U.S. v. Shelton Wholesale, Inc.

• Decision Date: 06 January 1999
• Docket Number: No. 96-6131-CV-SJ-6.,No. 97-6021-CV-SJ-4-6.,96-6131-CV-SJ-6.,97-6021-CV-SJ-4-6.
• Citation: 34 F.Supp.2d 1147
• Parties: UNITED STATES of America, Plaintiff, v. SHELTON WHOLESALE, INC., a Missouri corporation, d/b/a Shelton Fireworks; Polaris Fireworks, Inc., a Missouri corporation; and Greg Shelton, an individual, Defendants. Greg Shelton, Shelton Wholesale, Inc. and the National Fireworks Association, Ltd., Plaintiffs, v. United States Consumer Product Safety Commission, Ann Brown and Eric B. Ault, Defendants.
• Court: U.S. District Court — Western District of Missouri

34 F.Supp.2d 1147

UNITED STATES of America, Plaintiff, v. SHELTON WHOLESALE, INC., a Missouri corporation, d/b/a Shelton Fireworks; Polaris Fireworks, Inc., a Missouri corporation; and Greg Shelton, an individual, Defendants.

Greg Shelton, Shelton Wholesale, Inc. and the National Fireworks Association, Ltd., Plaintiffs, v. United States Consumer Product Safety Commission, Ann Brown and Eric B. Ault, Defendants.

No. 96-6131-CV-SJ-6.

No. 97-6021-CV-SJ-4-6.

United States District Court, W.D. Missouri, St. Joseph Division.

January 6, 1999.

COPYRIGHT MATERIAL OMITTED

Drake Cutini and Anthony Scott Barkow, U.S. Department of Justice, Office of Consumer Litigation, Washington, D.C., for plaintiff in No. 96-6131-CV-SJ-6.

David W. Whipple, Whipple Law Firm, Kansas City, MO, for defendants in No. 96-6131-CV-SJ-6.

David W. Whipple, Whipple Law Firm, Kansas City, MO, Robert B. Hopkins, Ober, Kaler, Grimes & Shriver, Baltimore, MD, for plaintiffs in No. 97-6021-CV-SJ-6.

Drake Cutini and Anthony Scott Barkow, U.S. Department of Justice, Office of Consumer Litigation, Washington, D.C., Melissa V. Hampshire, U.S. Consumer Product Safety Commission, Bethesda, MD, for defendants in No. 97-6021-CV-SJ-6.

MEMORANDUM AND ORDER

SACHS, District Judge.

This matter is before the court following trial, post-trial briefing and oral argument concerning several items left unresolved by this court's April 1998 summary judgment order (the "April Order"). Having heard the evidence, considered the parties' submissions and held oral argument the court will enter judgment in favor of the Government in both the Fine Case (Case No. 96-6131-CV-SJ-6) and the NFA Case (Case 97-6021-CV-SJ-6) for the reasons set forth below.¹

I. Procedural Recap.

Before turning to the parties' trial and post-trial arguments, a brief recap of the 26-page April Order is appropriate. In that order, the court concluded, among other things, that: (1) the Consumer Product Safety Commission ("CPSC") possesses jurisdiction over common fireworks (April Order at 8-10); (2) the nineteen products at issue were introduced into interstate commerce the moment they left Hong Kong (id. at 10-11); (3) laches did not bar the CPSC from proceeding as to products 1-7 (id. at 11); (4) the CPSC's discretionary decision to permit Shelton² to sell five products that failed a CPSC test did not preclude enforcement action against Shelton based on those products (id. at 12-13); (5) making decisions about an entire shipment based on sampling is permissible under the FHSA (id. at 14-15); (6) no issue of fact existed in the Fine Case (Case No. 96-6131-CV-SJ-6) concerning Shelton's allegation that the CPSC takes non-random samples based on visual clues (leakage and crooked sticks) because none of the products at issue failed the straightness test and there was no evidence that the CPSC purposely selected products 5 and 6 because they were leaking (id. at 16); (7) issues of fact remained in the NFA Case (Case No. 97-6021-CV-SJ-6) concerning Shelton's allegation that the CPSC takes non-random samples based on visual clues (id. at 16-17);³ (8) genuine issues of fact existed in both cases over whether valid statistical inferences could be drawn where sub-samples for stick straightness and rigidity tests were not selected randomly (id. at 17-18); (9) summary judgment was proper in favor of the Government on Shelton's due process claim (id. at 18-20); (10) questions of whether the CPSC's sampling techniques were faulty for failing to adjust for the numbers of devices within a particular shipment of product and whether the CPSC's fuse burn test was faulty must be reserved for trial (id. at 20-22);⁴ (11) Shelton's challenge to the label requirement failed (id. at 21-22); (12) fact questions precluded decision on whether any violations were "knowing" (id. at 24); (13) summary judgment was proper on Count IV of the NFA Case, alleging "unjustified actions and threats" by the CPSC (id. at 24-25); and (14) it has jurisdiction over the NFA Case (id. at 25).

