When Consumer Product Safety Commissioner Thomas Moore retired in October 2011 after serving three terms, the Consumer Product Safety Commission (CPSC) was split evenly along party lines.   There were two republicans, Nancy Nord and Anne Northup, and two democrats, Robert Adler and Chairman Inez Tenenbaum.  Now it seems President Obama's nomination of democrat Marietta Robinson will again give democrats the edge. 

Marietta Robinson has been a trial lawyer in Michigan for thirty three years, representing both plaintiffs and defendants.   Additionally, for eight years Robinson served as the federally appointed trustee of the Dalkon Shield Trust, a trust that paid billions to women who used the Dalkon Shield contraceptive.  Robinson threw her hat in the ring for a seat on the Michigan Supreme Court in 2000 and 2002. 

The CPSC works to "protect the public against unreasonable risks of injury associated with consumer products."  CPSC Commissioners are nominated by the President and confirmed by the Senate.  Robinson told the Washington Post that she was honored to be nominated and hoped to get through Senate confirmation quickly.    

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A recent Seventh Circuit opinion indicates that plaintiffs' counsel in a class action suit that engages in misconduct will not likely be able to adequately represent the class.  In Creative Montessori Learning Centers v. Ashford Gear LLC, No. 11-8020 (7th Cir. Nov. 22, 2011), Judge Posner's opinion overturned the district court's class certification because the district court applied a standard that was too lenient for misconduct on the part of plaintiffs' counsel. 

The named plaintiff, Creative Montessori Learning Centers, sued Ashford Gear LLC for violating the Telephone Consumer Protection Act, 47 U.S.C. § 227.  The Act provides that the recipient of an unsolicited fax can be compensated up to $1,500 for each fax.  There are 14,573 other members of the class who collectively claim to have received 22,222 unsolicited faxes. 

Plaintiffs' attorneys, attorneys from Bock and Hatch, specialize in bringing suits under the Act, but used some unethical tactics to initiate the suit.  The attorneys contacted a fax broadcasting company that faxes advertisements on behalf of advertisers.  Then the attorneys asked the broadcasting company for information about faxes it had sent – and promised to keep the information confidential.  But instead of keeping the information confidential, the attorneys used the information to drum up lawsuits.  The attorneys found violators of the Act and potential plaintiffs.  Notably, the attorneys found Montessori, the named plaintiff, and misleadingly told them that a class action already existed.     

This behavior prompted defense attorneys to argue that the class should not be certified because plaintiffs' attorneys behaved unethically and would not be able to adequately represent the class.  However, the district court applied an egregious misconduct standard, and found that the conduct was not egregious and certified the class.  On appeal, the Seventh Circuit applied a different standard. 

The Seventh Circuit emphasized the importance of ensuring that plaintiffs' counsel can adequately represent a class.  The court noted that class plaintiffs lack the knowledge and monetary stake to allow them to monitor their lawyers.  Therefore, courts have to take great care in ensuring that plaintiffs' counsel will fulfill their fiduciary duties.  The court then held that the district court erred by applying an egregious misconduct standard; rather, any misconduct on behalf of plaintiffs' counsel should create a serious doubt that plaintiffs' counsel is fit to represent a class.  The court then remanded the case back to the district court so the district court could determine whether the class should be certified. 

With this decision, the Seventh Circuit is leaving less room for unethical conduct on the part of plaintiffs' counsel in class action litigation.  It is a decision that will likely be welcomed by defense counsel and class plaintiffs alike

William F. Auther is a partner with an active trial practice in business litigation and Kelly M. McInroy is an associate in the Phoenix office of Bowman and Brooke LLP.  

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The Consumer Product Safety Commission (CPSC) recently adopted a rule that requires children's products (products used by children twelve and under) to be tested by an authorized and independent third-party.  On October 19, 2011, the CPSC voted 3-2 along party lines to pass the rule.  The rule will likely take effect February 2013. 

