United States of America v. Spectrum Brands, Inc.

Filing 266

Transmission of Notice of Appeal, Orders, Judgments and Docket Sheet to Seventh Circuit Court of Appeals re: 264 Notice of Appeal, (Attachments: # 1 Order No.: 196, # 2 Order No.: 234, # 3 Judgment, # 4 Order No.: 256, # 5 Opinion and Order No.: 262, # 6 Amended Judgment, # 7 Docket Sheet) (lak)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN

UNITED STATES OF AMERICA,

v.

Plaintiff,

SPECTRUM BRANDS, INC.,

OPINION & ORDER
15-cv-371-wmc

Defendant.
Still before the court following the court’s entry of judgment (dkt. #235), is
defendant Spectrum’s motion to stay enforcement of the permanent injunction for
violations of the Consumer Product Safety Act (“CPSA”), with the exception of ¶ B of that
injunction, with which Spectrum represents it has already complied. (See dkt. #236 at 12, dkt. #237 at 5.) Recognizing that defendant’s criticism of the permanent injunction
may have merit -- particularly in light of Spectrum’s assertion that it had already taken
affirmative steps to improve its compliance procedures -- the court “direct[ed] Spectrum
to provide written notice . . . detailing what specific improvements it has already made”
and provided the government an opportunity to respond. (Dkt. #243 at 3-4.) Between
the request for a stay and the court’s order of November 13, 2017, Spectrum filed a notice
of appeal. (See dkt. ##240-242.) Convinced that the court’s permanent injunction fell
short of the detail and specificity requirements of Rule 65(d)(1)(B) & (C), the court issues
this opinion modifying the injunction to (1) clarify Spectrum’s specific obligations to
ensure compliance for the parties and (2) partially stay its enforcement to maintain the
status quo during the appeal before the Seventh Circuit Court of Appeals.

OPINION
I. Jurisdiction
As noted above, Spectrum’s pending motion requests a stay pending appeal. (See
dkt. #236.) Because an appeal is currently pending, this court’s jurisdiction is constrained.
See Ced’s v. U.S. EPA, 745 F.2d 1092, 1095 (7th Cir. 1984) (“[T]here is a general rule that
the filing of a notice of appeal divests the district court of jurisdiction over the matters
appealed.” (internal citations omitted)). Indeed, “[s]everal circuits have held that the
district court may not alter the injunction once an appeal has been filed except to maintain
the status quo of the parties pending the appeal.” United States v. Power Eng’g Co., 10 F.
Supp. 2d 1165, 1170 (D. Colo. 1998) (citing cases from the Second, Fourth, Fifth and
Ninth Circuits). 1 Other circuits permit modification of an injunction during the pendency
of appeal, even if the status quo is altered where “the modification would preserve the
integrity of the appeal.” Id. at 1170-71 (citing Ortho Pharmaceutical Corp. v. Amgen, Inc.,
887 F.2d 460, 464 (3d Cir. 1989); Bd. of Educ. Of St. Louis v. State of Missouri, 936 F.2d
993, 996 (8th Cir. 1991)).
Although the Seventh Circuit has not weighed in on this question, it would seem,
at minimum, that “any injunctive action taken [by this court] pursuant to Rule 62(c) ‘must
be designed to aid the appeal and, accordingly, may not materially alter the status of the

