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«UNITED STATES OF AMERICA CONSUMER PRODUCT SAFETY COMMISSION _ ) In the Matter of ) CPSC Docket No. 12-2 ) ZEN MAGNETS, LLC, ) ) Hon. Dean C. Metry ...»

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UNITED STATES OF AMERICA

CONSUMER PRODUCT SAFETY COMMISSION

_________________________________________

)

In the Matter of ) CPSC Docket No. 12-2

)

ZEN MAGNETS, LLC, )

) Hon. Dean C. Metry

Respondent. ) Administrative Law Judge

__________________________________________)

COMPLAINT COUNSEL’S NOTICE OF FILING

Complaint Counsel hereby files a redacted copy of Complaint Counsel’s Post Hearing Argument.

Respectfully submitted, dvice@cpsc. Digitally signed by dvice@cpsc.gov gov DN: cn=dvice@cpsc.gov Date: 2015.04.02 14:23:24 -04'00' _____________________________________

Mary B. Murphy, Assistant General Counsel Jennifer Argabright, Trial Attorney Daniel Vice, Trial Attorney Ray M. Aragon, Special Attorney Division of Compliance Office of the General Counsel U.S. Consumer Product Safety Commission Bethesda, MD 20814 Tel: (301) 504-7809 Complaint Counsel for U.S. Consumer Product Safety Commission April 2, 2015

UNITED STATES OF AMERICA

CONSUMER PRODUCT SAFETY COMMISSION

_________________________________________

) In the Matter of ) CPSC Docket No. 12-2 ) ZEN MAGNETS, LLC, ) ) Hon. Dean C. Metry Respondent. ) Administrative Law Judge __________________________________________)

COMPLAINT COUNSEL’S POST HEARING ARGUMENT – REDACTED

TABLE OF CONTENTS

I. LEGAL STANDARD

A. Substantial Product Hazard

B. Preponderance of the Evidence

II. THE SUBJECT PRODUCTS CONSTITUTE A SUBSTANTIAL PRODUCT

HAZARD UNDER SECTION 15(a)(1)

A. The Subject Products Fail to Comply with a Consumer Product Safety Rule....2

1. The Subject Products are Toys Under ASTM F963

2. The Subject Products Contain a Loose, Hazardous Magnet

3. The Subject Products are Not Exempt Science or Hobby Kits...............7 B. The Failure of the Subject Products to Comply with ASTM F963 Creates a Substantial Risk of Injury to the Public

III. THE SUBJECT PRODUCTS PRESENT A SUBSTANTIAL PRODUCT

HAZARD UNDER CPSA SECTION 15(a)(2) BECAUSE THEY CONTAIN

DEFECTS WHICH CREATE A SUBSTANTIAL RISK OF INJURY

TO THE PUBLIC

A. The Products Are Defective as Designed Because a Risk of Injury Occurs as a Result of Their Operation or Use

B. The Subject Products are Defective Because the Warnings Do Not and Cannot Mitigate the Risk

C. The Subject Products Are Defective Under the Factors in 16 C.F.R. § 1115.4

1. The Subject Products Have Limited Utility

2. The Nature of the Risk Posed by the Subject Products Renders Them Defective

3. The Products are Not a Necessity

4. The Population Exposed to the Subject Products Faces a Risk of Severe Injury

5. The Risk is Not Obvious

 

6. The Warnings and Instructions are Not Adequate to Mitigate the Risk

–  –  –

9. Case Law Interpreting the CPSA

10. Products Liability

D. The Subject Products Present a Substantial Product Hazard

1. Pattern of Defect

–  –  –

3. Severity of the Risk

IV. CONCLUSION

Exhibit – Respondent Zen Magnets LLC’s Responses to Complaint Counsel’s First Set of Requests for Admission

–  –  –

Case Law Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602 (1993)

In re Francis Alonso, Jr. d/b/a Mylar Star Kites, CPSC Docket No. 75-16 (Initial Decision, June 21, 1976, Decision and Order, findings of fact affirmed; order set aside on jurisdictional grounds, Sept. 16, 1977)

In re P&M Enterprises, CPSC Docket No. 88-1 (Initial Decision Mar. 30, 1989, unanimously upheld by Commission Jul. 17, 1991)

In re Winship, 397 U.S. 358 (1970)

Steadman v. S.E.C., 450 U.S. 91 (1981)

Statutes 15 U.S.C. § 2052 (CPSA § 3 - Definitions)

15 U.S.C. § 2064 (CPSA § 15 – Substantial Product Hazards)

Regulations 16 C.F.R. § 1115.4 (Defect)

16 C.F.R. § 1115.6 (Reporting of unreasonable risk of serious injury or death)...............29 16 C.F.R. § 1115.12 (Information which should be reported; evaluating substantial product hazard)

43 Fed. Reg. 34988 (Aug. 7, 1978)

Hearing Exhibits CC-1A (Vincent Amodeo Direct Testimony)

CC-2 (ASTM F963 Toy Standard)

