United States District Court, D. Colorado
ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
Brooke Jackson United States District Judge.
matter is before the Court on plaintiff Zen Magnets’
(“Zen”) and defendant U.S. Consumer Product
Safety Commission’s (the “Commission”)
cross-motions for summary judgment. ECF Nos. 35, 36. For the
reasons stated herein, the Commission’s Final Decision
and Order is reversed and remanded with instructions to grant
Zen a fair opportunity to participate in the Complaint
Counsel’s appeal of the ALJ’s Initial Decision
and Order before an impartial tribunal.
markets and sells sets of high-powered small rare earth
magnets (“SREMS”). These magnets are small (on
the order of five millimeters in diameter), spherical, coated
in reflective silver, and highly powerful. Zen sells its
magnets, known as “Zen Magnets” and
“Neoballs” (referred to collectively herein as
the “magnets”) individually or in sets of 76,
216, or 1,728 magnets. ECF No. 35 at 2. The magnets can be
separated and rearranged in various geometric shapes. Zen
markets and sells its magnet sets for educational and
scientific purposes, for stress relief, and as toys for
adults that can be used for jewelry or refrigerator art,
among other things. ECF No. 1-2 at 18.
have been implicated in injuries to children and adolescents
who swallow the magnets. Young children who come across spare
or lost magnets have been known to ingest them accidentally
or intentionally, whereas older children and adolescents may
accidentally ingest the magnets while simulating tongue
piercings or sticking the magnets to their braces. ECF No. 35
at 2. When two or more magnets-or one magnet and a metallic
object-are ingested, they can cause intestinal damage. Due to
their strength, ingested magnets can pinch or perforate
digestive tissue as they are attracted toward each other
within the gastrointestinal system. Id. at 3.
Injuries caused by ingestion of SREMs include perforations,
infections, tissue death, and gastrointestinal bleeding; such
injuries have resulted in one death. ECF No. 1-2 at
22–23. The dangers of ingestion are exacerbated because
many medical professionals and parents are unaware that
children have ingested the magnets or that they pose such
matter originated in August 2012 when the Commission’s
Complaint Counsel commenced an administrative adjudication
against Zen and two other companies distributing SREMs.
Complaint Counsel filed a complaint against the firms under
Sections 15(c) and (d) of the Consumer Product Safety Act
(“CPSA”) seeking to have the SREMs declared a
substantial product hazard and to obtain a public notice and
recall of the magnets. ECF No. 1-2 at 1 (Final Decision and
Order). The cases against Zen and the other firms were
consolidated before Administrative Law Judge
(“ALJ”) Dean Metry, and the two other firms
entered consent agreements with the Commission in 2014,
leaving only Zen in the adjudication.
August 2012, the Commission commenced a rulemaking to
establish safety standards for magnet sets. ECF No. 40-1. The
rule was finalized in October 2014. ECF No. 1 at 7. At the
time the rule was issued, Zen was the only remaining
distributor of SREMs in the American market. Safety Standard
for Magnet Sets, 79 Fed. Reg. at 59,962–63 (Oct. 3,
2014). The Commission’s final rule set an industry-wide
standard limiting the size and magnetic strength of SREMs.
See Id. However, the Tenth Circuit vacated and
remanded the rule in November 2016 after a challenge from
Zen, because the Commission’s “prerequisite
factual findings . . . are incomplete and inadequately
explained.” Zen Magnets, LLC v. CPSC, 841 F.3d
1141, 1144 (10th Cir. 2016).
result of the Commission’s rulemaking, Zen sought
dismissal of the Complaint Counsel’s Second Amended
Complaint in the adjudication proceeding before ALJ Metry in
October 2014. ECF No. 1 at 3. Zen argued that the rulemaking
demonstrated that the Commissioners were biased against Zen
and had prejudged the facts in its case. Id. at
3–4. ALJ Metry denied this motion. Id. After a
hearing in December 2014, ALJ Metry issued his Initial
Decision and Order on March 25, 2016 granting in part and
denying in part Complaint Counsel’s request for relief.
Id. at 4. The ALJ found that Complaint Counsel had
not proved the magnets were a hazard when accompanied with
proper warnings and allowed Zen to continue selling its
magnets with warnings. See id.