Just prior to trial, Shelton asked for reconsideration of the court's April Order respecting the due process claim. The court decided to take the motion with the case and to permit evidence concerning the due process claim at trial. The court also determined that the upcoming bench trial was inappropriate for Mr. Greg Shelton, as he had requested a jury trial in his answer to the Government's amended complaint adding him as a party defendant. See May 1, 1998, Order. After the week-long trial in mid-May as to the remaining two defendants, Shelton Wholesale and Polaris, and as directed by the court, the parties submitted deposition testimony, along with designations, objections, and counter-designations. Post-trial briefing followed in August, with responses filed in early October. The matter is before the court following November 5, 1998, oral arguments.

II. Shelton's Due Process Claim.

The court will first dispose of Shelton's renewed due process claim, which is asserted as a defense in the Fine Case and as an affirmative claim in the NFA case. Shelton argues that its due process rights have been violated by the CPSC and that as a result the CPSC should be barred from taking enforcement action against it for any claimed violations. In briefing before trial on this issue, Shelton principally claimed due process violations stemming from: (1) the CPSC's decision to permit it to sell five of the products and then later pursuing injunctive relief based upon them; and (2) the CPSC's alleged failure to provide an independent finder of fact to review evidence submitted by Shelton following the initial determination by the CPSC. See April Order at 18-19. In reconsideration briefing, Shelton argues that its due process rights were violated because the CPSC failed to afford it an administrative hearing, where oral testimony may be introduced, after the initial determination is made that a product violates the FHSA, contrary to 15 U.S.C. § 2066(b), 15 U.S.C. § 1273(a) and 16 C.F.R. § 1500.268. Shelton also reasserts its non-neutral fact-reviewer argument, largely based on the lack of the allegedly statutorily provided hearing process.

Section 2066(b), which provides in relevant part that "the owner of [an imported] product shall be afforded an opportunity by the Commission for a hearing in accordance with the [Administrative Procedure Act]," is a provision of the Consumer Product Safety Act ("CPSA"). According to 15 U.S.C. § 2079, however, the CPSA applies to products subject to regulation under the FHSA only if "the Commission by rule finds that it is in the public interest to regulate such risk of injury under this chapter." The CPSC states without contravention that it has made no such ruling, and accordingly § 2066(b) has no bearing on the due process issue here.

Section 1273(a) provides that after the delivery of samples from imported products to the CPSC, the owner of the product "may appear before the [CPSC] and have the right to introduce testimony." The regulation at issue, promulgated under § 1273(a), provides:

Hearing—(a) If it appears that the hazardous substance may be subject to refusal of admission, the area office director shall give the owner or consignee a written notice to that effect, stating the reasons therefor. The notice shall specify a place and period of time during which the owner or consignee shall have an opportunity to introduce testimony.... Such testimony shall be confined to matters relevant to the admissibility of the hazardous substance, and may be introduced orally or in writing.

16 C.F.R. § 1500.268.

In briefing and at oral argument, both parties appeared to labor under the mistaken belief that if certain formal hearing requirements and procedures are required by § 1273(a) or 16 C.F.R. § 1500.268 (or, for that matter, § 2066(b)), and the required hearing is not provided or the procedures not followed, a violation of constitutional due process automatically follows. See Shelton's Due Process Support Suggestions at 3-7; CPSC's Opposition Suggestions at 3-14. This is not the law. While it is true that those provisions could create in Shelton (and other importers) a constitutionally protected liberty or property interest,⁵ and failure to provide the required hearing or follow prescribed procedures could constitute a violation of the statute,⁶ what process is due (i.e., the type of hearing, the procedures, etc.) is not measured under the terms of these provisions. See Cleveland Board of Education v. Loudermill, 470 U.S. 532, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985); Hewitt v. Helms, 459 U.S. 460, 103 S.Ct. 864, 74 L.Ed.2d 675 (1983); Brown v. Frey, 889 F.2d 159 (8th Cir.1989); Norris by Norris v. Board of Education of Greenwood Community School Corp., 797 F.Supp. 1452 (S.D.Ind.1992).

Thus, merely because a statutory provision, regulation or agency protocol may call for an opportunity to introduce oral testimony, as here, appear at an administrative hearing before an Administrative Law Judge, as may be required under § 2066(b), cross-examine witnesses, or engage in oral argument, constitutionally sufficient due process may be supplied with far less. In any event, the court notes that both Sugarman v. Forbragd, 405 F.2d 1189 (9th Cir.1968), aff'g 267 F.Supp. 817 (N.D.Cal.1967), and Meserey v. United States, 447 F.Supp. 548 (D.Nev.1977), interpreted the Food, Drug, and Cosmetic Act, which contains both a statute (21 U.S.C. § 381(a)) and regulation (21 C.F.R. § 1.94(a)) identical in material respects to the statute and regulation at issue here, as not requiring a formal trial-type hearing.

The court thus turns to the ultimate question, whether the procedures actually provided by the CPSC supply the necessary due process. "Due process is flexible and calls for such procedural protections as the particular situation demands." Memphis Light, Gas and Water Division v. Craft, 436 U.S. 1, 14 n. 15, 98 S.Ct. 1554, 56 L.Ed.2d 30 (19...