On Wednesday the Fourth Circuit ruled that the identity of a manufacturing company had to be disclosed, even though the company had obtained a District Court order blocking the Consumer Product Safety Commission (CPSC) from publishing a product defect report on its online database. The business claimed the report was inaccurate but that suing the CPSC in its own name would have put at risk the very products allegedly maligned in the false report, so the business challenged the CPSC under the pseudonym “Company Doe.” This decision is just the latest in a series of actions that will make it increasingly likely that complaints to the CPSC about a company’s products will become public and could negatively impact how consumers view those products – even if the complaints are inaccurate.
The CPSC process was not supposed to work that way. On SaferProucts.gov the CPSC allows the public to submit “reports of harm” involving consumer products. Under current CPSC regulations, manufacturers, importers and private labelers identified in the reports are given an opportunity to comment on the reports before they are published on the CPSC webpage, including to claim that a report contains confidential or materially inaccurate information. Under those regulations, if a business timely submits such a claim, the CPSC will not publish what it agrees is materially inaccurate or confidential.
If the company and the CPSC disagree, the only recourse is for the company to seek to enjoin the CPSC’s publication of the claimed-to-be false report. That is what Company Doe did successfully in Company Doe v. Tenenbaum, et al. (No. 8:11-cv-02958-AW, slip op. (D. Md. Oct. 22, 2012)). Presumably, Company Doe was trying to hide its identity, and, by extension, the identity of its product, to prevent the false report from being published and harming sales. Company Doe was successful in the District Court and the CPSC chose not to appeal.
What remained, however, was a suit from three consumer groups challenging the district court’s sealing and pseudonymity orders. In its opinion issued in Company Doe v. Public Citizen, et al. (No. 12-2209, 2014 U.S. App. LEXIS 7113 (4th Cir. Apr. 16, 2014)) this week, the Fourth Circuit ruled that the groups had both nonparty appellate and independent Article III standing and the District Court could be ordered to unseal the name of Company Doe. It found that that there was no credible evidence provided in the District Court’s opinion or by Company Doe that Company Doe would have been harmed
had its true name and the court records been publicly available. Lacking such evidence, the district court’s sealing order violated the public’s presumed right of access to court proceedings under the First Amendment and, in the absence of exceptional circumstance, it was an abuse of discretion to allow Company Doe to litigate pseudonymously.
By remanding the matter to the district court to unseal the case records and reveal Company Doe’s true identity, the Court potentially has subjected the company’s products to the very business harm the company thought it had prevented successfully by stopping publication of the original false product claim. Now, however, there is likely to be a lot more notoriety after the litigation than the company would have had if it had simply allowed the allegedly false product report to be disclosed in the first instance.
It is possible, as Senior U.S. Circuit Judge Clyde Hamilton noted in a concurring opinion, that the result might have been different if Company Doe had provided expert testimony or other evidence as to the harm it might suffer. But because the outcome was unfavorable, consumer product manufacturers, importers and retailers will find themselves in a quandary when they learn of an apparently false consumer report submitted to the CPSC’s SafeProducts.gov website: Do they fight the disclosure in court (if they are unable to negotiate a reasonable resolution with the CPSC), in what could be a very public litigation battle, or is it better to allow the potentially damaging report to be published and deal with the false complaint directly and affirmatively?
The Fourth Circuit’s decision follows the CPSC’s proposed rulemaking that, if adopted, will limit the circumstances in which business information submitted to the CPSC would be kept confidential and could significantly expand the scope of information exempt from 6(b) protections for businesses. Notably, the proposal states, “Information that is publicly available or that has been disseminated in a manner intended to reach the public in general" is among the types of information that the CPSC would no longer have to notify companies of before publicly releasing, which could include published reports of harm. The comment period for this proposed regulation began in February when the rule was released and ends on Monday, April 28.