Zen Magnets, LLC v. Consumer Product Safety Commission

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS November 22, 2016
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
ZEN MAGNETS, LLC,
Petitioner,
v. No. 14-9610
CONSUMER PRODUCT SAFETY
COMMISSION,
Respondent.
_________________________________
Petition for Review of the
Consumer Products Safety Commission
(CPSC No. CPSC 2012 0050)
_________________________________
David C. Japha, Law Offices of David C. Japha, P.C., Denver, Colorado, for Petitioner.
Daniel Tenny (Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Adam
C. Jed, and Mark R. Freeman, Attorneys, on the brief) U.S. Department of Justice,
Washington, D.C., for Respondent.
_________________________________
Before GORSUCH, EBEL, and BACHARACH, Circuit Judges.
_________________________________
EBEL, Circuit Judge.
_________________________________
Petitioner Zen Magnets, LLC (“Zen”) challenges a regulation promulgated by
Respondent Consumer Product Safety Commission (“the Commission”) restricting
the size and strength of the rare earth magnets that Zen sells. See Final Rule: Safety
Standard for Magnet Sets, 79 Fed. Reg. 59,962 (Oct. 3, 2014) (codified at 16 C.F.R.
§§ 1240.1-1240.5). We conclude that the Commission’s prerequisite factual findings,
which are compulsory under the Consumer Product Safety Act, 15 U.S.C. §§ 2051-
2089, are incomplete and inadequately explained. Accordingly, we VACATE and
REMAND to the Commission.
I. BACKGROUND
This case concerns sets of small, high-powered magnets (“magnet sets”) that
users can arrange and rearrange in various geometric designs. The component
magnets are unusually small (their diameters are approximately five millimeters) and
unusually powerful (due to rare earth metal cores, their magnetic flux index1 ranges
from 400 to 500 kG2mm2). A set typically comprises on the order of 100 to 200
identical spherical magnets, coated in reflective silver or other bright colors.
Magnets of this type were introduced to the United States circa 2009. They have
since been marketed and sold to consumers—by Zen and other distributors—as
desktop trinkets, stress-relief puzzles, and toys, and apparently also for educational
and scientific purposes.
Although the strength of these magnets is part of their appeal, it can also pose
a grave danger when the magnets are misused. Specifically, if two or more magnets
are ingested—a temptation to which children are especially at risk—they can cause
serious damage to intestinal tissue that becomes tightly clamped between them.
1
Magnetic flux index is one way to estimate the attractive force of a magnet.
2
Attendant medical consequences can include hospitalization and surgery for such
injuries as perforations, infections, gastrointestinal bleeding, and tissue death. The
danger is compounded when parents and medical personnel remain unaware of the
type of magnets ingested and their heightened risks.
That danger caught the attention of the Consumer Product Safety Commission.
The Commission is an independent regulatory agency that administers and enforces
the Consumer Product Safety Act (“the Act”), 15 U.S.C. §§ 2051-2089, a primary
purpose of which is “to protect the public against unreasonable risks of injury associated
with consumer products,” id. § 2051(b)(1). In pursuit of that goal, the Commission is
authorized to “promulgate consumer product safety standards” establishing
performance or warning requirements for consumer products, id. § 2056(a), as well
as to ban hazardous products altogether, id. § 2057.
The Commission’s regulatory approach towards magnet sets progressed as
follows. In 2008, Congress adopted as mandatory safety standards certain
requirements developed by the American Society for Testing and Materials
(“ASTM”) to address hazards associated with children’s toys. See generally 15
U.S.C. § 2056b; AR 142. With respect to magnets, those requirements prohibit any
product “designed, manufactured, or marketed as a plaything for children under 14
years of age” from containing a loose magnet that (1) has a flux index greater than 50
kG2mm2 and (2) is small enough to fit within a standardized “small parts cylinder.”2
2
However, small, powerful magnets can be included in “[h]obby, craft, and
science kit-type items intended for children over 8 years of age,” so long as those
3
ASTM International Standard F963-11 Consumer Safety Specifications for Toy
Safety §§ 3.1.37 (definition of “hazardous magnet”), 3.1.81 (definition of “toy”),
4.38-4.38.1 (prohibition of hazardous magnets in toys), and Fig. 3 (defining the small
parts cylinder’s dimensions to be a diameter of 31.7 mm with a height that, due to a
sloped bottom surface, ranges from 25.4 mm on one side to 57.1 mm on the opposite
side).3 The purpose of those restrictions is to ensure that permissible magnets are
either large enough to discourage ingestion or weak enough to avoid tissue
strangulation upon ingestion. See ASTM F963-11 4.38; cf. Final Rule: Safety
Standard for Magnet Sets, 79 Fed. Reg. at 59,968.
During 2011, in response to reports of injured children, Commission staff
began evaluating whether the magnet sets currently on the market complied with
ASTM F963 (“the toy standard”). The Commission found that the individual
magnets in those sets tended to be ten times more powerful—or, alternatively, six
times smaller—than is permissible to market to children under the toy standard. See
ASTM F963-11 §§ 3.1.37, 4.38-4.3.81; Final Rule: Safety Standard for Magnet Sets,
79 Fed. Reg. at 59,976-77. Accordingly, Commission staff issued Notices of
items comply with certain safety labeling requirements. ASTM F963-11 4.38.3, 5.17.
Because neither party has cited or argued this aspect of the ASTM requirements on
appeal, we do not address it further.
3
This citation refers to the current version of the ASTM standard, which
became effective June 2012. See Acceptance of ASTM F963-11 as a Mandatory
Consumer Product Safety Standard, 77 Fed. Reg. 10,358, 10,358 (Feb. 22, 2012).
The previous version, which was effective from August 2009 to June 2012, imposed
the same requirements on children’s toy magnets. See id.; ASTM International
Standard F963-8 Consumer Safety Specifications for Toy Safety §§ 3.1.33, 3.1.72,
4.38-4.38.1, and Fig. 3. In the interests of brevity and clarity, this opinion cites only
to the current version of the ASTM standard.
4
Noncompliance to companies that labeled or marketed these powerful magnet sets to
appeal to children younger than fourteen years old, and warned other firms not to
market their sets to children below that age.4
Some distributors took steps to comply with the toy standard, including
implementing labeling enhancements and marketing restrictions. However, “into
spring 2012, staff continued to identify additional firms offering [magnet sets] on the
Internet with labeling and marketing violations.” Proposed Rule: Safety Standard for
Magnet Sets, 77 Fed. Reg. 53,781, 53,782 (proposed Sept. 4, 2012) (to be codified at 16
C.F.R. §§ 1240.1-1240.5). Moreover, reports of child injuries from magnet ingestion
continued.
So the Commission stepped up its enforcement efforts. In May 2012, the
Commission required the thirteen leading magnet set distributors to report any
information of which they were aware reasonably supporting the conclusion that their
magnets did not comply with an applicable safety standard, contained a defect, or
created an unreasonable risk of serious injury. See 15 U.S.C. § 2064(b) (requiring
distributors to report potential noncompliance with safety standards, defects, and risk
of serious injury). Based on that information, by July 2012 Commission staff had
negotiated agreements with ten of those companies to cease importation and
distribution of magnet sets. Commission staff then initiated administrative
complaints against the remaining three companies (including Zen), arguing that their
4
In cooperation with two distributors, the Commission also published a public
service announcement regarding magnet sets’ dangers.
5
magnet sets constituted “substantial product hazards” that must be prohibited and
recalled because they failed to comply with the toy standard and/or contained a
product defect.5 See 15 U.S.C. § 2064(a) (defining “substantial product hazard” to be
a product that either (1) fails to comply with an applicable safety standard or (2)
contains a product defect), (c) (authorizing the Commission to order a seller to cease
distributing and to recall products that constitute a “substantial product hazard”).
