An interesting development concerning the tiny, shiny magnets known as Buckyballs has created a great deal of attention. The Buckyballs, which are a lot more powerful than they look, are now at the center of a high-stakes legal dispute. The question is whether the government can hold a business owner personally liable for a consumer recall. Craig Zucker, a New York entrepreneur, had what he believed to be the most successful venture of his young career when he developed this desk toy in 2009. For those who don’t know about Buckyballs, they consist of pellets that can be twisted and stacked into infinite shapes.
Since the small magnets came to the market, many children, believed to be more than 1,000, have swallowed various brands of these magnets and required surgery. This development prompted the Consumer Product Safety Commission (CPSC) to appeal to retailers to stop selling the products and to initiate a recall aimed at Zucker’s company and two others. But instead of recalling the maganets Zucker dissolved his business in December 2012. Subsequently, the commission took the unusual step of filing a lawsuit to hold Zucker personally responsible for a potential recall that reportedly could cost up to $57 million. That number assumes every buyer of the desk toys would claim reimbursement. Zen Magnets and Star Networks USA, which sell similar products, were also named as defendants in the lawsuit.
In addition to the lawsuit, the commission has proposed a new regulation that would prohibit the sale of small toy magnets exceeding a certain level of attractive force. The agency’s four-member board of commissioners will decide this year whether to adopt the rule. Zucker is fighting back on the Buckeyballs recall issue. He filed his own suit in federal court in November contending that regulators don’t have the authority to hold an individual responsible for product-safety issues. In a media statement, Zucker called the commission’s effort an “egregious attempt at rewriting our cherished laws of limited liability.”
Zen Magnets and Star Networks also are contesting the lawsuit and continue to sell their products online. Zucker’s case is most unusual, not only because the lawsuit names him personally, but also because businesses typically cooperate with recall efforts. Before the Buckyballs lawsuit, more than a decade had passed since the commission had resorted to litigation over such a matter. The last case involved airgun maker Daisy Manufacturing, and that case ended with a settlement in 2003.
The commission denies that it named Zucker in its lawsuit because of a personal vendetta, saying it had to hold him personally responsible for the proposed recall after he closed down his company. In a statement, a commission spokesman Scott Wolfson said: “This is an issue about safety and children, not about one individual.” Companies that dissolve can be problematic for the commission, which has no money for refunds after recalling hazardous products. The agency can recommend that consumers throw away hazardous items, but that solution is not as effective as providing refunds.
According to Zucker, his former company, Maxfield and Oberton, sold about 2.5 million small-magnet sets. The product was said to have been sold at wholesale prices between $7.50 and $17.50. The commission estimates that 1,700 incidents involving children and teens occurred between 2009 and 2011. This is based on a sampling from hospitals across the country.
After Zucker shut down his company, the commission responded by naming him in its lawsuit. The commission supported that move with a legal precedent known as the “Park Doctrine,” which allows the government to criminally prosecute corporate officers for failing to prevent violations of the Food, Drug and Cosmetic Act. But critics say it is a misuse of the doctrine. The Consumer Federation of America supports the commission’s stance. Rachel Weintraub, the watchdog group’s senior counsel, stated:
It’s incredibly important for a manufacturer to take responsibility for how their product is used in the marketplace. These magnets have play value to children. They look like candy, and kids are swallowing them and being injured.
The commission had been sharply criticized in the wake of several deaths caused by lead-tainted Chinese toys in 2007. Congress responded by strengthening the commission, increasing the agency’s budget from $70 million to $120 million, and passing legislation that, among other measures, raised its maximum civil penalty from $1.25 million to $15 million. The commission has also grown its workforce from 380 employees to 530 and made some of its voluntary standards mandatory, particularly with children’s toys and durable juvenile goods. Agency officials say the moves are working, citing a drop in recalls from 449 in 2008 to 345 in 2013. It will be most interesting to see how the Zucker lawsuit comes out.
Source: Washington Post
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