4, 2016 Complaint Counsel appealed the ALJ’s Initial
Decision to the Commission for review. Id. Zen moved
to stay the appeal pending a decision on its
contemporaneously-filed Motion to Disqualify the Commission
or Some of its Members for bias. Zen Magnets, LLC, CPSC
Docket 12-2, Nos. 144, 145. The Commission denied Zen’s
motion to stay as well as its motion to disqualify, though
Commissioner Buerkle dissented from that decision, contending
that her colleagues should be disqualified from hearing the
appeal. See Zen Magnets, LLC, CPSC Docket 12-2, Nos.
Commission heard oral argument on the Complaint
Counsel’s appeal in June 2017 and issued its Final
Decision and Order (“FDO”) on October 26, 2017.
Id. at 163. In the FDO, the Commission overturned
ALJ Metry’s Initial Decision, finding that it was
“based on numerous errors in fact and law.” ECF
No. 1-2 at 1. Contrary to the ALJ’s decision, the FDO
found that the magnets at issue “present a substantial
product hazard and are, therefore subject to public
notification . . . and recall measures.” Id.
November 6, 2017 Zen Magnets filed its complaint for
injunctive and declaratory relief with this Court and moved
for a preliminary injunction to enjoin enforcement of the
FDO. See ECF Nos. 1, 2. After briefing and an oral
argument on the motion for a preliminary injunction, the
parties stipulated that the Commission would temporarily stay
its enforcement of paragraph 2 of the FDO for 120 days,
during which time the parties would submit cross-motions for
summary judgment. See ECF Nos. 20, 21, 24, 26. The
parties’ cross-motions for summary judgment have been
fully briefed. See ECF Nos. 35, 36, 39, 40. The
Administrative Record has also been filed. See ECF
complaint Zen seeks to enjoin the Commission’s FDO on
the grounds that the Commission violated Zen’s due
process rights because its members were biased and had
prejudged the matters on appeal. ECF No. 1 at 5. Zen also
seeks to set aside the FDO under the Administrative Procedure
Act (“APA”), codified at 5 U.S.C. §§
702, 706(2) for being arbitrary and capricious; contrary to
constitutional right; and/or unsupported by substantial
evidence. Id. The Commission asks the Court to
affirm the FDO and dismiss Zen’s complaint, whereas Zen
asks the Court to grant summary judgment on all the claims in
its complaint. ECF No. 35 at 1; ECF No. 36 at 1.
STANDARD OF REVIEW
the present motions are styled as cross-motions for summary
judgment, in effect they are motions to have the Court decide
Zen’s appeal of the Commission’s FDO.
“[M]otions for summary judgment are conceptually
incompatible with the very nature and purpose of an
appeal,” and are “inconsistent with the standards
for judicial review of agency action under the APA.”
Olenhouse v. Commodity Credit Corp., 42 F.3d 1560,
1579–80 (10th Cir. 1994). As such, the Court’s review
of these motions is governed by the APA.
the APA, the Court must set aside an agency’s decision
if, after reviewing the administrative record, the Court
finds that the decision was “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with
law,” 5 U.S.C. § 706(2)(A), “contrary to
constitutional right, power, privilege, or immunity,”
id. at § 706(2)(B), or “unsupported by
substantial evidence,” id. at §
706(2)(E). Agency actions are presumed valid, and the burden
of proof lies with plaintiffs who challenge such actions.
Citizens’ Comm. to Save Our Canyons v.
Krueger, 513 F.3d 1169, 1176 (10th Cir. 2008).
scope of review under the ‘arbitrary and
capricious’ standard is narrow and a court is not to
substitute its judgment for that of the agency.”
Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
“Nevertheless, the agency must examine the relevant
data and articulate a satisfactory explanation for its action
including a ‘rational connection between the facts
found and the choice made.’” Id.
(quoting Burlington Truck Lines, Inc. v. United
States, 371 U.S. 156, 168 (1962)). An agency action is
arbitrary and capricious if:
the agency has relied on factors which Congress has not
intended it to consider, entirely failed to consider an
important aspect of the problem, offered an explanation for
its decision that runs counter to the evidence before the
agency, or is so implausible that it could not be ascribed to
a difference in view or the product of agency expertise.
