In The Courts

Each Product Sold Is a Separate Offense for Violation of the Consumer Product Safety Act's Reporting Requirements

In United States v. Mirama Enterprises, Inc., 2004 WL 2404773 (9th Cir. Oct. 28, 2004), the Ninth Circuit held that for purposes of determining penalties against a company for violating the reporting requirements of the Consumer Product Safety Act (CPSA), 15 U.S.C. '' 2064(b), 2068(a)(4), and 2069(a)(1), each potentially dangerous product sold or distributed for sale to consumers was a separate offense. The CPSA requires manufacturers, distributors, and retailers to inform the Consumer Product Safety Commission of potentially dangerous products and imposes civil penalties for failing to do so. Section 2069(a)(1) specifies the penalty for reporting violations: “Any person who knowingly violates [the reporting requirements] shall be subject to a civil penalty … for each such violation … [A] violation … shall constitute a separate offense with respect to each consumer product involved … ”

Mirama Enterprises, Inc., d/b/a Aroma Housewares Co. (Aroma), a California corporation, distributed between 30,000 and 40,000 juicers, about which it received 23 consumer complaints of failed products. Aroma tested the juicers but was unable to replicate the malfunctions. However, Aroma failed to report either its tests or the complaints, in violation of the CPSA reporting requirements. The Ninth Circuit held that the district court did not abuse its discretion in imposing a penalty based on the 30,000 to 40,000 juicers sold because each juicer in the stream of commerce was a separate violation. The Ninth Circuit rejected Aroma's arguments that 1) “consumer product” in the CPSA means a product model rather than the individual units sold; or alternatively, 2) “consumer product involved” means only the 23 products about which Aroma received complaints. Finally, the Ninth Circuit held that the government does not have to prove that a product is actually defective before a court may assess penalties for violation of the CPSA reporting requirements.

'Specially Designed' Not Unconstitutionally Vague

In United States v. Lachman, 2004 WL 2378087 (1st Cir. Oct. 25, 2004), the First Circuit held that the term “specially designed” as used in 15 C.F.R. ' 399.1, Supp. 1, now 15 C.F.R. ' 774, Supp. 1 (collectively referred to as ' 774), was not unconstitutionally vague. Section 774 is an implementing regulation of the Export Administration Act (EAA), 50 U.S.C. '' 2401 et seq. The EAA requires exporters to obtain a license before exporting commodities listed in the regulations promulgated by the Secretary of the Department of Commerce. The EAA, which expired in 1994, was briefly renewed by Congress in 2000, and expired again in 2001. Its provisions have been carried forward by executive order under the authority of the International Emergency Economic Powers Act, 50 U.S.C. ' 1701 et seq.

Walter L. Lachman and Maurice H. Subilia, Jr., Fiber Materials, Inc., and Materials International, Inc., were convicted on charges of violating and conspiring to violate the EAA and its regulations by exporting a control panel for a hot isostatic press (HIP) without the necessary export license. The question under the regulation was whether the control panel was specially designed for use with an embargoed HIP. The district court granted defendants' motion for acquittal notwithstanding the verdict, finding that the term “specially designed” was unconstitutionally vague. The First Circuit vacated the acquittal and reinstated the defendants' convictions. By looking to the underlying policies of the EAA, the First Circuit held that an item was specially designed “for use with an embargoed commodity if it is intentionally created for use, and in fact capable of being used, with the embargoed commodity.” As defined, “specially designed” was not unconstitutionally vague.

Failure to List Document in Privilege Log Did Not Warrant Waiver of Attorney-Client Privilege

In United States v. British American Tobacco (Investments) Ltd., 2004 WL 2434615 (D.C. Cir. Nov. 2, 2004), the D.C. Circuit considered whether waiver of the attorney-client privilege was an appropriate sanction for failure to list a document in a privilege log. The district court held that British American Tobacco (Investments) Ltd. (BAT) waived any privilege to an attorney memorandum by failing to log it, because BAT lacked a reasonable belief that its general objections to the government's document request applied to the memorandum. In its analysis, the district court focused almost exclusively on BAT's alleged delay in raising its objections.

