Jake's Fireworks Inc. v. United States Consumer Product Safety CommissionJake's Fireworks Inc. v. United States Consumer Product Safety Commission
MEMORANDUM AND ORDER
Jake‘s Fireworks Inc. (“Jake‘s Fireworks“) seeks injunctive and declaratory relief against the United States Consumer Product Safety Commission (the “Commission” or “CPSC“) and Ann Marie Beurkle, in her official capacity as Acting Chairman of the Commission.1 Am. Compl. ¶ 1, ECF No. 16. The Commission is a regulatory agency charged with enforcing the Consumer Product Safety Act (“CPSA“),
consumer fireworks or, alternately, that the Commission‘s enforcement of the statutes and regulations is arbitrary and capricious. Id.
Defendants filed the pending motion to dismiss all claims brought against them in the Amended Complaint for lack of jurisdiction under
BACKGROUND
I. Regulatory Overview
The Consumer Product Safety Act (“CPSA“) was enacted, in part, “to protect the public against unreasonable risks of injury associated with consumer products.”
substance(s),”
The Commission works with importers and the United States Custom and Border Protection (“CBP“) to sample imported fireworks devices and examine them for possible violations of the FHSA.
When CPSC staff determines that a product violates a specific statute or regulation, CPSC Office of Compliance and Field Operations generally notifies the responsible firm (the product manufacturer, importer, distributor, or retailer) of the violation and requests a specific remediation of the problem.
Notification to the responsible firm is usually in the form of an official letter, referred to in this Handbook as the Letter of Advice or a Notice of Noncompliance from the Office of Compliance and Field Operations (collectively referred to in this Handbook as LOA). Firms should review this Handbook in conjunction with the LOA sent by CPSC staff that identifies the applicable statutes and regulations violated. The LOA informs the firm of the specific product and violation that has occurred; requests that the firm take specific corrective actions (including stopping the sale and distribution
of the product; recalling the product from distributors, retailers, and/or consumers; quarantining and disposing of inventory of the product; and changing future production of the product); and informs the firm of the legal actions available to the Commission (including civil and criminal penalties and injunctive rеlief). In addition, the LOA informs the firm that if it disagrees with CPSC staff‘s determination that a violation has occurred or believes the product is not subject to the Commission‘s jurisdiction, it may question staff‘s findings and present evidence to support its position. See Chapter 3 of this Handbook.
Handbook 5-6. Chapter 3 contains the procedures to be followed:
RESPONDING TO THE CPSC LETTER OF ADVICE (LOA)
When the CPSC staff notifies you in a LOA that a product that you manufacture, import, distribute, sell, or offer for sale fails to comply with a CPSC statute, rule, regulation, standard, or ban, you may present evidence supporting your view if you disagree with staff‘s determination.
The LOA will state that the firm may present evidence that a violation does not exist or that a product is not covered by the appliсable statute or regulation. The letter will indicate to whom the response should be addressed and will give you a timeframe for the expected response. You may submit, to the indicated recipient, all evidence and arguments that support why you believe the product is not violative; not subject to a specific statute, rule, regulation, standard, or ban; or, should not be refused admission in the United States (if the violation involves an import detained at the port) or seized by CBP.
A firm may respond to a notice of noncompliance orally or in writing, and the firm may request an informal hearing to meet personally with Office of Compliance or Import Surveillance Division staff to present orally views and evidencе. Such evidence may consist of:
- results from testing that supports certificates of compliance;
- results of tests indicating the product complies with the applicable regulation;
- marketing data indicating the product is not intended for the population group protected by the regulation or standard; or
- any other relevant data to support the claim of compliance.
CPSC RESPONSE TO FIRM RESPONSE
Any additional evidence or arguments that a firm presents are reviewed by the appropriate CPSC Office of Compliance or Import Surveillance Division staff, including appropriate technical and legal staff. If the information you present, in the staff‘s opinion, does not refute staff‘s claim that the product is violative or covered by a specific statute, rule, regulation, standard, or ban, Commission staff, as a general rule, will notify you in writing before staff pursues any enforcement action against the products or your firm.
If a firm continues to disagree with CPSC staff and declines to take corrective action, the staff may request the Commission approve appropriate legal proceedings, including the issuance of an administrative complaint, injunctive action, seizure action, or such other action as may be appropriate.
Id. at 18-19.
