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,
Plaintiff,

OPINION & ORDER

v.
15-cv-371-wmc
SPECTRUM BRANDS,
Defendant.
On October 3, 2017, the court entered a permanent injunction requiring Spectrum,
among other things, to “maintain sufficient systems, programs, and internal controls to
ensure compliance with the CPSA and the regulations enforced by the CPSC,” to
“implement appropriate improvements to its compliance programs . . . within 6 months,”
and to file “a notice indicating that improvements have been implemented.” (Dkt. #235.)
Defendant Spectrum then requested that any further enforcement of the permanent
injunction be stayed pending appeal (see dkt. #236 at 2), arguing that the remainder of the
injunction was “effectively an order requiring Spectrum to obey the law in the future.”
(Dkt. #237 at 9-10, 14.)1 The government opposed the request to stay the permanent
injunction, pointing out that Spectrum could instead seek clarification about its
compliance. (Dkt. #239 at 4, 11.) Before the court could rule on the motion to stay,
Spectrum filed a notice of appeal. (See dkt. #240.)
Recognizing that the permanent injunction may have “fall[en] short of what was
required under Rule 65(d)(1)(B)&(C),” the court “direct[ed] Spectrum to provide written

Spectrum also requested, and the government did not oppose, a stay without bond on the civil
penalty imposed for failure to timely report. (See dkt. #236 at 1-2; dkt. #239 at 4.)
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notice . . . detailing what specific improvements it has already made” and allowing the
government the opportunity “to indicate its agreement or identify any shortcomings and
propose specific alternative improvements.” (Dkt. #243 at 4.) After considering the
parties’ submissions, the court clarified the permanent injunction by setting forth six
specific requirements, “all of which Spectrum represent[ed were] already in place,” and an
additional, seventh requirement that Spectrum retain an independent expert to review and
make recommendations on the company’s safety program. (Dkt. #256 at 4-5, 8.) Because
the case was already before the Seventh Circuit, this court imposed the six specific
requirements already in place, but stayed the seventh because it “require[d] Spectrum to
do more than simply maintain the status quo.” (Id. at 8.)
In response to that order, the government sought a formal remand from the Seventh
Circuit “to ensure that this [c]ourt possesses jurisdiction to alter the injunction” as
contemplated (dkt. #257 at 2), which was granted (dkt. #258 at 1). Upon remand, this
court then permitted defendant an opportunity to address the proposed independentexpert requirement (see dkt. #259 at 1).
Spectrum’s opposition is basically that the court cannot incorporate the
independent-expert requirement “unless the government has shown both that
circumstances have materially changed since the entry of the permanent injunction last
October and that the modification the government has proposed is suitably tailored to
address those changes,” arguing further that “[t]he government has not met its burden.”
(Dkt. #260 at 4.) This objection is odd indeed. As the government’s response points out,
this is not an instance where “simply . . . the plaintiff belatedly [came] up with a new idea.”

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(Dkt. #260 at 8.)

Rather, the court only reconsidered the permanent injunction at

Spectrum’s urging as the enjoined party. Indeed, it was Spectrum that complained the
initial permanent injunction lacked specificity, prompting the court to agree and
determining that, combined with the already-implemented improvements, “[h]iring an
outside consultant to review its procedures is a straightforward, specific way for Spectrum
to ensure its good faith compliance with the permanent injunction,” removing “the
vagueness of the admonition to [simply] ‘obey-the-law’” of which Spectrum complained.
(Dkt. #256 at 7.) Thus, the court finds it appropriate to incorporate all seven clarifications
elucidated in its January 19, 2018, order and the final judgment will be amended to read
as follows:
IT IS ORDERED AND ADJUDGED that final judgment is entered in favor of
plaintiff United States of America against defendant Spectrum Brands.

Unless paid

already, defendant is directed to pay civil penalties to plaintiff, the United States of
America, in the amount of $1,936,675.00 on or before October 30, 2017. This amount
represents a civil penalty owed to the United States pursuant to 15 U.S.C. § 2069 and is
not compensation for actual pecuniary loss and, therefore is not subject to discharge under
the Bankruptcy Code pursuant to 11 U.S.C. §523(a)(&).
No interest shall accrue on the ordered payment if timely made. In the event of
any default in payment, the entire unpaid amount shall constitute a debt due and
immediately owing to plaintiff and post-judgment interest shall be assessed from the date
of this order until payment is made as set forth in 28 U.S.C. § 1961.

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IT IS FURTHER ORDERED AND ADJUDGED that a Permanent Injunction
pursuant to Federal Rule of Civil Procedure 65 is ENTERED under the following terms
and conditions:
A. Defendant shall maintain sufficient systems, programs, and internal controls to
ensure compliance with the CPSA and the regulations enforced by the CPSC
including, without limitation, the section 15(b) 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).
B. Defendant shall, on or before October 13, 2017, disseminate copies of both the
civil penalty and summary judgment opinions and orders (dkt. ##196, 234) by
personal service or certified mail to each of its directors, officers, managementlevel employees, and in-house attorneys involved in the sale, offering for sale,
manufacture, distribution in commerce, or importation into the United States
of “consumer products” as defined in the CPSA, 15 U.S.C. § 2052(a)(5)
(collectively “Associated Persons”).
C. Defendant shall implement improvements to its compliance programs as
required under subsection A as follows:
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

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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;
6. Ensure compliance training of responsible employees on CPSA and/or
CPSC regulations, particularly with respect to section 15(b)’s reporting

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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); and
7. 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.

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8. Compliance with ¶¶ 1–7 shall be deemed good faith compliance with this
permanent injunction.
D. Unlike paragraphs 1-6 above, 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 continue to stay enforcement
of that paragraph pending appeal or expiration of the time to appeal, whichever
is later. Additionally, the court stays enforcement of the $821,675 civil liability
attributable to Spectrum’s failure to report.
E. This court will retain jurisdiction of this action for the purposes of construing,
enforcing, or modifying this order and granting such additional relief as may be
necessary or appropriate.
F. The United States may seek reasonable costs and attorney’s fees upon
succeeding in a suit to enforce this order.

Entered this 6th day of April, 2018.
BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge

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