United States v. Spectrum Brands, Inc. ( 2019 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 18-1785
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
SPECTRUM BRANDS, INC.,
Defendant-Appellant.
Appeal from the United States District Court for the
Western District of Wisconsin
No. 3:15-cv-00371-wmc — William M. Conley, Judge.
ARGUED NOVEMBER 1, 2018 — DECIDED MAY 9, 2019
Before WOOD, Chief Judge, and MANION and ROVNER, Circuit
Judges.
ROVNER, Circuit Judge. The district court found that Spec-
trum Brands, Inc. (“Spectrum”) violated section 15(b) of the
Consumer Product Safety Act (“CPSA” or the “Act”), 15 U.S.C.
§ 2064(b)(3), when its subsidiary failed to timely report to the
government a potentially hazardous defect in its Black &
2 No. 18-1785
Decker SpaceMaker coffeemaker despite years’ worth of
consumer complaints about the product. Following an eviden-
tiary hearing as to the appropriate remedy for the reporting
violation, the court entered a permanent injunction which, in
its final form, requires Spectrum to adhere to its newly-
implemented CPSA compliance practices and to retain an
independent consultant to recommend additional modifica-
tions to those practices. Spectrum appeals, contending both
that the government’s late-reporting claim is barred by the
statute of limitations, that the district court had no authority to
enter a forward-looking injunction, and that the court other-
wise abused its discretion in awarding permanent injunctive
relief, including the requirement that it engage the expert.
Finding no merit in any of these challenges, we affirm the
judgment.
I.
Spectrum is a global, diversified consumer products
company headquartered in Middleton, Wisconsin. During the
years relevant to this action, Spectrum distributed to retailers
more than 24 million individual products per year across more
than 500 stock keeping units. Among the products it sold was
a line of under-the-cabinet Black & Decker SpaceMaker
coffeemakers, distributed by its subsidiary, Applica Consumer
Products, Inc. (“Applica”).1
1
Applica imported the Black & Decker coffeemakers from China and
distributed them to retailers from 2008 to 2012. Applica became a wholly-
owned subsidiary of Spectrum in 2010 and then merged with Spectrum in
2014. At the time of the merger, Spectrum assumed all of the assets and
(continued...)
No. 18-1785 3
As a purveyor of consumer products, Spectrum is legally
obligated to notify the U.S. Consumer Products Safety Com-
mission (“CPSC” or “Commission”) of potentially hazardous
defects in any of its products. Specifically, section 15(b) of the
CPSA requires a manufacturer, distributor, or retailer of a
consumer product “who obtains information which reasonably
supports the conclusion that such product” contains “a defect
which— … could create a substantial product hazard” to
“immediately” inform the Commission of said defect, “unless
such manufacturer, distributor, or retailer has actual knowl-
edge that the Commission has been adequately informed of
such defect … .” 15 U.S.C. § 2064(b)(3). A “substantial product
hazard” is one which poses a “substantial risk of injury to the
public.” Id. § 2064(a)(2). The duty to report such a hazard
“immediately” means within 24 hours of becoming aware of
the hazard. 16 C.F.R. § 1115.14(e).2 And a manufacturer,
distributor, or retailer can be said to have “actual knowledge”
that the Commission has already been adequately informed of
a defect (relieving it of the obligation to make a report) only if
the manufacturer, distributor, or retailer has previously
1
(...continued)
obligations of Applica, and there is no dispute that the assumed liabilities
include Applica’s liability with respect to the events underlying this case.
For the sake of simplicity, then, we have treated Spectrum as the distributor
of the coffeemakers at issue here.
2
The regulations allow a “reasonable time” for a company to investigate
the problem with its product when the information in its possession is “not
clearly reportable” to the Commission. 16 C.F.R. § 1115.14(c). A period of
up to ten days (excluding weekends and holidays) is deemed a presump-
tively reasonable time period for that purpose. See id. §§ 1115.14(a), (d).
4 No. 18-1785
disclosed the defect in a section 15(b) report to the CPSC or if
the Commission itself indicates that it has already been
adequately informed of the defect. 16 C.F.R. § 1115.3(a).
Separately, the statute makes it unlawful for any person to “fail
to furnish information required by section 2064(b).” 15 U.S.C.
§ 2068(a)(4).
By February 2009, Spectrum’s third-party customer call
center had received a number of complaints from consumers
regarding the SpaceMaker coffeemakers, including in particu-
lar complaints that the plastic handle on the coffeemaker’s 12-
cup carafe had broken. In one instance, the failure of a handle
had caused a consumer to suffer a burn from the hot coffee in
the carafe. It appears from the record that when the carafe
handle failed, typically its top portion (which was secured by
a screw) detached from the glass carafe, while the bottom of
the handle (which was fastened by a metal band running
around the bottom of the carafe) remained securely in place.
This caused the carafe to tip or wobble in the consumer’s hand.
When the carafe was full of hot coffee, the sudden movement
could cause the consumer to spill the coffee or drop the carafe
altogether.
In April 2009, in the face of continuing complaints about
broken handles, Spectrum commenced an investigation which
culminated in a decision to modify the design of the carafe
handle. The manufacturer was instructed to cease fabricating
the original version of the carafe and to scrap any units already
in production. Spectrum began stocking coffeemakers with the
modified handle beginning in May. Rather than ceasing sales
of the original coffeemakers with the problematic carafe,
however, Spectrum implemented a “rolling change” pursuant
No. 18-1785 5
to which it continued to sell the older versions so long as they
remained in stock. Although Spectrum has assumed that the
engineering change fixed the problem with the carafe handle,
there is no proof in the record as to whether all of the con-
sumer complaints that Spectrum received about the carafe
prior to the eventual recall of the coffeemakers in 2012 were
limited to the original version of the carafe.
Meanwhile, Spectrum continued to receive complaints
about broken handles on the carafes. By the end of 2009, it had
received an additional 300 such complaints, which included
more than a dozen reports of burns or lacerations. During this
time, the CPSC itself received a report about a faulty handle,
and the Commission, consistent with its practice, passed the
report on to Spectrum without investigation, reminding the
company of its duty under section 15(b) to notify the Commis-
sion if Spectrum was aware of a potentially hazardous defect
in its product. Spectrum did not file a section 15(b) report at
that time.
Over the course of the next two years, the company
remained silent about the carafe handle even as more com-
plaints of handle failures and resulting injuries made their way
to Spectrum. During this time, the CPSC itself received and
forwarded another seven broken-handle reports to Spectrum.3
3
The fact that Spectrum did not respond more proactively to the steady
stream of complaints appears to have been the result of both a skepticism
with respect to consumer complaints generally as well as an internal
practice as to when such complaints merited investigatory followup. The
coffeemaker, including the carafe, had been thoroughly tested before it was
(continued...)
6 No. 18-1785
Not until April 2012 did Spectrum finally file a section 15(b)
report with the Commission. The report was what the CPSC
called a “fast-track” report which indicated the company’s
intent to recall the coffeemaker. One month earlier, a class
action suit had been filed against Spectrum alleging that there
was a design defect in the carafe handle, and that suit evidently
persuaded the company that the best course of action was to
recall the product entirely, including models with both the
original and re-engineered carafe handles. The report as
amended advised the Commission that Spectrum had received
3
(...continued)
placed on the market, so the company had reason to believe that there was
no fault in the design of the carafe. The testimony presented to the district
court suggests that it is not uncommon for a consumer to complain about
a broken product and seek a refund or replacement based on a purported
defect in the product, when in fact it is the consumer who has caused the
product to break through his own misuse or clumsy handling. Spectrum
(really, Applica) thus had a practice of not investigating its products for
potential design and/or safety flaws unless a consumer was willing to
return the broken product to the company for inspection. Early on, two
consumers did return failed carafes to the company, and it was the
company’s investigation as to those failures that resulted in the re-
engineering of the carafe handle in 2009. At that point, Spectrum evidently
considered any problem with the carafe to have been solved. The company
viewed the ongoing complaints about the carafe as a quality-control
problem with the production of the carafe rather than a safety issue. And
Applica’s prior experience with another coffeemaker, as to which it filed a
report with the Commission but was required to take no remedial action,
lulled the company into thinking there was no need to file a report as to the
Black & Decker carafe.
No. 18-1785 7
over 1,600 complaints of handle failures4 and more than 60
reports of associated injuries to consumers.5 Two months later,
in June 2012, Spectrum and the CPSC jointly announced a
recall of the defective coffeemakers.6 By the time the recall was
announced, Spectrum had sold some 159,000 of the coffee-
makers, with the majority of them having been sold by
December 2009.
