U.S. v. Focht

• Decision Date: 08 August 1989
• Docket Number: No. 88-3781,88-3781
• Citation: 882 F.2d 55
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. Charles FOCHT, an Individual, and Mark Focht, an Individual, Doing Business Under the Name Liberty Industries, Defendants-Appellees.
• Court: U.S. Court of Appeals — Third Circuit

Page 55

882 F.2d 55

UNITED STATES of America, Plaintiff-Appellant, v. Charles FOCHT, an Individual, and Mark Focht, an Individual Doing Business Under the Name Liberty Industries Defendants-Appellees.

No. 88-3781.

United States Court of Appeals Third Circuit.

Argued July 27, 1989.

Decided Aug. 8, 1989.

Charles D. Sheehy, Acting U.S. Atty., Bonnie R. Schlueter (Argued), Barbara M. Carlin, Asst. U.S. Attys., for plaintiff-appellant.

Louis Pomerico, (Argued), New Castle, Pa., Nancilee Burzachechi, Ellwood City, Pa., for defendants-appellees.

Before GIBBONS, Chief Judge, HUTCHINSON, Circuit Judge, and REED, District Judge. ^*

OPINION OF THE COURT

GIBBONS, Chief Judge:

The United States Consumer Products Safety Commission appeals from a denial of its motion to the court under 15 U.S.C. Sec. 1263(a) to preliminarily enjoin Charles and Mark Focht, doing business as Liberty Industries, from distributing firework components in interstate commerce. The Government contends that the district court misconstrued the statute to require application of a subjective standard to the Fochts' actions. We will reverse.

I.

Charles and Mark Focht own and operate Liberty Industries, located in Slippery Rock, Pennsylvania. Liberty sells component parts used to assemble fireworks. ¹ Liberty markets its goods nationally using a catalog. The catalog not only lists Liberty's components but also offers "how-to" books ² and is sent with a list of chemical suppliers bearing the note: "We hope this list helps you to fill your chemical needs, while Liberty continues to serve all of your other needs!" App. 168, 268. ³

The Consumer Product Safety Commission ("CPSC") began to investigate Liberty in March, 1987. Between March and July of that year, five CPSC employees from various parts of the country requested and received catalogs from Liberty. The catalogs contained referral cards to Chemco of Virginia. App. 272-73, 338-39, 379-82, 441-42, 483-84. Six CPSC employees then each placed an order for tubes, twice as many end plugs, and fuses. App. 289, 318, 365, 425, 458, 517. Liberty filled the orders. ⁴

Based on the sales to its employees, ⁵ the government filed a complaint against Liberty on May 27, 1988 seeking to enjoin Liberty's interstate sale of tubes, end plugs, and fuses. ⁶ The complaint theorizes that the sales violated 15 U.S.C. Sec. 1261 because the components shipped were intended for use in illegal fireworks. It raises a question of first impression.

The district court held a hearing on the motion on September 13, 1988. There the government introduced the testimony of two experts; Liberty presented the testimony of one. All three agreed that traditional filling of the number 12 tube sold by Liberty would result in a firework over 1,000 times more powerful than allowed by law. The government witness conceded that the same tube also could be used to assemble a less powerful firework by displacing the end plugs. He also testified that the components could be used to manufacture legitimate Class C fireworks, which are sold to the general public. Both sides agreed that the tubes also could be used to construct mortars to loft stars or other fireworks, another legitimate use. ⁷ After the hearing, the district court consolidated the government's requests for preliminary and permanent injunctions pursuant to Fed.R.Civ.P. 65(a).

The court rendered its decision in a memorandum opinion and order entered September 26, 1988. United States v. Focht, 694 F.Supp. 1199 (W.D.Pa.1988) [hereinafter Dist. Ct. Op.]. It found that the components could be used to assemble legal firecrackers and fireworks. Therefore, the goods per se did not violate the Act. Holding that the regulatory language prohibiting sale of components intended to be used in banned fireworks contemplates the subjective, rather than the objective, intent of the purchaser, the district court denied the government's motion and entered judgment for Liberty. Based on its finding that no statutory violation had occurred, it never examined whether recurrent violations were likely, the second half of the statutory injunction test. See Commodity Futures Trading Comm'n v. British Am. Commodity Options Corp., 560 F.2d 135, 141 (2d Cir.1977), cert. denied, 438 U.S. 905, 98 S.Ct. 3123, 57 L.Ed.2d 1147 (1978). On appeal, the government asserts the district court misconstrued 16 C.F.R. Sec. 1500.17(a)(3), (8) when it held the regulation's "intended to produce" language imposes a subjective consumer standard on sales of fireworks components to determine whether a violation has occurred. Our review of this question of law is plenary. Dent v. Cunningham, 786 F.2d 173, 175 (3d Cir.1986).

II.