CC-4 (Zen Magnets sample)

CC-4A (Zen Magnets sample)

CC-5 (Neoballs sample)

CC-5A (Neoballs sample)

–  –  –

CC-6 (Buckyballs sample)

CC-7 (Zen Magnets Product Safety Assessment)

CC-8 (Neoballs Product Safety Assessment)

CC-9 (Buckyballs Product Safety Assessment)

CC-10A (Dr. J. Paul Frantz Direct Testimony)

CC-11 (Dr. Frantz Expert Report)

CC-12 (Zen Magnets twitter page)

CC-13 (Zen Magnets website, Zen Gift Set product page)

CC-14 (Dr. Frantz Magnet drop video)

CC-15A (Dr. Frantz Magnet drop video still frame)





CC-15B (Dr. Frantz Magnet drop video still frame)

CC-16 (Zen sales spreadsheet)

CC-17 (Zen Magnets website – Monopoly contest winners, May 2, 2013)

CC-18.1-18.95 (CPSC Incident Reports)

CC-19A (Dr. Lawrence Steinberg Direct Testimony)............. 3-4, 10-11, 17-19, 21-22, 24 CC-20 (Amazon.com website)

CC-21 (Magnet mock piercings YouTube video)

CC-22 (Celebrity mock tongue piercing YouTube video)

CC-24 (NASPGHAN, Protecting Children From Magnet Ingestions)

CC-25 (AAP News, June 2012)

CC-26 (Neodymium magnet ingestion pamphlet)

CC-27A (Dr. Robert Adam Noel Direct Testimony)............ 8, 10, 13-15, 18-20, 25, 28-30 CC-28 (NASPGHAN survey results slides)

CC-29 (NASPGHAN survey results graphs)

CC-30 (Patient M medical records)

–  –  –

CC-31 (Bruski medical records)

CC-32 (Bustamante medical records)

CC-33 (Zen Magnets e-mails, Aug. 11-12, 2013)

CC-34 (Zen Magnets e-mails, Jan. 15 and 18, 2011)

CC-35 (Zen Magnets e-mails, May 14 and 17-18, 2010)

CC-39 (Memo from S. Garland to J. Midgett, June 25, 2014)

CC-43 (Exploding Top YouTube video)

CC-44 (Zen Magnets “A Stroll Through Possibilities” pamphlet)

CC-45 (Zen Magnets website August 30, 2009)

CC-46 (Zen Magnets website October 8, 2011)

CC-48 (Zen Magnets website November 3, 2011)

CC-50 (Zen Magnets website October 11, 2012)

CC-52 (Zen Magnets website December 12, 2013)

CC-55 (Shihan Qu affidavit, May 16, 2012)

CC-57 (Zen Magnets Full Report to CPSC)

CC-58 (Zen Magnets website – Super Smash contest, July 13, 2014)

CC-63 (Zen Magnets website – product pages, July 3, 2014)

CC-64 (Zen Magnets e-mails, Feb. 17, 2010)

CC-65 (Zen Magnets e-mails, June 13 and 15, 2010)

CC-68 (Photo – Soldis mall kiosk)

CC-69 (Photo – Zen Magnets at Soldis mall kiosk)

CC-70 (Hobby Town receipt)

Joint Notice Regarding Witness Stipulations, Dec. 8, 2014..12-14, 17-19, 21, 24-25, 29-30 R-75 (PPP National Survey Results)

R-189 (Dr. Anthony Pelletier deposition transcript)

–  –  –

R-196 (Zen Magnets contest video)

Hearing Transcript Vol. 1, Dec. 1, 2014, pages 1 to 210

Vol. 2, Dec. 2, 2014, pages 235 to 485

Vol. 3, Dec. 3, 2014, pages 514 to 816

Vol. 5, Dec. 8, 2014, pages 867 to 1060

Vol. 6, Dec. 9, 2014, pages 1085 to 1346

Vol. 7, Dec. 10, 2014, pages 1381 to 1595

Vol. 8, Dec. 11, 2014, pages 1624 to 1882

Vol. 9, Dec. 12, 2014, pages 1915 to 1985

Vol. 10, Dec. 15, 2014, pages 1997 to 2257

Vol. 11, Dec. 16, 2014, pages 2291 to 2455

Vol. 12, Dec. 17, 2014, pages 2477 to 2720

–  –  –

COMPLAINT COUNSEL’S POST HEARING ARGUMENT – REDACTED

Complaint Counsel initiated this proceeding pursuant to section 15 of the Consumer Product Safety Act (CPSA), 15 U.S.C. § 2064, seeking remedial action to protect the public from the substantial risk of injury created by Zen Magnets and Neoballs (Subject Products). Because a preponderance of the evidence establishes that the Subject Products present a substantial product hazard, Complaint Counsel asks this Court to order Respondent to implement a corrective action plan that includes a stop sale, notice to the public, and a refund.

