Hunton Retail Law Resource

The CPSC’s nine-year saga over magnet sets has finally concluded.  Magnet sets are clusters of small, separable, magnetic balls that a consumer can rearrange into countless shapes.  In 2012, a distributor refused to voluntarily recall the magnet sets, forcing the CPSC to file an administrative complaint alleging that the magnet sets were defective and presented a substantial ingestion hazard to young children.  In 2017, the CPSC concluded that the magnet sets posed a substantial product hazard that cannot be mitigated by package warnings and ordered the distributor to recall the magnet sets.  The distributor sued in federal court to block the CPSC’s order.  After multiple appeals, the Tenth Circuit Court of Appeals ultimately agreed with the CPSC.  Thus, this month the CPSC issued a rare mandatory recall of 10 million magnet sets.  The recall noted that two children who had ingested the magnets from the magnet sets required surgery to remove them and a 19-month-old child died after ingesting similar high-powered magnets.  The CPSC also issued a warning to consumers about the dangers of high-powered magnets, noting that from 2009 to 2018, there was an estimated 4,500 cases of children from 11 months old to 16 years old who were treated in US hospitals for ingestion of high-powered magnets.

The CPSC also experienced a political shift this month.  Previously, the CPSC had four commissioners (and one vacancy):

Commissioners may stay for one year after their term expiration if a replacement has not yet been nominated and confirmed.  Thus, although Commissioner Kaye’s appointment expired in October 2020, he was permitted to stay for up to one additional year.  Kaye announced his departure from the CPSC on August 27, 2021 by letter.  Kaye’s departure leaves just three commissioners and a Republican majority at the agency.  In June, President Biden announced two nominees for the CPSC, although the Senate has not yet taken any major action on the nominations.

Lawyers from Hunton Andrews Kurth LLP’s insurance coverage practice have provided an update on recent recall-related insurance coverage disputes below:

We previously reported on Landec Corp.’s action against its insurers in a California federal court regarding the insurers’ denial of coverage for over $5 million in losses related to a government-ordered recall of kale salad products.  The insurers recently asked the court to toss Landec’s California federal court action on forum non conveniens grounds, claiming that the policy’s forum selection clause requires the suit be venued in New York.  The insurers further claim that Landec’s reliance on the policy’s “Service of Suit” provision, which specifically provides that insurers “will submit to the jurisdiction of a Court of competent jurisdiction within the United States,” is “legally impermissible” and does not override the policy’s forum-selection clause requiring the suit to be litigated in New York.  Landec counters that the “Service of Suit” provision, which was added by endorsement, “supersedes” the forum selection clause and gives it the right to select the forum. Landec adds that California has the strongest relationship to the dispute because it is where Landec resides, where the policy was purchased, and where most of the key witnesses are located.  The insurers responded that the forum selection provision and Service of Suit clause are complimentary and do not conflict at all.  Specifically, the insurers contend that the Service of Suit clause generally requires them to submit to the jurisdiction of a court in the United States, while the forum selection clause specifies the particular forum where the parties agree to litigate.  We will continue to monitor this case for further developments.

We previously reported on the lawsuit filed by two Travelers entities against their insured, Blue Bell Creameries USA, Inc., seeking to avoid coverage under commercial general liability policies for a derivative lawsuit against Blue Bell’s directors and officers arising out of a 2015 Listeria outbreak that resulted in a nationwide recall of ice cream products.  Blue Bell recently filed its answer to the insurers’ complaint and counter claimed for breach of contract.  In its counter claim, Blue Bell alleges that the underlying action against its directors and officers seeks compensatory and other damages, which would not be owed had the claimants not suffered bodily injury.  Thus, Blue Bell concludes, the underlying claim satisfies the policies’ requirement that the damages occur “because of” bodily injury and therefore it is entitled to defense coverage.  The insurers filed an answer generally denying the substantive allegations asserted by Blue Bell.  We will continue to monitor the case for further developments.

Total Recalls: 21

Hazards:  Fire/Burn/Shock (4); Choke (4); Violation of Federal Standard (3); Fall (3); Injury (2); Entrapment (1); Laceration (1); Ingestion (1); Skin Irritation (1); Drown (1)