CL811 Administrative Law and Practice.
Memorandum
This memorandum addresses three questions:
1. What advice would you give Kids Toys and why would you give that advice?
2. Did the CPSC follow all of the requirements in the statute and the relevant regulations in performing its investigation?
3. Did the CPSC’s inspection of Kids Toys without a warrant violate the Fourth Amendment?
I. Advice
The advice that I would give would depend upon the information that the Kids Toys personnel provided to me during our phone call. The relevant statutes and regulatory requirements in 16 CFR § 1118.2(c) require certain information to be included in the Notice of Inspection, so I would ask the Kids Toys personnel questions about that to see if all of the required information was included in the notice. The agency regulations, 16 CFR § 1118.2(c)-(d), also require the CPSC to present appropriate credentials and receive consent from the person in charge of the facility, so I would ask the Kids Toys personnel about the credentials that were presented, and if the person in charge is present to provide consent.
If some of those requirements were not met, I would advise Kids Toys to decline to allow CPSC to enter on the grounds that these requirements were not met. If they are all met, then I would inform Kids Toys that they have the ability to refuse to allow CPSC to enter and require them to obtain a warrant, or use some other compulsory process noted in 16 CFR § 1118.2(d), to obtain the information.
I would then discuss whether requiring the agency to do this had any benefit to Kids Toys. Some of that discussion would depend upon the scope of the Notice of Inspection and what information that agency plans on reviewing and taking in their inspection, and then considering whether a warrant may have to be more limited in scope. I may also ask to speak to the CPSC investigator to obtain more information about what information the agency has about potential violations to support the Notice of Inspection, and what information they are looking to obtain.
If it turns out that the scope of a warrant would likely be the same as the scope of the notice, I would advise Kids Toys to consent, but to ask CPSC to wait until I arrived until they started their actual investigation so that I could be there to oversee the process. If the Notice seemed too broad based on these discussions, and CPSC is not willing to
narrow the scope of it, I would advise Kids Toys to not consent and require the CPSC to obtain a warrant.
II. Did the CPSC follow the governing statutes and regulations?
The CPSC has the statutory authority under the Consumer Product Safety Act (CPSA) to perform investigations and inspections to implement and enforce the provisions of the law. 15 USC § 2065. The law is designed to protect consumers from unsafe consumer products and authorizes CPSC agents to inspect manufacturing facilities like the Kids Toys plant. 15 USC § 2051; 15 USC § 2065.
Specifically, the law allows officers or employees of the agency, upon presenting appropriate credentials and a written notice from the Commission to the owner, operator, or agent in charge, to
(1) to enter, at reasonable times, any factory, warehouse, or establishment in which consumer products are manufactured or held, in connection with distribution in commerce…; and
(2) to inspect, at reasonable times and in a reasonable manner such conveyance or those areas of such factory, warehouse, or establishment where such products are manufactured, held, or transported and which may relate to the safety of such products. 15 USC § 2065(a). The Gamamahi is a consumer product under the law since it is an article produced or distributed for sale to consumers for use in recreation.
15 USC § 2052(a).
The law also requires manufacturers and distributors like Kids Toys to “permit the inspection of appropriate books, records, and papers” to determine whether the manufacturer or distributor has complied with the law, and to obtain information related to the production, testing, distribution or sale of any consumer product. 15 USC § 2065(b); 16 CFR § 1118.2(a)(3).
In order to perform an inspection, the CPSC must first issue a Notice of Inspection. 15 USC § 2065(a). The regulations contain some very specific requirements about what has to be in the Notice. Regulation 16 CFR § 1118.2(c) states:
The notice of inspection shall include the name and address of the person or firm being inspected; the name and title of the Commission officer or employee; the date and time of the anticipated entry; pertinent extracts from the statutory provisions upon which the right to access is based; pertinent extracts from § 1118.2 of these rules setting forth the authority of Commission officers or employees and the types of information and items they are authorized to obtain; a statement that the inspection will be conducted and the information will be provided with the cooperation of the person or firm being inspected; a statement which sets forth the purposes of the inspection and the nature of the information and items to be obtained and/or copied; and a statement that those from whom information is requested should state in writing whether any of the information submitted is believed to contain or relate to a trade secret or other matter which should be considered by the Commission to be confidential in accordance with section 6(a)(2) of the Act ( 15 U.S.C. 2055(a)(2)) and whether any of the information is believed to be entitled to exemption from disclosure by the Commission under the provisions of the Freedom of Information Act
In order to inspect a facility, CPSC agents must present the Notice and “appropriate credentials” to the person in charge of the facility to be inspected. Id. Once that is done, CPSC agents may enter and inspect the facility and review and copy documents, take samples, etc., as noted above if, granted permission to do so by the person in charge of the facility. 16 CFR § 1118.2(c)-(d). The regulations also permit CPSC agents to obtain “oral” information about the consumer product and about the “organization, business, conduct, practices and management” of the manufacturer/distributor being inspected. 16 CFR § 1118.2(a)(4).
The facts of our case indicate that CPSC initiated their investigation based on consumer complaints indicating the Gamamahi was unsafe and caused injuries to consumers. These allegations would fit under the Consumer Product Safety Act and give CPSC the authority to investigate. See 15 USC § 2051 -2052; 15 USC § 2064; 15 USC § 2065; 16 CFR § 1115; 16 CFR § 1118; 16 CFR § 1505.