Despite the recall, due to gaps in its inventory-control
procedures, Spectrum inadvertently continued to sell the
recalled coffeemakers.7 By June of 2013, it had sold another 641
such coffeemakers. A secondary recall was implemented to
reach those coffeemakers. At that point, sales of the product
finally ceased.
4
A long-serving CPSC employee would later testify that this number of
complaints was extremely high for a product—perhaps the most he had
seen in his two decades at the Commission.
5
Some 900 of these complaints were received after Spectrum took over
Applica, the importer and distributor of the coffeemakers, in 2010.
6
A section 15(b) report would ordinarily trigger an investigation by the
Commission to determine whether, inter alia, a recall of the product was
appropriate. However, because Spectrum had signaled its intention to
voluntarily recall the coffeemaker, no such investigation was necessary.
7
Spectrum had placed a product hold on the recalled coffeemakers, which
stopped distribution of units already on its warehouse shelves, but the hold
did not reach products in transit from China. When the latter units arrived
at the company’s warehouse, they were erroneously released for distribu-
tion.
8 No. 18-1785
In June 2015, three years after Spectrum recalled the
defective coffeemakers, the government filed a civil complaint
against the company in the district court. As relevant here, the
complaint alleged that Spectrum, beginning in February 2009,
obtained information reasonably supporting the conclusion
that the coffeemakers it was distributing contained a hazard-
ous defect or posed an unreasonable risk of injury, failed to so
inform the CPSC for several years thereafter, and thereby
knowingly violated section 15(b) of the Act. § 2064(b)(3).8 The
complaint also alleged that Spectrum committed a second
violation of the Act by continuing to distribute or sell coffee-
makers that it had previously recalled. See 15 U.S.C.
§ 2068(a)(2)(B).
The CPSA authorizes civil penalties of up to $100,000 for
each knowing violation of the Act, not to exceed a ceiling of
$15,150,000 for “any related series of violations.” 15 U.S.C.
§ 2069(a)(1); 76 Fed. Reg. 71,554, 71,554–55 (Nov. 18, 2011)
(providing for inflation-related increases to maximum penalty).
The statute also authorizes the government to seek injunctive
8
The statute separately requires the disclosure of a defect which “creates
an unreasonable risk of serious injury or death.” § 2064(b)(4). The govern-
ment’s complaint contained a count alleging that Spectrum’s coffeemaker
contained such a defect. However, Spectrum disputed the notion that its
coffeemaker posed a risk of causing anything more than minor injuries; and
because the district court found that the defect in the coffeemaker could
create a “substantial product hazard,” see § 2063(b)(3), and Spectrum was
required to give notice to the Commission on that basis, the court saw no
need to determine whether notice was additionally required on the ground
that the product posed a risk of serious injury or death. See United States v.
Spectrum Brands, Inc., 218 F. Supp. 3d 794, 822 n.24 (W.D. Wis. 2016).
No. 18-1785 9
relief in order to “[r]estrain any violation of” the Act. 15 U.S.C.
§ 2071(a)(1). The government sought both forms of relief in its
complaint against Spectrum.
Spectrum did not contest its liability for distributing
recalled products, and the district court on summary judgment
deemed the company liable for violating its reporting obliga-
tion under section 15(b). United States v. Spectrum Brands, Inc.,
218 F. Supp. 3d 794, 818–22 (W.D. Wis. 2016). The uncontested
facts indicated to the district court that, as early as May 2009
(when the company had already received 60 reports of broken
carafe handles and four consumer burns), and certainly no
later than June 2010 (by which time it was aware of over 700
handle failures and 35 injuries), Spectrum possessed informa-
tion supporting a conclusion that the carafe handle on the
coffeemakers the company was distributing contained a defect
which could create a substantial product hazard. Id. at 821–22.
Yet, Spectrum did not “immediately” report the problem to the
CPSC, as section 15(b) required, but instead delayed its report
for another two years. See id. at 820–21.
The court rejected Spectrum’s contention that the govern-
ment’s section 15(b) claims were barred by the applicable five-
year statute of limitations. 218 F. Supp. 3d at 815–17; see 28
U.S.C. § 2462. Spectrum’s theory was that the limitations
period began to run in May 2009, when (as the district court
postulated) its duty to report arguably first arose, and expired
in May 2014, more than a year before the government filed
suit. Id. at 815. The court reasoned that the reporting obligation
imposed by section 15(b) is a continuing one, such that a
company’s violation of its duty is not complete until such time
as the company finally submits a report to the Commission or
10 No. 18-1785
acquires actual knowledge that the Commission has otherwise
been adequately informed of the product defect. Id. at 817.
Consequently, in the district court’s view, a cause of action for
breach of the reporting requirement does not accrue until this
time. Id. A contrary understanding, the court pointed out,
would encourage a company that has not immediately filed a
section 15(b) report with the Commission to continue to
withhold information about a product defect until such time as
the limitations period has run, and thereby undermine the
statutory goal of encouraging the timely reporting of product
failures in order to protect the public from harm. Id. Deeming
a failure to report as a discrete, time-limited violation struck
the court as “nonsensical,” particularly where the egregious-
ness of the failure to report increases exponentially over time
with continuing consumer complaints of product failures and
injuries, as occurred in this case. Id.
The court likewise rejected Spectrum’s contention that the
court lacked authority under the CPSA to impose the forward-
looking injunctive relief on the company that the government
had sought (in addition to monetary penalties) in its prayer for
relief. Because the statute authorizes injunctive relief as
necessary to “[r]estrain any violation” of the Act, 15 U.S.C.
§ 2701(a)(1), the court inferred that its power to award injunc-
tive relief included the power to enjoin future violations. 218
F. Supp. 3d at 823–25. The government, it concluded, had put
forth a plausible case that Spectrum’s “knowing, arguably
outrageous, conduct” warranted such an injunction. Id. at 825.
The court therefore declined to dismiss this portion of the
government’s prayer for injunctive relief, reserving judgment
No. 18-1785 11
as to whether an injunction was warranted pending further
development of the facts. Id.
Following an evidentiary hearing as to the appropriate
remedies for Spectrum’s violations of the CPSA and a thor-
ough canvassing of the criteria set forth in the statute and
regulations, see 15 U.S.C. § 2069(b); 16 C.F.R. §§ 1119.1, 1119.4;
R. 234 at 5–12, the district court issued a decision imposing
both fines and a permanent injunction. The court ordered the
company to pay civil penalties totaling $1,936,675—$821,675
for the section 15(b) reporting violation and $1,115,000 for the
sale of recalled products. R. 234 at 12–16. The court also
concluded that the government had established a reasonable
likelihood of future violations warranting a permanent
injunction requiring Spectrum to reform its internal compliance
programs and procedures. R. 234 at 17–21. The court found
that a key problem contributing to the company’s failure to
timely report the problem with its problematic coffee carafe
was a lack of communication among employees responsible for
evaluating consumer complaints, those employees with
knowledge of the product’s design and defect, and senior
management personnel. R. 234 at 18–19. Similar communica-
tion failures, along with the failure to implement relatively
simple measures to prevent the distribution of recalled
products, largely explained Spectrum’s continuing sales of the
recalled coffeemaker. R. 234 at 19. The court acknowledged a
report prepared by Spectrum’s expert witness identifying a
number of procedures the company was utilizing to gather,
evaluate, and escalate product information that might require
reporting to the CPSC. But that report did not address whether
these same procedures were in place during prior years, when
12 No. 18-1785
Spectrum had failed to report the carafe-handle defect to the
Commission despite ongoing reports of handle failures and
injuries. Nor did the report discuss whether these procedures
were written, disseminated, and enforced within the company
and whether appropriate company personnel were trained in
these procedures. R. 234 at 19. Moreover, so far as the record
revealed, Spectrum had not commissioned an independent
audit to gauge the efficacy of these measures. R. 234 at 21. The
court found it telling that senior engineering and global quality
personnel at Spectrum could not recall meaningful discussions
of the problems with the carafes prior to 2012, notwithstanding
the receipt of consumer complaints beginning in 2009. R. 234 at
20. Consequently, the court was left with serious doubts as to
the efficacy of the efforts Spectrum had undertaken to address
the faults that had caused the company to violate its reporting
obligations under section 15(b) and to prevent the continued
sales of recalled products.
