Jake's Fireworks Inc. v. United States Consumer Prod. Safety Comm'n
| Decision Date | 21 April 2023 |
| Docket Number | Civil Action TDC-21-2058 |
| Parties | JAKE'S FIREWORKS INC., Plaintiff, v. UNITED STATES CONSUMER PRODUCT SAFETY COMMISSION and ALEXANDER HOEHN-SARIC, in his official capacity, Defendants. |
| Court | U.S. District Court — District of Maryland |
For the second time, Plaintiff Jake's Fireworks Inc. (“Jake's Fireworks”) has filed a civil action in this Court alleging that the United States Consumer Product Safety Commission and its Chairman (collectively “the CPSC”) have applied certain regulations and testing procedures to its “Excalibur” line of fireworks in an arbitrary and capricious manner, in violation of the Administrative Procedure Act (“APA”), 5 U.S.C. § 706 (2018). Jake's Fireworks seeks declaratory and injunctive relief as well as attorney's fees and costs. The CPSC has filed a Motion to Dismiss for lack of subject matter jurisdiction, which is fully briefed. Having reviewed the submitted materials, the Court finds that no hearing is necessary. See D. Md. Local R. 105.6. For . the reasons set forth below, Defendants' Motion to Dismiss will be GRANTED.
The factual background and procedural history of this dispute prior to October 2020, as well as the relevant legal framework, are set forth in detail in the opinion of the Court in Jake's Fireworks's first civil action against the CPSC, Jake's Fireworks v. CPSC (“Jake's Fireworks I'') 498 F.Supp.3d 792 (D. Md. 2020), in which Judge Paul W. Grimm dismissed a nearly identical case for lack of subject matter jurisdiction because there had been no final agency action. Id. at 799-800. Judge Grimm's opinion in Jake's Fireworks I is incorporated by reference in its entirety, and this Court will therefore only summarize the pre-2020 background and will focus on the events following the issuance of that opinion., I. Notices of Non-Compliance
Jake's Fireworks is among the largest importers and distributors of consumer fireworks in the United States, with distribution centers in seven states from which it sells fireworks to consumers in over 20 states. Among the consumer fireworks sold by Jake's Fireworks are those classified as “reloadable aerial shell” fireworks, which are shot from a mortar tube or launch tube. Compl. ¶ 19, ECF No. 1. Reloadable aerial shell fireworks are classified as either “Display fireworks,” which must be launched by licensed operators, or as “Consumer fireworks,” which may be launched by ordinary consumers. Id.
At various points from 2014 to 2019, Compliance Officers from the CPSC Office of Compliance and Field Operations (“OCFO”) issued to Jake's Fireworks multiple Notices of Non-Compliance (“Notices”), sometimes referred to by the CPSC as Letters of Advice, which asserted . that certain reloadable aerial shell fireworks violated regulations under the Federal Hazardous Substances Act (“FHSA”), 15 U.S.C. § 1261(q)(1)(B) (2018) particularly based on the finding from sample testing that they were “intended to produce audible effects” and “the audible effect is produced by a charge of more than 2 grains of pyrotechnic composition.” 16 C.F.R § 1500.17 (2023); Compl. ¶ 66. Jake's Fireworks has responded to the Notices by requesting that the CPSC rescind the Notices based on its position that its reloadable Aerial Shell Fireworks (“the Aerial Shell Fireworks”) are not banned hazardous substances because they are not “fireworks devices intended to produce audible effects,” 16 C.F.R. § 1500.17(a)(3), and that the CPSC's testing methodology is improper. Though the OCFO, staff at one point agreed to re-test certain of the sampled fireworks products and on that basis rescinded some of the relevant Notices, Compl. ¶ 74, the OCFO staff continued to conduct sample tests on the Aerial Shell Fireworks and to issue Notices to Jake's Fireworks.