Four months after eliminating ten of the leading magnet set distributors, the
Commission proposed a new safety standard aimed at regulating the size and strength
of all magnet sets. See Proposed Rule: Safety Standard for Magnet Sets, 77 Fed.
Reg. 53,781. In effect, the proposed standard extended the size and strength
restrictions applicable to children’s toys under ASTM F963 to magnets marketed,
intended, or used for adult entertainment. After receiving comments and holding a
public hearing, the Commission promulgated the proposed rule as a final safety
standard on October 3, 2014. See Final Rule: Safety Standard for Magnet Sets, 79
Fed. Reg. at 59,962, 59,966-72.
The final rule requires that, “Each magnet in a magnet set . . . that fits
completely within the cylinder described in 16 CFR 1501.4 must have a flux index of
50 kG2 mm2 or less when tested in accordance with the method described in
§ 1240.4.” 16 C.F.R. § 1240.3. The referenced cylinder is the same small parts
cylinder as that used in the toy standard. Compare 16 C.F.R. § 1501.4 with ASTM
5
The other two companies targeted by the Commission subsequently entered
into settlement agreements to stop selling and to recall their products.
6
F963-11 § 3.1.37 and Fig. 3. And the flux index limit of 50 kG2 mm2 is the same
limit as that used in the toy standard. See 16 C.F.R. § 1240.4 (incorporating the flux
index measurement procedure of ASTM F963-11 §§ 8.24.1-8.24.3). As a result, the
primary difference between the two standards is their scope of intended consumers.
Unlike the toy standard, the final rule is not limited to magnets designed or marketed
as toys for children under fourteen years of age, but rather applies to all magnet sets
that meet the following definition: “Any aggregation of separable magnetic objects
that is a consumer product intended, marketed or commonly used as a manipulative
or construction item for entertainment.”6 16 C.F.R. § 1240.2(b).
Zen is the only remaining importer and distributor of the magnet sets targeted
by the final rule. Over the years, Zen has made efforts to comply with the toy
standard by implementing fourteen-and-under age restrictions and placing warnings
on its website and packaging, as well as by imposing sales restrictions on its retail
distributors. Its magnet sets, however, do not comply with the strength and size
restrictions of the final rule set forth at 16 C.F.R. § 1240.3. Accordingly, Zen seeks
review of that safety standard pursuant to 15 U.S.C. § 2060(a), which provides that any
person adversely affected by a rule promulgated by the Commission “may file a
petition with the United States court of appeals . . . for the circuit in which such
6
The other difference between the two standards that figures into this
litigation is the addition of the phrase “commonly used,” which enlarges the new rule
in comparison with respect to the toy standard. That difference is discussed infra in
Section II.C.
7
person . . . resides or has his principal place of business for judicial review of such
rule.”
II. DISCUSSION
Exercising jurisdiction pursuant to 15 U.S.C. § 2060(c), we review the magnet
set safety standard in accordance with the provisions for judicial review set forth in
the Administrative Procedures Act (“APA”), 5 U.S.C. ch. 7. See 15 U.S.C. § 2060(c)
(“[T]he court shall have jurisdiction to review the consumer product safety rule in
accordance with chapter 7 of title 5, and to grant appropriate relief . . . as provided in
such chapter . . . .”). Accordingly, “our review is ‘very deferential to the agency.’”
Andalex Res., Inc. v. Mine Safety & Health Admin., 792 F.3d 1252, 1257 (10th Cir.
2015) (quoting Ron Peterson Firearms, LLC v. Jones, 760 F.3d 1147, 1161 (10th Cir.
2014)). Notwithstanding that deferential standard, we conclude that the Commission
failed to meet the Consumer Product Safety Act’s requirements for issuing a safety
standard, for the reasons explained below.
I. The Consumer Product Safety Act
Broadly speaking, the Act sets forth a two-step process for promulgating a
safety standard. See D. D. Bean & Sons Co. v. Consumer Prod. Safety Comm’n, 574
F.2d 643, 649 (1st Cir. 1978). First, the Commission must “consider” and “make
appropriate findings” regarding the social and economic costs and benefits of the
rule. See 15 U.S.C. § 2058(f)(1), (2). Specifically, the Commission must make
findings identifying (1) the degree and nature of the risk of injury sought to be
prevented; (2) the approximate number and type of products subject to the rule; (3)
8
the public’s need for those products, and the probable effect of the rule on the utility,
cost, and availability of the products; and (4) any means of reducing the risk of injury
while minimizing adverse effects on competition or other commercial practices. Id.Second, the Commission must balance the costs and benefits identified in its
findings to determine whether a safety standard is justified. See 15 U.S.C.
§ 2058(f)(3). Specifically, the Commission can only promulgate a safety standard if
it reaches and articulates four conclusions: (1) “that the rule . . . is reasonably
necessary to eliminate or reduce an unreasonable risk of injury”; (2) that the . . . rule is in
the public interest”; (3) “that the benefits expected from the rule bear a reasonable
relationship to its costs”; and (4) “that the rule imposes the least burdensome requirement
which prevents or adequately reduces the risk of injury for which the rule is being
promulgated.”7 See 15 U.S.C. § 2058(f)(3)(A), (B), (E), (F).
Overall, then, the determination “involves ‘a balancing test like that familiar in
tort law: The regulation may issue if the severity of the injury that may result from the
product, factored by the likelihood of the injury, offsets the harm the regulation imposes
upon manufacturers and consumers.’” Southland Mower Co. v. Consumer Prod. Safety
Comm’n, 619 F.2d 499, 508-09 (5th Cir. 1980) (quoting Aqua Slide ‘N’ Dive Corp. v.
Consumer Prod. Safety Comm’n, 569 F.2d 831, 839 (5th Cir. 1978)); see also 15 U.S.C.
§ 2056(a) (requiring that “[a]ny requirement of such a [safety] standard shall be
7
Additional conclusions (which we need not address, see infra Section II.C)
are required for safety bans and rules implicating existing voluntary standards. See
15 U.S.C. § 2058(f)(3)(C), (D).
9
reasonably necessary to prevent or reduce an unreasonable risk of injury associated
with such product”).
The Act provides that a court may not uphold a safety standard unless the
Commission’s statutorily required findings and conclusions are “supported by
substantial evidence on the record taken as a whole.” 15 U.S.C. § 2060(c).
Substantial evidence is “such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.”8 Fowler v. Bowen, 876 F.2d 1451, 1453 (10th Cir.
1989) (quoting Richardson v. Perales, 402 U.S. 389, 401 (1971) (“The [Supreme]
Court has adhered to that definition in varying statutory situations.”)); see also
Am. Textile Mfrs. Inst., Inc. v. Donovan, 452 U.S. 490, 522-23 (1981) (adhering to that
definition when reviewing whether safety standards issued by the Occupational Safety
and Health Administration were “reasonably necessary” under 29 U.S.C. § 652(8)). A
court may “neither reweigh the evidence nor substitute [its] judgment for that of the
agency.” Andalex Res., 792 F.3d at 1257 (quoting Branum v. Barnhart, 385 F.3d 1268,
1270 (10th Cir. 2004)). Nonetheless, “[t]he substantiality of evidence must take into
8
Contrary to Zen’s contention, although courts once assumed that the Act’s
substantial evidence standard of review was more stringent than the APA’s arbitrary
and capricious standard of review, see, e.g., Aqua Slide, 569 F.2d at 837, that view is
no longer viable. Courts now recognize that, “[w]hen the arbitrary or capricious
standard is performing th[e] function of assuring factual support, there is no substantive
difference between what it requires and what would be required by the substantial
evidence test.” Olenhouse v. Commodity Credit Corp., 42 F.3d 1560, 1575 (10th Cir.