[Q]uestions … remain regarding the extent to which
Spectrum has undertaken a meaningful independent
audit of its CPSA reporting and recall obligations,
and addressed the deficiencies in its systems and
programs that led to its violation of these obliga-
tions. While Spectrum appears to have made some
efforts to prevent similar violations from occurring
in the future, the seriousness of its offens[es] to date
require that the systems that it has in place to com-
ply with the CPSA should by now be rigorous and
well-defined. … Accordingly, the court finds that
plaintiff has made an adequate showing of the need
for permanent injunctive relief to address Spec-
No. 18-1785 13
trum’s auditing, compliance and training regarding
compliance with the CPSA’s reporting requirement
and post-recall sale prohibition going forward.
R. 234 at 21. The court went on to enter a forward-looking
permanent injunction which, among other things, required
Spectrum to “maintain sufficient systems, programs, and
internal controls to ensure compliance with the CPSA and the
regulations enforced by the CPSC” and to “implement appro-
priate improvements to its compliance programs” within six
months of the court’s order. R. 234 at 22. The order also
required Spectrum to disseminate copies of the court’s sum-
mary judgment and penalty decisions to its directors, officers,
management personnel, and in-house counsel to the extent
they were involved in the manufacturing and distribution of
consumer products in the United States. R. 234 at 22.
Spectrum filed a motion asking the court for a partial stay
of its judgment. It asked the court to stay both the penalty
imposed for the section 15(b) late-reporting violation as well as
the bulk of the injunction the court had entered, both of which
it intended to appeal.9 As to the injunction, Spectrum argued
that a stay was warranted, inter alia, because the terms of the
injunction were so vague as to render it nothing more than a
command to “obey the law.” R. 237 at 5–6; see E.E.O.C v.
AutoZone, Inc., 707 F.3d 824, 841–42 (7th Cir. 2013) (outlining
the concerns presented by such an injunction). Before the court
ruled on the stay request, Spectrum filed its notice of appeal.
9
Spectrum did not seek a stay as to the provision in the injunction
requiring it to distribute copies of the court’s summary judgment and
penalty opinions to appropriate company personnel.
14 No. 18-1785
The district court subsequently granted the stay request in
part, agreeing to place the late-reporting penalty on hold but
not the injunction. R. 243. The court acknowledged that in
setting forth what the injunction required of Spectrum, it might
have “fall[en] short” of the specificity required by Federal Rule
of Civil Procedure 65(d)(1)(B) and (C). R. 243 at 4. With an eye
to correcting that problem, the district court ordered Spectrum
to file a memorandum detailing the specific steps it had
already taken to ensure compliance with the CPSA and the
CPSC’s regulations; it also ordered the government to file a
response as to the sufficiency of the measures Spectrum had
taken along with any proposals of its own. R. 243 at 4.
After reviewing the memoranda the parties subsequently
submitted, the court issued an opinion which modified the
terms of the injunction in order to clarify what specific conduct
would constitute compliance with the injunction’s directive to
improve and maintain sufficient systems, programs, and the
like to ensure compliance with the statute and regulations.
United States v. Spectrum Brands, Inc., 2018 WL 502736 (W.D.
Wis. Jan. 19, 2018). Cognizant of the limits on its authority to
alter the injunction in view of Spectrum’s pending appeal, the
court proceeded on the assumption that it could, at a mini-
mum, “preserve the status quo pending appeal and clarify the
injunction’s specific requirements.” Id. at *2; see Fed. R. Civ. P.
62(d) (as amended effective 12-1-2018); Newton v. Consol. Gas
Co. of N.Y., 258 U.S. 165, 177–78, 42 S. Ct. 264, 267 (1922);
Meinhold v. U.S. Dep’t of Defense, 34 F.3d 1469, 1480 n.14 (9th
Cir. 1994). Toward that end, the court incorporated into the
injunction six specific measures that Spectrum represented it
had already taken to improve its compliance processes and
No. 18-1785 15
which the court found to be “consistent with the spirit of [its]
original permanent injunction, if not its letter.” 2018 WL
502736, at *3.10 As modified, the injunction required Spectrum
to:
(1) Maintain the position of Senior Director, Global
Quality (or its equivalent) with qualifications
and authority to monitor (and if necessary,
enhance) Spectrum’s policies to ensure future
product quality and safety;
(2) Regularly track product safety information,
including product return rates, call center data,
and product “star” ratings by consumers on
various websites, and evaluate that informa-
tion to determine whether issues are being
identified and appropriately handled;
(3) Document calls and written communications
regarding potential and actual incidents and
injury information, collect products that are the
subject of reports by consumers or retail part-
ners of potential safety issues, analyze those
products and bring the results of any such
analysis to the attention of Spectrum’s Senior
Director, Global Quality (or its equivalent), and
10
Spectrum had evidently begun to implement some reforms to Applica’s
compliance procedures when Applica first became a subsidiary of Spectrum
in 2010.
16 No. 18-1785
others as appropriate, to determine whether
Spectrum has a reporting obligation to the
CPSC;
(4) Implement a formal “Request for Corrective
Action” procedure whereby quality engineers
and products safety managers can make a
request to change a product based on various
factors, including consumer complaints and
incidents;
(5) Maintain a “Product Hold Process” (or its
equivalent) through which the manufacture
and distribution of products can be placed on
hold for design issues, manufacturing issues,
performance issues, and safety issues, includ-
ing any and all such products that may be
returned to Spectrum by a warehouse, distribu-
tor, customer or otherwise to prevent the sale
of recalled products; and
(6) Ensure compliance training of responsible
employees on CPSA and/or CPSC regulations,
particularly with respect to section 15(b)’s
reporting requirement under 15 U.S.C.
§ 2064(b)(3)-(4) and the prohibition of the sale
of recalled products under 15 U.S.C.
§ 2068(a)(2)(B).
Id. at *2–*3, *4–*5 (emphasis in original). The court agreed with
the government, however, that these measures by themselves
might not be sufficient to ensure Spectrum’s compliance with
its legal obligations and avoid a repetition of the events that
No. 18-1785 17
had brought Spectrum into court here. Id. at *4. The court
accepted the government’s suggestion that Spectrum be
required to engage a professional consultant from outside the
company to evaluate Spectrum’s compliance processes and
make recommendations for additional improvements. In the
court’s view, “[h]iring an outside consultant is a straightfor-
ward, specific way for Spectrum to ensure its good faith
compliance with the permanent injunction, rather than
continuing to live under the vagueness of the admonition to
‘obey-the-law’ currently contained in the permanent injunc-
tion.” Id. The court therefore added the following command as
a final measure Spectrum was required to undertake:
(7) Defendant shall retain, at its own expense, an
independent expert, who, by reason of back-
ground, training and education is qualified to
assist in reviewing and recommending
changes, if necessary, to Spectrum’s compre-
hensive safety program for CPSA compliance,
with particular emphasis on compliance with
the section 15(b) reporting requirement and
procedures necessary to prevent the sale of
recalled products.
a. The parties may have 90 days to agree upon
an independent expert, or if the parties
cannot reach agreement, for each party to
designate one expert with whom the court
will consult to identify a neutral expert.
b. Following the retention of the neutral ex-
pert and that expert’s review, Spectrum
18 No. 18-1785
shall have 120 days to implement the rec-
ommendations made by that expert in good
faith, unless within 30 days of receiving a
recommendation, Spectrum files a written
challenge in this court on the basis that it is
unreasonable (in timeframe or otherwise)
or overreaches the number or severity of
defendant’s past violations of the CPSA, in
which case Spectrum need only implement
that recommendation by further order of
this court.
Id. at *4, *5. The court then added the following provision:
(8) Compliance with ¶¶ 1–7 shall be deemed good
faith compliance with this permanent injunc-
tion.
Id. The court recognized that the command to engage an
expert, in contrast with the other requirements it had imposed,
went beyond maintaining the status quo. It therefore stayed
enforcement of that requirement pending appeal. Id. at *4.
In view of these alterations to the injunction, the govern-
ment asked this court to treat the district court’s decision as an
indicative ruling, see Fed. R. Civ. P. 62.1(a)(3), and remand the
case to the district court so that the district court could re-enter
the injunction as modified and eliminate any question about
the district court’s authority to do so with an appeal already
pending. See Fed. R. App. P. 12.1; Seventh Circuit Rule 57; In re
Cent. Ill. Energy Coop., 847 F.3d 873, 874 (7th Cir. 2017) (Ripple,
J., in chambers); United States v. Ray, 831 F.3d 431, 436, 438 (7th
Cir. 2016); United States v. Taylor, 796 F.3d 788, 792 (7th Cir.