The D.C. Circuit reversed, noting that waiver is a “serious sanction that requires, at the very least, a showing that [BAT] failed to log the memorandum without [a] reasonable belief that its objections applied to it.” First, the D.C. Circuit held that a party's failure to timely raise objections “may well justify an inference that, rather than reasonably believing an objection applied, the party has simply come up with a post hoc rationale for withholding a document.” But the district court should not have considered the issue of timeliness — the D.C. Circuit had previously issued two opinions in the case that held BAT timely raised its objections. Second, although no objections applied to the memorandum, one of the objections was unclear and BAT's interpretation had some support in the objection's text. Accordingly, BAT had a reasonable belief that one of its objections applied to the memorandum and should not be sanctioned with waiver for failing to log the memorandum.

Each Product Sold Is a Separate Offense for Violation of the Consumer Product Safety Act's Reporting Requirements

In United States v. Mirama Enterprises, Inc., 2004 WL 2404773 (9th Cir. Oct. 28, 2004), the Ninth Circuit held that for purposes of determining penalties against a company for violating the reporting requirements of the Consumer Product Safety Act (CPSA), 15 U.S.C. '' 2064(b), 2068(a)(4), and 2069(a)(1), each potentially dangerous product sold or distributed for sale to consumers was a separate offense. The CPSA requires manufacturers, distributors, and retailers to inform the Consumer Product Safety Commission of potentially dangerous products and imposes civil penalties for failing to do so. Section 2069(a)(1) specifies the penalty for reporting violations: “Any person who knowingly violates [the reporting requirements] shall be subject to a civil penalty … for each such violation … [A] violation … shall constitute a separate offense with respect to each consumer product involved … ”

Mirama Enterprises, Inc., d/b/a Aroma Housewares Co. (Aroma), a California corporation, distributed between 30,000 and 40,000 juicers, about which it received 23 consumer complaints of failed products. Aroma tested the juicers but was unable to replicate the malfunctions. However, Aroma failed to report either its tests or the complaints, in violation of the CPSA reporting requirements. The Ninth Circuit held that the district court did not abuse its discretion in imposing a penalty based on the 30,000 to 40,000 juicers sold because each juicer in the stream of commerce was a separate violation. The Ninth Circuit rejected Aroma's arguments that 1) “consumer product” in the CPSA means a product model rather than the individual units sold; or alternatively, 2) “consumer product involved” means only the 23 products about which Aroma received complaints. Finally, the Ninth Circuit held that the government does not have to prove that a product is actually defective before a court may assess penalties for violation of the CPSA reporting requirements.

'Specially Designed' Not Unconstitutionally Vague

In United States v. Lachman, 2004 WL 2378087 (1st Cir. Oct. 25, 2004), the First Circuit held that the term “specially designed” as used in 15 C.F.R. ' 399.1, Supp. 1, now 15 C.F.R. ' 774, Supp. 1 (collectively referred to as ' 774), was not unconstitutionally vague. Section 774 is an implementing regulation of the Export Administration Act (EAA), 50 U.S.C. '' 2401 et seq. The EAA requires exporters to obtain a license before exporting commodities listed in the regulations promulgated by the Secretary of the Department of Commerce. The EAA, which expired in 1994, was briefly renewed by Congress in 2000, and expired again in 2001. Its provisions have been carried forward by executive order under the authority of the International Emergency Economic Powers Act, 50 U.S.C. ' 1701 et seq.

Walter L. Lachman and Maurice H. Subilia, Jr., Fiber Materials, Inc., and Materials International, Inc., were convicted on charges of violating and conspiring to violate the EAA and its regulations by exporting a control panel for a hot isostatic press (HIP) without the necessary export license. The question under the regulation was whether the control panel was specially designed for use with an embargoed HIP. The district court granted defendants' motion for acquittal notwithstanding the verdict, finding that the term “specially designed” was unconstitutionally vague. The First Circuit vacated the acquittal and reinstated the defendants' convictions. By looking to the underlying policies of the EAA, the First Circuit held that an item was specially designed “for use with an embargoed commodity if it is intentionally created for use, and in fact capable of being used, with the embargoed commodity.” As defined, “specially designed” was not unconstitutionally vague.