The 'Daisy Airgun Case'—not CPSC's finest hour

CPSC Monitor, Jan, 2004

CPSC's decision to file an administrative complaint against the Daisy Manufacturing Co. of Rogers, Arkansas in 2001 was flawed from the start. The case was developed by CPSC's Compliance staff after then-Chairman Ann Brown made it known that she wanted a strong federal action against the company--demanding that the company recall 7.5 million airguns.

Brown was under fire from Republicans in Congress following the Senate Commerce Committee's rejection of President Bush's nomination of Commissioner Mary Gall as the new chairman of CPSC. Some Republicans believed that Brown had played a major role in the successful effort to defeat Gall.

Brown announced her resignation effective Nov. l, 2001. At the same time, she dropped a big hint that there would soon be another major CPSC lawsuit or recall involving a product that caused injury to children. (1)

Indeed, on Oct. 30, 2001, CPSC announced it had filed a lawsuit against Daisy Manufacturing Co. to recall two models of Daisy's powerline airguns. The complaint alleged a defect in the airguns that caused the guns to discharge when a user believed the gun to be empty. The case was largely based on a lawsuit brought by parents of a 16-year-old boy who was injured when he and a friend were playing with a Daisy airgun. Daisy settled the lawsuit for a reported $18 million.

As soon as the lawsuit was announced, Commissioner Mary Gall issued a statement calling the complaint "politicized" and criticizing both Brown and CPSC Compliance staff for failure to observe the Commission's rules of administrative procedure.

Gall said that the timing of the lawsuit, announced at a press conference at 2 p.m. on the day before Chairman Brown's departure, had been manipulated to give the outgoing chairman the best possible media send-off. (2)

The Commission voted 2-1 to issue the complaint with Chairman Brown and Commissioner Moore voting in favor, and Commissioner Gall voting against.

The case continued through administrative procedures, and when the new Chairman, Hal Stratton, arrived at CPSC, it was already before an Administrative Law Judge (ALJ).

In May 2003, Daisy's attorneys offered a settlement, but on a 2-1 vote, the Commission turned down the offer. Chairman Stratton argued that he was new to the Commission and had little access to the facts of the case. When the parties were asked to waive the Commission's exparte rules against direct conversations with the complaint counsel and the defendants, Daisy refused. Stratton then determined that since he still lacked sufficient information, he must vote to reject the settlement offer.

Daisy's representatives submitted a new settlement offer on Nov. 5, 2003. This time, Stratton and Commissioner Gall voted to accept and Commissioner Moore voted to reject the offer.

All three Commissioners submitted statements to accompany the announcement of the settlement of the Daisy case, but Commissioner Gall's statement deserves a gold star for the most cogent argument and the best narrative of the case. (3)

Commissioner Gall wrote:

   "I voted to approve the proposed Consent
   Agreement and Order ... because it is in the public
   interest and represents an adequate resolution of
   this case. This case remains, however, one that
   should never have been brought and a case that
   should have been settled much earlier. The
   Commission's actions have done serious and
   unjustified damage to the reputation and business
   prospects of a company whose product represents
   no substantial product hazard." (4)

Gall goes on to argue that there was little evidence that the air rifles in question were really "a substantial product hazard" under Section 15(a) of the Consumer Product Safety Act.

In conclusion, Gall noted that she was extremely dissatisfied with the way the case was handled.

She stated,

   "In my nearly twelve years of service with
   this Commission, and indeed, in my over thirty
   years of government service, I have never seen a
   more outrageous miscarriage of justice and abuse
   of the processes of public policy than this case ...
   Some of the deposition testimony given by
   Commission employees show clearly that the
   previous Chairman ordered that the case be
   removed from the ordinary processes of
   Commission staff review because she did not like
   the conclusions that the career staff were reaching
   about the hazards associated with the Model 856
   and 880 air rifles.

   "... The record shows that this is a case that
   should not have been brought in the first place, and
   which has now been settled on terms substantially
   similar to those that Daisy proposed over fourteen
   months ago. Students of government who wish to
   see how the regulatory enforcement process can be
   used to harass a small company to no good purpose
   need look no further than this action for a splendid
   case study ..." (5)

Commissioner Gall deserves credit for taking a courageous stance in the face of both internal and external pressures that might have overcome a more timid public official.