No. 18-1785 19
2015); Mendez v. Republic Bank, 725 F.3d 651, 656, 660 (7th Cir.
2013). The government reasoned that although the majority of
the specifications the court had added to the injunction
arguably could be characterized as simple clarifications that
were entirely permissible despite the appeal, the directive to
engage an expert consultant was a more substantive change
that might have exceeded the court’s limited authority.
We granted the government’s motion, remanded the case
to the district court, and dismissed Spectrum’s appeal. 2018
WL 2228179 (7th Cir. Feb. 23, 2018) (Bauer, J.). On remand, the
district court re-entered the injunction as modified, 2018 WL
1704773 (W.D. Wis. Apr. 9, 2018), and Spectrum took a fresh
appeal from the new judgment.
II.
Spectrum’s appeal is focused on two aspects of the reme-
dies the district court ordered for its violations of the CPSA. It
contends that the district court lacked authority to impose the
$821,000 penalty for its section 15(b) reporting violation,
because the government’s suit on that violation was barred by
the statute of limitations. Spectrum does not otherwise chal-
lenge the propriety or calculation of the penalty for failing to
report, nor does it challenge in any respect the $1.1 million
penalty the district court ordered for continuing to sell the
SpaceMaker coffeemakers in question after they were recalled.
As for the injunction the court entered, Spectrum presses
several arguments: that the court lacked authority to enter
forward-looking injunctive relief; that it abused its discretion
in thinking such relief was appropriate in this case; and that the
20 No. 18-1785
court abused its discretion in requiring the company to engage
an outside expert.
A. Statute of limitations for reporting violations
Section 15(b) does not specify a limitations period for
failure-to-report claims, so we look to the default, catchall
limitations provision for civil penalty actions set forth in 18
U.S.C. § 2462. In relevant part, that provision specifies that “an
action, suit or proceeding for the enforcement of any civil fine,
penalty, or forfeiture, pecuniary or otherwise, shall not be
entertained unless commenced within five years from the date
when the claim first accrued … .”
Spectrum argues that because its duty under section 15(b)
was to “immediately” report a potentially hazardous defect in
its product, and because the regulation makes clear that
“immediately” means within 24 hours of obtaining information
reasonably pointing to the existence of such a defect, the
government’s cause of action for Spectrum’s failure to make a
timely report first accrued no later than May 2009, by which
time the company had received from consumers 60 reports of
broken carafe handles and four burns associated with such
failures. In its summary judgment decision, the court found
that Spectrum arguably had a duty to make a report to the
Commission at that point. 218 F. Supp. 3d at 821–22.11 In
11
The court went on to find that Spectrum had a duty to make a section
15(b) report no later than June of 2010. 218 F. Supp. 3d at 822. But as
Spectrum points out, the court for purposes of calculating the monetary
penalties it imposed on the company took into account the consumer
complaints received in 2009. R. 234 at 13. So for the purposes of resolving
(continued...)
No. 18-1785 21
Spectrum’s view, the five years that section 2462 allowed for
filing suit thus began to run in May 2009 and expired in May
2014, roughly 13 months before the government actually filed
its complaint.
Like the district court, and for the same reasons, we reject
Spectrum’s contention that the government filed suit too late.
Because, as we shall explain, Spectrum’s failure to report is
properly understood to constitute a continuing violation of its
statutory reporting obligation that did not end until Spectrum
finally submitted a section 15(b) report in 2012, the statute of
limitations did not begin to run until that time. The govern-
ment thus had five years from the filing of Spectrum’s section
15(b) report to file suit, and it did so well before the limitations
period expired in 2017.
Spectrum contends that the Supreme Court’s decision in
Gabelli v. SEC, 568 U.S. 442, 133 S. Ct. 1216 (2013), forecloses the
notion that the failure to make the report required by section
15(b) is a continuing violation, but because that case addressed
the discovery rule—which the government is not relying upon
here—the case is, in our view, inapposite. In Gabelli, the
government had filed a civil enforcement action charging the
defendants with securities fraud and seeking monetary
penalties for the fraud some six years after the alleged scheme
of securities fraud had ended; as here, section 2462 supplied
the applicable statute of limitations—five years. The govern-
ment contended the suit was timely because it had only
11
(...continued)
Spectrum’s argument, we shall assume that its duty to report arose in May
2009.
22 No. 18-1785
discovered the fraud after the scheme was over, and less than
five years before filing suit. However, after noting that the
“standard rule” in such cases was that a claim accrues “when
the plaintiff has a complete and present cause of action,” i.e.,
when the fraud occurs, id. at 448, 133 S. Ct. at 1220 (quoting
Wallace v. Kato, 549 U.S. 384, 388, 127 S. Ct. 1091, 1095 (2007)),
the Court concluded that this was “the most natural reading of
[section 2462],” ibid. The Court rejected the government’s
invitation to invoke the discovery rule in order to lengthen the
time in which it could bring a suit in such a case. The Court
found no “textual, historical, or equitable reasons to graft a
discovery rule onto the statute of limitations of § 2462.” Id. at
454, 133 S. Ct. at 1224. “The discovery rule exists in part to
preserve the claims of victims who do not know they are
injured and who reasonably do not inquire as to any injury.”
Id. at 450, 133 S. Ct. at 1222. The government was not in a
position to claim the benefit of this rule in Gabelli.
The government was not a victim seeking recompense for
a self-concealing fraud; rather, it was a regulator seeking to
enforce the securities statutes through civil penalties. And in
the Court’s view, the equities did not warrant giving the
government in the latter capacity the benefit of an extended
statute of limitations. Whereas the typical fraud victim “do[es]
not live in a state of constant investigation” and will have no
reason to cause to search for wrongdoing in the absence of an
apparent injury, the very purpose of a regulatory agency like
the S.E.C. is to root out fraud, and such an agency—unlike the
ordinary private plaintiff—has any number of tools at its
disposal to do so. Id. at 450–51, 133 S. Ct. at 1222. And, whereas
a private victim of fraud typically brings suit seeking recom-
No. 18-1785 23
pense for his injury, the government in an enforcement action
seeks “penalties, which go beyond compensation, are intended
to punish, and label defendants wrongdoers.” Id. at 451–52, 133
S. Ct. at 1223. Moreover, given the arsenal of investigatory
tools available to the government, determining when it should
have been able to discover that a fraud had occurred presents
unique and difficult questions not ordinarily presented in a
case of a fraud perpetrated upon a private person. Id. at 452–53,
133 S. Ct. at 1223–24. “Applying a discovery rule to Govern-
ment penalty actions is far more challenging than applying the
rule to suits by defrauded victims, and we have no mandate
from Congress to undertake that challenge here.” Id. at 454, 133
S. Ct. at 1224.
The government in this case is not arguing that the statute
of limitations should be extended until such time as it had
reason to know of Spectrum’s failure to comply with its
reporting obligation under section 15(b). It is, instead, arguing
that Spectrum’s failure to report the defect in its product was
a continuing violation that did not cease until such time as the
company at last filed a section 15(b) report with the CPSC.
Gabelli sheds no light on whether a defendant’s violation of any
statute, let alone section 15(b), amounts to a continuing
violation.
The discovery rule and the continuing violation doctrine
are both equitable doctrines, but they serve different purposes
and operate in different ways. The discovery rule is designed
to protect a plaintiff who through no fault of his own does not
learn that a defendant has caused him harm until the limita-
tions period has already run; the discovery rule thus delays the
accrual of his cause of action until such time as he reasonably
24 No. 18-1785
could have discovered the defendant’s wrongdoing. See Gabelli,
568 U.S. at 449, 133 S. Ct. at 1221; Rodrigue v. Olin Employees
Credit Union, 406 F.3d 434, 444 (7th Cir. 2005); Ellul v. Congrega-
tion of Christian Bros., 774 F.3d 791, 799, 801 (2d Cir. 2014). The
continuing violation doctrine, on the other hand, is aimed at
ensuring that illegal conduct is punished by preventing a
defendant from invoking the earliest manifestation of its
wrongdoing as a means of running out the limitations clock on
a course of misconduct that persisted over time; the doctrine
serves that end by treating the defendant’s misconduct as a
continuing wrong and deeming an action timely so long as the
last act evidencing a defendant’s violation falls within the
limitations period. See Karraker v. Rent-A-Center, Inc., 411 F.3d
831, 837 (7th Cir. 2005); Shanoff v. Ill. Dep’t of Human Servs., 258
F.3d 696, 703 (7th Cir. 2001); Selan v. Kiley, 969 F.2d 560, 564
(7th Cir. 1992); Miami Nation of Indians of Ind., Inc. v. Lujan, 832
F. Supp. 253, 256 (N.D. Ind. 1993), j. aff’d, 255 F.3d 342 (7th Cir.
2001); see also O’Loghlin v. Cnty. of Orange, 229 F.3d 871, 875 (9th
Cir. 2000). Thus, where the violation at issue can be character-
ized as a continuing wrong, the limitations period begins to
run not when an action on the violation could first be brought,
but when the course of illegal conduct is complete. Taylor v.
