In USA v. Spectrum Brands, Inc., Case No. 18-1785 (7th Cir. May 9, 2019), the Seventh Circuit affirmed a Wisconsin District Court Judge regarding the continuous nature of Section 15 reporting requirements for product defects under the Consumer Product Safety Act. This case arose out of a line of Black & Decker SpaceMaker coffee makers with defective handles that were sold and distributed by Spectrum?s subsidiary, Applica, beginning in 2008. By May 2009, Applica had received 60 reports of broken handles and four reports of burns. According to the CPSC, these reports triggered Applica’s obligation to “immediately” report a product hazard within 24 hours. In April 2012, Applica submitted a Section 15(b) report to the Commission. A voluntary recall followed. Spectrum was the responsible party when the Commission and Department of Justice teamed up and filed an enforcement action in 2015.
The District Court ordered civil penalties of $1.9 million for violating the reporting requirement and an injunction to ensure future compliance with the Act. Spectrum challenged the penalty, arguing that the government?s actions were too little, too late because the statute of limitations ran before the government filed suit in 2015. The District Court characterized the failure to report as a “continuing violation” that accrues anew each day the violation occurs, and the five-year statute of limitations commences only when the company actually reports to the Commission. Spectrum disagreed and argued instead that the claim first accrued as soon as the government could go after Applica for a reporting violation, which was in May 2009.
The Seventh Circuit affirmed, holding that a violation of Section 15(b) is not complete until a company reports the product hazard to the Commission or the Commissions has ?actual knowledge? of the risk. Thus, Spectrum?s delay in reporting was an ?ongoing event? until it notified the Commission in April 2012. In response to Spectrum?s argument that the May 2009 reporting date triggered the statute of limitations, Chief Judge Wood explained that May 2009 served as the ?trigger for the duty, but the duty itself is a reporting duty? that continues until a report is filed. Otherwise, companies could ?brazen it out? and avoid the reporting scheme and any negative consequences.