Policy

The Government's Bogus Lawsuit Against Buckyballs' Creator Craig Zucker Ends In a Settlement

The Consumer Product Safety Commission's lawsuit against Zucker violated the agency's own rules.

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Last November, Reason TV contributor Naomi Brockwell interviewed Craig Zucker, the creator of the super-charged tiny magnets known as Buckyballs, which the Consumer Product Safety Commission (CPSC) forced off the market in 2012 because they allegedly posed a danger to children. When his company's trouble began, rather than suck up to the federal regulators who controlled the fate of his firm, Zucker went on a mediablitz to get the word out that the agency's accusations were profoundly unfair. In December 2012, with sales plummeting because of the CPSC's actions, Zucker gave up and dissolved hiscompany.

As I wrote in a follow up article, what happened next was extraordinary:

A couple of months later, the CPSC added Craig Zucker to its complaint, holding him personally liable for the cost of recalling Buckyballs. If the CPSC has its way, Zucker will have to personally reimburse retailers for their costs, notify all distributors and local public health officials of the recall, and submit monthly progress reports to the commission. (The CPSC initially estimated the cost of the recall at $57 million, but an agency spokesperson says the actual cost would be significantly less.)

The case has drawn widespread attention in legal circles because it is extremely unusual for the CPSC to hold a former officer personally responsible for the actions of a defunct corporation. Zucker opposed the CPSC's motion, and three trade groups—the National Association of Manufacturers, the National Retail Federation, and the Retail Industry Leaders Association—filed a joint brief on his behalf.

Last week, Zucker and the CPSC announced they had reached a settlement. Zucker agreed to hand over $375,000 that will go to pay for a recall of the product. The CPSC will spend the first $75,000 publicizing the recall, but Zucker gets any unused portion of the fund returned to him. So if nobody turns in their old Buckyballs, Zucker's only out the $75,000.

"After nearly two years of fighting, it's good to finally have this case behind me," said Zucker in a prepared statement. "The law does not support an individual being named in a case like this and I hope that this settlement will discourage the CPSC from wrongfully pursuing individual officers and entrepreneurs again in the future."

Buckyballs |||

All the negative publicity surrounding this case might discourage the CPSC from attempting similar actions, but a court victory could have settled the issue of whether the agency can apply the Park Doctrine in future product recalls. The Park Doctrine, which is based on a 1975 U.S. Supreme Court decision, says the government can hold officers responsible for the misdeeds of the corporations they represent even when they're unaware of those misdeeds.

It turns out the complaint against Zucker violated the CPSC's own rules. After the settlement was reached, Commissioner Ann Marie Buerkle released a statement expressing concerns about how this case "unfolded," arguing that the CPSC's rules require it to vote before broadening a complaint to add a new respondent, which it never did. 

After the CPSC came after his company, Zucker boldly mocked the agency's Chairman Inez Tenenbaum |||

"I believe the case against Mr. Zucker should never have gotten started without an affirmative Commission vote approving the issuance of a complaint against him," she wrote. This lawsuit consumed two years of Zucker's life and will cost him as much as $375,000 plus more in legal fees; now, after the case is settled, she speaks out?

With the announcement of a settlement, the government accountability law firm Cause of Action is dropping the countersuit it filed on Zucker's behalf, but will continue its efforts to uncover why the agency went after him in the first place through Freedom of Information Act litigation. It'll be interesting to see what Cause of Action can uncover.