Meirick, 712 F.2d 1112, 1118 (7th Cir. 1983) (“the statute of
limitations does not begin to run on a continuing wrong till the
wrong is over and done with”).
Our decision in United States v. Yashar, 166 F.3d 873 (7th Cir.
1999), addresses the question of when a defendant’s statutory
transgression is properly understood to be a continuing
violation to which this doctrine would apply. Yashar, a criminal
No. 18-1785 25
case,12 recognized that an offense is ordinarily deemed to have
been committed—thus triggering the statute of limita-
tions—when each element of the offense is present. Id. at 875.
But continuing offenses, Yashar recognized, are an exception to
that rule. We explained that a criminal offense is treated as
continuing only if the substantive criminal statute explicitly
compels that conclusion or if “‘the nature of the crime involved
is such that Congress must assuredly have intended it be
treated as a continuing one.’” Id. (quoting Toussie v. United
States, 397 U.S. 112, 115, 90 S. Ct. 858, 860 (1970)). “The hall-
mark of the continuing offense is that it perdures beyond the
initial illegal act, and that ‘each day brings a renewed threat of
the evil Congress sought to prevent’ even after the elements
necessary to establish the crime have occurred.” Id. (quoting
Toussie, 397 U.S. at 122, 90 S. Ct. at 864). We later added that
when assessing the nature of an offense, the appropriate focus
is not on the nature of the defendant’s actions, but rather on
the statutory language defining the offense. Id. at 877. “If the
statute describes an offense that by its nature continues after
the elements have been met, then the offense is a continuing
one regardless of the nature of defendant’s actions beyond that
point.” Id.
In our view, the terms and purpose of section 15(b) leave no
doubt that the failure to report a defect is a wrong that contin-
ues beyond a company’s initial failure to report. The statute
requires a consumer products manufacturer, retailer, or
12
The continuing violation doctrine, of course, is not limited to the
criminal context. See, e.g., Taylor, 712 F.2d at 1118; Miami Nation, 832 F.
Supp. at 256.
26 No. 18-1785
distributor which comes into possession of information
supporting the conclusion that its product has a potentially
hazardous defect to file a report with the Commission; the
company is relieved of that obligation only if it knows that the
Commission has already been properly informed of that defect.
Although, as Spectrum naturally emphasizes, the company’s
duty is to make an immediate report, which the regulation
defines to mean within 24 hours of the company coming into
information regarding the hazard posed by its product, there
is no reason to think that the company’s dereliction of its duty
is a one-time defalcation that is complete for statute of limita-
tions purposes once 24 hours have passed without the filing of
a report. The statutory obligation, after all, is to convey
information to the Commission so that it may take action as
necessary to protect the public from the potential harm posed
by the company’s product. See Zepik v. Tidewater Midwest, Inc.,
856 F.2d 936, 944 (7th Cir. 1988) (“The Commission had come
to rely heavily on reports from manufacturers and sellers and
views underreporting as a serious problem.”); Drake v.
Honeywell, Inc., 797 F.2d 603, 611 (8th Cir. 1986) (“Compliance
by manufacturers, distributors, and retailers with section 15(b)
obviously is critical to the fulfillment of the congressional
purpose, to ‘protect the public against unreasonable risks of
injuries associated with consumer products.’”) (quoting 15
U.S.C. § 2051(b)(1) (1982)); United States v. Advance Mach. Co.,
547 F. Supp. 1085, 1090 (D. Minn. 1982) (“Congress intended to
increase the likelihood that a substantial product hazard will
come to the attention of the Commission in a timely fashion so
that it c[an] act swiftly to protect the consuming public.”).
Nothing about the significance of that information or the need
No. 18-1785 27
for governmental intervention changes with the passage of
time in and of itself: So long as the defective product is offered
for sale and otherwise remains in use by consumers, the
potential danger presented by the product and the need for
action to address that danger remain unabated. Thus, although
a product distributor may have breached its obligation under
section 15(b) by sitting on information regarding a product
hazard for more than 24 hours, its transgression continues so
long as it fails to file the requisite report with the CPSC. To
paraphrase Yashar, once a company has omitted to “immedi-
ately” inform the Commission of a potentially hazardous
product defect, the elements of its statutory breach are present,
but the wrong manifested by its silence perdures beyond the
initial failure to make a timely report. The fact that the statute
relieves the manufacturer, distributor, or retailer of the duty to
report only when the company has actual knowledge that the
Commission already knows about the defect reinforces the
point: the duty is tied to the Commission’s awareness of the
defect rather than the passage of any arbitrary period of time.
See United States v. Michaels Stores, Inc., 2016 WL 1090666, at *2
(N.D. Tex. Mar. 21, 2016) (duty to report under section 15(b) is
continuing one and limitations period does not begin to run
until defendant has actual knowledge that Commission is
adequately informed of product defect); Advance Mach., 547
F. Supp. at 1089–92 (same); cf. Postow v. OBA Fed. Sav. & Loan
Ass’n, 627 F.2d 1370, 1379–80 (D.C. Cir. 1980) (construing
mortgage lender’s failure to make specified disclosures to
borrower regarding certain fees and closing costs before loan
commitment letter is issued, as required by Truth-in-Lending
Act, 15 U.S.C. § 1639(b) (1976), to constitute limited continuing
28 No. 18-1785
violation—inhibiting buyer’s ability to compare bank’s offer
with others—that lasted beyond issuance of commitment letter
until such time as disclosure was made at settlement, at which
point borrower could still walk away without signing loan
agreement).
The facts of this case reveal that Spectrum’s failure to report
the potential danger posed by its carafe was continuing in a
second sense. Spectrum did not come into information reveal-
ing the hazard on one occasion, but on many occasions in the
years that it remained silent. Recall that by the time Spectrum
finally filed its section 15(b) report, it had received over 1,600
complaints from customers. Each time it received a consumer
complaint regarding a carafe failure, Spectrum had a fresh
opportunity and obligation to consider the potentially hazard-
ous nature of its product and to reassess its reporting obliga-
tion. And with each new complaint, it would have become
more clear to Spectrum that the incidents its customers were
reporting were not flukes, and that carafe failures and con-
sumer injuries would continue so long as the defective version
or versions of the carafe remained in circulation. To say then,
as Spectrum does, that both its duty to report and its failure to
report were ripe at a single point in time—May 2009—and that
the limitations period began to tick irrevocably at that time, is
to ignore that the potential hazard posed by its product
persisted beyond that point, and with each additional com-
plaint of a carafe failure, the company was placed on renewed
notice of an ever more compelling need to act. These com-
plaints continued right up until the time that Spectrum finally
filed its section 15(b) report with the CPSC in 2012. To para-
phrase Yashar’s rationale again, each day that Spectrum did not
No. 18-1785 29
make a report to the Commission brought a renewed threat of
the evil that Congress sought to prevent by requiring a
company to report a possible hazard with its product. 166 F.3d
at 875. Whether one views Spectrum’s silence in response to
each new complaint as a separate violation of section 15(b), or
instead sees the unending stream of complaints as a manifesta-
tion of the continuing risks posed by the company’s failure to
report the hazard to the Commission, it is clear that the nature
of Spectrum’s wrongdoing cannot logically be confined to one
point in time but must be seen as a continuing wrong. See
O’Loghlin v. Cnty. of Orange, supra, 229 F.3d at 875 (“an impor-
tant purpose of the continuing violation doctrine is to prevent
a defendant from using its earlier illegal conduct to avoid
liability for later illegal conduct of the same sort”); cf. Birkelbach
v. S.E.C., 751 F.3d 472, 479 (7th Cir. 2014) (on review of order
disciplining securities principal for failure to supervise associ-
ate, it would be “absurd” to treat failure to supervise as single
indivisible act which accrued, for limitations purposes, on first
day of failure to supervise and to ignore fact that failure of
supervision persisted thereafter: “Under [defendant’s] inter-
pretation, if an unethical supervisor were to avoid detection for
five years, he could continue his unethical behavior forever
without [the government] being able to discipline him.”).