1994) (quoting Ass’n of Data Processing Serv. Orgs., Inc. v. Bd. of Governors of Fed.
Reserve Sys., 745 F.2d 677, 683-84 (D.C. Cir. 1984) (“[I]n their application to the
requirement of factual support the substantial evidence test and the arbitrary or capricious
test are one and the same.”)).
10
account whatever in the record fairly detracts from its weight.” Norris v. NLRB, 417
F.3d 1161, 1168 (10th Cir. 2005) (internal quotation marks omitted).
II. The Commission’s findings
In this instance, the Commission’s rulemaking analysis fails at the first step of
the Act’s two-step process: the initial cost and benefit findings. Specifically, the
Commission’s analysis neglected to address critical ambiguities and complexities in
the data underpinning the Commission’s findings as to (1) the degree of the risk of
injury caused by magnet sets, and (2) the public’s need for the sets and the rule’s
effect on their utility and availability, see 15 U.S.C. § 2058(f)(1)(A), (C). As a result
of those omissions, the Court is unable to ascertain whether the Commission’s
findings meet the substantial evidence standard—let alone to proceed to the next step
of reviewing the Commission’s balancing of the safety standard’s costs and benefits.
1. Risk of injury
After analyzing a nationwide sampling of emergency room injury reports, the
Commission estimated that the final rule would prevent approximately 900 magnet set-
ingestion injuries annually, for a savings of $28.6 million. See Final Rule: Safety
Standard for Magnets, 79 Fed. Reg. at 59,978-80; 16 C.F.R. § 1240.5(e)(2), (3). The
Commission’s benefit analysis, however, gives short shrift to two aspects of the injury
data set that cast doubt on the Commission’s findings.
The first problem stems from the data set’s time frame. In performing its cost-
benefit analysis, the Commission chose to rely on data spanning January 2009 through
June 2012. See Final Rule: Safety Standard for Magnets, 79 Fed. Reg. at 59,978-80; 16
11
C.F.R. § 1240.5(e)(2), (3). But that data set does not reflect the subsequent significant
market changes triggered by the Commission’s compliance activities beginning in May
2012. As of July 2012, ten of the thirteen largest distributors had agreed, “at
[Commission] staff’s request,” to stop selling and start recalling magnet sets; by
December 2012, the dominant firm in the market had ceased operating. Id. at 59,964,
59,978. Sales of magnet sets dropped commensurately (in the Commission’s words, they
dropped “dramatically”). See id. at 59,978 (“[A]s a result of these actions and events,
sales of the subject magnet sets currently are dramatically lower than they were at the
time of the enforcement actions.”); 16 C.F.R. § 1240.5(b) (estimating that magnet set
sales, which totaled 2.7 million from 2009 to 2012, dropped to fewer than 25,000 per
year after 2012).
As might be expected, injuries associated with ingestion of magnets from magnet
sets also declined. According to the Commission’s calculations regarding the eighteen
months following June 2012, the estimated number of emergency room visits due to
magnet sets dropped by about 100 incidents a year.9 See 16 C.F.R. 1240.5(a).
Inasmuch as the Commission estimated the expected useful life of magnet sets to be
about one year, the injury rates appeared poised to continue to drop. See Final Rule:
9
That is, the Commission estimated that an average of 610 emergency room-
treated injuries per year occurred during the three and a half years from January 2009
through June 2012. 16 C.F.R. § 1240.5(e)(2). But the Commission estimated that an
average of only 580 emergency room-treated injuries per year occurred during the
five years from January 2009 through December 2013. 16 C.F.R. § 1240.5(a). In
order for the data collected during those last eighteen months to reduce the annual
average by that amount, estimated emergency room injuries must have decreased by
about 100 injuries per year.
12
Safety Standard for Magnets, 79 Fed. Reg. at 59,982. Indeed, the number of incidents
reported directly to the Commission receded from 52 in 2012, to 13 in 2013, to only
2 in 2014. See id. at 59,962.
The Commission recognized that the decrease in injuries was “[l]ikely due to
[Commission] enforcement and regulatory activity beginning in mid-2012.” Id. It
appears that the Commission’s regulatory activity was predicated at least in part on
enforcing the preexisting toy standard, see id. at 59,962, 59,978 n.14 (incorporating
administrative complaint by reference), which prohibits designing and marketing
magnet sets to children, see ASTM F963-11 §§ 3.1.37, 4.38-4.38.1. Most of the pre-
enforcement reported and estimated injuries concerned young children. See id. at
59,964 (stating that eighty-seven of the 100 incidents reported directly to the
Commission concerned children younger than twelve years old, and 65% of the
estimated injuries involved children between four and twelve years old). The
Commission’s benefits findings, however, do not adequately account for the reduced
injury rate (and therefore reduced need for a new standard) resulting from its recent
apparent enforcement of the existing safety standard addressed specifically to toys
and children.
In general, where there is a known and significant change or trend in the data
underlying an agency decision, the agency must either take that change or trend into
account, or explain why it relied solely on data pre-dating that change or trend. See,
e.g., Cty. of Los Angeles v. Shalala, 192 F.3d 1005, 1020-22 (D.C. Cir. 1999)
(remanding a Medicare rate-setting for the agency to explain why it relied on data
13
collected under its former payment regime, where more recent data collected under
its current regime showed a marked downward trend in relevant hospital discharge
times); Seattle Audubon Soc. v. Espy, 998 F.2d 699, 703-04 (9th Cir. 1993) (finding
that an agency preparing an environmental impact statement erred in failing to
address an intervening, independent report indicating that an endangered species’
“population [wa]s declining more substantially and more quickly than previously
thought”).10
Since agencies “have an obligation to deal with newly acquired
evidence in some reasonable fashion,” Catawba Cnty. v. EPA, 571 F.3d
20, 45 (D.C. Cir. 2009), or to “reexamine” their approaches “if a
significant factual predicate” changes, Bechtel v. FCC, 957 F.2d 873,
881 (D.C. Cir. 1992), an agency must have a similar obligation to
acknowledge and account for a changed regulatory posture the agency
creates—especially when the change impacts a contemporaneous and
closely related rulemaking.”
Portland Cement Ass’n v. EPA, 665 F.3d 177, 187 (D.C. Cir. 2011) (holding that,
before issuing a new rule based on the predicted emissions of certain pollutant
sources, an agency should have considered the effect that a parallel pending
rulemaking would have on those same emissions). “The refrain that [an agency]
must promulgate rules based on the information it currently possesses simply cannot
excuse its reliance on that information when its own process [may have] render[ed] it
irrelevant.” Id.10
See generally Dist. Hosp. Partners, L.P. v. Burwell, 786 F.3d 46, 56-57
(D.C. Cir. 2015) (“[A]n agency cannot ignore new and better data.”); Sierra Club v.
U.S. EPA, 671 F.3d 955, 968 (9th Cir. 2012) (“[W]e should not silently rubber stamp
agency action that is arbitrary and capricious in its reliance on old data without
meaningful comment on the significance of more current compiled data.”).
14
Here, the downward trend in injury rates is obvious, and appears to speak
directly to the question of whether the new rule is “reasonably necessary.” 15 U.S.C.
§ 2056(a). Yet the Commission offered no explanation or rationale for its apparent
assumption that the observed reduction in injury rates would not endure. Rather, in
addressing its decision to rely solely on pre-enforcement injury data, the Commission
stated only:
Because [Commission] compliance actions have significantly altered the
state of the market, the environment before these actions occurred
represents the best approximation of how the market would have
operated in the absence of [Commission] intervention and is the
appropriate reference baseline for evaluating the impact of the rule.
