United States of America v. Michaels Stores Inc et al

Filing 19

Memorandum Opinion and Order denies 6 Motion to Dismiss filed by Michaels Stores Procurement Co Inc, Michaels Stores Inc. (Ordered by Senior Judge A. Joe Fish on 3/21/2016) (ndt)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

UNITED STATES OF AMERICA,
Plaintiff,
VS.
MICHAELS STORES, INC., ET AL.,
Defendants.

)
)
)
)
)
)
)
)
)

CIVIL ACTION NO.
3:15-CV-1203-G

MEMORANDUM OPINION AND ORDER
Before the court is the motion of the defendants Michaels Stores, Inc., and
Michaels Stores Procurement Co., Inc. (collectively, “Michaels”) for partial dismissal
(docket entry 6). For the reasons stated below, the motion is denied.
I. BACKGROUND
From June 2006 through March 2010, Michaels imported and sold
approximately 203,000 twenty- inch glass vases through its retail stores and website.
Complaint for Civil Penalties and Permanent Injunctive Relief (“Complaint”) ¶¶ 1,
13, 14, 16 (docket entry 1). The glass walls of these vases proved “too thin to
withstand normal handling” and thus the vases could “break or shatter in consumers’
hands, causing lacerations . . . severed tendons and nerve damage, that required

stitches and surgery.” Id. ¶ 1. Injuries to consumers were documented as a result of
the handling of these vases either in Michaels stores or in consumers’ homes. See, e.g.,
id. ¶ 22(a-i). For example, on or about October 19, 2007, a consumer notified
Michaels of injuries she sustained when a vase shattered in her hand, resulting in
tendon and nerve damage and permanent impairment of her left thumb. Id. ¶ 22(a).
In resulting litigation, an expert report (“the expert report”) concluded that “the vase
was ‘unreasonably dangerous for its normal use’ and that the thinnest portions of the
vase’s glass were comparable in thickness to a light bulb.” Id.
On April 21, 2015, the United States of America (“the government”) filed the
instant case and alleged that Michaels knowingly failed to timely report information
to the United States Consumer Product Safety Commission (“the Commission”) that
the vases contained a defect that could create a substantial product hazard and an
unreasonable risk of serious injury to the public. Id. ¶¶ 1, 2(a-b). The government
seeks civil penalties and injunctive relief under the Consumer Product Safety Act
(“CPSA”), 15 U.S.C. § 2051, et seq. Michaels asserts that the government’s claims for
civil penalties and the concomitant claim for injunctive relief should be dismissed
because they are time-barred. Defendants’ Memorandum in Support of Their
Motion for Partial Dismissal of the United States’ Complaint for Civil Penalties and
Permanent Injunctive Relief (“Motion”) at 1 (docket entry 7).

-2-

II. ANALYSIS
A. Standard for Determination under Rule 12(b)(6)
FED. R. CIV. P. 12(b)(6) authorizes dismissal of a complaint “for failure to state
a claim upon which relief can be granted.” A motion under Rule 12(b)(6) should be
granted only if it appears beyond doubt that the plaintiff could prove no set of facts
in support of its claim that would entitle it to relief. Conley v. Gibson, 355 U.S. 41,
45-46 (1957); Leffall v. Dallas Independent School District, 28 F.3d 521, 524 (5th Cir.
1994) (citations omitted).
The motion to dismiss for failure to state a claim is viewed with disfavor and is
rarely granted. Kaiser Aluminum & Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677
F.2d 1045, 1050 (5th Cir. 1982) (quoting WRIGHT & MILLER, FEDERAL PRACTICE
AND PROCEDURE

§ 1357), cert. denied, 459 U.S. 1105 (1983). Granting such a

motion “is a ‘precarious disposition with a high mortality rate.’” Id. (quoting Barber v.
Motor Vessel “Blue Cat,” 372 F.2d 626, 627 (5th Cir. 1967)).
Before dismissal is granted, the court must accept all well-pleaded facts as true
and view them in the light most favorable to the non-movant. Capital Parks, Inc. v.
Southeastern Advertising and Sales System, Inc., 30 F.3d 627, 629 (5th Cir. 1994)
(citation omitted); Norman v. Apache Corporation, 19 F.3d 1017, 1021 (5th Cir. 1994)
(citations omitted); Chrissy F. by Medley v. Mississippi Department of Public Welfare, 925
F.2d 844, 846 (5th Cir. 1991).