CPSC did provide Kids Toys a Notice and did present credentials before entering and inspecting the manufacturing and distribution facility. While the notice itself must contain the time of anticipated entry, the regulations do not require that the Notice be sent ahead of the actual inspection. 16 CFR § 1118.2(c). It seems that under the CPSC regulations, showing up unannounced and providing the Notice at the time of the inspection is permitted.
The unanswered questions are whether the CPSC notice and credentials were presented to the person or agent in charge as required by the regulations, 16 CFR § 1118.2(a), and whether the notice contained all of the specific information required by the regulations 16 CFR § 1118.2(c). The first question may be important since someone at Kids Toys consented to the inspection. The question is whether that person was the person or agent in charge to be capable of receiving the notice and to consent under the CPSC’s regulations. As noted above, if the person in charge was not present, then I would have advised Kids Toys to not consent to the inspection.
The second question could be important as the Notice must detail the “nature of the information and items to be obtained and/or copied.” 16 CFR § 1118.2(c). If the information the agents actually obtained or copied went beyond what was in the Notice, we may be able to argue that the information was obtained illegally. Also, if the notice did not comply with the requirements of 16 CFR § 1118.2(c), I would have advised Kids Toys to not consent to the inspection.
III. Did CPSC’s inspection violate the 4th Amendment?
An administrative inspection to determine compliance with a law, such as the one performed by the CPSC, is subject to the Fourth Amendment’s reasonableness requirement. Camara v. Municipal Court, 387 U.S. 523 (1967); See v. City of Seattle, 387 U.S. 541 (1967). To be reasonable, an administrative search or inspection generally needs to be authorized by a search warrant issued by a neutral magistrate. Id.
The statute that authorizes the CPSC to inspect, 15 USC § 2065, does not require CPSC agents to obtain a warrant. Instead, CPSC may enter and inspect as long as it has an appropriate Notice of Inspection issued by the CPSC commission and the CPSC agents present their credentials. 15 USC § 2065; 16 CFR § 1118.2(c). If a CPSC agent is denied entry by a manufacturer when they appear at the facility to be inspected with the written notice and credentials, then the CPSC regulations authorize the CPSC agents to obtain a search warrant or follow some other form of compulsory process.16 CFR § 1118.2(d).
In Marshall v. Barlow’s Inc., 436 U.S. 307 (1978), the United States Supreme Court held that a federal statute that allowed Occupational Safety and Health Administration (OSHA) agents to inspect a business premise without a warrant violated the Fourth Amendment. The court ruled that the agency needed to obtain a warrant through a showing of reasonableness before it could perform the search. Id. So, we may be able to establish that the statutory and regulatory provisions that authorize CPSC agents to inspect without a warrant are unconstitutional.
There are, however, a number of exceptions to the warrant requirement for administrative agencies. One of these exceptions is that Congress may authorize warrantless searches of “closely regulated industries.” The United States Supreme Court has found automobile junkyards, firearms, federal alcoholic beverage licenses, and stone quarries to be closely regulated industries. New York v. Burger, 482 U.S 691 (1987); Colonnade Catering Corp. v. United States, 397 U.S. 72 (1970); Donovan v. Dewey, 452 U.S. 594 (1981).
Consumer products such as toys could also be a closely regulated industry. The consumer product safety act and the consumer product safety commission impose a myriad of safety and reporting requirements on product manufacturers and distributors much like those imposed on the other industries that the court has found to be closely regulated. However, in City of Los Angeles v. Patel, 135 S.Ct. 2443 (2015), the Court noted that being a closely regulated industry means that the industry must be subjected to a regulatory scheme that is so comprehensive that it distinguishes it from the regulation of other industries. The regulation of consumer products likely does not meet this standard.
Another exception is consent. If a party consents to the search or inspection, it eliminates the need for a warrant. The CPSC’s regulations seem to be based upon this approach as they provide the CPSC agents with the authority to inspect with just a notice and appropriate credentials and then authorize the CPSC to obtain a warrant if the manufacturer refuses to allow the inspection when presented with the notice and credentials. 16 CFR § 1118.3(d).
Here, Kids Toys allowed CPSC agents to inspect, speak to employees copy documents, and take samples. By doing so, Kids Toys arguably consented and eliminated the need for a warrant assuming that the CPSC agents provided the notice and credentials to the “person or agent in charge” of Kids Toys as required by CPSC regulations, 16 CFR § 1118.2(a).
IV. Conclusion
The advice that I would provide to Kids Toys would depend on the various factors discussed in this memo. There are some unanswered factual questions about the details of the notice and credentials in terms of whether the CPSC met all of the statutory and regulatory requirements in conducting the investigation. Assuming that those requirements are met, the CPSC likely did not violate the Fourth Amendment when it inspected the Kids Toys’ facility. Even though the CPSC did not have a warrant, an exception to the warrant requirement may apply in that Kids Toys consented to the inspection, as long as the person who received the notice to inspect was the proper person under the regulations.
NOTE TO STUDENTS:
As with many legal problems, you could conclude differently on a number of issues addressed in the model answer. The answer is just intended to give you an example of how you could address the issues. The cases cited in this memo are all included in the Funk, Shapiro & Weaver, Administrative Law Casebook. Outside research to find the cases was not required.
