Shelton v. Consumer Prod. Safety Comm'n

• Decision Date: 10 September 2001
• Docket Number: DEFENDANTS-APPELLEES,DEFENDANTS-APPELLANTS,PLAINTIFFS-APPELLANTS,No. 99-1450,PLAINTIFF-APPELLEE,99-1450
• Citation: 277 F.3d 998
• Parties: (8th Cir. 2002) GREG SHELTON, SHELTON WHOLESALE, INC., NATIONAL FIREWORKS ASSOCIATION, INC.,, v. CONSUMER PRODUCTS SAFETY COMMISSION; UNITED STATES; ANN BROWN, CHAIRMAN, U.S. CONSUMER PRODUCT SAFETY COMMISSION; ERIC B. AULT, DIRECTOR, CENTRAL REGIONAL CENTER, U.S. CONSUMER PRODUCT SAFETY DIVISION, UNITED STATES OF AMERICA,, v. SHELTON WHOLESALE, INC., A MISSOURI CORPORATION, DOING BUSINESS AS SHELTON FIREWORKS, INC., DOING BUSINESS AS POLARIS FIREWORKS; POLARIS FIREWORKS, INC., A MISSOURI CORPORATION; GREGORY P. SHELTON, Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 998

277 F.3d 998 (8th Cir. 2002)

GREG SHELTON, SHELTON WHOLESALE, INC., NATIONAL FIREWORKS ASSOCIATION, INC., PLAINTIFFS-APPELLANTS, v. CONSUMER PRODUCTS SAFETY COMMISSION; UNITED STATES; ANN BROWN, CHAIRMAN, U.S. CONSUMER PRODUCT SAFETY COMMISSION; ERIC B. AULT, DIRECTOR, CENTRAL REGIONAL CENTER, U.S. CONSUMER PRODUCT SAFETY DIVISION, DEFENDANTS-APPELLEES.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, v. SHELTON WHOLESALE, INC., A MISSOURI CORPORATION, DOING BUSINESS AS SHELTON FIREWORKS, INC., DOING BUSINESS AS POLARIS FIREWORKS; POLARIS FIREWORKS, INC., A MISSOURI CORPORATION; GREGORY P. SHELTON, DEFENDANTS-APPELLANTS.

No. 99-1450

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: September 10, 2001

Filed January 23, 2002

Appeals from the United States No. 01-1599 District Court for the Western District of Missouri

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before McMILLIAN, Beam and Hansen, Circuit Judges.

McMILLIAN, Circuit Judge

Shelton Wholesale, Inc., and Polaris Fireworks, Inc., (together, the "corporate parties") are Missouri businesses that import and distribute fireworks from Hong Kong, and Gregory Shelton is president and owner of both corporate parties. Gregory Shelton and the corporate parties (collectively, "the Shelton parties") appeal from two final orders granting summary judgment, a final bench verdict, and a bench ruling in favor of the United States and the Consumer Product Safety Commission ("CPSC") (together, the "Government"), entered in the United States District Court for the Western District of Missouri¹ in two related cases. United States v. Shelton Wholesale, Inc., No. 96-6131-CV-SJ-6 (W.D. Mo. filed Oct. 2, 1996) ("the Fine Case"); Shelton v. Consumer Products Safety Comm'n., No. 97-6021-CV-SJ-6) (W.D. Mo. filed Feb. 14, 1997) ("the NFA Case"). For reversal in both cases, the Shelton parties argue that the district court (1) erred in holding that the CPSC did not exceed its jurisdiction because the Federal Hazardous Substances Act ("FHSA") does not extend to common fireworks, (2) erred in holding that the CPSC did not violate the Shelton parties' due process rights by destroying the Shelton parties' fireworks without providing an opportunity for a full administrative hearing, (3) abused its discretion in admitting into evidence laboratory test reports offered by the Government under the business exception to the hearsay rule, and (4) abused its discretion in denying a jury trial to the corporate parties. For the reasons discussed below, we affirm the orders of the district court.

The district court had jurisdiction pursuant to 28 U.S.C. § 1331. This Court has jurisdiction pursuant to 28 U.S.C. § 1291.

I. Factual and Procedural Background

In the Fine Case, the United States sought civil penalties and injunctive relief against the Shelton parties for violations of the FHSA, 15 U.S.C. § 1261 et seq. Between 1992 and 1996, the Shelton parties imported fireworks from Hong Kong that the Government contended were defective under fireworks regulations enacted pursuant to the FHSA and enforced by the CPSC. The United States originally filed suit in the Fine Case against the corporate parties - but not Gregory Shelton - on October 2, 1996, and filed an amended complaint on November 7, 1996.² On February 20, 1997, the United States moved to amend its complaint to add Gregory Shelton. On May 20, 1997, the district court granted the United States' motion; on the same day, the United States filed its second amended complaint adding Gregory Shelton. On June 11, 1997, all three defendants comprising the Shelton parties answered the second amended complaint and, for the first time, demanded a jury trial.