Before this rule, it was the manufacturer's responsibility to test its products and ensure that they met all safety requirements before releasing them into the stream of commerce.  But by passing this rule, three CPSC Commissioners obviously felt that self-testing and market forces were insufficient to keep unsafe products away from children.  According to Chairman Inez Tenenbaum, the rule will fetter out unsafe children's products before they get in the hands of children.     

While consumer safety advocates see the rule as a much needed safety measure, manufacturers are not happy.  Not only will every new children's product have to be independently tested, but any design, manufacturing, or component change will require a product to be re-tested.  All of this testing will either require manufacturers to absorb extra costs, or pass them onto customers.  And in this economy, passing on costs to consumers can lead to fewer sales and hurt a manufacturer's bottom line. 

Whether or not the rule will actually improve the safety of children's products is yet to be determined.  But it is a foregone conclusion that manufacturers and consumers are footing the bill either way.    

 

William F. Auther is a partner with an active trial practice in product liability and business litigation and Kelly M. McInroy is an associate in the Phoenix office of Bowman and Brooke LLP.  

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It is well known that manufacturers do not have to make the safest possible products.  Rather, manufacturers are prohibited from making unreasonably dangerous products.  And one of the biggest factors in determining whether or not a product is unreasonably dangerous is the existence of a feasible alternative design.  Concerning for manufacturers though, the First Circuit just upheld a verdict against a manufacturer even though the plaintiff failed to prove the existence of a feasible alternative design.    

In Osorio v. One World Tech., Inc., No. 10-1824 (1st Cir. Oct. 5, 2011), the plaintiff sued the maker of a table saw after he cut his arm while using the saw.  The plaintiff argued that the saw should have contained a mechanism that stops and retracts the blade when the blade comes into contact with flesh.  To bolster this argument, the plaintiff brought the inventor of the mechanism to testify on his behalf. 

The manufacturer argued that the mechanism is not a feasible alternative design.  The mechanism makes the saw larger and heavier, which would substantially change the use of the light, portable saw.  Also, the mechanism has a tendency to retract when the blade gets wet, meaning that it cannot be used outside.   Further, each time the blade retracts, the blade must be replaced.  Additionally, the mechanism makes the $179 saw almost twice as expensive, adding $150 to the retail price.  It is no surprise then that none of the major saw manufacturers use the mechanism. 

Even after hearing all of this information, the jury found that the saw was defective and awarded the plaintiff $1.5 million.  The manufacturer appealed, arguing that the plaintiff failed to prove the existence of a feasible alternative design.  On appeal, the First Circuit determined that a plaintiff does not have to prove the existence of a feasible alternative design to win a design defect claim.  Rather, the existence of a feasible alternative design is just one factor in the "unreasonably dangerous" determination.  As such, the court upheld the jury's verdict. 

If you're shaking your head, you're not alone.  While this case may not sit well with manufacturers, at least it provides a reminder that they should think twice before trying design defect cases in states where plaintiffs do not have to prove the existence of a feasible alternative design.   

 

William F. Auther is a partner with an active trial practice in product liability and business litigation and Kelly M. McInroy is an associate in the Phoenix office of Bowman and Brooke LLP.  

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An unnamed company has taken the first step in challenging the Consumer Product Safety Commission's (CPSC) online complaint database.  No information is currently listed in Pacer, the federal court filing system, but the Washington Post reported that a complaint was filed Monday in Maryland District Court.  The company that filed the suit is listed as "Company Doe" to protect its name – the exact reason that it filed the complaint in the first place. 

On August 14, 2008, the Consumer Product Safety Improvement Act became law and mandated that the CPSC create an online portal for customers to post complaints about products that can either injure children or pose fire, electrical, chemical, or mechanical hazards.  The Act sought to provide consumers with timely information about potentially unsafe products, so consumers would not have to wait for a recall to get the information.  However, the database has been criticized because of accuracy issues and the burden it places on manufacturers. 

