Fourth Circuit Sets Precedent on CPSIA Database Disclosure Over Company’s Objections

April 18, 2014

In the first reported case of its kind, the 4th U.S. Circuit Court of Appeals this week overturned a federal district court’s order that allowed a company to proceed under a pseudonym and to file all pleading related to a challenge of the Consumer Product Safety Commission’s (CPSC) online database publication of a report of harm under seal. The case, Co. Doe v. Public Citizen, 2014 U.S. App. LEXIS 7113, 2-3 (4th Cir. 2014), stemmed from a company’s challenge to the CPSC’s publication of a report received on its database under the Consumer Product Safety Improvement Act of 2008 (CPSIA), which allows for publication of such reports unless a manufacturer objects that the reports are materially inaccurate or confidential. 15 U.S.C. § 2055(c)(2). Materially inaccurate information is defined as “false or misleading and which is so substantial and important as to affect a reasonable consumer’s decision making about the product.” 16 C.F.R. § 1102.26(a)(1). The particular report at issue was submitted to the CPSC by an unidentified local government agency and referenced an infant’s death while using or interacting with the company’s product. When the company and CPSC were unable to reach an agreement on whether the report met the criteria for publication, the company filed suit under a pseudonym to enjoin the CPSC from publishing the report.

The district court found that the report was materially inaccurate and issued a permanent injunction against online publication. It ordered that all pleading be filed and maintained under seal to protect the company’s identity. In doing so, the lower court ruled that Company Doe’s interest in preserving its “reputational and fiscal health” outweighed the public’s abstract interest in obtaining information about the lawsuit.

Several consumer groups including Public Citizen and Consumers Union sought to intervene in the lower court’s action, but their intervention was denied. The 4th Circuit allowed the consumer groups to intervene in the appeal of the lower court’s order that allowed the company to use a pseudonym and to seal the docket. The consumer groups argued and ultimately persuaded the 4th Circuit that they had standing to appeal as nonparties and that the presumptive right of access to judicial documents under the First Amendment and common law provided sufficient justiciable interests.

While the company argued that publication of the report and disclosure of its identity risked both reputational and economic damages, the 4th Circuit rejected these arguments, stating, “A corporation very well may desire that the allegations lodged against it in the course of litigation be kept from public view to protect its corporate image, but the First Amendment right of access does not yield to such an interest.” The court noted that “[a]djudicating claims that carry the potential for embarrassing or injurious revelations about a corporation’s image … are part of the day-to-day operations of federal courts.”

The company is now in the unenviable position of having not only the report of harm made public on the CPSC database but associated coverage of the appeal as well. Companies must remain vigilant to all CPSIA database reports and, when appropriate, raise early and robust material inaccuracy or confidentiality challenges. In light of this ruling, companies would be best served by offering evidence to support allegations of economic and reputational injury.

McGuireWoods LLP’s CPSC team has decades of experience counseling manufacturers, importers, distributors and retailers on their regulatory obligations and remedies, including all manner of CPSC and CPSIA compliance issues. We invite you to contact us to discuss the implications for your company.