-3-

B. Consumer Product Safety Act
Under the CPSA , “[e]very manufacturer of a consumer product, or other
product or substance over which the Commission has jurisdiction . . . distributed in
commerce, and every distributor and retailer of such product, who obtains
information which reasonably supports the conclusion that such product . . . contains
a defect which could create a substantial product hazard . . . shall immediately inform
the Commission . . . of such defect, . . . unless such manufacturer, distributor, or
retailer has actual knowledge that the Commission has been adequately informed of
such defect . . ..” 15 U.S.C. § 2064(b). Under the statute, Michaels was both a
manufacturer and a retailer. Complaint ¶¶ 15, 17. A “substantial product hazard” is
“a product defect which (because of the pattern of defect, the number of defective
products distributed in commerce, the severity of the risk, or otherwise) creates a
substantial risk of injury to the public.” 15 U.S.C. § 2064(a)(2). The Commission is
adequately informed of such defect or risk when “the Commission staff has received
the information requested under [the CPSA]” or the Commission staff “has informed
the subject firm that the staff is adequately informed.” 16 C.F.R. § 1115.3(a).
The government asserts that Michaels’ violations of the Commission’s
reporting requirements began in September 2008 and continued until at least
February 2012. Complaint ¶ 30. Specifically, the government contends that
Michaels received the expert report as early as September 2008 but did not provide

-4-

notice of the vases’ defect to the Commission until February 22, 2010. Id. ¶¶ 1,
22(a). Furthermore, the government maintains that Michaels did not have “actual
knowledge” until February 2012 that the Commission had been “adequately
informed” when “Michaels finally disclosed to the [Commission] that it was the
importer of the vases. . . ” in response to an inquiry by the Commission. Id. ¶ 29.
Generally, under the CPSA “. . . an action, suit or proceeding for the
enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not
be entertained unless commenced within five years from the date when the claim first
accrued . . ..” 28 U.S.C. § 2462. However, where a statute defines conduct in a way
that clearly indicates the violations are continuing, the statute of limitations does not
run until the violations cease. See Newell Recycling Company, Inc. v. United States
Environmental Protection Agency, 231 F.3d 204, 206 (5th Cir. 2000), cert. denied, 534
U.S. 813 (2001).
Michaels asserts that since the complaint alleges the first violation of the CPSA
occurred on or about September 2008, the action accrued no later than that date and
since this lawsuit was not filed until April 21, 2015, the five-year period has expired,
and thus any attempt to seek a civil penalty is time-barred. Motion at 1. Michaels
further argues that the reporting violation is not “continuing.” Id. at 2. Conversely,
the government contends that “both the explicit language of the CPSA as well as the
nature of the violation make clear that Congress intended the reporting violation to

-5-

be a continuing one.” See Memorandum of Law in Opposition to Defendants’
Motion for Partial Dismissal of the United States’ Complaint for Civil Penalties and
Permanent Injunctive Relief at 9 (docket entry 9-1). Upon learning about a potential
product hazard, of the vase, Michaels immediately must inform the Commission
“unless [it] has actual knowledge that the Commission has been adequately informed
of such defect . . . or such risk.” 15 U.S.C. § 2064(b) (emphasis added). In viewing
the evidence in the light most favorable to the non-movant, the court finds that the
violations first began when Michaels obtained the information regarding the vases’
defect in the expert report and continued until Michaels obtained actual knowledge
that the Commission was adequately informed of the defect or risk of injury. Thus,
Michaels’ motion to dismiss the government’s claim for civil penalties as time-barred
is denied.
Michaels further contends that the concurrent remedy doctrine bars the
government’s claim for injunctive relief, a claim dependent on its claim for civil
penalties. Motion at 13. Because this suit is brought by the United States in its
governmental capacity, its request for injunctive relief is not subject to the concurrent
remedy doctrine. See United States v. Banks, 115 F.3d 916, 919 (11th Cir. 1997)
(“[T]he concurrent remedy rule cannot properly be invoked against the government
when it seeks equitable relief in its official enforcement capacity.”). Even if it were
assumed arguendo that this action is subject to the concurrent remedy doctrine, the

-6-

concurrent claim for civil penalties is not barred by the statute of limitations.
Therefore, the motion to dismiss the claim for injunctive relief is also denied.
III. CONCLUSION
For the reasons stated above, Michaels’ partial motion to dismiss for civil
penalties and permanent injunctive relief is DENIED.
SO ORDERED.

March 21, 2016.

___________________________________
A. JOE FISH
Senior United States District Judge

-7-