Final Rule: Safety Standard for Magnet Sets, 79 Fed. Reg. at 59,978. That
conclusory statement is insufficient to fulfill the Commission’s duty to explain why
the downward trend in post-enforcement injury rates was not relevant to its
evaluation of the benefits of the new rule. See Portland Cement, 665 F.3d at 187;
Shalala, 192 F.3d at 1020-21.
This Court stands ready and willing to defer to agency expertise and
discretion, properly exercised. See Andalex, 792 F.3d at 1257. But “[i]t is not the role
of the courts to speculate on reasons that might have supported an agency’s
decision.” Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2127 (2016); see
also Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983) (“We may not supply a reasoned basis for the agency’s action that the
agency itself has not given.’”) (quoting SEC v. Chenery Corp., 332 U.S. 194, 196
15
(1947)). “Whatever potential reasons the [Commission] might have given,
the agency in fact gave . . . no reasons at all.” Id.An agency may not simply ignore without analysis important data trends
reflected in the record. See Portland Cement, 665 F.3d at 187; Shalala, 192 F.3d at
1020-21. To the extent the Commission’s findings rely solely on pre-enforcement
injury rates, the Commission must offer a credible record-supported explanation as to
why those rates accurately reflect the benefits of the new rule.11
The second problem with the Commission’s injury findings arises from the
imprecision of the injury report narratives. The Commission used a keyword search to
identify magnet set-related injuries within a representative sample of emergency room
reports. See Final Rule: Safety Standard for Magnets, 79 Fed. Reg. at 59,978. To the
resulting injury count, the Commission applied a cost model to extrapolate the overall
number of injuries nationwide. See id. at 59,979. We take issue not with the
Commission’s methodology, but rather with the degree of uncertainty the Commission
11
The Commission contends Zen forfeited the time frame argument by failing
to raise it before the Commission during the notice-and-comment period. Generally,
a party challenging an agency regulation must have initially presented its concerns to
the agency during the rulemaking process in order for a reviewing court to consider
those concerns. See Nutraceutical Corp. v. Von Eschenbach, 459 F.3d 1033, 1041
n.9 (10th Cir. 2006). There are, however, exceptions to that requirement.
Claims not raised before an agency are not waived if “the problems underlying
the claim are ‘obvious.’” Forest Guardians v. U.S. Forest Serv., 495 F.3d 1162, 1170
(10th Cir. 2007) (quoting Dep’t of Transp. v. Pub. Citizen, 541 U.S. 752, 765
(2004)); see also Sierra Club, Inc. v. Bostick, 787 F.3d 1043, 1048 (10th Cir. 2015)
(same). Because the Commission’s own calculations show a marked reduction in
post-enforcement injury rates, the potential problems with that assumption were
obvious. See Forest Guardians, 495 F.3d at 1170. Accordingly, we are not
prohibited from reaching Zen’s time frame argument.
16
condoned when implementing it: According to the Commission, ninety percent of the
injury reports on which it ultimately relied only “possibly” involved the subject magnets
sets.12 See id. at 59,978, 59,980 (“[A]bout 90 percent of the cases upon which the table
[estimating medical costs] was based were described as only possibly involving the
magnets of interest . . . .”), 59,985 (“[T]here was an annual average of about 929
medically attended magnet ingestions that were defined as at least ‘possibly of
interest’ during the period from 2009 through June 2012.”).13
The Act provides that the Commission cannot promulgate a safety standard
unless it concludes “that the rule . . . is reasonably necessary to eliminate or reduce an
unreasonable risk of injury.” 15 U.S.C. § 2058(f)(3)(A). Underlying findings that peg
the risk of injury as a mere “possibility” provide the Court no assistance in assessing
that conclusion. See Gulf S. Insulation v. Consumer Prod. Safety Comm’n, 701 F.2d
1137, 1148 (5th Cir. 1983) (finding the Commission failed to show an unreasonable
risk of injury because the equivocal predictions that the increased cancer risk could
be “up to 51 in a million,” and that “somewhat less than 20% of the population may
12
Specifically, of the eighty-six injury reports on which the Commission based
its benefits finding, only nine definitively involved the subject magnet sets (as
evidenced by brand names mentioned in the injury reports). See Final Rule: Safety
Standard for Magnets, 79 Fed. Reg. at 59,978. The remaining seventy-seven injuries
“were determined possibly to have involved the magnets of interest” based on a
keyword search. Id. (including injury reports with keywords and phrases such as
“high-powered,” “magnetic ball,” “magnetic marble,” “BB size magnet,” and
“magnet beads”).
13
Although a greater percentage of the incidents reported directly to the
Commission can be reliably traced to subject magnet sets, 16 C.F.R. § 1240.5(a), the
Commission specifically found that those anecdotal incidents could not be used to
estimate nationwide injuries, Final Rule: Safety Standard for Magnets, 79 Fed. Reg. at
59,969.
17
respond” to the given toxicity level, “provides [the court] no basis for review”);
Southland Mower, 619 F.2d at 510 (“Without reliable evidence of the likely number
of injuries that would be addressed . . . , we are unable to agree that this provision is
reasonably necessary to reduce or prevent an unreasonable risk of injury.”). Almost
anything is “possible.” Therefore, the Commission’s finding that 90% of the
predicate injuries only “possibly” involved magnet sets provides the Court with little
guidance as to where, on the spectrum from ninety to 900 annual injuries, the real
injury rate lies.
We need not decide here what would be an acceptable degree of uncertainty in
a benefits finding; it may vary depending on the inherent factual uncertainties in a
given context. However, we are confident that mere possibility falls short of the
appropriate standard. See Morall v. Drug Enf’t Admin., 412 F.3d 165, 176 (D.C. Cir.
2005) (“Substantial evidence ‘means evidence which is substantial, that is, affording a
substantial basis of fact from which the fact in issue can be reasonably inferred.
Substantial evidence is more than a scintilla, and must do more that create a
suspicion of the existence of the fact to be established.’”) (quoting NLRB v.
Columbian Enameling & Stamping Co., 306 U.S. 292, 299-300 (1939); Greater
Yellowstone Coal., Inc. v. Servheen, 665 F.3d 1015, 1028 (9th Cir. 2011) (“It is not
enough for the [agency] to simply invoke ‘scientific uncertainty’ to justify its
action.”) (citing State Farm, 463 U.S. at 52); Vera-Villegas v. I.N.S., 330 F.3d 1222,
1231 (9th Cir. 2003) (“[C]onjecture is not a substitute for substantial evidence.”)
(quotation omitted)).
18
While the Commission is certainly free to rely on the emergency room injury
report data set, it may not do so in a way that cloaks its findings in ambiguity and
imprecision, and consequently hinders judicial review. We leave it to the
Commission to determine whether its methodology and data set can in fact support a
higher standard. We find only that the Commission’s benefits statistics must instill
in the Court a greater degree of confidence in their accuracy than is currently present
here.14 In so holding, we offer no opinion on the number of injuries that would
support issuance of a new magnet set safety standard.
2. The public’s need for magnet sets
Although the Commission’s evaluation of the costs of the rule to magnet
distributors was adequate, its evaluation of the costs to consumers was incomplete.
Specifically, the Commission failed to address an entire aspect of magnet sets’ utility—
namely, the public’s need for the sets as scientific and mathematics education and
research tools—and the rule’s probable effect on magnet sets’ availability and usefulness
for those purposes. See 15 U.S.C. § 2058(f)(1)(C).
14
The Commission attempted to bolster its injury count by pointing out that
(1) some injury reports that did not alert to the keyword search may have in fact
involved magnet sets and (2) some medical experts have opined that the available
medical research undercounts injuries associated with magnet sets. See Final Rule:
Safety Standard for Magnet Sets, 79 Fed. Reg. at 59,966, 59,980. Those two facts
suggest that the true injury count may be higher than the Commission’s estimate.
