Pactra Industries, Inc. v. Consumer Product Safety Commission, s. 74-2902

Decision Date02 May 1977
Docket NumberNos. 74-2902,74-3168,s. 74-2902
Citation555 F.2d 677
PartiesPACTRA INDUSTRIES, INC., Petitioner, v. CONSUMER PRODUCT SAFETY COMMISSION, Respondent, DAP, Inc., Intervenor, Sprayon Products, Inc., Intervenor.
CourtU.S. Court of Appeals — Ninth Circuit

Joel E. Hoffman, argued, Anthony L. Young, Wald, Harkrader & Ross, Washington, D. C., for petitioner.

Gregory B. Hovendon, Chief Consumer Affairs Section, John R. Fleder, argued, Antitrust Div., Dept. of Justice, Washington, D. C., for respondent.

On Petitions for Review of an Order of the Consumer Product Safety Commission.

Before BARNES, CHOY and KENNEDY, Circuit Judges.

KENNEDY, Circuit Judge:

This case requires an examination of the statutory authority of the Consumer Products Safety Commission (the Commission) to issue regulations under section 701(e) of the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 371(e), without first holding public hearings. Pactra Industries, Inc. (Pactra) petitions for review of an order of the Commission promulgating a regulation that classifies all self-pressurized products intended or suitable for household use and containing vinyl chloride monomer as "banned hazardous substances" and that requires the repurchase of all existing quantities of those articles. 1

The Commission's order and regulation are predicated on the Federal Hazardous Substances Act, 15 U.S.C. §§ 1261-1274. 2 The act defines "hazardous substance[s]" to include certain toxic, corrosive, irritating, sensitizing, flammable, pressure generating, or radioactive materials which may cause substantial illness or injury as a proximate result of foreseeable use. 15 U.S.C. §§ 1261(f)(1)(A), (B) & (C). The Commission is authorized to adopt regulations declaring specific items to be hazardous substances. Id. § 1262(a). 3 Hazardous substances are subject to various inspection and record-keeping requirements, id. §§ 1270, 1271, and, if not labeled in accordance with the statute, are defined as "misbranded hazardous substances." Id. § 1261(p). The Commission may also adopt regulations declaring specific items to be "banned hazardous substances" where, notwithstanding cautionary labeling,

the degree or nature of the hazard involved in the presence or use of such substance[s] in households is such that the objective of the protection of the public health and safety can be adequately served only by keeping such substance[s], when so intended or packaged, out of the channels of interstate commerce . . . .

Id. § 1261(q)(1). This substantive provision is the foundation of the Commission's regulation in this case.

In issuing an order or regulation that declares a product a hazardous substance or banned hazardous substance, the Commission must follow the procedures mandated by the Federal Food, Drug and Cosmetic Act, § 701(e), 21 U.S.C. § 371(e). See 15 U.S.C. §§ 1261(q)(2), 1262(a)(2). Section 371(e) contemplates a one or two-stage rule-making procedure, depending on whether objections are filed by persons adversely affected by the Commission's action. At the first stage, the Commission publishes a proposed regulation, and interested persons may present their views thereon. As soon as practicable thereafter, the Commission then acts on the proposal and publishes its order. A second stage is reached if, on or before the thirtieth day after publication of the order, any person adversely affected files objections "specifying with particularity the provisions of the order deemed objectionable, stating the grounds therefor, and requesting a public hearing upon such objections." 21 U.S.C. § 371(e)(2). The filing of objections operates to stay the provisions of the Commission's order that are drawn in question. The statute then requires a public hearing "for the purpose of receiving evidence relevant and material to the issues raised by" the objections, 21 U.S.C. § 371(e)(3), and further mandates as follows:

As soon as practicable after completion of the hearing, the (Commission) shall by order act upon such objections and make such order public. Such order shall be based only on substantial evidence of record at such hearing and shall set forth, as part of the order, detailed findings of fact on which the order is based.