Against this logic Spectrum invokes our decision in United
States v. Midwest Generation, LLC, 720 F.3d 644 (7th Cir. 2013),
which declined to construe the failure to obtain a pre-construc-
tion permit as required by statute to be a continuing violation.
The provision of the Clean Air Act at issue in Midwest Genera-
tion required the operator of power plants and other “major
emitting facilities” to obtain a construction permit before
30 No. 18-1785
commencing substantial modifications to their facilities. 42
U.S.C. § 7475(a). A permit was required, in relevant part, in
order to give regulators the opportunity to condition approval
of the proposed modifications upon the installation of the best-
available pollution-reducing measures. Between 1994 and 1999,
Commonwealth Edison Co. (“ComEd”) made modifications to
five of its coal-fired power plants without first obtaining
permits; ComEd contended that the nature of the modifications
it made to the plants did not require permits. The government
disagreed, but it did not file suit to enforce the permit require-
ment until 2009, a decade or more after the modifications were
made. ComEd invoked the five-year limitations period
specified by section 2462 and argued that the suit was un-
timely. As relevant here, the government excused the delay by
arguing that ComEd’s failure to obtain the permits mandated
by the statute was a continuing violation that persisted beyond
the point at which work on the modifications began.
We understood the government’s argument to posit that
“every day a plant operates without a § 7475 permit is a fresh
violation of the Clean Air Act.” 720 F.3d at 647, and we rejected
that contention:
The violation is complete when construction com-
mences without a permit in hand. Nothing in the
text of § 7475 even hints at the possibility that a fresh
violation occurs every day until the end of the
universe if an owner that lacks a construction permit
operates a completed facility. Gabelli tells us not to
read statutes in a way that would abolish effective
time constraints on litigation.
No. 18-1785 31
Id. We went on to reject the government’s follow-up contention
that the suit was nonetheless timely because ComEd’s failure
to obtain the requisite permits—the issuance of which would
have been conditioned on ComEd’s installation of the best-
available pollution control technologies—had resulted in
continuing injury to the public in the form of power plant
emissions that were higher than they would have been had
permits been sought. Current plant emissions were governed
by rules other than section 7475, we pointed out, and those
emissions could not be characterized as “unlawful” simply
because ComEd had never obtained construction permits
within the (expired) limitations period. Id. at 648. “Once the
statute of limitations expired, Commonwealth Edison was
entitled to proceed as if it possessed all required construction
permits.” Id.; accord Sierra Club v. Okla. Gas & Elec. Co., 816 F.3d
666, 672 (10th Cir. 2016) (“It is the act of constructing itself
[without a permit] that is unlawful.”).
Midwest Generation is distinguishable in material respects
from this case. The statute at issue in Midwest Generation
incorporated an explicit and obvious external deadline for the
obligation it imposed: the company was required to obtain a
permit before construction commenced. There is no compara-
ble deadline set forth in section 15(b): the statute calls for a
timely (i.e. immediate) disclosure, but it does not tie that
disclosure to some other event or point in time akin to the
commencement of construction. See Colo. Dep’t of Public Health
& Environ. v. U.S., 2019 WL 1147601, at *8 (D. Colo. Mar. 13,
2019). Moreover, when the deadline in Midwest Generations
came and went with the commencement of construction, the
nature of the problem changed materially from a regulatory
32 No. 18-1785
standpoint. Once the utility company had modified its power
plants, permits were a moot point; there was no longer an
opportunity for regulators to review the proposed modifica-
tions and condition those modifications upon the installation
of better pollution controls. The harm post-construction was
now higher emissions of pollutants, and that harm, as we
pointed out, was subject to remedy via different statutory
provisions. By contrast, the wrongfulness of Spectrum’s failure
to disclose the potential defect in its product neither ended nor
transmogrified into a different form as of any particular time.
At all times, the failure to disclose deprived the Commission of
the opportunity to investigate the product and take appropri-
ate action (including a product recall) in order to protect
consumers; and that wrong and the hazard it posed could be
addressed no matter how long it took for Spectrum to make its
disclosure to the Commission.
Nor are we persuaded by Spectrum’s contention that the
single express reference to a continuing violation in one section
of the CPSA’s civil penalty provision, 15 U.S.C. § 2069, rules
out treating a section 15(b) violation as a continuing wrong.
The provision in question treats each failure to keep appropri-
ate records and allow an inspection of those records, see 15
U.S.C. § 2068(a)(3), as a separate violation of the act for
purposes of calculating the appropriate penalty (to be capped
at $100,000 per violation), and “if such violation is a continuing
one,” treats each day that the violation persists as a separate
offense (subject to a maximum penalty of $15 million, as
adjusted by inflation), § 2069(a)(1). The recognition that one
type of violation of the CPSA (a failure of record-keeping) can
be a continuing offense, for penalty assessment purposes, does
No. 18-1785 33
not rule out the possibility that another violation, including the
failure to report a potentially hazardous product defect, can be
a continuing offense for limitations purposes. See Advanced
Mach., 547 F. Supp. at 1090.
We have not overlooked a recurring theme in Spectrum’s
arguments—that treating a failure to report as a continuing
violation is, if nothing else, inconsistent with the “first accrues”
language of section 2462. The company reasons that so long as
Spectrum had come into the requisite information about a
possible product hazard and failed to make a report within 24
hours, it was in violation of the statute and all elements of the
government’s cause of action were established; thus, the
government’s reporting claim first accrued at that time, and the
limitations clock began to tick, giving the government five
years from that date to commence suit.
There is a superficial logic to this line of argument, but it
fails to recognize the underlying rationale of the continuing
violation doctrine. Cases applying this doctrine recognize that
the elements of a crime or a civil statutory violation may be
present early on in the course of a defendant’s wrongdoing, so
that the government, if it were aware of the wrongdoing,
would be free to pursue a charge. But given the continuing
nature of the underlying wrong, the doctrine delays the accrual
of the government’s cause of action, for limitations purposes,
until the defendant’s last act. See United States v. Elliott, 467
F.3d 688, 690 (7th Cir. 2006) (“All continuing offenses work the
same way. Someone commits the crime of conspiracy by
agreeing to commit a future crime (and, for some conspiracy
statutes, by committing an overt act); he may be prosecuted
even if he repents ere the clock strikes midnight. The offense
34 No. 18-1785
nonetheless continues (for limitations purposes) until he
withdraws or is captured. Likewise the crime of escape,
complete when the prisoner leaves custody, continues until he
turns himself in or is nabbed.”); Yashar, 166 F.3d at 875–76;
Womack v. Brady McCasland, Inc., 2017 WL 2828708, at *6
(S.D. Ill. June 29, 2017) (civil case) (applying Illinois law). So
although nothing would have prevented the Commission from
bringing suit in May 2009 had the Commission been aware of
the material facts, the continuing violation doctrine delayed the
clock from running on the government’s right to bring suit
until such time as Spectrum filed its section 15(b) report and its
ongoing violation of the statute ended.
We recognize that Gabelli admonishes us not to construe a
statute of limitations in such a way as to “abolish effective time
constraints on litigation.” Midwest Generating, 720 F.3d at 647.
But, for all of the reasons we have explained, the duty to report
a potentially dangerous defect in a product so that the Com-
mission can take appropriate action to protect consumers is
necessarily an ongoing duty which, by the terms of section
15(b), does not end until such time as the product’s maker,
distributor, or seller either makes a report or actually knows
the Commission has been properly informed. At all times, it
was within Spectrum’s ability to start the clock running on the
government’s cause of action by filing a section 15(b) report.
The filing of such a report entails minimal time and effort.13 It
could not have been the intent of Congress to treat the failure
13
Testimony presented to the district court indicates that the appropriate
reporting form can be filled out and submitted to the Commission via the
internet within a matter of minutes.