To enforce its statutes and regulations, the Commission prefers to work cooperatively with industry “but initiat[es] litigation when necessary.” Id. at 7. It may
II. Factual and Procedural Background
Jake‘s Fireworks is one of the nation‘s largest importers and distributors of consumer fireworks with distribution centers from coast to coast. Am. Compl. ¶¶ 5, 57. One of its best sellers is the Excalibur product line of small reloadable aerial shells,6 which it purchases and imports from a Chinese manufacturer. Id. at ¶ 57. When Jake‘s Fireworks imports these shells, it must certify that the fireworks comply “with all rules, bans, standards, or regulations applicablе.” Id. at ¶ 59 (quoting CPSA,
When the Commission‘s testing reveals a violation of an applicable requirement—such as improper audible effects or improper labeling—it follows the process described in the Handbook for advising the importer. Id. at ¶ 63. Ultimаtely, the Commission either authorizes release of the product or requests that the shipment be destroyed, subject to civil and criminal penalties if the products are sold without having been released. Id. Jake‘s Fireworks alleges that the Commission increased its sampling of Jake‘s Fireworks’ imports of its reloadable aerial shells beginning in the
spring of 2014, and between March 19,
Jake‘s Fireworks received Notices of Non-Compliance (which the Commission also refers to as “Lеtters of Advice,” Handbook at 5) from the Commission requesting that it stop the sale of certain products and destroy them, advising that violations were subject to civil and criminal penalties. Id. at ¶¶ 65-68 (attaching Exhibits B-D as examples).8 Jake‘s Fireworks responded to the notices and requested that the Commission rescind them and release the fireworks without condition. Id. at ¶¶ 70-71 (attaching Exhibit E as an example response).9 On October 3, 2014, the Commission reiterated its position that the reloadable aerial shell fireworks violated applicable statutory and regulatory requirements and requested that they be destroyed. Id. at ¶ 72 (attaching the letter as Exhibit F).10 Jake‘s Fireworks responded by letter, again asking that the Commission rescind the notices. Id. at ¶¶ 72-73 (attaching the letter as Exhibit G).11 At some point, Jake‘s Fireworks inquired whether the Commission‘s October 3, 2014 letter constituted final agency
action. Id. at ¶ 73.12 On December 8, 2014, the Commission‘s staff orally indicated that it would re-test samples, and Jake‘s Fireworks believes that the re-testing occurred before February 13, 2015. Id. at ¶ 73. On May 20, 2015, the Commission issued another Notice of Non-Compliance, including the reports of its re-tests with a determination that two shipments, upon re-testing, complied with regulations, but that other shipments violated regulations. Id. at ¶¶ 74-75 (attaching the notice as Exhibit H).13 The
Jake‘s Fireworks alleges that the Commission is applying inapplicable regulations to their reloadable aerial shells in an arbitrary, capricious manner that constitutes an abuse of discretion. Am. Compl. at ¶¶ 76-80. Specifically, Jake‘s Fireworks alleges four causes of action in its Amendеd Complaint:
- First Cause of Action – Violation of the Administrative Procedure Act for Abuse of Discretion and Unlawful, Arbitrary and Capricious Agency Action (Application of
16 C.F.R. § 1500.17(a)(3) ); - Second Cause of Action – Violation of the Administrative Procedure Act for Abuse of Discretion and Unlawful, Arbitrary and Capricious Agency Action (Application of Non-existent Reports Labeling Requirement);
- Third Cause of Action – Violation of the Administrative Procedure Act for Abuse of Discretion and Unlawful, Arbitrary and Capricious Agency Action (Use of “Poof/Bang” Test);
- Fourth Cause of Action – Unlawful Agency Action under the Administrative Procedure Act Based on the Commission‘s Violation of the Fifth Amendment to the United States Constitution.
Defendants assert that because the notices аnd letters transmitted to Jake‘s Fireworks do not constitute final agency action, the Court lacks subject matter jurisdiction to review them. Mot. Mem. 1-3. Defendants also argue that the fourth cause of action should be dismissed for failure to state a claim, and that the requests for injunctive relief are moot. Id.