The Court, however, takes issue with the uncertainty of the Commission’s estimate—
not with its magnitude. Inasmuch as those two facts are subject to their own
reliability concerns (namely, imprecise report narratives cannot be traced to magnet
sets, the experts did not quantify the degree to which they believe injuries are
undercounted), they do not assuage the Court’s concerns about the accuracy of the
Commission’s estimate.
19
Numerous comments received by the Commission indicated that teachers and
researchers use magnet sets to model and explain physics, biology, and geometry
concepts.15 The Commission’s findings, however, contain no substantive discussion
of those uses. The Commission’s analysis does not examine how widespread the
claimed uses are, or whether substitute products, such as larger magnetic spheres or
alternative construction toys, are (or could be made) available to serve those uses.
Instead, the Commission’s cost finding referred only to “some unknown quantity of
lost utility.” 16 C.F.R. § 1240.5(e)(6), (h)(2).
Even though the task may be difficult, the Commission is required to advance
some explanation that allows a reviewing court to evaluate whether the cost of the lost
utility is in fact outweighed by the benefits of the rule. See Aqua Slide, 569 F.2d at 840
(“The Commission does not have to conduct an elaborate cost-benefit analysis. It does,
however, have to shoulder the burden of examining the relevant factors and producing
substantial evidence to support its conclusion that they weigh in favor of the standard.”)
(citation omitted). In this instance, the Commission abdicated that responsibility by
15
See, e.g., AR 911 (“As a physicist, graduate instructor, and Los Alamos
National Laboratory employee, I wish to strongly oppose the ban on magnetic toys.
These magnet sets are of tremendous educational values [sic], and I have used them
in the classroom as well as at scientific community outreach events.”); 1410 (“As a
practicing physicist, I have used these magnets for experimental and demonstrative
purposes, and they are very effective tools.”), 1601 (“I am a high school biology
teacher and I use magnets such as these as an invaluable teaching tool when
discussing proteins structure and function. . . . It would be a great hardship to me
and to the education of my students if these tools were no longer available.”), 1696
(“I do research into geometric lattice theory with these mini-magnets . . . [now] I can
no longer take advantage of a powerful tool.”), 3704 (high school math department
chair stating, “The Buckyball Science toy [(a certain brand of magnet set)] has been a
remarkable teaching and learning tool in our home and in the classroom.”).
20
failing to assess the demand for and usefulness of magnet sets as research and
teaching tools. Without that information, the Court cannot accurately gauge the full
costs of the safety standard.16 Cf. id at 839-40 (citing Forester v. Consumer Prod.
Safety Comm’n, 559 F.2d 774, 790-91 (D.C. Cir. 1977) (remanding safety requirements
for bicycles because the “Commission has evidently not considered the utility of
specific items that will be prohibited by the regulations”)).
III. Zen’s remaining arguments
We find the remainder of Zen’s challenges to the rule unpersuasive.
To begin, we do not reach Zen’s alternative argument that the safety standard is in
effect a ban. Because we find the Commission’s underlying cost and benefit findings
are inadequate, we have no cause to decide whether, in the next stage of cost-benefit
balancing, the Commission would be required to meet the arguably higher standard
applicable to bans. See 15 U.S.C. § 2058(f)(3)(C) (requiring, in the case of a ban, that
the Commission find “that no feasible consumer product safety standard under this
16
The Commission does not contend that it would not enforce the rule, which
applies to magnets “intended, marketed or commonly used . . . for entertainment,” 16
C.F.R. § 1240.2(b), against magnets also used for teaching or research. Although the
Commission’s regulatory analysis does not quantify what amount of use it considers
“common,” it does make clear that entertainment use by some consumers could
trump both a distributor’s stated intentions and alternative uses by other consumers.
See Final Rule: Safety Standard for Magnets, 79 Fed. Reg. at 59,973 (“Common uses
may be indicated by information found in consumer reports to the [Commission], firm
reports to the [Commission], injury reports, and consumer comments/reviews posted on
product Web sites stating that a product, regardless of whether it is intended or marketed
by the manufacturer as such, was, in fact, being used as a manipulative or construction
item for entertainment, such as puzzle working, sculpture building, mental stimulation or
stress relief.”) (emphasis added). Accordingly, the Commission should have
considered all substantial uses—including research and education—that could be
foreclosed by full enforcement of the rule.
21
chapter would adequately protect the public from the unreasonable risk of injury
associated with such product”).
Next, we find no merit in Zen’s contention that the Commission did not
comply with the APA’s notice-and-comment procedures. See 5 U.S.C. § 553(b), (c).
Zen complains it did not receive adequate notice of the scope of the final rule
because it was not given an opportunity to comment on the Commission’s insertion
of the phrase “or commonly used” into the final definition of subject magnet sets.
See 16 C.F.R. § 1240.2(b) (“Magnet set means: Any aggregation of separable
magnetic objects that is a consumer product intended, marketed or commonly used as
a manipulative or construction item for entertainment . . . .”) (emphasis added).
However, “[i]t is a well settled and sound rule which permits administrative agencies
to make changes in the proposed rule after the comment period without a new round
of hearings.” Beirne v. Sec’y of Dep’t of Agric., 645 F.2d 862, 865 (10th Cir. 1981).
The primary limitation on that principle is that a final rule must be a “logical
outgrowth” of the proposed rule. Am. Mining Cong. v. Thomas, 772 F.2d 617, 637
(10th Cir. 1985). “A final rule qualifies as a logical outgrowth if interested parties
should have anticipated that the change was possible, and thus reasonably should
have filed their comments on the subject during the notice-and-comment period.”
CSX Transp., Inc. v. Surface Transp. Bd., 584 F.3d 1076, 1079-80 (D.C. Cir. 2009)
(internal quotation marks omitted).
The Commission’s notice of proposed rulemaking expressly requested
comments regarding the rule’s scope. See Proposed Rule: Safety Standard for
22
Magnets, 77 Fed. Reg. at 53,788, 53,799. Moreover, the notice evinced the
Commission’s concern that the proposed definition would not address the risks of
magnets ostensibly marketed for purposes other than entertainment. See id. at
53,787. As such, it was reasonably foreseeable that the Commission would revise the
definition to address that concern.
Moreover, the resulting revision was not “surprisingly distant” from the original
definition. CSX Transp., 584 F.3d at 1080. Rather, the addition of the phrase
“commonly used” is a logical outgrowth of the Commission’s original approach of
targeting magnets according to their primary use. See Proposed Rule: Safety
Standard for Magnets, 77 Fed. Reg. at 53,800 (original definition applying to magnets
“intended or marketed . . . primarily as” manipulative or construction entertainment
items). The final rule confirms the purpose of the revision: “[It] seeks to prevent a
manufacturer or importer of magnet sets from avoiding the rule by simply stating in
marketing and other materials that the magnets are intended for uses other than those
specified.” Final Rule: Safety Standard for Magnets, 79 Fed. Reg. at 59,973.
Because the final definition of magnet sets is a logical outgrowth of the proposed
definition, the APA’s notice requirement was satisfied.
Finally, we decline to rely on either party’s letter purporting to alert the Court
to supplemental authority. Neither letter is sanctioned by Federal Rule of Appellate
Procedure 28(j), which permits a party to bring new legal authority—not new
evidence—to the attention of the court. See Utah v. U.S. Dep’t of Interior, 535 F.3d
1184, 1195 n.7 (10th Cir. 2008). Moreover, both letters improperly invite the Court to
23
review the safety standard on grounds and evidence that was not available to the
Commission in promulgating the rule. See Fed. Power Comm’n v. Transcon. Gas Pipe
Line Corp., 423 U.S. 326, 331 (1976) (“[W]e have consistently expressed the view
that ordinarily review of administrative decisions is to be confined to consideration
of the decision of the agency and of the evidence on which it was based. . . . The
focal point for judicial review should be the administrative record already in
existence, not some new record made initially in the reviewing court.”) (internal
alteration, quotation marks, and citations omitted); Custer Cnty. Action Ass’n v.