No. 18-1785 35
to make such a report as a “one and done” event that confines
a company’s duty, for limitations purposes, to the earliest
possible point in time and effectively ignores the stream of
consumer complaints presented to the company in the ensuing
months and years, the many opportunities the company had to
reevaluate its obligation to report, and the missed opportuni-
ties for the Commission to take remedial action to protect
consumers.
This action is therefore timely. For purposes of the statute
of limitations, Spectrum’s wrongdoing did not end, and the
government’s cause of action did not first accrue, until April
2012, when the company finally complied with its section 15(b)
obligation by filing a report with the Commission.
B. Propriety of permanent injunction
Spectrum also challenges the permanent injunctive relief
awarded by the district court. As we have noted, Spectrum
contends in the first instance that the court had no authority to
enter a permanent, forward-looking injunction in the absence
of an ongoing violation of the CPSC. Beyond that, the company
argues that it was an abuse of discretion for the court to order
such relief here, and in particular to require the company to
engage an expert to evaluate its compliance procedures and
make recommendations for improvements.
We reject at the outset Spectrum’s contention that the CPSA
does not authorize forward-looking injunctive relief. Section
22(a) of the Act authorizes a district court to “[r]estrain any
violation of section 2068 of this title.” 15 U.S.C. § 2071(a)(1).
“Any” is a broad term that to our mind, and contrary to
Spectrum’s understanding, is not limited to ongoing violations
36 No. 18-1785
of the statute but also encompasses prospective violations as
well. See Affiliated Ute Citizens of Utah v. United States, 406 U.S.
128, 151, 92 S. Ct. 1456, 1471 (1972) (recognizing that “any” is
a broad, inclusive term); cf. Manning v. United States, 546 F.3d
430, 436 (7th Cir. 2008) (rejecting plaintiff’s contention that
provision of Federal Tort Claims Act, 28 U.S.C. § 2676, specify-
ing that judgment in FTCA action constitutes a complete bar to
“any action” by claimant, applies only to future actions:
“Section § 2676 applies to ‘any action’; ‘any’ means ‘any,’
regardless of the sequencing of the judgments.”). Indeed, given
that an injunction by its nature regulates the conduct of the
enjoined party going forward, Shore v. United States, 282 F. 857,
859 (7th Cir. 1922) (“Relief by injunction looks toward the
future.”), the natural assumption, in the absence of an express
limitation on the court’s power, would be that Congress
intended to authorize injunctive relief aimed at a preventing a
repetition of the wrongful acts that the court has found to have
already occurred. See N.L.R.B. v. Express Pub. Co., 312 U.S. 426,
435, 61 S. Ct. 693, 699 (1941) (“A federal court has broad power
to restrain acts which are of the same type or class as unlawful
acts which the court has found to have been committed or
whose commission in the future unless enjoined, may fairly be
anticipated from the defendant's conduct in the past.”); Russian
Media Grp., LLC v. Cable America, Inc., 598 F.3d 302, 307 (7th Cir.
2010); Lineback v. Spurino Mat’ls, LLC, 546 F.3d 491, 504 (7th Cir.
2008). Thus, we are not persuaded that the lack of express
statutory authorization for forward-looking injunctive relief, cf.
15 U.S.C. §§ 77t(b), 78u(d)(1) (authorizing injunctions to
restrain imminent violations of securities laws), deprived the
district court of the power to enter such an injunction.
No. 18-1785 37
Nor has Spectrum persuaded us that the district court
abused its discretion in deciding that injunctive relief is
appropriate in this case. The burden of proof on this point of
course belonged to the government, and the court did not
improperly shift the burden to Spectrum, as the company
suggests it did. R. 234 at 17 (recognizing that burden belonged
to government as plaintiff); R. 234 at 21 (“the court finds that
plaintiff has made an adequate showing of the need for
permanent injunctive relief …”). The burden was not onerous:
once the government “has demonstrated a past violation, it
need only show that there is a reasonable likelihood of future
violations in order to obtain injunctive relief.” SEC v. Yang, 795
F.3d 674, 681 (7th Cir. 2015) (quoting S.E.C. v. Holschuh, 694
F.2d 130, 144 (7th Cir. 1982)). The district court did not clearly
err in finding that the government met this burden. Spectrum
describes its violations as an “isolated occurrence.” Spectrum
Reply Br. 22. That may be true in the sense that its violations of
the CPSA involved a single defect in one line of coffeemakers.
But it is not isolated in any other sense of the word. For three
years after Spectrum itself concluded that the original handle
on its SpaceMaker carafe was defective and ordered changes
to the design, the company failed to report the defect to the
CPSC, notwithstanding the many hundreds of complaints it
continued to receive during that period and the knowledge
that the handle failures resulted in consumer injuries with
some regularity. And when it finally recalled the coffeemaker,
Spectrum (inadvertently) continued to sell the product. The
evidence produced at the remedies hearing showed—and the
district court found—that Spectrum’s violations of the statute
were due to serious and systemic defalcations within the
38 No. 18-1785
company, among them: a failure of communication between
staff who were familiar with the defects in the design of the
original carafe handle and staff who handled customer
complaints; a failure among senior managers to meaningfully
confront the situation with the coffeemaker’s carafe until 2012
despite knowing as early as April 2009 that there were prob-
lems with the product; the lack of systems to prevent the
continued distribution of recalled products; and the failure to
train staff on compliance with the CPSA.
Given the gravity of these failures and the company’s delay
in complying with its reporting obligation, the district court
justifiably concluded that there was a reasonable likelihood
that Spectrum might again commit similar violations of the
statute in the future. To be sure, Spectrum by the time of the
remedies hearing had undertaken significant efforts to address
the weaknesses in its corporate culture that had resulted in its
continued sales of the defective coffeemaker and its failure to
timely report the hazard posed by the defect to the Commis-
sion. But, as the district court pointed out, Spectrum had not
submitted to an independent audit to evaluate its compliance
systems or processes and to solicit external advice as to what
additional changes, if any, might be prudent. Nor, we would
add, was there evidence before the court as to how effective the
remedial measures undertaken by the company in the wake of
the coffeemaker matter had thus far proven to be in practice.
The court reasonably concluded that a permanent injunction
requiring the company to take specified categories of proactive
measures was a necessary and appropriate step aimed at
reducing the likelihood that the company would, in the future,
commit violations similar to those that had led the court to fine
No. 18-1785 39
the company. And, of course, pursuant to Fed. R. Civ. P. 60(b)
and Rufo v. Inmates of Suffolk Cnty. Jail, 502 U.S. 367, 112 S. Ct.
748 (1992), Spectrum retains the right to seek a modification
and/or lifting of the injunction at a future date as any material
change in the circumstances warrant.
Finally, the district court did not err in ordering the
company to employ an independent auditor as one of these
proactive measures. Spectrum’s objections to this requirement
fall into two categories: procedural and substantive.
Spectrum’s first contention is that the district court lacked
authority to amend the injunction to add the consultant
requirement. In Spectrum’s view, the requirement constituted
not a mere clarification of the original injunction but a new,
substantive requirement that represented a substantial change
from the terms of the injunction as originally entered; and
although the district court had the authority to modify the
judgment, see Rufo, 502 U.S. 367, 112 S. Ct. 748; Protectoseal Co.
v. Barancik, 23 F.3d 1184, 1187 (7th Cir. 1994), the government
itself never made a motion pursuant to Rule 60 asking the
court to entertain such a modification.
Given the sequence of events that led to the final injunction
as amended, however, the district court was within its rights to
consider a modification of this nature. Recall that in its first
iteration, the injunction ordered Spectrum to “maintain
sufficient systems, programs, and internal controls to ensure
compliance with the CPSA and the regulations enforced by the
CPSC” and, within a period of six months, to “implement
appropriate improvements to its compliance programs.” R. 234
at 22. When Spectrum subsequently sought a partial stay of the
40 No. 18-1785
district court’s judgment pending appeal, including most of the
requirements imposed by the injunction, the company argued
among other things that the injunction was impermissibly
vague and overbroad. It was in response to that line of argu-
ment that the court, recognizing that its injunction may not
have been as specific and concrete as it ought to have been,
treated Spectrum’s motion as one to clarify the obligations
imposed by the injunction. R. 243 at 3–4. Following briefing as
to the nature and sufficiency of the improvements Spectrum
had already made to its compliance procedures and programs,
the court endeavored to do just that. It modified the injunction
to include six specific requirements tracking the improvements
Spectrum averred were already in place; the court viewed
these improvements as sufficient to resolve Spectrum’s
concerns about the vagueness of the injunction and to ensure
preservation of the status quo pending appeal. 2018 WL
502736, at *2–*3. But the court agreed with the government that
these improvements might not be sufficient, in and of them-
selves, to ensure compliance with the spirit of the court’s
injunction and to avoid a repetition of the events that led to the
company’s violation of the CPSA. For that reason, the court
accepted the government’s proposal that Spectrum also be
required to engage an outside consultant to assess the efficacy
of its compliance systems. Id. at *4. The court viewed the
consultant as “a straightforward, specific way for Spectrum to
ensure its good faith compliance with the permanent injunc-
tion, rather than continuing to live under the vagueness of the
admonition to ‘obey-the-law’ currently contained in the
permanent injunction.” Id. Recognizing, however, that engag-
No. 18-1785 41
ing a consultant went beyond the status quo, the court stayed
enforcement of that specific requirement pending appeal. Id.
