Shining a Light on Agency FOIA Policies that Contradict the Law

Some agencies have regulations that conflict with the Freedom of Information Act (FOIA), which can lead to confusion for officials and the public, as well as the improper withholding of public information.  For instance, a few agencies still base their definition of a “representative of the news media” on language that is outdated and contradicted by both the FOIA statute and judicial authorities.  The old “organized and operated” standard that certain agencies have left in their regulations can be used to deny preferential fee treatment to nascent or non-traditional news media groups, as well as government watchdog organizations like Cause of Action Institute (CoA Institute).  The current statutory definition, by contrast, is meant to broaden the universe of requesters qualifying for the news media fee category.

In Cause of Action v. Federal Trade Commission,  a monumental decision in 2015 that resulted with an appellate court victory for Cause of Action Institute, the U.S Court of Appeals for the D.C. Circuit struck down the Federal Trade Commission’s outdated and narrow definition of a “representative of the news media” and confirmed the current statutory standard.  The FTC had tried to deny CoA Institute its proper fee categorization and a public interest fee waiver.

In March 2018, CoA Institute submitted a comment to the Millennium Challenge Corporation (MCC), a small agency tasked with delivering foreign aid to combat global poverty, on the agency’s proposed rule revising its FOIA regulations.  Among other things, CoA Institute suggested that the MCC correct its definition of a “representative of the news media.” In July of that year, MCC finalized a rule implementing the recommended revisions and taking a step towards effective and transparent oversight.  CoA Institute has had similar success with FOIA reform at other agencies, including the Consumer Product Safety Commission, Office of the Special Counsel, U.S. Department of Defense, U.S. Agency for International Development, and the U.S. Department of Homeland Security.

This is but one example of the work CoA Institute performs to advance government transparency and protect the rights of the American public, taxpayers and our collective ability to hold our government accountable for its actions.

Matt Frendewey is Director of Communications at Cause of Action Institute.

 

Zen Magnets Wins, but Decision Does Little to Protect Against Regulatory Overreach

Last month, a U.S. District Court tossed a mandatory recall issued by the Consumer Product Safety Commission (CPSC) against Zen Magnets, a company that sells powerful Small Rare Earth Magnets (SREMs) to adults as desk toys or for use in art, jewelry, and physics education. The recall was the latest in a long series of CPSC actions taken against SREM sellers premised on child safety. In a handful of cases, children who swallowed multiple magnets sustained internal harm when the magnets would reconnect in the digestive tract, often despite unmistakable warnings against ingestion or use by children.

The CPSC has been on a relentless crusade to eradicate SREMs from the market using a variety of strategies. One tactic, an attempt to set a regulatory safety standard, was thrown out by the 10th Circuit in part because the Commission ignored the public’s use of SREMs for educational and artistic purposes. Further, the court explained that because the CPSC couldn’t explain why the injury rate from magnets was actually declining, the standard violated the Administrative Procedure Act:

“The Act provides that the Commission cannot promulgate a safety standard unless it concludes “that the rule . . . is reasonably necessary to eliminate or reduce an unreasonable risk of injury. . .” Here, the downward trend in injury rates is obvious, and appears to speak directly to the question of whether the new rule is “reasonably necessary. . . ” While the Commission is certainly free to rely on the emergency room injury report data set, it may not do so in a way that cloaks its findings in ambiguity and imprecision, and consequently hinders judicial review.”

Rather than trying to better back up their data or acknowledging the miniscule risk posed by SREMs, the Commission tried another tactic – continuing to take administrative action against SREM companies who refused to voluntarily recall their products. To companies, a standard would have provided much-needed certainty about which marketing tactics and warnings they could adopt to stay in business and minimize injuries to children. Instead, companies were forced to guess at which fixes would satisfy the CPSC; most were taken to administrative adjudication anyway.

Unlike nearly all similar companies in the market, Zen Magnets’ founder, Shihan Qu, refused to recall his products. But he did add multiple highly visible warnings and primarily marketed the magnets to stores frequented by adults, like marijuana dispensaries. None of these changes placated the CPSC, who at the same time managed to drive every other company selling SREMs out of business.