STANDARD OF REVIEW
“[W]hether an agency‘s action ‘constituted final agency action under the APA so as to be reviewable in court’ is ‘a question of subject matter jurisdiction.‘” Am. Acad. of Pediatrics v. Food & Drug Admin., 379 F. Supp. 3d 461, 474 (D. Md. 2019) (quoting Invention Submission Corp. v. Rogan, 357 F.3d 452, 458 (4th Cir. 2004)).14 When subject matter jurisdiction is challenged under
When a defendant moves to dismiss pursuant to
Pursuant to
Whether considering a
Here, the Plaintiff attached letters and notices to its Amended Complaint, and Defendants’ Motion also included attachments of letters and notices as well as the referenced Handbook. There are no challenges to the authenticity of these documents, and I may consider them when deciding the dismissal motion.
DISCUSSION
“Judicial review under the APA . . . is limited to ‘final agency actions.‘” City of New York v. U.S. Dep‘t of Defense, 913 F.3d 423, 430 (4th Cir. 2019) (quoting
Jake‘s Fireworks alleges that the May 20, 2015 Notice of Non-Compliance16 (“the Notice“) constitutes final agency action. Am. Compl. ¶¶ 10, 90, 94, 101; Pl.‘s Resp. 2. “‘The term “action” as used in the APA is a term of art that does not include all conduct’ on the part of the government.” City of New York, 913 F.3d at 430-31 (quoting Vill. of Bald Head Island, 714 F.3d at 193). The alleged “action” at issue here is an “order” or “sanction.” Pl.‘s Resp. 6; see
(indicating that both Bennett requirements must be satisfied); COMSAT Corp. v. National Sci. Found., 190 F.3d 269, 274 (4th Cir. 1999) (“[A]n agency action may be considered ‘final’ only when the action signals the consummation of an agency‘s decisionmaking process
I. Consummation of Process
Under the first Bennett prong, I must evaluate whether the Notice represents the culmination of the Commission‘s decision-making process rather than a “tentative” or intermediate step. See Franklin, 505 U.S. at 797. It also cannot be the ruling of a subordinate оfficial that needs approval from the agency‘s head before it becomes final. Abbott Labs. v. Gardner, 387 U.S. 136, 151 (1967); see also Soundboard Ass‘n v. FTC, 888 F.3d 1261, 1267 (D.C. Cir. 2018) (“The decisionmaking processes set out in an agency‘s governing statutes and regulations are key to determining whether an action is properly attributable to the agency itself and represents the culmination of that agency‘s consideration of an issue.“). And there must be no indication that the decision will be revised in the future, that there is an appeal or further review pending, or that there is any entitlement to further action. See Sackett v. EPA, 566 U.S. 120, 127 (2012) (“The mere possibility that an agency might reconsider in light of ‘informal discussion’ and invited contentions of inaccuracy does not suffice to make an otherwise final agency action nonfinаl.“).
Here, the decision-making process is outlined in the Handbook. The Handbook describes a back-and-forth communication process, which both parties agree occurred here. After multiple communications, the Notice was sent from the “Lead Compliance Officer” of the Regulatory Enforcement Division responding to earlier correspondence and details retesting results of multiple devices. The retesting and review resulted in multiple findings, including that some devices were
found to be in compliance and released from bond, some devices were found to be in violation of a different requirement, which allowed for them to be reconditioned or relabeled, and some were found to continue to exhibit non-compliance requiring corrective action. The Handbook, which was attached to the Notice, states that “[a] firm may respond to a notice of noncompliance orally or in writing, and the firm may request an informal hearing to meet personally with Office of Compliance of Import Surveillance Division staff to present orally views and evidence.” Handbook at 18. However, Jake‘s Fireworks did not request a hearing and opportunity to present evidence. The Handbook also states that “[i]f a firm continues to disagree with CPSC staff and declines to take corrective action, the staff may request the Commission approve appropriate legal proceеdings, including the issuance of an administrative complaint, injunctive action, seizure action, or such other action as may be appropriate.” Id. at 19. Thus, the Lead Compliance Officer lacks the independent authority to initiate enforcement action that could expose Jake‘s Fireworks to civil or criminal penalties, without first obtaining the approval of the Commission‘s Office of General Counsel, which, in turn, must refer the matter to the Department of Justice, which then must decide whether to bring an enforcement action. Reply 4-5, 8 n.4. On this basis, the Notice appears to be an intermediate ruling of a subordinate official, and it does not, as contended, clearly reflect the culmination of a series of communications.