“Maintaining the status quo means that a controversy will still exist once the appeal is heard. Any
action on the district court’s part which has the effect of divesting the court of appeals of its
jurisdiction over the matter, by eliminating the controversy prior to the hearing of the appeal, is
inappropriate.” 12 James Wm. Moore et al., Moore’s Federal Practice § 62.06[1] (Matthew Bender
3d Ed. 2017) (emphasis in original).
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case on appeal.’” Id. at 1171 (quoting Allan Ides, The Authority of a Federal District Court to
Proceed After a Notice of Appeal Has Been Filed, 143 F.R.D. 307, 321-22 (1992)); see also S &
S Sales Corp. v. Marvin Lumber & Cedar Co., 457 F. Supp. 2d 903, 905-06 (E.D. Wis. 2006)
(“Construed narrowly, Rule 62(c) only authorizes district courts to issue orders designed
to preserve the status quo or, perhaps somewhat more liberally, to preserve the integrity of
the case on appeal. . . . [J]udicial authority ‘must be designed to aid the appeal and,
accordingly, may not materially alter the status of the case on appeal.’” (quoting Ides, supra,
143 F.R.D. at 320) (other internal citations omitted)).
In issuing this opinion, therefore, the court is very cognizant of the limitations on
its authority. As the government notes, however, “[t]he parties appear to agree that the
Court retains jurisdiction, despite the ongoing appeal, to make . . . a minor clarification [of
the permanent injunction].” (Dkt. #254 at 7 (citing dkt. #250 at 3 (citing Meinhold v.
U.S. Dep’t of Def., 34 F.3d 1469, 1480 n.14 (9th Cir. 1994); Wash. Metro. Area Transit
Comm’n v. Reliable Limousine Serv., LLC, 985 F. Supp. 2d 23, 29 (D.D.C. 2013) (each
finding the district court had jurisdiction to issue amended order clarifying its original
injunction in order to supervise compliance))).) More importantly, the Supreme Court
has expressly recognized that the district court’s
sound judicial discretion may call for the modification of the
terms of an injunctive decree if the circumstances . . . have
changed . . . . The source of the power to modify is of course
the fact that an injunction often requires continuing
supervision by the issuing court and always a continuing
willingness to apply its powers and processes on behalf of the
party who obtained that equitable relief.
Sys. Fed. No. 91, Ry. Emp. Dept., AFL-CIO v. Wright, 364 U.S. 642, 647 (1961).

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Given that the court agrees with the thrust of Spectrum’s motion to stay -- that the
injunction as written is too vague and overly broad in light of Spectrum’s own actions to
ensure future compliance with the CPSA -- the court will modify it to preserve the status
quo during the pending appeal and clarify the injunction’s specific requirements. See Wash.
Metro. Area Transit Comm’n, 985 F. Supp. 2d at 29 (“The district court’s power to modify
an injunction to preserve the status quo necessarily includes the lesser power to clarify the
injunction to supervise compliance.”); Power Eng’g Co., 10 F. Supp. 2d at 1172 (granting
plaintiff’s request for order requiring defendants provide a specified form of financial
assurance following earlier issuance of preliminary injunction directing defendants provide
assurance in a form permitted by state law); see also Advent Elec., Inc. v. Buckman, No. 95 C
0305, 1995 WL 683833, at *1 (N.D. Ill. Nov. 16, 1995) (recognizing that plaintiff’s
motion to “clarif[y] the precise parameters of the preliminary injunction” was “merely a
petition for clarification” that did “not call for the court to consider new issues or
arguments not previously raised, nor . . . have the effect of changing the relationship
between the parties that was [previously] established”). 2

II. Scope of Injunction
Having considered the parties’ helpful submissions, therefore, the court will modify

In the same vein, the court previously determined that Spectrum’s past violations were severe
enough to justify injunctive relief (see dkt. #234 at 16-21) and declines Spectrum’s invitation to
reexamine the appropriateness of a permanent injunction (see dkt. #250 at 13-15). To the extent
that the court has exceeded its authority in clarifying the permanent injunction as part of its
issuance of the stay, hopefully this opinion at least informs the Court of Appeals and the parties as
to the intent behind the injunction, and thereby facilitates a meaningful, final resolution of the
parties’ dispute.
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the injunction to include the following, specific requirements -- all of which Spectrum
represents are already in place (see dkt. #250 at 8-9, 11-12) -- in an effort to ensure
compliance while preserving the status quo as the appeal pends:
1) Maintain the position of Senior Director, Global Quality (or its equivalent) with
qualifications and authority to monitor (and if necessary, enhance) Spectrum’s
policies to ensure future product quality and safety;
2) Regularly track product safety information, including product return rates, call
center data, and product “star” ratings by consumers on various websites, and
evaluate that information to determine whether issues are being identified and
appropriately handled;
3) Document calls and written communications regarding potential and actual
incidents and injury information, collect products that are the subject of reports
by consumers or retail partners of potential safety issues, analyze those products
and bring the results of any such analysis to the attention of Spectrum’s Senior
Director, Global Quality (or its equivalent), and others as appropriate, to
determine whether Spectrum has a reporting obligation to the CPSC;
4) Implement a formal “Request for Corrective Action” procedure whereby quality
engineers and product safety managers can make a request to change a product
based on various factors, including consumer complaints and incidents;
5) Maintain a “Product Hold Process” (or its equivalent) through which the
manufacture and distribution of products can be placed on hold for design
issues, manufacturing issues, performance issues, and safety issues, including any
and all such products that may be returned to Spectrum by a warehouse,
distributor, customer or otherwise to prevent the sale of recalled products; and
6) Ensure compliance training of responsible employees on CPSA and/or CPSC
regulations, particularly with respect to section 15(b)’s reporting requirement
under 15 U.S.C. § 2064(b)(3)-(4) and the prohibition of the sale of recalled
products under 15 U.S.C. § 2068(a)(2)(B).
All of these requirements are consistent with the spirit of the court’s original permanent
injunction, if not its letter. Although substantially more specific, now that the court has
benefited from further information and briefing by the parties, the intent of the court’s
modifications are “to make explicit what is already implicitly so” pursuant to Fed. R. Civ.