Garvey, 256 F.3d 1024, 1027 n.1 (10th Cir. 2001) (“Judicial review of an agency
decision is generally limited to review of the administrative record.”). Consistent
with those conclusions, we do not consider either letter, and we DENY Zen’s motion
to strike the Commission’s supplemental authority as moot.17
III. CONCLUSION
For the foregoing reasons, we VACATE and REMAND the Consumer Product
Safety Commission’s magnet set safety standard, 79 Fed. Reg. 59,962 (codified at 16
C.F.R. §§ 1240.1-1240.5), to the Commission for further proceedings consistent with
this opinion.
17
Of course, on remand, the Commission is free to consider that evidence if it
reopens the administrative record to conduct additional fact-finding.
24
No. 14-9610, Zen Magnets, LLC v. Consumer Product Safety Commission
BACHARACH, J., dissenting.
Zen Magnets asserts six challenges to the Consumer Product Safety
Commission’s final rule establishing safety standards for magnet sets:
1. The Commission lacked substantial evidence in finding that the
rule is reasonably necessary to avoid an unreasonable risk of
injury.
2. The Commission’s cost-benefit analysis was not supported by
substantial evidence.
3. The Commission lacked substantial evidence in finding that the
rule promotes the public interest.
4. The Commission did not adequately consider the magnets’
usefulness in education, research, and art.
5. The rule constitutes a ban, which required additional findings.
6. The final rule impermissibly expanded the definition of the
covered products.
I would reject these challenges and deny the petition for review. As a
result, I respectfully dissent.
I. Sufficiency of the Evidentiary Support for the Commission’s
Findings
Zen Magnets challenges the adequacy of the evidentiary support for
the Commission’s findings on reasonable necessity, an unreasonable risk of
injury, balancing of costs and benefits, and consideration of the public
interest. For these challenges, we consider only whether the findings were
based on substantial evidence. See 15 U.S.C. § 2060(c) (“The consumer
product safety rule shall not be affirmed unless the Commission’s findings
under sections 2058(f)(1) and 2058(f)(3) of this title are supported by
substantial evidence on the record taken as a whole.”). In my view, such
evidence existed.
A. Our Framework for Review
“[O]ur duty is to guarantee that factual determinations are supported
by reasonable, substantial and probative evidence considering the record as
a whole.” Sidabutar v. Gonzales, 503 F.3d 1116, 1122 (10th Cir. 2007)
(alteration in original) (quoting Uanreroro v. Gonzales, 443 F.3d 1197,
1204 (10th Cir. 2006)). The evidence is considered “substantial” if it is
relevant and might reasonably lead to a given finding. TransAm Trucking,
Inc. v. Admin. Review Bd., 833 F.3d 1206, 1209 (10th Cir. 2016). When
applying this test, we follow three steps:
1. “[L]ook to the statute and legislative intent to determine
the criteria necessary to establish the required findings.” 1
2 Ascertain “the relevant portions of the record . . .
primarily by reference to pages cited by the parties.” 2
3. Evaluate the evidence and reject the agency’s finding
only if “any reasonable adjudicator would be compelled
to conclude to the contrary.” 3
1
Aqua Slide ‘N’ Dive Corp. v. Consumer Prod. Safety Comm’n, 569
F.2d 831, 838 (5th Cir. 1978).
2
Id.3
Sidabutar, 503 F.3d at 1125.
2
B. Risk of Injury and Reasonable Necessity
The Commission could adopt the rule only by finding that
 the product creates an unreasonable risk of injury and
 the rule is reasonably necessary in light of that risk.
15 U.S.C. § 2058(f)(3)(A). In my view, the record supports the
Commission’s findings on both the unreasonable risk of injury and
reasonable necessity for the rule.
Unreasonable Risk of Injury. A risk of injury is unreasonable when it
exceeds “the harm the regulation imposes upon manufacturers and
consumers.” Southland Mower Co. v. Consumer Prod. Safety Comm’n, 619
F.2d 499, 508-09 (5th Cir. 1980) (quoting Aqua Slide, 569 F.2d at 839);
see also Mathew E. Hoffman, The Consumer Product Safety Commission:
In Search of a Regulatory Pattern, 12 Colum. J.L. & Soc. Probs. 393, 403
(1976) (“Basically, then, the cost of the Commission-imposed standards
must be weighed against the cost of their absence.”).
The Commission considered the risk posed by the magnet sets in an
unregulated market and concluded that the magnet sets pose an
unreasonable risk of injury and death. 79 Fed. Reg. at 59,962; 59,978-82.
Zen Magnets argues that this finding lacked substantial evidence because
the Commission relied on empirical data lacking enough certainty. 4 The
4
Zen Magnets also contends that the number of ingestions did not
increase when the magnets became available in 2009. But the record
3
majority agrees with Zen Magnets, reasoning that because 90% of the
injury data only “possibly” involved the covered magnets, the data was too
uncertain and imprecise to constitute substantial evidence for the
Commission’s findings on the risk of injury. But in addition to the
empirical data, the Commission relied on three other sources of
information.
contains contrary evidence. For example, Dr. Oliva-Hemker testified about
a clinical case survey conducted by the North American Society for
Pediatric Gastroenterology, Hepatology and Nutrition. Record at 7641-44.
She observed that the study had shown an increase in the ingestion of
magnets when high-powered magnet sets flooded the market in 2009:
It was shown that during [a] ten year period. . . there
were more than 16,000 emergency department visits for magnet
related ingestion’s [sic], and such visits in aggregate overall
increased more than eight-fold.
Importantly, it shows that magnet ingestion’s [sic] began
to increase in 2009. This was following a drop in cases from
2007 to 2009. We speculate that the drop in cases from 2007 to
2009 is attributed to the Commission’s recall of numerous toy
products that contained high powered magnets and adherence to
toy safety standards.
The increase in magnet ingestion’s [sic] correlates with
2009 being the first year of significant sales of high powered
magnet sets. For example, based on data available from one
company alone, 1.5 million units of Bucky Balls were sold
between 2009 and 2011, and other companies have similar high
sales during that time period.
Id. at 7647-48.
4
The first was a survey of doctors, which showed a sharp increase in
injuries caused by ingestion of magnets from 2008 to 2012. Record at
7719-20 (Statement of Dr. Maria Oliva-Hemker).
The second consisted of testimony about the results of a study
published in the Journal of Pediatric Gastroenterology and Nutrition. Id. at
7644 (Statement of Dr. Maria Oliva-Hemker). This study concluded that
incidents had spiked in 2009, when the magnet sets became popular. Id. at
7644-48.
The third consisted of comments by medical experts who regarded
the statistical data as “a serious under estimation.” Id. at 7619.
These sources support the Commission’s findings that injuries
increased when the magnet sets entered the market and that the magnets
posed an unreasonable risk of injury.
Zen Magnets responds with two arguments: (1) the risk was
reasonable because consumers were aware of the dangers, and (2) the risks
were remote. These arguments do not vitiate the evidentiary support for the
Commission’s findings.
The Commission concluded that many children are unlikely to
appreciate the dangers from ingesting the magnet sets. 79 Fed. Reg. at
59,969-71. For this conclusion, the Commission pointed to studies showing
that caregivers are unable to constantly monitor children, older children
5
will “test limits and bend rules,” and bitterants would not deter initial
ingestions. Id.