To the extent the requirement to engage a consultant
constituted a substantive modification, as opposed to a simple
clarification, of the original injunction, it was well within the
court’s authority to make this modification in response to
Spectrum’s arguments that the injunction’s vagueness made it
impossible for the company to know how precisely to comply
with the court’s command. R. 237 at 6. True, Spectrum did not
formally ask the court to modify the injunction and neither did
the government separately make such a motion. But it was well
within the court’s power to look beyond the label to the
substance of Spectrum’s motion and to treat the request for a
stay not only as one to clarify the injunction, but also as one to
modify the injunction as necessary to address Spectrum’s
concerns—which is precisely how the court construed the
motion. R. 243 at 3–4 & n.1. Our subsequent remand of the case
to the district court eliminated any question as to whether the
court had jurisdiction to make this change and the other
amendments to the judgment. See Doctors Nursing & Rehab. Ctr.
v. Sebelius, 613 F.3d 672, 677–78 (7th Cir. 2010); Chicago Downs
Ass’n v. Chase, 944 F.2d 366, 370 (7th Cir. 1991); Textile Banking
Co. v. Rentschler, 657 F.2d 844, 849–50 (7th Cir. 1981).
Nor did the district court abuse its discretion in concluding
that an outside consultant was warranted. As the parties agree,
this provision is commonly included in consent decrees as a
means of insuring that the problems that have given rise to
litigation are, in fact, resolved. See R. 254 at 9 n.4 (collecting
consent decrees in CPSA cases requiring employment of
42 No. 18-1785
outside experts); NW Environ. Defense Ctr. v. H&H Welding,
2015 WL 7820958, at *4 (D. Ore. Oct. 13, 2015); F.T.C. v. Nat’l
Urological Grp., Inc., 2006 WL 8431977, at *1 (N.D. Ga. Jan. 9,
2006); E.E.O.C. v. Harvest Med. Clinic, Inc., 2005 WL 2484668, at
*2 (D. Az. Sept. 14, 2005). Spectrum, of course, did not enter
into a consent decree, but that by no means undermines the
utility or propriety of requiring it to engage an outside expert.
See, e.g., United States v. Blue Ribbon Smoked Fish, Inc., 179
F. Supp. 2d 30, 50–51 (E.D.N.Y. 2001) (sustaining government’s
request that defendant be ordered either to pay for agency
inspections or to hire outside consultant to monitor food
safety), j. aff’d in part, vacated in part on other grounds, & re-
manded, 56 F. App’x 542 (2d Cir. 2003). The omissions that gave
rise to Spectrum’s liability in this case were significant and
prolonged, and unnecessarily exposed a significant number of
consumers to physical harm. There appears to be no dispute
that wholesale reforms to Spectrum’s regulatory compliance
systems and culture were called for; the number of consumer
products that Spectrum distributes only makes the need for
those reforms more imperative. Although the company had
endeavored to make the changes needed, those reforms, as we
have said, had not been subjected to independent scrutiny. It
was reasonable for the district judge to think that a second
opinion as to the sufficiency of these reforms would be useful
as an additional means of ensuring that Spectrum did not
commit similar violations in the future. Moreover, Spectrum
itself, in seeking a partial stay of the judgment, had expressed
concern about its ability to comply with the spirit of the court’s
injunction. It complained of the “difficulties inherent in
operating a large consumer business pursuant to a vague
No. 18-1785 43
injunction that does not specify what Spectrum must do in
order to ensure that it is complying with the Court’s order.”
R. 237 at 6. The advice of an independent consultant would no
doubt help to address this very concern. We add, finally, that
the district court included a procedure for judicial review of
any proposals by the consultant that Spectrum found objec-
tionable, which will serve as a check on the consultant’s
authority.
III.
For all of the reasons we have discussed, the judgment of
the district court is AFFIRMED.
44 No. 18‐1785
MANION, Circuit Judge, concurring in part and concurring
in the judgment. I write separately to note a narrow point of
disagreement with the court’s detailed opinion relating to the
statute of limitations issue.1 I agree Spectrum’s2 conduct
amounts to a “continuing violation” that lasted into 2012, and
therefore the government’s complaint was timely. I disagree,
however, concerning the nature of that continuing violation.
The court relies on United States v. Yashar, 166 F.3d 873 (7th
Cir. 1999), and concludes a failure to report is a single contin‐
uing wrong that lasts until a report is filed3 because the failure
“perdures beyond the initial failure to make a timely report.”
Maj. Op. at 27. I, on the other hand, view the failure to report
as a series of isolated acts that continue to occur each time
when an entity fails to report within 24 hours of obtaining suf‐
ficient information to trigger the requirement. See 15 U.S.C. §
2064(b); 16 C.F.R. § 1115.14(e).
Nevertheless, given the facts in this case, my understand‐
ing does not change the outcome. Because Spectrum did not
report to the Commission when its duty first arose in 2009,
each new consumer complaint and subsequent failure to re‐
port amounted to a recurring series of violations of the
1 I join in full the court’s opinion as it concerns the appropriateness
of the district court’s injunction.
2 Like the court, I treat Spectrum and its former subsidiary Applica
Consumer Products, Inc., as one and the same company. See Maj. Op. at
2 n.1.
3 The failure also ends if the requirement to file a report is obviated
by the Commission “inform[ing] the subject firm” it is already “ade‐
quately informed.” 16 C.F.R. § 1115.3(a).
No. 18‐1785 45
reporting requirement.4 Thus, Spectrum’s persistent failure to
file a report with the Commission as it continued to obtain
information showing its product was dangerously defective
was a “continuing violation” that continued into 2012,5 and
the government’s 2015 complaint was timely.6 See Shanoff v.
Ill. Dept. of Human Servs., 258 F.3d 696, 703 (7th Cir. 2001)
(“The continuing violation doctrine allows a plaintiff to get
relief for time‐barred acts by linking them with acts within the
limitations period.”); Selan v. Kiley, 969 F.2d 560, 564 (7th Cir.
1992) (announcing the same rule); Taylor v. Meirick, 712 F.2d
1112, 1118 (7th Cir. 1983) (“[T]he statute of limitations does
not begin to run on a continuing wrong till the wrong is over
and done with … .”).
*****
From January 2009 to April 2012, Spectrum received 1,620
customer complaints; a rate of more than one per day. Spec‐
trum could have filed its report to the Commission much
sooner than it did, and that date, at the latest, would be the
4 The court acknowledges this as a possibility, but it does not con‐
sider it dispositive. See Maj. Op. at 29. I think it is dispositive.
5 When Spectrum finally filed its report with the Commission in
April 2012, it definitively prevented further violations of the reporting
requirement. At that point, information may have triggered a duty to
supplement the report already filed, see 16 C.F.R. § 1115.13(d), but there
could no longer be violations of the initial duty to report because the
Commission would have knowledge of the defect, see 15 U.S.C. 2064(b).
6 I point out that in February 2014—within the limitations period as
even Spectrum would have it—the government sent Spectrum a letter
explaining its belief Spectrum had violated the reporting requirement
and penalties were appropriate. Nevertheless, for some reason it delayed
filing its complaint until June 2015.
46 No. 18‐1785
start of the five‐year limitations period. The government
would then have five years to file a complaint, probably not‐
ing that customers continued to complain. If Spectrum and
the government had proceeded accordingly, this case would
not be here.
But as it is, Spectrum engaged in a series of violations of
the reporting requirement that lasted into 2012. It cannot hide
behind the untimeliness of its self‐imposed delay in reporting
a problem that developed months and years earlier. The gov‐
ernment timely filed its complaint in 2015.