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Reliable Automatic Sprinkler Co., Inc. v. Consumer Product Safety Commission

November 28, 2001

THE RELIABLE AUTOMATIC SPRINKLER CO., INC. PLAINTIFF,
v.
CONSUMER PRODUCT SAFETY COMMISSION, DEFENDANT.



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION

The question before this Court is whether the commencement of an investigation by the staff of the Consumer Product Safety Commission ("CPSC") under the Consumer Product Safety Act, 15 U.S.C. § 2051 et seq. ("CPSA"), constitutes "final agency action" within the meaning of Section 704 of the Administrative Procedure Act, 5 U.S.C. § 701 et seq. ("APA"). The CPSC enjoys regulatory jurisdiction over "consumer products," as defined by 15 U.S.C. § 2052(a)(1), and pursuant to this authority, the CPSC staff has been investigating sprinkler heads manufactured by The Reliable Automatic Sprinkler Co., Inc. ("Reliable"). Reliable seeks declaratory relief, claiming that its products are not "consumer products," and therefore not within the regulatory ambit of the CPSC. As explained more fully below, because the agency's action at this preliminary stage does not constitute final agency action, this Court lacks subject matter jurisdiction over Reliable's claim, and defendant's motion to dismiss must therefore be granted.

BACKGROUND

Reliable manufactures the Model A Flush sprinkler head, which is incorporated into automatic fire sprinkler systems throughout the United States. The CPSC has been investigating the Model A Flush sprinkler head since 1999 to determine whether it performs reliably. The CPSC claims to have gathered evidence sufficient to support a "preliminary determination that . . . [the Model A Flush] sprinklers present a substantial product hazard, as defined by Section 15(a) of the Consumer Product Safety Act . . . ." (Memorandum in Support of Defendant's Motion to Dismiss [hereinafter Def.'s Mem.], Ex. A.) Although the CPSC staff has not yet made that preliminary determination pursuant to 15 U.S.C. § 2064(a), in a letter dated September 11, 2000, the staff communicated to Reliable its intention to do so. (Def.'s Mem. at 3-4.) In that same letter, the CPSC requested that Reliable undertake a voluntary "corrective action plan," as described in 16 C.F.R. § 1115.20(a). (Def.'s Mem. at 3.) To date, no corrective plan has been instituted. (Id. at 4.

Instead, taking the offensive, Reliable filed a complaint on January 9, 2001, seeking declaratory relief. Specifically, Reliable seeks a declaration that its sprinkler heads are not "consumer products" within the meaning of the CPSA. On July 27, 2001, defendant filed a motion to dismiss, arguing that this Court has no jurisdiction over Reliable's claim because there has been no final agency action within the meaning of the APA.

ANALYSIS

Review of agency action is available when specified by statute or for "final agency action for which there is no other adequate remedy in a court." 5 U.S.C. § 704. In this case, defendant does not allege, nor could it, that the CPSA independently confers jurisdiction over the CPSC's preliminary administrative determination that Reliable's sprinkler head is a "consumer product." See generally 15 U.S.C. § 2051 et seq. Therefore, to establish jurisdiction, Reliable must be able to point to some final agency action. See American Telephone & Telegraph Co. v. EEOC, 2001 WL 1435529, at *2 (D.C. Cir. November 16, 2001) (district court's authority is limited to challenges to "final agency action"); DRG Funding Corp. v. Secretary of Housing and Urban Dev., 76 F.3d 1212, 1214 (D.C. Cir. 1996) (final agency action is "jurisdictional" requirement). *fn1

The standard for determining if an agency's action is final and therefore reviewable was set forth by the Supreme Court in FTC v. Standard Oil of Cal., 449 U.S. 232 (1980). *fn2 In that case, the Federal Trade Commission ("FTC") filed a complaint against a number of oil companies, averring that it had "'reason to believe' that the companies were violating [federal law]." Id. at 234. Prior to a final adjudication of the complaint, the Standard Oil Company of California ("Socal") filed a complaint in federal court, asserting that the FTC had issued its complaint without "reason to believe" that there had been any violation. Id. at 235. The Court held that the agency's preliminary determination that it had "reason to believe" was not a final agency action or otherwise reviewable under the APA. Id. at 238. The FTC's averment of a "reason to believe" was not a "definitive statement of position"; rather, it "represent[ed] a threshold determination that further inquiry is warranted and that a complaint should initiate proceedings." Id. at 241. Furthermore, the Court noted that the FTC's decision had no "legal or practical effect, except to impose on Socal the burden of responding to the charges made against it," and while that burden might be substantial, it was different "in kind and legal effect" from the burdens imposed by conduct traditionally considered final agency action. Id. at 242. Since the FTC's issuance of a complaint was not final agency action within the meaning of Section 704 of the APA, it was "not judicially reviewable before administrative adjudication concludes." Id. at 246.

As is clear from Standard Oil, the actions of the CPSC staff do not rise to the level of final agency action. Like the FTC in Standard Oil, the CPSC has conducted an investigation. The CPSC clearly believes that it has gathered sufficient evidence to support a preliminary determination that Reliable's sprinkler heads pose a "substantial product hazard" under the CPSA, 15 U.S.C. § 2064(a). (Def.'s Mem. at 3.) But unlike Standard Oil, where the FTC had made a precatory finding of "reason to believe" a violation of law had occurred, 449 U.S. at 234, the CPSC's investigation has not yet reached the administrative complaint stage. *fn3 (Def.'s Mem. at 4.) Because final agency action "emphatically does not mean the issuance of the administrative complaint," it cannot possibly encompass the investigatory steps that the CPSC staff has taken to date. Abbs v. Sullivan, 963 F.2d 918, 926 (7th Cir. 1992) (finding no jurisdiction over challenge to the National Institute of Health's investigation into allegations of scientific misconduct prior to the filing of an administrative complaint); see also Brandenfels v. Day, 316 F.2d 375 (D.C. Cir. 1963) (finding no subject matter jurisdiction over the FTC's investigation when the agency had not yet taken any action against the plaintiff).