The CPSC justified their administrative action under the Consumer Products Safety Act, which gives the Commission the ability to make companies recall, replace, or refund products with hazardous defects. But under the agency’s corresponding regulation, before finding a design defect, an agency or court has to weigh the adequacy of warnings, the utility of the product, and the frequency and probability of injury – all of which the 10th Circuit said the agency hadn’t done! Nonetheless, Qu’s magnets were labelled a “design defect” and he was forced to incinerate some $40,000 of his products.

The recent district court ruling invalidated the CPSC’s decision because one of the Commissioners had made public statements (see the video here at 22:14) indicating that he was incapable of judging the case fairly and on its facts. The ruling, though a win for Qu and Zen Magnets, affirms the CPSC’s authority to order mandatory recalls. Unfortunately, nothing in this decision prevents the CPSC from abusing this power in the future, so long as its commissioners keep their internal thoughts out of the public record.

In 2014, Cause of Action Institute investigated a similar case brought by the CPSC against Craig Zucker, founder of the magnet company Buckyballs. One of Zen’s biggest competitors, Zucker settled with the CPSC, but for less than one percent of the Commission’s estimated cost of recall. This disparity, combined with concerns that the CPSC had initiated the action in retaliation for Zucker’s popular anti-CPSC internet campaign, prompted us to submit FOIA requests and demand investigations to determine why the Commission had pursued the case so fervently, yet only as far as driving Zucker out of business. The CPSC not only bankrupted Zucker’s business but also attempted to go after him in his personal capacity to pay for a mandatory recall.

Shihan Qu fought for over six years in numerous courts before this recent victory, which likely won’t restrain the CPSC’s ability to go after other entrepreneurs in the future. For Qu, the ruling marked the end of a costly, drawn-out tangle with the administrative state:

Along the way we eulogized burnt magnets, uncovered CPSC injury data dishonesty, spent two dozen days in court over four years, all while a blizzard of legal motions flew around us.
The nationwide magnet ban meant we were without income for most of 2015. After downsizing from 12 employees in a big warehouse to one loyal part time in a spare bedroom, 2016 was when we had our first significant victories.

The experience of entrepreneurs like Zucker and Qu serve as a stark reminder of the cost of fighting the federal government.  But it is thanks to people like Qu, who are willing to push back against agencies that are abusing their power, that we are able to hold our government accountable.

Jake Carmin is a Law Clerk at Cause of Action Institute. 

Consumer Product Safety Commission Revises FOIA Rule in Response to CoA Institute Comments

The Consumer Product Safety Commission (“CPSC”) finalized a rule today implementing new Freedom of Information Act (“FOIA”) regulations. The agency incorporated important revisions proposed by Cause of Action Institute (“CoA Institute”) in a comment submitted to the agency in in January 2017.

CoA Institute urged the CPSC to remove outdated “organized and operated” language from its definition of a “representative of the news media.”  Such language has been used in the past to deny news media requester status to government watchdog organizations like CoA Institute.  For example, CoA Institute took the Federal Trade Commission to the D.C. Circuit just to get the agency to acknowledge that its FOIA fee regulations were outdated and that it was improperly denying CoA Institute a fee reduction.

In deciding that case, the D.C. Circuit issued a landmark decision clarifying proper fee category definitions and the application of fees in FOIA cases.  CoA Institute cited this case to the CPSC and the agency took heed of the current case law, removing the outdated “organized and operated” language from its regulations.

The Consumer Product Safety Commission indicated that its revisions, which incorporated model language developed by the Department of Justice, focused on the nature of a news media requester, as opposed to the content of any given request. The agency further agreed that press releases could qualify as distinct work product.  Finally the CPSC added language clarifying that the examples of news media entities used in its fee category definition were “not all-inclusive.”

CoA Institute’s successful comment is just another small step in our efforts to provide effective and transparent oversight of the administrative state and, more specifically, to ensure agency compliance with the FOIA.

Ryan Mulvey is Counsel at Cause of Action Institute

Cause of Action Demands Investigation of CPSC for Waste, Abuse and Mismanagement Relating to Buckyballs Matter

FOR IMMEDIATE RELEASE                                                       CONTACT:      

July 23, 2014                                                    Mary Beth Hutchins, 202-400-2721

 

Cause of Action Demands Investigation of CPSC for Waste, Abuse and Mismanagement Relating to Buckyballs Matter

WASHINGTON – Cause of Action (CoA), a government accountability organization, sent a letter Wednesday to the Consumer Product Safety Commission (CPSC)’s Inspector General (IG) seeking an investigation of CPSC for improprieties related to its investigation of Mr. Craig Zucker, the former CEO of the company that sold Buckyballs.  The CPSC’s investigation led to waste of taxpayer dollars and forced Mr. Zucker to expend considerable resources to defend himself.