Anyone can file a report in the database, found at www.SaferProducts.gov. , but a report is not eligible for publication unless it contains: (1) a description of the product; (2) the name of the manufacturer; (3) a description of the injury or risk of injury caused by the product; (4) the date that the incident occurred or risk of injury was discovered; (5) the type of reporter (consumer, agency, child service provider, etc.); (6) the reporter's name and address (this is not published); (7) the reporter's acknowledgement that the report is true and accurate; and (8) whether or not the reporter wants the information published. 

Once a report is filed online, the CPSC has five days to review it before sending it to the manufacturer.  However, the CPSC's "review" only entails ensuring that the minimum publication requirements have been met; the CPSC does not conduct any type of fact-finding investigation.  Instead, the burden is placed on the manufacturer to prove that the report is untrue, and it has just ten days to prove it.   If a report ends up being published, manufacturers can have their comments published with the report, but the CPSC does not always process comments in time to publish them the same day the report is published, and posting a comment is little consolation if a report is untrue. 

Since its inception, the database has been criticized for not requiring more information to reduce inaccuracies, such as a product serial number.  And the fact that manufacturers have to conduct all of the fact-finding and essentially prove themselves innocent seems a bit backwards considering anyone with access to a computer can file a report. 

Given these circumstances, it was only a matter of time before a company stepped up and challenged the system.  Consistent with argument that the database needlessly harms the reputation of manufacturers, the company has filed the lawsuit anonymously.  Whether or not the court will allow the company to remain "Company Doe" presents another question altogether.  But either way, this case could have major consequences for the CPSC database, and is definitely one to watch. 

William F. Auther is a partner with an active trial practice in product liability and business litigation and Kelly M. McInroy is a law clerk in the Phoenix office of Bowman and Brooke LLP.  

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This week, the FDIC and SEC approved the Volcker Rule and released a draft for public comments.  Bank regulators will have to solidify the Rule in the coming months, as the Rule is set to take effect in July, 2012 – although banks would have three years to comply with the Rule. 

Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Volcker Rule limits the type of investments that banks can make with their own money.  A result of the financial crisis, the Rule seeks to reign in the behavior that caused banks to fail in 2008.  The Rule is named after former Federal Reserve Chairman Paul Volcker, a man who criticized bank practices long before the financial crisis.  The Rule applies to banks that have government guarantees and may even impose limits on financial companies supervised by the Federal Reserve Board.  

The Volcker Rule places two big limitations on banks.  First, the Rule prohibits banks from owning or controlling hedge funds and private equity funds: a bank cannot own more than three percent of a hedge fund or private equity fund, and cannot invest more than three percent of its capital in such funds.  

Second, the Rule prohibits banks from engaging in proprietary trading.  Proprietary trading occurs when a bank makes trades for its own benefit, rather than for the benefit of a customer.  There are a few exceptions to this rule though, including trades of foreign currencies, commodities, and government bonds.  Additionally, banks can engage in proprietary trading if they are hedging while trading on behalf of a customer.  And banks may still act as market-makers and underwriters.      
The Rule is not without problems though.  Even its supporters claim note that the Rule may not be strict enough, and may contain loopholes.  Also, it can be difficult to draw a line between proprietary trades and trades made for customers.  

Wall Street is certainly not happy with the additional regulations.  Compliance will create new costs; the Rule requires banks to create internal compliance programs overseen by executives.  And Moody's noted that the Rule gives certain companies, like investment firms and offshore banks, a competitive advantage because they are not subject to the regulations.  

At almost 300 pages, the Volcker Rule will likely receive several public comments in the next few months, including some very loud ones from Wall Street.  

William F. Auther is a partner with an active trial practice in business litigation and Kelly M. McInroy is a law clerk in the Phoenix office of Bowman and Brooke LLP.  

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