Pursuant to procedures outlined in the OCFO Regulated Products Handbook (“the Handbook”), Jake's Fireworks made written submissions in support of its position and also received an in-person meeting with OCFO Director Robert Kaye and OCFO staff on December 14, 2017. At the meeting, however, the staff reiterated that they intended to enforce the existing regulations as they understood them. Since the meeting, OCFO has continued to issue Notices. For example, an April 9, 2019 Notice, signed by an OCFO Compliance Officer, stated that based on certain testing, “the sampled lot is a banned hazardous substance” under FHS A regulations, and that “the staff requests that the distribution of the sampled lots . . . not take place and that the existing inventory be destroyed.” 4/9/19 Notice at 3, Compl. Ex. L, ECF No. 1-12. It further outlined certain steps that must be followed, if Jake's Fireworks chose to destroy the inventory, in order to provide proper documentation. The April 9, 2019 Notice also warned Jake's Fireworks that selling a banned hazardous substance would violate the law and subject it to civil penalties and possibly criminal prosecution. Finally, the Notice informed Jake's Fireworks that if it disagrees with the OCFO staffs position, it can follow the procedure in the Handbook to present its views and supporting evidence, and it requested a response on how Jake's Fireworks would respond to the Notice. As a result of the Notices, Jakes's Fireworks asserts that it has not sold the Aerial Shell Fireworks alleged to be banned hazardous substances, which has caused it significant financial harm.
In 2019, Jake's Fireworks filed Jakes Fireworks I, alleging that the CPSC's Notices and determinations that the Aerial Shell Fireworks violated the FHSA constituted arbitrary and capricious agency action in violation of the APA and also violated Jake's Fireworks's right to due process of law under the Fifth Amendment to the United States Constitution. Jake's Fireworks I, 498 F.Supp.3d at 800. The CPSC filed a motion to dismiss for lack of subject matter jurisdiction in which it argued that the Notices did not constitute “final agency action” as is required before a plaintiff may file a civil action under the APA. See 5 U.S.C. § 704.
To determine whether the CPSC's actions constituted final agency action, Judge Grimm applied the two-pronged approach mandated by Bennett v. Spear, 520 U.S. 154 (1997), which requires that (1) the action mark the “consummation of the agency's decisionmaking process”; and . (2) the action be “one by which rights or obligations have been determined, or from which legal consequences will flow.” Id. at 178 (citations omitted); see Jake's Fireworks I, 498 F.Supp.3d at 802. As to the first prong, Judge Grimm concluded that the Notices were not the “consummation of the Commission's decision-making process.” Jake's Fireworks I, 498 F.Supp.3d at 806. In particular, Judge Grimm found that the Notice at issue was “an intermediate ruling of a subordinate official” who lacked 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 the General Counsel.” Id. at 803. Rather, as noted in the Handbook, if the subject of a Notice “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 a may be appropriate.” Id. Judge Grimm noted that although after discussions with the subject of the Notice, the CPSC staff “may request that the Commission . . . 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.” Id. at 804. Judge Grimm further noted that “[w]hile the process may be nearing its end, there are still steps that Jake's Fireworks may take, such as request a hearing or reconsideration.” Id. at 806. Because Bennett requires that both prongs be satisfied, Judge Grimm concluded that the failure to satisfy the first prong warranted dismissal for lack of subject matter jurisdiction. Id. at 806-07.
Since Jake's Fireworks I, Jake's Fireworks has taken additional steps. In a November 13, 2020 letter to OCFO Director Kaye, Jake's Fireworks requested that OCFO either inform it of what steps it could take to “perfect the informal hearing process,” including requesting another meeting, or confirm that Jake's Fireworks had “exhausted [its] administrative appeals and that your determinations expressed in the Notices stand.” 11/13/20 Letter at 2-3, Compl. Ex. N, ECF No. 1-14. In a responsive letter dated December 16, 2020, Director Kaye clarified that while the lots of imported fireworks referenced in the Notice were conditionally released to Jake's Fireworks under an “import and entry bond,” OCFO staff had never requested that U.S. Customs and Border Protection (“CBP”) take any action such as demanding the return of the fireworks, the conditional release periods had all expired, and as a result neither OCFO staff nor CBP could take further action regarding the bonds such as to require the return of the fireworks. 12/16/20 Letter at 1, Compl. Ex. O, ECF No. 1-15. Director Kaye further stated that Notices “are an initial determination in the Commission's process,” and that “issuance of a Notice of Non-Compliance by a Compliance Officer does not constitute a final determination by the Commission subject to enforcement in federal court, nor does it complete the agency's decision-making process.” Id. At 1-2.
Director Kaye noted that Jake's Fireworks could still submit “information bearing...
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