“The CPSC’s actions regarding Craig Zucker were never about consumer safety, they’re about punishing an entrepreneur who spoke out against the agency’s overzealous, overreaching activity,” said CoA Executive Director Dan Epstein. “The IG’s role is to prevent and root out fraud, waste, abuse and mismanagement.  Therefore, it must investigate the CPSC’s behavior concerning Mr. Zucker.”

CoA’s request centers on 3 primary allegations:

  • CPSC Made Material Misrepresentations in its Amended Complaints – Former CPSC Executive Director Kenneth Hinson and CPSC Assistant General Counsel Mary B. Murphy claimed that they obtained Commission authorization to amend CPSC’s original Complaint against Mr. Zucker’s company and to potentially hold Mr. Zucker personally responsible for conducting a recall.  But they never obtained such authorization, in violation of CPSC regulations and Mr. Zucker’s due process rights.
  • CPSC Retaliated Against Mr. Zucker for his Exercise of First Amendment Rights.  Mr. Zucker aggressively defended his actions in numerous forums, and CPSC responded by pursuing the complaint against Mr. Zucker personally in an attempt to deter him and other corporate officers from exercising their rights to free speech.  Never before in the history of CPSC had an action been filed to require an officer or former officer of a company to personally conduct a recall.
  • CPSC Failed to Comply with the IQA and FOIA.  In connection with this matter, CPSC’s actions demonstrated its failure to comply with its information collection, dissemination and quality requirements under the Information Quality Act (IQA) and the Freedom of Information Act (FOIA).  CPSC made public statements that failed to include information required by the IQA and/or were inconsistent with the facts.  CPSC also failed for months to respond to a FOIA request for records relating to the Buckyballs investigation and the prosecution of Mr. Zucker.  As a result, CoA was forced to file an IQA petition (on Mr. Zucker’s behalf) and a FOIA lawsuit.

Read the letter here.

Read the exhibits here.

About Cause of Action:

Cause of Action is a non-profit, nonpartisan government accountability organization that fights to protect economic opportunity when federal regulations, spending and cronyism threaten it. For more information, visit www.causeofaction.org.

To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Mary Beth Hutchins, mary.beth.hutchins@causeofaction.org

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Dan Epstein on the Lars Larson Show 5/20/2014

Cause of Action’s Dan Epstein talks with Lars Larson about how the CPSC’s actions regarding Craig Zucker are not about consumer safety, they’re about punishing an entrepreneur who dared to speak out against the federal government. 

Reason: The Government’s Bogus Lawsuit Against Buckyballs’ Creator Craig Zucker Ends In a Settlement

Read the full story: Reason

“I believe the case against Mr. Zucker should never have gotten started without an affirmative Commission vote approving the issuance of a complaint against him,” she wrote. This lawsuit consumed two years of Zucker’s life and will cost him as much as $375,000 plus more in legal fees; now, after the case is settled, she speaks out?

With the announcement of a settlement, the government accountability law firm Cause of Action is dropping the countersuit it filed on Zucker’s behalf, but will continue its efforts to uncover why the agency went after him in the first place through Freedom of Information Act litigation. It’ll be interesting to see what Cause of Action can uncover.

Wall Street Journal: Zucker Wins Against the Machine

Read the full story: Wall Street Journal

Individuals increasingly find themselves with little choice but stand up against President Obama’s regulatory machine. So congratulations to Craig Zucker, who scored a modest if still costly victory against the Consumer Product Safety Commission earlier this month.

 

Mr. Zucker cofounded Maxfield & Oberton, which in 2009 began marketing powerful rare-earth magnets as desk toys for office workers. By 2012 Buckyballs were generating $10 million in sales. Then in July 2012 the CPSC filed an administrative suit against the company, citing the risk of children swallowing the magnets and essentially banning Buckyballs from the marketplace. It did not matter that Maxfield & Oberton had included multiple warning labels and kept Buckyballs out of stores that sell children’s toys.