I. LEGAL STANDARD

–  –  –

The Commission may order a firm to stop sale of a consumer product, recall the product, and notify the public about the recall if the product “presents a substantial product hazard.” CPSA §§ 15(c) and (d). CPSA Section 15(a) defines a substantial product hazard as a consumer product that either: (a) fails to comply with an applicable consumer product safety rule under the CPSA, which creates a substantial risk of injury to the public; or (b) contains a product defect which (because of the pattern of defect, the number of defective products distributed in commerce, the severity of the risk, or otherwise), creates a substantial risk of injury to the public.

Although Complaint Counsel must satisfy only one prong of Section 15(a), the evidence demonstrates that Zen Magnets and Neoballs present a substantial product hazard because they   fail to comply with a consumer product safety rule and because they contain defects, both of which create a substantial risk of injury to the public.

–  –  –

Complaint Counsel must prove its case by a preponderance of the evidence. See Steadman v. S.E.C., 450 U.S. 91, 104 (1981) (determinations in agency adjudicatory proceedings “are made according to the preponderance of the evidence”). This standard applies in a CPSA Section 15 proceeding. See In re P&M Enterprises, CPSC Docket No. 88-1, at 19 (Initial Decision, Mar. 30, 1989, unanimously upheld by Commission Jul. 17, 1991) (in adjudication to determine whether a product constitutes a substantial product hazard, Complaint Counsel must meet its burden of proof by “a preponderance of the evidence”). The preponderance of the evidence standard “simply requires the trier of fact ‘to believe that the existence of a fact is more probable than its nonexistence before [he] may find in favor of the party who has the burden to persuade the [judge] of the fact’s existence.’” Concrete Pipe & Prods. of Cal., Inc. v. Constr.

Laborers Pension Trust for S. Cal., 508 U.S. 602, 622 (1993), quoting In re Winship, 397 U.S.

358, 371–372 (1970) (Harlan, J., concurring). Complaint Counsel has met this burden here.

II. THE SUBJECT PRODUCTS CONSTITUTE A SUBSTANTIAL PRODUCT

HAZARD UNDER SECTION 15(a)(1) A. The Subject Products Fail to Comply with a Consumer Product Safety Rule The Subject Products do not comply with the Standard for Consumer Safety Specification for Toy Safety, ASTM F963 (the Toy Standard) (CC-2), a mandatory consumer product safety rule pursuant to section 106 of the Consumer Product Safety Improvement Act of 2008. The Toy Standard establishes mandatory requirements for toys intended for use by children under 14.

ASTM F963 § 1.3. The Toy Standard provides that “[t]oys must not contain a loose as-received hazardous magnet or a loose as-received hazardous magnet component.” ASTM F963 § 4.38.1.

–  –  –

A “toy” is “any object designed, manufactured, or marketed as a plaything for children under 14 years of age.” ASTM F963 § 3.1.81. Written in the disjunctive, this requirement is satisfied if a product meets any one of these criteria. Under the Toy Standard, a “hazardous magnet” has a flux index greater than 50 and is a “small object.” ASTM F963 §§ 3.1.37, 4.6, 8.24.1. A preponderance of the evidence demonstrates that the Subject Products are toys that contain hazardous magnets in violation of the Toy Standard, which creates a substantial risk of injury to the public. Accordingly, the Subject Products present a substantial product hazard.

–  –  –

Zen Magnets and Neoballs are toys under the Toy Standard because they are designed, manufactured, or marketed to children under age 14. Testimony from Dr. Paul Frantz indicates that the Subject Products are designed so that individual small, rare earth magnets (SREMs) can be separated from a set and manipulated into different forms. CC-10A at 7; CC-11 at 12; Tr. at 254:9-17. That design allows users to create items of jewelry and refrigerator art, activities appealing to and engaged in by children under 14.1 In addition to designing the Subject Products to appeal to children under 14, Respondent advertised and marketed the Subject Products to that age cohort. CC-10A at 26-27. Specifically, Respondent advertised the Subject Products as a “fun toy,” promoted them as play jewelry that “looks hot on girls” and “looks good on cute people,” and is “terrific for refrigerator art.”2 In fact, Shihan Qu, founder of Zen Magnets, admits that he marketed and advertised the Subject Products for such purposes, stating that Zen Magnets are appropriate for a “wrist worthy chain”

                                                            

CC-10A at 10, CC-11 at 12 (marketed as jewelry, refrigerator art); CC-10A at 12 and CC-13 (refrigerator art); CCA at 12-13 and CC-12 (jewelry including lip and tongue piercings); CC-19A at 12-13 (“[c]hildren over the age of five are likely to be enticed by the advertised play features”); Tr. at 431:20.

CC-44 (“Fun Toy”); CC-10A at 10, CC-11 at 12 (“look hot on girls”); Tr. at 2421:8-11 (“looks good on cute people”); Tr. at 2429:18-20 (“terrific for refrigerator art”); CC-63 at 2 (website promoting use as refrigerator art).

–  –  –



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