and provide updates on any new proposed standards in light of the Tenth Circuit opinion in Zen Magnets and the shifting roster at CPSC.

Footnotes

1 For background regarding CPSC's prior enforcement activity regarding SREMS, see http://classdismissed.mofo.com/consumer-products/definitely-not-zen-magnets-attract-unprecedented-action-from-cpsc/.

2 See 82 Fed. Reg. 11347-02 (Feb. 22, 2017) (notice of meeting).

3 Reported in full here: http://classdismissed.mofo.com/consumer-products/zen-challenges-cpsc-rulemaking-10th-circuit/.

4 Under the safety standard, SREMS that fell within the size sold by companies like Zen had to have a flux index of 50 kG2mm2 or less.  See 16 C.F.R. § 1240.3.  The SREMS in Zen Magnets had a magnetic flux index of 400 to 500 kG2mm2Zen Magnets, 841 F.3d at 1144.

5 Zen was the last remaining importer and distributor of SREMS by the time CPSC issued its 2014 Safety Standard.  See id. at 1146.

6 Video, Commission Meeting: Decisional Matter: Magnet Sets Safety Standard – Removal from the Code of Federal Regulations, Consumer Product Safety Commission (posted Mar. 2, 2017), https://cpsc.gov/Newsroom/Video/commission-meeting-decisional-matter-magnet-sets-safety-standard-removal-from-the.

7 Commission Meeting Video (posted Mar. 2, 2017).

8 Id.

9 Id.

10 Id.

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

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