Jake‘s Fireworks contends that the determination of non-compliance was definitive, and the Notice, unlike examples provided of earlier notices, did not invite further discussion, did not include instructions for disputing the determination, and did not refer to the Handbook chapter about how to dispute a determination. Pl.‘s Resp. 8-10. But Jake‘s Fireworks
the opportunity to request an informal hearing, which Jake‘s Fireworks chose not to pursue, see Pl.‘s Resp. 4, 9-10), used language such as “reiterates its requests,” аnd ended with “Please submit your response . . . within 10 days from the date you receive this letter outlining the specific corrective action that Jake‘s Fireworks plans to take to address the future sale of these products and any other products subject to the mandatory requirements.” This type of language can be distinguished from the definitive language used in the cases that Jake‘s Fireworks cited. See, e.g., Doe v. Tenenbaum, 127 F. Supp. 3d 426 (D. Md. 2012) (contesting the Commission‘s planned publication of an agency report); Scenic America, Inc. v. United States Dep‘t of Transp., 836 F.3d 42 (D.C. Cir. 2016) (challenging a guidance memorandum issued by the Federal Highway Administration); City of Dania Beach, Fla. v. FAA, 485 F.3d 1181 (D.C. Cir. 2007) (petitioning for review of a FAA letter changing runway use procedures at airport); American Bar Ass‘n v. United States Dep‘t of Educ., 370 F. Supp. 3d 1 (D.D.C. 2019) (challenging loan forgiveness denial letters).
Jake‘s Fireworks also argues that the process culminating in the Notice is similar to the informаl adjudication that took place in Tenenbaum, which was found to qualify as a final agency action. Pl.‘s Resp. 10. There, Judge Williams of this court rejected the Commission‘s arguments about the intermediate nature of its decision to publish a report, concluding instead that the decision was the consummation of a lengthy informal adjudication, and even if subsequent action remained a possibility, it was final for purposes of judicial review. Tenenbaum, 127 F. Supp. 3d at 464-65. He found that the notice and procedural requirements obligated the Commission to make a legal determination and included an adversarial process with the provision of evidence “with a view to meeting the ‘burden of proof.‘” Id. at 462-63 (quoting
of the back-and-forth communications, but rather, it states that at the end of the process, the staff may request that the Commission (and thereafter, the DOJ) approve appropriate legal proceedings and, generally, will provide a written notification before that happens. No enforcement proceedings have been initiated, and the Notice does not indicate in any way that an enforcement action will be pursued by the staff.
Jake‘s Fireworks’ responds to the lack of an enforcement action by arguing that the threat of enforcement hangs over its head like a Damoclean sword, and the Commission does not actually nеed to bring an enforcement action to be “final.” Pl.‘s Resp. 15 (citing Hawkes, 136 S. Ct. at 1815 and Sackett, 566 U.S. at 129). And by its filing of supplemental authority, Jake‘s Fireworks notes that a series of letters may constitute final action because “receipt of the letters significantly increased its risk of a statutory civil penalty being levied. . . .” Ipsen Biopharmaceuticals, Inc. v. Azar, 943 F.3d 953, 954 (D.C. Cir. 2019). However, the “increased risk” argument made in Ipsen supported a finding of finality under Bennett‘s second prong. Id. at 955. The parties had agreed that the action was the consummation of the agency‘s decision-making process and only the second prong was in dispute. Id. at 955-56. Likewise, the Hawkes and Sackett courts considered enforcement
Jake‘s Fireworks argues that the Notice comes to a “definitive conclusion” like the finding in Scenic America. Pl.‘s Resp. 8-9. In Scenic America, the Federal Highway Administration issued guidance criteria for the regulation of billboard lighting, withdrawing discretion from the states’
divisional offices. 836 F.3d at 46. The guidance included a statement that it “may provide further guidance in the future as a result of additional information.” Id. at 56. The Scenic America court interpreted the language as a “boilerplate” indication that the agency might issue further interpretations “at some point in the indeterminate future.” Id. The court primarily relied on Bennett‘s second prong, because the revised criteria for the agency‘s offices to use in approving or rejecting state regulаtions created legal consequences for regulated parties. Id. There is no comparable language in the Notice or the Handbook, and the action at issue here is a sanction, not a rule-making action. Rather than presenting a definitive conclusion, the Notice presents multiple conclusions with multiple options for response, and it invites a response.