The Commission also rejected the argument that the risk of injury
was remote, noting that “there were an estimated 2,138 injuries treated in
U.S. hospital emergency departments from 2009 through June 2012.” Id. at
59,978; see also id. at 59,962 (“We do not agree that this is a low figure
for injuries.”).
Zen Magnets downplays the risk, citing favorable comparisons to the
risk from harmless items like balloons. But these comparisons were far
from unanimous. In my view, the record sufficed for the Commission’s
finding of an unreasonable risk of injury.
Reasonable Necessity in Light of the Risk. Zen Magnets also denies
the existence of substantial evidence for Commission’s finding that the
new rule was reasonably necessary in light of the risk. I regard the
evidence as sufficient.
Zen Magnets argues that the rule effectively bans the magnet sets,
which is excessive in light of the risk of injury. But as discussed below,
the Commission reasonably classified the rule as a safety standard rather
than a ban.
Apart from characterizing the rule as a ban, Zen Magnets asserts that
the rule is unnecessary in light of its costs. This assertion is neither
developed nor persuasive. The Commission quantified the economic loss
6
from the rule, projecting $6 million in lost surplus. Id. at 59,981-82. In
addition, the Commission acknowledged that consumers would lose some
useful features of the covered magnets. Id. But the Commission concluded
that the rule was reasonably necessary to curb injuries. Id. at 59,988. That
conclusion was reasonable based on the record.
C. The Cost-Benefit Analysis
In conducting the cost-benefit analysis, the Commission relied on
injury data from 2009 through June 2012. Zen Magnets argues that this
data was outdated because the market changed dramatically in mid-2012,
when the Commission announced future efforts to regulate magnet sets.
The majority concludes that the data’s timeframe is potentially
problematic.
I would not reach the time-frame argument. During the notice-and-
comment period, no one commented on the Commission’s choice of a time-
period for the cost-benefit analysis. In my view, the absence of public
comment on this issue results in waiver of the challenge.
The Necessity of Public Comment. As the majority notes, a party
challenging an agency rule must generally present its concerns to the
agency during the rulemaking process. Maj. Op. at 16 n.11. “In a review of
the decision of an administrative agency, a party waives its right to appeal
an issue if it fails to object through comments or documents in the record.”
7
Nutraceutical Corp. v. Von Eschenbach, 459 F.3d 1033, 1041 n.9 (10th
Cir. 2006).
Because no one objected to the Commission’s choice of a time-
period, the Commission argues that this issue has been waived. Neither Zen
Magnets nor the majority suggests otherwise. In fact, Zen Magnets fails to
address waiver in either of its appeal briefs.
We ordinarily would go no further, for we generally take the parties’
issues as they are presented to us. Greenlaw v. United States, 554 U.S.
237, 243 (2008). Instead, the majority concludes that we may address Zen
Magnets’ time-frame argument because a claim involving obvious defects
is not waived even in the absence of a comment during the notice-and-
comment process. Maj. Op. at 16 n.11.
So, is the Commission’s reliance on data from 2009 through June
2012 an obvious flaw in the Commission’s cost-benefit analysis? The
majority answers “yes,” reasoning that the injury rate substantially
declined in 2012. Id.The Commission acknowledged the decline in injuries, attributing the
decline to a 2012 announcement of future rulemaking to curtail ingestions
of high-powered magnets. Record at 8087. But in the Commission’s view,
the announcement “significantly altered the state of the market” and the
prior environment “represent[ed] the best approximation of how the market
would have operated in the absence of [the Commission’s] intervention.”
8
Final Rule: Safety Standard for Magnet Sets, 79 Fed. Reg. 59,962, 59,978
(Oct. 3, 2014) (codified at 16 C.F.R. §§ 1240.1-1240.5). Thus, the
Commission chose a time-period, 2009 through June 2012, that reflected
the injury rate when sellers had been allowed to flood the market with
high-powered magnets. Id.I do not think that this rationale is obviously defective. In any event,
neither Zen Magnets nor the majority explains what is wrong with the
Commission’s explanation. I would hesitate to reject the Commission’s
explanation as “obviously” flawed in the absence of at least some argument
by Zen Magnets.
D. The Public Interest
The rule could be adopted only if it promoted the public interest. 15
U.S.C. § 2058(f)(3)(B). The Commission found that this requirement had
been met. 79 Fed. Reg. at 59,988 (“The regulations in this part are in the
public interest because they would reduce deaths and injuries associated
with magnet sets in the future.”). Zen Magnets disagrees, contending that
this finding was unsupported by substantial evidence and that the
Commission ignored the magnet sets’ utility as an art medium. I disagree.
Determination of the public interest involves policy-making, which
lies within the Commission’s expertise. See Teresa M. Schwartz, The
Consumer Product Safety Commission, 51 Geo. Wash. L. Rev. 32, 34 n.5
(1982) (“Such general statutory guidelines delegated to the Consumer
9
Product Safety Commission . . . wide discretion to balance broad social
goals and the competing claims of private interests in selecting products to
regulate and in defining the contents of the regulation.”). Applying this
expertise, the Commission acknowledged the utility of magnet sets but
found greater danger through injury and death. See p. 6, above. In
assessing the public interest this way, the Commission did not err.
II. The Magnets’ Usefulness
The majority concludes that the Commission inadequately considered
the magnets’ usefulness for education, research, and art. I respectfully
disagree.
The Commission noted that some commenters had expressed concern
that the new rule would eliminate the use of high-powered magnets in
education and research. Id. at 59,967. Addressing these concerns, the
Commission stated that many high-powered magnets would continue to be
used in education and research:
Magnets have long played a role in education. However,
the specific products that are covered by the rule have been on
the market only since 2008. The rule will cover only “any
aggregation of separable magnetic objects that is a consumer
product intended, marketed or commonly used as a
manipulative or construction item for entertainment, such as
puzzle working, sculpture building, mental stimulation, or
stress relief.” Magnets that are not subject to the restrictions of
the rule would continue to be available. For example, less
powerful magnets are sometimes included in science kits to
demonstrate magnetism. In addition, high-powered magnets
that serve industrial and commercial needs would not be
covered by the rule.
10
Id. This explanation was sufficient.
Zen Magnets also argues that the Commission overlooked the
magnets’ use as an art form. The Commission acknowledged this use and
explained that “[m]agnet sets that comply with the rule could serve some
purposes of magnet sets that are currently available.” Id. Zen Magnets does
not identify any shortcomings in this explanation.
The majority states that the Commission must provide an explanation
that allows meaningful review. Maj. Op. at 20. In my view, the
Commission’s explanation was sufficient for meaningful review.
III. Classification as a Safety Standard Rather than a Ban
Zen Magnets alternatively argues that the safety standard is
functionally a ban. The Consumer Product Safety Act distinguishes
between “safety standards” and “bans,” but does not define either term.
Because the statute is ambiguous and administered by the Commission, we
must defer to the Commission’s rules if they involve reasonable
interpretations of statutory ambiguities. The Commission’s classification
of its rule as a safety standard, rather than a ban, is reasonable and entitled
to deference.
A. The Commission’s Administration of the Consumer Product
Safety Act
The Commission administers the Consumer Product Safety Act, and
Congress expressly instructed the Commission to use the notice-and-
11
comment process to adopt safety rules. 15 U.S.C. § 2058(d)(2). Therefore,
Chevron deference applies to the Commission’s interpretation of the
Consumer Product Safety Act. See United States v. Mead Corp., 533 U.S.
218, 229 (2001) (“[A] very good indicator of delegation meriting Chevron
treatment [is] express congressional authorizations to engage in the process
of rulemaking or adjudication that produces the regulations or rulings for
which deference is claimed.”); Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837, 844 (1984) (“We have long recognized that
considerable weight should be accorded to an executive department’s
construction of a statutory scheme it is entrusted to administer . . . .”).