The Federal Hazardous Substances Act, ("FHSA" or "the Act"), 15 U.S.C. Secs. 1261-77 (1982 & Supp. V 1987), makes illegal "[t]he introduction or delivery for introduction into interstate commerce of any ... banned hazardous substance." 15 U.S.C. Sec. 1263(a) (1982); see also id. at Sec. 1264 (penalties; exceptions); United States v. Scharstein, 531 F.Supp. 460, 465 (E.D.Ky.1982) (FHSA meant "to protect the general public ... from extremely hazardous products"). Neither the parties nor the district court disputes this. The Act contains the following definition of "banned hazardous substance":

(q)(1) The term "banned hazardous substance" means (A) any toy, or other article intended for use by children, which is a hazardous substance, or which bears or contains a hazardous substance in such manner as to be susceptible of access by a child to whom such toy or other article is entrusted; or (B) any hazardous substance intended, or packaged in a form suitable, for use in the household, which the Secretary by regulation classifies as a "banned hazardous substance" on the basis of a finding that, notwithstanding such cautionary labeling as is or may be required under this chapter for that substance, the degree or nature of the hazard involved in the presence or use of such substance 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, when so intended or packaged, out of the channels of interstate commerce: Provided, That the Secretary, by regulation, ... (ii) shall exempt from clause (A), and provide for the labeling of, common fireworks (including toy paper caps, cone fountains, cylinder fountains, whistles without report, and sparklers) to the extent that he determines that such articles can be adequately labeled to protect the purchasers and users thereof.

15 U.S.C. Sec. 1261(q)(1) (1982).

The statute grants the Secretary of Health, Education, and Welfare broad regulatory powers. See 15 U.S.C. Secs. 1261(f)(1)(B), 1262 (1982). Section 1261(q)(1)(B) expressly instructs the Secretary to make determinations and then ban ⁸ any substance that cannot be made safe through labeling. Id. Sec. 1261(q)(1)(B); 16 C.F.R. Sec. 1500.17(a) (1988). A ban on two kinds of fireworks has resulted. One applies to aerial fireworks:

Fireworks devices intended to produce audible effects (including but not limited to cherry bombs, M-80 salutes, silver salutes, and other large firecrackers, aerial bombs, and other fireworks designed to produce audible effects, and including kits and components intended to produce such fireworks) if the audible effect is produced by a charge of more than 2 grains of pyrotechnic composition....

16 C.F.R. Sec. 1500.17(a)(3) (1988). The other applies stricter standards to firecrackers exploding on the ground:

Firecrackers designed to produce audible effects, if the audible effect is produced by a charge of more than 50 milligrams (.772 grains) of pyrotechnic composition (not including firecrackers included as components of a rocket), aerial bombs, and devices that may be confused with candy or other foods, such as "dragon eggs," and "cracker balls" (also known as "ball-type caps"), and including kits and components intended to produce such fireworks....

Id. at Sec. 1500.17(a)(8). Thus, the "components intended to produce" language at issue is regulatory.

The district court found this language difficult--perhaps even impossible--to construe. Dist.Ct.Op. at 8. We have no such difficulty. The regulations clearly contemplate an objective seller standard.

The starting point of our analysis must be the regulatory language itself. Pursuant to 15 U.S.C. Sec. 1261(q)(1)(B). Section 1500.17 bans certain hazardous substances because they are so dangerous that adequate labeling cannot be devised, and therefore "the public health and safety can be served only by keeping such articles out of interstate commerce." 16 C.F.R. Sec. 1500.17(a) (1988); see R.B. Jarts, Inc. v. Richardson, 438 F.2d 846, 848-49 (2d Cir.1981), United States v. Chalaire, 316 F.Supp. 543, 546 (E.D.La.1982). ⁹ The regulation borrows this quoted material almost verbatim from section 1261(q)(1)(B).

This language tells us three things. First, it tells us the regulation prohibits certain substances from entry into interstate commerce. Second it tells us that an extreme problem, justifying an extreme response, exists. Third, it tells us that Congress expressly authorized such a response. See 15 U.S.C. Sec. 1261(q)(1)(B) (1982); see also H.R.Rep. No. 2166, 89th Cong., 2d Sess., reprinted in 1966 U.S.Code Cong. & Admin.News 4095, 4095, 4096, 4099-4100.

Subsections (a)(3) and (a)(8) each bans a particular type of firework, "including kits and components intended to produce such fireworks." 16 C.F.R. Sec. 1500.17(a)(3), (8) (1988). Taken in context, this language calls for application of an objective seller standard. Congress intended the ban to keep certain items out of commerce; it intended the ban to prevent such goods from ever entering American homes. 15 C.F.R. Sec. 1261(q)(1)(B) (1982). The regulations adopt the statutory language and attempt to effectuate its purpose. See 16 C.F.R. Sec. 1500.17(a) (1988). They identify an item posing a...