In Dania Beach, the court rejected the FAA‘s assertion that the letter it sent was not an order that changed existing procedures without a proper review, but merely information about existing procedures. 485 F.3d at 1187-88. The court reasoned that the letter provided a new interpretation of the airport runway restrictions related to the noise cоmpatibility program, and nothing about it was open to further consideration. Id. Jake‘s Fireworks argues that the Notice is like the FAA letter, and, unlike previous letters, did not invite further discussion and did not offer information about possible avenues of further appeal or reconsideration. Pl.‘s Resp. 9. But the Notice is subject to the procedures outlined in the Handbook, which was attached to the Notice, and unlike providing a new interpretation of a program, it was consistent with the prior example letters provided, each of which stated that products in violation of the standard may not be sold and must be destroyed. Compare Exs. B, D, F, with H. Each letter also referred to an attached Affidavit of Destruction of Fireworks. Sеe id. Also, the language in each letter consistently uses the word “request” and provides a time for a response. See id. Unlike the FAA letter, the Notice does not contain “new marching orders.” Dania Beach, 485 F.3d at 1188.
Jake‘s Fireworks argues that “courts also look to the way in which the agency subsequently treats the challenged action.” Pl.‘s Resp. 11 (quoting American Bar Ass‘n, 370 F. Supp. 3d at 21). In American Bar Ass‘n, law school graduates challenged the Department of Education‘s letters reversing determinations of loan forgiveness, alleging that the Department had changed its interpretation of its regulations, but the Department argued that the denial letters sent to the plaintiffs were not final agency actions. 370 F. Supp. 3d at 10, 19. Under the first Bennett prong, the court determined that the definitive language in the letters demonstrated the Dеpartment‘s final determination that plaintiffs did not qualify for the loan forgiveness program. Id. at 20. The letter sent to one of the plaintiffs was “less-than-definitive,”
In Holistic Candlers, a case cited by the Commission, the court found that the FDA‘s warning letters “plainly” did not demonstrate the consummation of the agency‘s decision-making process because the agency‘s procedures manual describes the warning letters “as giving ‘firms an
opportunity to take voluntary and prompt corrective action before it initiates an enforcement action.‘” 664 F.3d 940, 944 (D.C. Cir. 2012). Similarly, the Handbook describes the Commission‘s warning letters as notifications that inform the recipient of violations, requests corrective action, informs what legal actions may be taken (including “the maximum sanctions to which the firm and/or individual may be subject“), and informs the steps to take to question the findings. Handbook at 5-6, 11, 18-19. Importantly, the Handbook describes what steps to take upon being informed of a violation, which includes the ability to present evidence, requesting an informal hearing, conditional release, and a possible opportunity to bring the violative product into compliance. Id. at 18-22. It specifically states thаt “the firm may request an informal hearing to meeting personally with Office of Compliance or Import Surveillance Division staff to present orally views and evidence.” Id. at 18. “If the information you present, in the staff‘s opinion, does not refute staff‘s claim that the product is violative . . . Commission staff, as a general rule, will notify you in writing before staff pursues any enforcement action against the products or your firm.” Id. Jake‘s Fireworks has not alleged that it requested a hearing that was denied nor that it requested reconsideration and was denied.
In sum, based on my review of Jake‘s Fireworks’ allegations as well as the letters and Handbook, I conclude that the Notice was not the consummation of the Commission‘s decision-making process. While the process may be nearing its end, there are still steps that Jake‘s Fireworks may take, such as request a hearing or reconsideration. Therefore, Jake‘s Fireworks has failed to satisfy the first prong of the Bennett test.
II. Bennett‘s Second Prong
For the Notice to be reviewable as a final agency action, it must satisfy both prongs of the Bennett test. See Domenech, 599 F.3d at 432; COMSAT, 190 F.3d at 274. Because I have
concluded that Jake‘s Fireworks has not met the burden of showing that the Notice satisfied the first prong of the Bennett test, I need not and do not conduct a full analysis of the second prong.
Having concluded that Jake‘s Fireworks has not satisfied its burden to show that the Notice was a final agency action, this Court does not have subject-matter jurisdiction to proceed. Accordingly, the Commission‘s motion shall be GRANTED, and the Amended Complaint is DISMISSED WITHOUT PREJUDICE.
ORDER
For the foregoing reasons, it is, this 30th day of October, 2020, hereby ORDERED that:
- Defendants’ Motion to Dismiss, ECF No. 17, is GRANTED.
- Plaintiff‘s Amended Complaint, ECF No. 16, is DISMISSED WITHOUT PREJUDICE.
- The Clerk of Court is directed to CLOSE this case.
/S/
Paul W. Grimm
United States District Judge