I voted to approve the proposed settlement, but there is an aspect of this case that I find troubling.  The consent agreement before us names as a Respondent one Craig Zucker, a former Chief Executive Officer of Maxfield and Oberton Holdings, LLC (hereinafter “Maxfield”).  Upon review of the public record, however, it appears that, the Commission never approved the issuance of a complaint against Mr. Zucker.  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. 

Under CPSC rules, “any adjudicative proceedings . . . shall be commenced by the issuance of a complaint authorized by the Commission . . ..”  16 C.F.R. §1025.11(a) (emphasis added).  The rules prescribe the form and content of such a complaint.  Of primary significance here, it must include “Identification of each respondent or class of respondents.”  Id. § 1025.11(b)(2)(emphasis added).  Other requirements include a “clear and concise statement of the charges, sufficient to inform each respondent with reasonable definiteness of the factual basis or bases of the allegations of violation or hazard.”  Id. § 1025.11(b)(3)(emphasis added).

The rules permit the Presiding Officer in an adjudicative proceeding to approve an amended complaint, but only if the amendment “do[es] not unduly broaden the issues in the proceedings or cause undue delay.”  Id. § 1025.13.  Plainly, this provision was never intended to allow an expansion of the case beyond what the Commission has authorized.  Naming a new respondent or leveling a new charge would fall outside the scope of the original complaint approved by the Commission.  To allow such an amendment without Commission approval would usurp the prerogative of the Commission under § 1025.11(a). 

This reading of the rule was emphasized in the preamble that accompanied it.  Commenters on the proposed rule had expressed concern that allowing the Presiding Officer to permit certain amendments could “alter the charges originally authorized by the Commission, thereby usurping the Commission’s function . . ..”  Rules of Practice for Adjudicative Proceedings, 45 Fed. Reg. 29206, 29207 (col. 3) (May 1, 1980).  In response, the Commission observed: “[S]ince § 1025.11(a) provides that only a complaint authorized by the Commission may be issued, amendments to the complaint must come within the scope of the Commission’s authorization.  Thus, neither the presiding officer nor the Commission’s staff is usurping the Commission’s function.”  Id. at 29208 (col. 1).

The case before us started out as a case against Maxfield only.  It began with a complaint filed in July 2012.  That complaint was duly authorized by a majority vote of the Commission, and it states explicitly that it was “ISSUED BY ORDER OF THE COMMISSION.”  See Complaint at 12 (July 25, 2012).  Maxfield was the one and only Respondent named in the July 25 complaint; it does not mention Mr. Zucker. 

In September 2012, Complaint Counsel filed a motion for leave to file an amended complaint.  Counsel sought to add a count, based on a new theory, namely failure to comply with an applicable consumer product safety rule.  Again the complaint states that it was “ISSUED BY ORDER OF THE COMMISSION.”  Amended Complaint at 19 (Sept. 18, 2012).  In reality, however, the Commission had not voted to approve the additional count. 

Maxfield never responded to Complaint Counsel’s motion seeking leave to file the amended complaint.  On November 16, 2012, the Presiding Officer granted the unopposed motion, and the Amended Complaint was docketed.  A few weeks later, Maxfield filed a Certificate of Dissolution. 

In February 2013, Complaint Counsel responded to this unexpected development by moving to file a Second Amended Complaint, which named Mr. Zucker as a new Respondent in his capacity as CEO of Maxfield and Oberton and as an individual.  The lodged Complaint again states that it was “ISSUED BY ORDER OF THE COMMISSION.”  Second Amended Complaint at 21 (Feb. 11, 2103).  This representation, however, was untrue.  In reality, the Commission has never authorized any amendment since the original complaint. 

Mr. Zucker vehemently opposed the Second Amended Complaint, without conceding jurisdiction, on various grounds.  He argued that Section 15 of the Consumer Product Safety Act does not permit the Commission to order a recall to be conducted by an individual officer or director of a corporation that manufactures consumer products.  Opposition to Motion for Leave to Amend Complaint in CPSC Docket 12-1, at 2 (Feb. 28, 2103).  More generally, he stated that “bedrock principles of corporate law make clear that corporate officers such as Mr. Zucker are not liable for the company’s obligations, even if the company has dissolved.”  Id. 

The Presiding Officer disagreed with Mr. Zucker’s analysis and issued an opinion ruling that Mr. Zucker “may properly be included as a respondent in the instant proceeding.”  Order Granting Complaint Counsel’s Motion for Leave to File Second Amended Complaint in Docket Nos. 12-1 and 12-2, at 17 (May 3, 2013).  Thereafter, the Presiding Officer also denied Zucker’s motion for an interlocutory appeal on the issue.

The question raised by Mr. Zucker-- when, if ever, an individual officer or director of a corporation can properly be made a Respondent in a contested recall case—is one of enormous consequence for consumers and manufacturers alike.  The proposed settlement agreement before us leaves the question open, and hence presents no occasion for us to address it.  Our rules of practice reserve the decision as to whom should be made a respondent in adjudicative proceedings for the Commission alone, and this important policy question should never have been injected into the litigation without our prior approval.  If Complaint Counsel can alter our fundamental policy judgments about whom to sue and why, by amending the complaint, then § 1025.11(a) is virtually meaningless.^[1]

Despite my concerns about how this case unfolded, I do not think it necessary to vote against the proposed settlement.  Mr. Zucker has conceded our jurisdiction over him, “for purposes of settlement only.”  Consent Agreement at 4.  On review of the settlement, I see no basis for unraveling the parties’ negotiated agreement.

After my colleagues have had an opportunity to reflect on the issue I am raising, I hope we can remove any lingering ambiguity on this important matter.  If they do not agree that the current rule forbids adding new counts or new respondents in an adjudication without our approval, then I propose that we modify the rule as necessary to make our primacy in this regard unambiguous.  However we proceed, we also must ensure that no CPSC document indicates it has been “issued by order of the Commission” unless that is true.