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P 65(d)(1)(B) & (C). See Wash. Metro. Area Transit Comm’n, 985 F. Supp. 2d at 30
(“Because a court’s authority to modify or clarify an injunction while on appeal is limited
to preserving the status quo or otherwise supervising compliance, its power to clarify to
make explicit which non-parties are bound by the injunction is necessarily as broad as
(though no broader than) the non-party provisions in Fed. R. Civ. P. 65(d)(2)(B)-(C).”)
The government objects that “Spectrum’s response largely recycles statements by
Mr. Schoem and Mr. Mihlbauer and other evidence that all was previously considered by
the Court” and “presented at the February hearing.” (Dkt. #254 at 3.) However, this
argument misses the point: the question is whether following Spectrum’s prior misconduct,
which justified a permanent injunction, its now-improved compliance programs “ensure
compliance with the CPSA and the regulations enforced by the CPSC” as the permanent
injunction requires. (Dkt. #235 at 1.) As the party under the injunction’s strictures,
Spectrum is unquestionably entitled to clarification as to whether its undertakings to date
are “appropriate improvements” required by that injunction. See Motorola, Inc. v. Computer
Displays Int’l, Inc., 739 F.2d 1149, 1155 (7th Cir. 1984), reh’g denied (“A true
interpretation . . . does not change the parties' original relationship, but merely restates
that relationship in new terms.”); see also Advent Elec., 1995 WL 683833 at *1 (“To
determine whether or not an order is a clarification, or a modification, the court must look
to the actual effect of the order. If the motion calls for a court to consider[] a question or
issue not previously considered, then it is calling for a modification as opposed to a

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clarification.”). 3 Moreover, because they have already been undertaken, the improvements
neither upset the status quo, nor detract from the integrity of the parties’ pending appeal.
For its part, the government argues that “[t]he injunction entered against Spectrum
meets the requirements of Rule 65,” but suggests that “the Court should modify the
injunction to direct Spectrum to retain an independent, outside expert to help the company
create a robust CPSA compliance program.” (Dkt. #254 at 1.) The government is correct
that the aforementioned improvements may not be sufficient to “ensure compliance” and
“avoid a repetition of the violations discussed [in the court’s earlier] opinion and order.”
(Dkt. #235 at 1-2.) As the government explains, such “[a] professional outside consultant
. . . could confidentially delve into the details of relevant corporate procedures, candidly
discuss operations with pertinent employees, and assist in designing detailed, effective
enhancements,” as well as “design employee training necessary to make the revised
program work.” (Dkt. #254 at 8-9.)
The government’s points are well taken. Hiring an outside consultant to review its
procedures is a straightforward, specific way for Spectrum to ensure its good faith
compliance with the permanent injunction, rather than continuing to live under the
vagueness of the admonition to “obey-the-law” currently contained in the permanent
injunction. Keeping in mind its narrow authority because of the pending appeal, the court
will further clarify its permanent injunction with the following provisions:

The court notes that this situation is also distinguishable from that in Ced’s, 745 F.2d 1094-95,
where the Seventh Circuit determined that a supplemental memorandum opinion providing only
additional grounds of support for an earlier order granting a preliminary injunction failed to meet
the “assist the court of appeals in its determination” exception to the rule that “the filing of a notice
of appeal divests the district court of jurisdiction over the matters appealed.”