On February 14, 1997, the Shelton parties and a nonprofit trade association, National Fireworks Association, Ltd. ("NFA"), filed suit in the NFA Case against the CPSC seeking a declaratory judgment that the CPSC (1) had no jurisdiction over common fireworks, (2) had denied the Shelton parties' due process rights, and (3) had improperly tested the fireworks.

On April 28, 1998, after noting that the parties incorporated into their briefs in the Fine Case many of the same arguments raised in the NFA Case, the district court ruled on summary judgment in both cases that the FHSA extends to common fireworks and that the Shelton parties' due process rights had not been violated. See United States v. Shelton Wholesale, Inc., No. 96-6131-CV-SJ-6/97-6021-CV-SJ-4-6, 1998 WL 251273, at *1, 3 n.7 (W.D. Mo. Apr. 28, 1998) (Shelton I) (granting partial summary judgment in Fine Case and NFA Case, reserving questions of fact for trial). The district court noted that the uncontroverted evidence showed that the CPSC had selected nineteen samples representing various fireworks products for testing from twelve shipments imported by the Shelton parties from Hong Kong to a United States Customs Port. See id. at *1. All of the fireworks products were common fireworks (e.g. toy paper caps, cone fountains, cylinder fountains, whistles without report, and sparklers), and were intended only to be used outdoors. See id. at *4. The CPSC transported the samples to its laboratory to conduct performance tests to determine whether the fireworks products were safe for consumers based on the standards outlined in the fireworks regulations. See id. at *2. When the samples of all of the nineteen fireworks products failed at least one (and in some cases more than one) of the performance tests conducted, the CPSC determined that each of the fireworks products was a banned hazardous substance under the FHSA. See id. at *3, 4.

On May 1, 1998, the district court ruled that the corporate parties were not entitled to a jury trial because the corporate parties did not make a timely demand for a jury trial, but that a separate jury trial for Gregory Shelton, who had timely invoked his right to a jury, was appropriate. See United States v. Shelton Wholesale, Inc., No. 96-6131-CV-SJ-6/97-6021-CV-SJ-4-6 (May 1, 1998 (order denying jury trial to corporate parties)).

At the bench trial, the Government called CPSC Director of Laboratory Sciences Warren Porter to introduce the laboratory test results for each of the nineteen products. Porter testified on direct examination that the CPSC always uses the following procedures when it tests fireworks: First, each fireworks performance test is conducted by a chemist and a technician, who contemporaneously record the test results on a standard form. Next, the secretary enters the test results recorded on the form into a database and prints out a report. The report is checked for accuracy by the same chemist and technician who performed the test, then the report is brought to Porter, who conducts a final review for accuracy. The district court admitted the test reports into evidence under the business records exception over the Shelton parties' objection that the laboratory reports were not produced in the regular course of business because Porter did not personally conduct all of the testing and less experienced analysts helped with the testing on occasion. The Shelton parties' expert witness, Dr. Roger L. Schneider, testified that the CPSC test methods were imprecise in his opinion because human error was not considered to the extent he deemed sufficient. See Shelton I, 1998 WL 251273, at *10.

The evidence further showed that each time the CPSC determined that one of the Shelton parties' fireworks products violated the fireworks regulations, the CPSC informed the Shelton parties by sending a letter of advice ("LOA"), itemizing the violations and explaining the procedures for submitting contrary evidence or views. See id. at *3-4.

With respect to the first seven products, the CPSC sent LOAs to Polaris Fireworks, Inc., addressed to Gregory Shelton, that stated "[i]f you disagree with our decision regarding these... banned fireworks devices, you may submit your views as to why you disagree with our conclusion. You should submit any information that you wish to offer into evidence within 10 days of your receipt of this letter."

For products eight through nineteen, the LOAs were accompanied by a copy of the CPSC's Regulated Products Handbook and referred to the relevant chapter therein describing what importers and distributors should do if they disagreed with the CPSC's conclusions. Chapter Two of the Regulated Products Handbook explains:

In response to the LOA, you may submit to the [CPSC] staff evidence and arguments that the product is not violative, not covered by a specific regulation, or should not be refused admission into the U.S.... Such evidence may consist of:

* results of tests indicating the product complies with the applicable regulation;

* marketing data indicating the product is not intended for the population group protected by the regulation;

* any other type of information.

Each LOA specified the individual to whom any responses should be directed, and included that individual's address and telephone number. In total, the Shelton parties submitted one letter challenging the CPSC's finding with respect to two of the nineteen products for which they received LOAs. See Shelton I, 1998 WL 251273, at *9.

On January 6, 1999, at the conclusion of the bench trial, the district court issued a joint memorandum and order, ruling in both cases that the fireworks products in question were banned hazardous substances under the FHSA and that the Shelton parties' due process rights had not been violated. See United States v. Shelton, 34 F. Supp. 2d 1147, 1167 (W.D. Mo. 1999) (entering judgment in favor of Government and against corporate parties; rejecting corporate parties' renewed due process claims and attacks on precision of CPSC testing methods) (Shelton II).

In the Fine Case, the district court assessed a $100,000 fine against Shelton Wholesale, Inc., for knowingly importing as many as ten of the nineteen products at issue in...