Id. Any person adversely affected by a regulation promulgated under section 371(e) may file a petition for review with the United States Court of Appeals. 21 U.S.C. § 371(f)(1). 4

For some years, vinyl chloride commonly served as a propellant in aerosol cans manufactured to dispense paints, cosmetics, and other household products. Pactra, which manufactures and sells aerosol spray cans, at one time employed vinyl chloride as a propellant in its small cans of hobby paint. In 1974, a sharp increase in the cost of vinyl chloride caused Pactra and many aerosol can manufacturers to stop using that propellant, but many of the cans containing vinyl chloride still remain in the chain of distribution.

In early 1974, the B. F. Goodrich Company reported to the National Institute of Health that since 1971, three of its employees who had been exposed to vinyl chloride at an industrial plant for approximately nineteen years had died from angiosarcoma of the liver, a rare form of cancer. Laboratory studies on animals who were administered varying dosages of vinyl chloride over extended periods further suggested that the chemical may be carcinogenic. As a result of this evidence, a number of federal agencies sought to protect industrial workers and the general public from exposure to vinyl chloride. 5

In May 1974, the Commission acted to ban the propellant. The Commission began the administrative process here at issue by publishing a proposed regulation banning all "self-pressurized products intended for household use that contain(ed) vinyl chloride monomer." 39 Fed.Reg. 18115, 18116 (1974). In proposing its regulation, the Commission referred both to the report mentioned above linking the death of industrial workers from angiosarcoma of the liver to vinyl chloride exposure, and to certain laboratory experiments conducted in a European university. Interested persons were invited to submit written comments on the proposed regulation.

The Commission received nine comments on the proposed order. Three of the comments criticized the ban. These comments noted that household users of the spray cans were exposed to only limited amounts of vinyl chloride and that there was no evidence that such limited exposure was hazardous. They urged the Commission to implement its regulation only prospectively on the ground that there was little likelihood of harm from use of existing stocks. After considering these comments and examining other information, including testimony presented at hearings conducted by other federal agencies, 39 Fed.Reg. 30112 (1974), the Commission promulgated its order classifying as "banned hazardous substances" all aerosol products containing vinyl chloride and intended or suitable for household use. 16 C.F.R. § 1500.17(a)(10) (1977). In support of its order, the Commission stated that no safe level of human exposure to vinyl chloride has been established. 39 Fed.Reg. at 30113. It stated that it did not regard the health hazard posed by the use of such products to be speculative or minimal, and it declined to give its order only prospective application. It concluded that "the potential hazard . . . is sufficiently serious and immediate to warrant repurchase . . . ." Id.

In response to the Commission's order, Pactra submitted timely objections under 21 U.S.C. § 371(e)(2) and requested a hearing. The company took exception to certain studies mentioned by the Commission and stated that the Commission's published explanation failed to mention facts that militated against its conclusion. 6 Contending that the information cited by the Commission dealt solely with the effects of vinyl chloride in high intensity and long-term industrial patterns of use, Pactra asserted that the data failed to establish the conditions of customary use for the products at issue. It claimed that the risk of cancer stemming from foreseeable use of household paint products could not be extrapolated from data relating to occupational exposure. The company alleged that there was no evidence that the level of exposure resulting from the use of aerosol spray paints was harmful to humans and that the Commission had not shown why banning those products was necessary in order to protect the public health.

Pactra argues that under 21 U.S.C. § 371(e) these objections required the Commission to hold public hearings, make details of finding of fact, and support any new regulation by substantial evidence in the record in short, Pactra asserts that the Commission was bound to proceed to the second stage of the rule-making process under 21 U.S.C. § 371(e). The Commission declined to reach this second stage. It issued an order denying a public hearing and stated:

The objections are practically void (sic ) of any references to, or offers to present, factual information which the Commission believes would lead to a conclusion contrary to that reached by it. Such information as has been referred to, even if true, is not legally sufficient to invalidate the ban order.

39 Fed.Reg. 36576, 36577 (1974). Commenting on the hearing requirement of section 371(e), the order noted:

The section (371(e) ) hearing was not placed in the statute so that parties regulated by agency action can require the agency to present evidence, more evidence, and still more evidence until the affected parties are finally satisfied that enough evidence has been presented. Whether the Commission's conclusions are reasonable cannot be resolved by an evidentiary hearing.

Id. Pactra then filed the instant petition for review of the Commission's order.

As authority for denying a hearing to Pactra, the Commission cites its own regulation providing that a hearing under section 371(e) will...

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