Implicit in its investigation is the CPSC's determination that Reliable's sprinkler heads constitute a "consumer product," and thus fall within the jurisdictional ambit of the CPSA. However, this belief is of no more legal significance than the CPSC's belief that it has sufficient evidence to show that Reliable's products are unreliable. As recognized by this Circuit in AT&T, at this stage of the investigation the agency has not "inflicted any injury" upon Reliable "merely by expressing its view of the law - a view that has force only to the extent the agency can persuade a court to the same conclusion." 2001 WL 1435529, at *3 (holding no final agency action where the EEOC had issued a Letter of Determination stating its belief that AT&T had unlawfully discriminated against two employees, and warning the company that if conciliation efforts failed, the matter would be referred to the agency's legal department). Until the jurisdictional issue is adjudicated in an administrative proceeding, the CPSC simply has not made a definitive statement with any legal consequence within the meaning of Standard Oil.

Recently, in Grucon Corp. v. Consumer Product Safety Commission, No. 01-C-0157 (E.D. Wis. September 18, 2001), United States Magistrate Judge William E. Callahan, Jr. rejected a similar challenge to CPSC action on jurisdictional grounds. In that case, the CPSC staff informed the Grucon Corporation ("Grucon") that a fire protection sprinkler head, which had been manufactured by a now defunct subsidiary of Grucon's, presented a "substantial product hazard" under the CPSA. The staff requested that Grucon take voluntary corrective action, the company refused, and before the CPSC could initiate administrative proceedings, Grucon filed suit seeking a declaration that it was a separate corporate entity, and therefore not responsible for the sprinkler heads. On the CPSC's motion, the court dismissed Grucon's complaint, holding that it had no jurisdiction because the CPSC staff's actions did not constitute final agency action. Grucon, No. 01-C-0157, slip op. at 12. The magistrate judge noted that "final agency action must 'impose an obligation, deny a right or fix some legal relationship as a consummation of the administrative process.'" Id. at 15 (citation omitted).

Reliable disputes this conclusion, arguing that even if the APA is the exclusive basis for jurisdiction, there is final agency action ripe for review. (Pl.'s Opp. at 13-14.) First, Reliable claims that the CPSC's letter of September 11, 2000 constitutes final agency action. (Id. at 14.) However, the CPSC's letter states no more than the intent of the agency's staff to make a preliminary determination that Reliable's sprinkler heads constitute a "substantial product hazard," and thus, it is arguably not even an agency action, much less a final one. See AT&T, 2001 WL 1435529, at *4; Borg-Warner Protective Serv. Corp. v. EEOC, 245 F.3d 831, 836 (D.C. Cir. 2001) (holding that an EEOC letter communicating that the agency had reasonable cause to believe that the employer had violated Title VII was not final agency action); see also DRG Funding Corp. v. HUD, 76 F.3d 1212, 1214-15 (D.C. Cir. 1996) (holding that a determination by an HUD official affirming an administrative law judge's decision that HUD could collect debts by administrative offset was not sufficiently final to confer subject matter jurisdiction).

Nonetheless, citing Ciba-Geigy Corp. v. EPA, 801 F.2d 430, 435-36 (D.C. Cir. 1986), *fn4 Reliable argues that because the letter is a sufficiently definitive statement of the CPSC's interpretation of the coverage of the CPSA, which will have a "significant practical and legal effect" on its business, that letter should be reviewable prior to the institution of any enforcement action. (Pl.'s Opp. at 14.) However, Reliable's reliance on Ciba-Geigy is misplaced. As an initial matter, Ciba-Geigy concerned ripeness, not a determination of what constitutes final agency action. Furthermore, the pragmatic concerns that motivated the Court's review in Ciba-Geigy are not present here. The Ciba-Geigy plaintiffs challenged the Environmental Protection Agency's position that any of the subject products not bearing a required labeling change were misbranded and that plaintiff was not entitled to a hearing. 801 F.2d at 433. Judicial review of that action was appropriate to determine if the statute at issue permitted the labeling changes without a hearing. See id. at 435. Reliable has not suffered a similar process-based injury, but will have the opportunity to argue its jurisdictional defense if the CPSC brings administrative action. As the Ciba-Geigy Court itself noted, judicial intervention is not appropriate "until administrative action has had a direct and immediate impact." Id. at 434.

Second, Reliable argues that the agency's "demand" for voluntary corrective action is a final agency action. (Pl.'s Opp. at 13.) Reliable offers no case law or argument in support of this point, and indeed, the position is irreconcilable with Standard Oil. If an administrative complaint is not a "definitive statement" of the agency's position, Standard Oil, 449 U.S. at 241, a decision to investigate cannot be elevated into a final agency action. Reliable's argument would open the door to collateral attacks or preemptive strikes even prior to the initiation of administrative action, assuming that the regulatory target could make a colorable jurisdictional challenge. Obviously, this would frustrate the carefully crafted mechanism for judicial review that is established by the APA. See AT&T, 2001 WL 1435529, at *4 (permitting premature challenge "would disrupt the administrative process in a manner clearly at odds with the contemplation of the Congress"). Moreover, as discussed herein, Reliable faces no legal detriment from the CPSC's request to take corrective action; Reliable remains free to decline the invitation, ...


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