Vermont’s Action against Dollar Tree and the CPSIA
By Hal Stratton
The provisions of Section 218 of the Consumer Product Safety Improvement Act of 2008 (CPSIA) give the attorneys general of each of the 50 states the authority to enforce certain provisions of federal product safety statutes administered by the Consumer Product Safety Commission (CPSC). To date, this authority has not been widely used by the state attorneys general. However, a recent enforcement action by the Vermont Attorney General provides insight as to what product safety stakeholders and those in the consumer product supply chain may expect in the future as to enforcement of product safety laws by the states.
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State Attorney General Product Safety Powers Granted by the CPSIA
In enacting the CPSIA, Congress gave state attorneys general broad power to enforce certain federal product safety statutes administered by the CPSC. These powers include, among others, the right to proceed in U.S. District Court to enjoin product safety stakeholders from a number of activities including selling products that violate a CPSC safety regulation, selling products that have been recalled, selling banned hazardous substances and selling products that do not meet the certification provisions provided in the CPSIA. In addition, state attorneys general now also have the authority to proceed in U.S. District court, on their own without the CPSC, to enjoin the sale of products that exhibit a “substantial product hazard” under federal law, a power which previously has been reserved to and within the province and discretion of the CPSC.
However, the CPSIA does not give the state attorneys general authority to impose or seek monetary penalties against parties who violate federal product safety laws. Such provisions were included in various drafts of CPSIA legislation as it worked its way through the Congress. While this language was the source of much behind the scenes debate and negotiation, the final version of the CPSIA did not include authority for state attorneys general to impose penalties under federal statutes which they may otherwise enforce. The lack of the authority to recover monetary damages and penalties under the CPSIA will likely have a significant effect upon whether any of the state attorneys general will routinely use powers granted in the CPSIA alone in consumer product enforcement efforts in the future. With budget cuts virtually across the board in the states, any action that does not allow the state to collect monetary damages or penalties will likely not take priority.
Vermont Attorney General Action
However, this does not mean that state attorneys general will not become more involved in the enforcement of product safety laws in the future. The enactment of the CPSIA and the publicity surrounding certain high-profile recalls over the past few years, have served to raise the profile of product safety nationwide including among the state attorneys general. A recent action by the Vermont Attorney General against Dollar Tree Stores, Inc. (Dollar Tree) illustrates the inherent power, aside from federal law, possessed by the state attorneys general under state law to enforce product safety laws and perhaps portends what will likely be the most widely used procedure by the states to ensure product safety in their jurisdictions.
In March 2006 and October 2007, Dollar Tree recalled children’s jewelry that contained lead. In November and December 2007, the Vermont Attorney General’s office purchased four products similar to those that were subject to the recall from Dollar Tree and had them tested. The results of the tests indicated high levels of cadmium in some of the products and high levels of lead in others. Prior to learning of the Vermont Attorney General’s actions, Dollar Tree adopted procedures to ensure that it would not sell any further products containing lead or cadmium. The CPSC did not seek (or as yet has not sought) a penalty from Dollar Tree under the federal law in connection with the recalls and, as discussed above, the Vermont Attorney General did not have authority under the CPSIA to seek such penalties. So, it would seem the case was closed at that point.
However, the Vermont Attorney General’s office wasn’t finished with Dollar Tree. It proceeded not under the CPSIA, but rather under Vermont state law, specifically the Vermont Consumer Fraud Act, 9 V.S.A. §§ 2451-2480n. The Vermont Attorney General’s office used the following provision of this act, 9 V.S.A. § 2453(a), to seek relief under Vermont state law under the circumstances against Dollar Tree:
“(a) Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are hereby declared unlawful.”
The contention of the Vermont Attorney General under this language was that the selling of children’s jewelry containing high levels of toxic substances such as cadmium and lead constitutes an unfair or deceptive trade practice under the Vermont statute.
In addition, however, unlike the attorney generals’ power under the CPSIA, the Vermont Attorney General, once an unfair or deceptive act such as selling an unsafe product has been determined, has the authority to seek a civil penalty under the provisions of 9 V.S.A. § 2458(a)(1) which provides for penalties of $10,000 per violation. Under this provision, Dollar Tree agreed to pay the state of Vermont a civil penalty for all violations of $100,000.
State Consumer Protection Laws
Each state has a consumer protection or fraud statute similar to Vermont’s which can be enforced by the state attorney general. Although these statutes differ from one another in various ways, each provides its state attorney general with wide latitude to enforce unfair or deceptive trade practices. Each of these statutes also provides for the recovery of monetary damages and penalties for its violation. As product safety law and issues evolve, state attorneys general and their staffs will likely be turning to their state consumer protection statutes more and more to address the violation of federal consumer product safety laws and the sale of unsafe products alleging that such sales constitute unfair or deceptive trade practices under the state statutes.
Potential Future Enforcement Actions
Involvement in consumer product safety enforcement is an area of the law that is relatively new for most state attorneys general, although a number of the larger states, such as California and Illinois, have been involved in product safety issues even prior to the enactment of the CPSIA. Previously, most states have relied on the federal government to enforce consumer product safety law and sought to enforce only state statutes which specifically address product safety. However, the recent actions of the Vermont Attorney General may portend a new era in state product safety enforcement, where specific state product safety laws do not exist. All consumer product stakeholders in the supply chain are subject to these state actions and authority. In looking toward the future, consumer product stakeholders should expect the following:
1. More and more states through their attorneys general will become involved in consumer product safety enforcement primarily through their state consumer protection statutes even where specific state consumer product safety statutes do not exist.
2. States will seek monetary damages from stakeholders and those involved in the consumer product supply chain for violations of consumer product safety law through their state consumer protection statutes even where the CPSC does not.
3. Depending on the circumstances of the situation, states may engage in multistate action as to consumer product enforcement joining together to collectively assert their claims stemming from each state’s consumer protection statute. The state attorneys general have a long history of multistate action in various consumer areas, including among others, tobacco, pharmaceuticals, consumer finance and more recently the Toyota recalls.
4. The enforcement powers of the CPSC and the states are not mutually exclusive. States may take enforcement action under their respective consumer protection statutes in certain circumstances where the CPSC does or not.
Consumer stakeholders should monitor and consider the actions and the powers of the state attorneys general and the states as well as the CPSC and the federal government in their product safety planning, assurance and remediation programs.
Hal Stratton is the former Chairman of the U.S. Consumer Product Safety Commission (2002-2006) and Attorney General of New Mexico (1987-1990). He is currently Senior Counsel at the law firm of Brownstein Hyatt Farber Schreck (www.bhfs.com) and works out of their Albuquerque and Washington, D.C. offices. Contact him at (505) 724-9596, hstratton@bhfs.com.
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