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7) Defendant shall retain, at its own expense, an independent expert, who, by
reason of background, training and education is qualified to assist in reviewing
and recommending changes, if necessary, to Spectrum’s comprehensive safety
program for CPSA compliance, with particular emphasis on compliance with
the section 15(b) reporting requirement and procedures necessary to prevent
the sale of recalled products.
a. The parties may have 90 days to agree upon an independent expert, or if
the parties cannot reach agreement, for each party to designate one expert
with whom the court will consult to identify a neutral expert.
b. Following the retention of the neutral expert and that expert’s review,
Spectrum shall have 120 days to implement the recommendations made
by that expert in good faith, unless within 30 days of receiving a
recommendation, Spectrum files a written challenge in this court on the
basis that it is unreasonable (in timeframe or otherwise) or overreaches
the number or severity of defendant’s past violations of the CPSA, in
which case Spectrum need only implement that recommendation by
further order of this court.
8) Compliance with ¶¶ 1–7 shall be deemed good faith compliance with this
permanent injunction.
As noted, these additional changes are also intended to provide specific guidance to
Spectrum to ensure compliance. Unlike paragraphs 1–6 above, however, implementation
of paragraph 7 would go beyond the status quo, as paragraph 7 requires Spectrum to do
more than simply maintain the status quo. As such, the court will stay enforcement of that
paragraph pending appeal, as the Seventh Circuit is in the best position to resolve whether
this particular provision is an appropriate clarification by this court both as a matter of
jurisdiction and on the merits.

ORDER
IT IS ORDERED that:
A. The permanent injunction (dkt. ##234, 235) is amended to read as follows:

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1) Maintain the position of Senior Director, Global Quality (or its equivalent)
with qualifications and authority to monitor (and if necessary, enhance)
Spectrum’s policies to ensure future product quality and safety;
2) Regularly track product safety information, including product return rates,
call center data, and product “star” ratings by consumers on various websites,
and evaluate that information to determine whether issues are being
identified and appropriately handled;
3) Document calls and written communications regarding potential and actual
incidents and injury information, collect products that are the subject of
reports by consumers or retail partners of potential safety issues, analyze
those products and bring the results of any such analysis to the attention of
Spectrum’s Senior Director, Global Quality (or its equivalent), and others as
appropriate, to determine whether Spectrum has a reporting obligation to
the CPSC;
4) Implement a formal “Request for Corrective Action” procedure whereby
quality engineers and product safety managers can make a request to change
a product based on various factors, including consumer complaints and
incidents;
5) Maintain a “Product Hold Process” (or its equivalent) through which the
manufacture and distribution of products can be placed on hold for design
issues, manufacturing issues, performance issues, and safety issues, including
any and all such products that may be returned to Spectrum by a warehouse,
distributor, customer or otherwise to prevent the sale of recalled products;
and
6) Ensure compliance training of responsible employees on CPSA and/or CPSC
regulations, particularly with respect to section 15(b)’s reporting
requirement under 15 U.S.C. § 2064(b)(3)-(4) and the prohibition of the
sale of recalled products under 15 U.S.C. § 2068(a)(2)(B).
7) Defendant shall retain, at its own expense, an independent expert, who by
reason of background, training and education is qualified to assist in reviewing
and recommending changes, if necessary, to Spectrum’s comprehensive safety
program for CPSA compliance, with particular emphasis on compliance with
the section 15(b) reporting requirement and procedures necessary to prevent
the sale of recalled products.

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a. The parties may have 90 days to agree upon an independent expert,
or if the parties cannot reach agreement, for each party to designate
one expert with whom the court will consult to identify a neutral
expert.
b. Following the retention of the neutral expert and that expert’s review,
Spectrum shall have 120 days to implement the recommendations
made by that expert in good faith, unless within 30 days of receiving
a recommendation, Spectrum files a written challenge in this court on
the basis that it is unreasonable (in timeframe or otherwise) or
overreaches the number or severity of defendant’s past violations of
the CPSA, in which case Spectrum need only implement that
recommendation by further order of this court.
8) Compliance with ¶¶ 1–7 shall be deemed good faith compliance with this
permanent injunction.

B. Defendant’s motion to stay the permanent injunction pending appeal (dkt.
#236) is GRANTED as to the seventh modification above, but DENIED in all
other respects.
C. The clerk of court is directed to forward this Opinion & Order to the Seventh
Circuit as a supplement to the record on appeal
Entered this 19th day of January, 2018.
BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge

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