As a consequence, we undertake the two-step Chevron-deference
analysis. “When Congress has spoken to the precise question at issue, we
must give effect to the express intent of Congress. If the statute is silent or
ambiguous, however, we defer to the agency’s interpretation, if it is a
permissible one.” S. Utah Wilderness All. v. Dabney, 222 F.3d 819, 1235-
36 (10th Cir. 2000) (citing Chevron, 467 U.S. at 842-44).
B. Ambiguity of the Statutory Provision
We first consider whether Congress has spoken to the question at
issue. Here, Congress failed to specify how to distinguish bans from safety
standards. This omission left room for the Commission to exercise its
discretion.
12
The Act contains separate sections for safety standards and bans, but
does not give content to those terms. Section 2056(a) authorizes the
Commission to adopt consumer product safety standards, which include
“[r]equirements expressed in terms of performance requirements.” 15
U.S.C. § 2056(a)(1). In contrast, § 2057 allows the Commission to ban a
consumer product if “no feasible consumer product safety standard . . .
would adequately protect the public from the unreasonable risk of injury
associated with such product.” 15 U.S.C. § 2057. There is no further
discussion of the term “ban.”
These provisions are ambiguous because they do not distinguish bans
from safety standards. A safety standard that sets performance
requirements can always be reframed as a “ban” on nonconforming
products. But surely Congress did not mean to treat every safety standard
as a ban, for the law states that the Commission can create performance
requirements through safety standards. Thus, Congress ruled out the
possibility that every prohibition on the sale of nonconforming products
would constitute a ban. Instead, Congress allowed the Commission to draw
a different line: Some safety standards that create performance
requirements must qualify as safety standards rather than bans.
13
C. The Commission’s Distinction Between Bans and Safety
Standards
The Commission classified its rule—which prohibits the sale of small
magnets with a flux index greater than 50 kG2 mm2 —as a safety standard.
This interpretation of the statute is reasonable and entitled to deference.
Under Chevron, we cannot “substitute [our] own construction of a
statutory provision for a reasonable interpretation made by the
administrator of an agency.” Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837, 844 (1984). Such judicial micromanagement
would undermine an important rationale for deferring to administrative
agencies: “to ‘achieve predictable (and relatively litigation-free)
administration of the vast body of complex laws committed to the charge
of executive agencies,’ by ‘assur[ing] that reviewing courts will accept
reasonable and authoritative agency interpretation of ambiguous
provisions.’” S. Utah Wilderness Alliance v. Office of Surface Mining
Reclamation & Enf’t., 620 F.3d 1227, 1235-36 (alteration in original)
(quoting Coeur Alaska, Inc. v. Se. Alaska Conservation Council, 557 U.S.
261, 296 (2009) (Scalia, J., concurring)). Thus, we must defer to the
Commission’s classification of the rule as a “Safety Standard for Magnet
Sets.” 79 Fed. Reg. 59,962-01; 16 C.F.R. pt. 1240.
Zen Magnets points out that members of the Commission and public
have sometimes referred to the rule as a ban. E.g., Petitioner’s Reply Br. at
14
14. But the Commission definitively expressed its view that the rule is a
safety standard, rather than a ban, and we should defer to the
Commission’s characterization. 5
IV. Expansion of the Definition of Products
Zen Magnets also contends that the Commission expanded the
definition of the regulated products from what had been proposed in the
notice of proposed rulemaking. Like the majority, I would reject this
contention.
When an administrative agency uses the notice-and-comment process,
the final rule must constitute a “logical outgrowth” of the proposed rule.
Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 174 (2007). This
requirement ensures fair notice of what rule the agency might ultimately
adopt. Id. Thus, a final rule is a logical outgrowth of a proposed rule if the
final rule was “reasonably foreseeable” when the rule was proposed. Id. at
175.
Zen Magnets argues that the final rule deviated too far from the
proposed rule, violating the Administrative Procedure Act, 5 U.S.C. § 553.
I agree with the majority’s rejection of this argument because the final
5
In arguing that the safety standard was actually a ban, Zen Magnets
maintains that the Commission did not make findings to support a ban. See
15 U.S.C. §§ 2057(2), 2058(f)(3)(C). Because the rule was not a ban, I
would not address this argument.
15
definition of regulated products logically grew out of the proposed
definition.
Zen Magnets challenges the change to the proposed definition of the
magnet sets to be regulated. (The altered text is italicized.)
 Proposed Rule: “any aggregation of separable, permanent
magnetic objects that is a consumer product intended or
marketed by the manufacturer primarily as a manipulative or
construction desk toy for entertainment, such as puzzle
working, sculpture building, mental stimulation, or stress
relief.” 77 Fed. Reg. 53,783.
 Final Rule: “[a]ny aggregation of separable magnetic objects
that is a consumer product intended, marketed, or commonly
used as a manipulative or construction item for entertainment,
such as puzzle working, sculpture building, mental stimulation,
or stress relief.” 16 C.F.R. § 1240.2(b).
The final rule reaches further than the proposed rule by adding the phrase
“commonly used.”
The magnets’ common use does not necessarily reflect
manufacturers’ intentions, for individuals might use magnet sets
differently than manufacturers intend. For instance, assume that Zen
Magnets advertised only in high school science catalogs and websites,
labeled the magnet sets “educational products,” and warned that the
magnets are not safe for use as toys. With these assumptions, we could
infer that Zen Magnets intended purchasers to use the magnet sets as
educational products. But if consumers chose to use the magnets as toys,
the common use would diverge from Zen Magnets’ intended and marketed
16
uses. Thus, the final rule differs from the proposed rule and we must
consider whether the final rule is a “logical outgrowth” of the proposed
rule.
This determination generally hinges on the salience of the changed
language to a reader of the proposed rule. Salience is a product of
 the prominence of the issue in the proposed rule 6 and
 whether the issue was flagged as something that might be
changed in the eventual rule. 7
Here, both factors indicate that the final rule was a logical outgrowth
of the proposed rule, for the Commission unambiguously stated that the
definition of “magnet set” was subject to change and invited comments on
the definition. See Notice of Proposed Rulemaking: Safety Standard for
Magnet Sets, 77 Fed. Reg. 53,781, 53,787 (Sept. 4, 2012) (“The
Commission seeks comment on the scope of the products proposed to be
covered by this proposed rule and, in particular, whether risks are
presented by magnets in science kits or craft and hobby kits no matter how
they are age graded and labeled.”).
6
See, e.g., AFL-CIO v. Donovan, 757 F.2d 330, 339 (D.C. Cir. 1985)
(noting that language that was altered by the final rule “appeared [in the
proposed rule] only as part of the entire set of Service Contract Act
regulations . . . , which was reprinted in full in some forty pages of the
Federal Register”).
7
See CSX Transp., Inc. v. Surface Transp. Bd., 584 F.3d 1076, 1081
(D.C. Cir. 2009) (explaining that when the notice of proposed rulemaking
expressly asked for comments on an issue, changes to the relevant
language were a logical outgrowth).
17
In this manner, the Commission provided notice to interested parties
that the definition of “magnet sets” might be broadened or narrowed. Such
notice was sufficient. See CSX Transp., Inc. v. Surface Transp. Bd., 584
F.3d 1076, 1081 (D.C. Cir. 2009) (“We have found that a final rule
represents a logical outgrowth where the [notice of proposed rulemaking]
expressly asked for comments on a particular issue or otherwise made clear
that the agency was contemplating a particular change.”); Alto Dairy v.
Veneman, 336 F.3d 560, 570 (7th Cir. 2003) (holding that notice was
sufficient because industry “insiders” would realize that an issue was at
stake).
V. Conclusion
Because I would not disturb the Commission’s rule, I respectfully
dissent.
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