Id. Moreover, in reviewing an agency’s
explanation for its action, the court must “consider
whether the decision was based on a consideration of the
relevant factors and whether there has been a clear error of
judgment.” Id. (citation omitted). An agency
is owed especially strong deference when “the
challenged decisions involve technical or scientific matters
within the agency’s area of expertise.” Utah
Envtl. Cong. v. Dale Bosworth, 443 F.3d 732, 739 (10th
Cir. 2006) (citation omitted).
also seeks to overturn the Commission’s FDO because it
is not supported by substantial evidence.
“‘Substantial evidence’ is more than a mere
scintilla; it must be such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion. . . .
Evidence is not substantial if it is overwhelmed by other
evidence . . . or if it constitutes mere conclusion.”
Olenhouse, 42 F.3d at 1581 (internal citations
omitted). “The substantial-evidence standard does not
allow a court to displace the agency’s ‘choice
between two fairly conflicting views, even though the court
would justifiably have made a different choice had the matter
been before it de novo.’” Trimmer v.
U.S. Dep’t of Labor, 174 F.3d 1098, 1102–03
(10th Cir. 1999) (quoting NLRB v. Walton Mfg. Co.,
369 U.S. 404, 405 (1962) (per curiam)).
also requires the Court to set aside any agency decision that
is “contrary to constitutional right, power, privilege,
or immunity.” 5 U.S.C. § 706(2)(B). Though the
parties appear to disagree about the appropriate standard of
review to apply to Zen’s constitutional claim, they
both concede that a constitutional claim does not take the
Court’s review outside the “procedural
framework of the APA.” ECF No. 29 at 13 (emphasis
in original); see also ECF No. 35 at 5. With respect
to constitutional claims arising under the APA,
“[C]ourts afford agencies no deference in interpreting
the Constitution. . . . The presence of a constitutional
claim does not take a court’s review outside of the
APA, however . . . and courts must still respect agency
fact-finding and the administrative record when reviewing
agency action for constitutional infirmities; they just
should not defer to the agency on issues of substantive legal
Jarita Mesa Livestock Grazing Ass’n v. U.S. Forest
Serv., 305 F.R.D. 256, 289 (D. N. M. 2015).
issues are raised in this action: (1) whether the FDO
violated the APA because it is arbitrary and capricious or
unsupported by substantial evidence; and (2) whether Zen was
denied due process as a result of the Commission’s
alleged bias and prejudgment of the facts and law at issue in
FDO the Commission determined that the magnets contain a
defect because they create a risk of injury based on
operation or use, including reasonably foreseeable misuse.
ECF No. 1-2 at 15. The Commission observed that the
magnets’ characteristics create a risk of injury
because they are small, loose, separable, and strongly
magnetic. Id. at 16. The Commission also rejected
Zen’s argument that warnings could mitigate the risk of
injury. Id. at 8–9.
noted above, an agency action is arbitrary and capricious if
the agency (1) failed to consider the relevant statutory
factors; (2) relied on factors which Congress has not
intended it to consider; (3) entirely failed to consider an
important aspect of the problem; or (4) offered an
explanation for its decision that runs counter to the
evidence before the agency or is so implausible that it could
not be ascribed to a difference in view or the product of
agency expertise. Motor Vehicle Mfrs., 463 U.S. at
43. I agree with the Commission that its FDO does not reflect
any of these deficiencies. However, Zen raises several
discrete reasons it contends the FDO was arbitrary and
capricious and unsupported by substantial evidence.
Zen contends the Commission’s reading of its defect
regulation was arbitrary and capricious because the
Commission included foreseeable misuse and ignored the
dictionary definition of defect. ECF No. 36 at 18, 22.
Second, Zen argues that the Commission’s design defect
finding was arbitrary and capricious because the Commission
relied on the magnets’ separability and on allegedly
faulty expert testimony with no other evidence of a defective
design. Id. at 20–21. Last, Zen contends that
the Commission’s finding that Zen’s warnings were
defective was arbitrary and capricious because it ignored
certain data and ingestion incident reports. Id. at
21–22. I will address each argument in turn.