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United States v. Athlone Industries Inc.

October 23, 1984

UNITED STATES OF AMERICA
v.
ATHLONE INDUSTRIES, INC., ALSO DOING BUSINESS AS DUDLEY SPORTS COMPANY V. CONSUMER PRODUCT SAFETY COMMISSION, NANCY H. STEORTS, INDIVIDUALLY AND IN HER OFFICIAL CAPACITY AS CHAIRMAN, CONSUMER PRODUCT SAFETY COMMISSION, R. DAVID PITTLE, CHAIRMAN, CONSUMER PRODUCT SAFETY COMMISSION, EDITH B. SLOAN, SAM ZAGORIA AND STUART M. STATLER, INDIVIDUALLY AND IN THEIR OFFICIAL CAPACITIES AS COMMISSIONERS CONSUMER PRODUCTS SAFETY COMMISSION UNITED STATES, APPELLANT



ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

Author: Higginbotham

Before: ALDISERT, Chief Judge, and HIGGINBOTHAM, Circuit Judges, and HUYETT, District Judge.*fn*

Opinion OF THE COURT

HIGGINBOTHAM, A. LEON, JR., Circuit Judge.

In our semi-robot age, as a substitute for the batting practice pitcher, inanimate machines have been manufactured which confront the player in the batter's box. In this case, some of the machines were defective and more wild than an erratic pitcher. In fact some of the machines were mysterious and unpredictable; even when disconnected from their power source, these machines retained such a high degree of tension in the spring and cable that with the slightest vibration, the pitching arm would unexpectedly swing forward and downward at great speed, striking any unsuspecting person within its range, allegedly causing injuries that were as serious as fractured skulls and loss of eye sight.

Since robots cannot be sued, but they can cause devastating damage, the defendant Athlone Industries, was twice sued as the ultimate responsible distributor for various violations of the Consumer Product Safety Act, 15 U.S.C. §§ 2051-2083 (1982). The first inning of litigation was what one might call the "imminent hazard" suit. The second inning was the "civil penalty" suit. Now on appeal we are asked to determine whether the civil penalty action can be nullified because of what happened earlier in the imminent hazard suit.

Technically we are confronted with the issue of whether there is a "claim preclusive" effect of a district court judgment in a prior declaratory and injunctive imminent hazard suit brought by the United States Consumer Product Safety Commission pursuant to section 12 of the Consumer Product Safety Act, 15 U.S.C. § 2061(a). This subsequent civil penalty suit under sections 15 and 20 of the Act, 15 U.S.C. §§ 2064, 2069 was instituted on behalf of the Commission by the United States against the same party, Athlone Industries, that had been sued in the earlier imminent hazard suit.

We reverse the summary judgment in favor of the defendant, concluding that the district court erred in ruling that the civil penalty action was barred by res judicata. We therefore remand this matter for further proceedings -- or in baseball parlance -- for completion of the other innings.

I.

The United States appeals a final order of the United States District Court for the District of New Jersey granting summary judgment in favor of defendant Athlone Industries, Inc. ("Athlone") in an action instituted on February 19, 1982 by the United States, on behalf of the United States Consumer Product Safety Commission ("the Commission"), seeking the assessment of a civil penalty against Athlone pursuant to sections 15 and 20 of the Consumer Product Safety Act, 15 U.S.C. §§ 2064, 2069.

This civil penalty action commenced with the filing of a complaint by the United States Department of Justice against Athlone, the primary distributor of automatic baseball pitching machines manufactured by Advance Machine Company, Inc. ("Advance Machine") of Spring Park, Minnesota. The government's complaint charged that Athlone and Dudley Sports Company ("Dudley"), a division of Athlone, failed to report to the Commission certain information regarding these machines, as required by the Act.

Athlone moved for summary judgment on the grounds that the civil penalty action was barred by res judicata, the applicable statute of limitations, and the Commission's failure to determine the amount of penalty to be sought prior to commencing the action. The district court heard argument on Athlone's motion on July 28, 1983 and ruled in an oral opinion that the Commission's case was barred by res judicata, without reaching Athlone's other claims. The district court concluded that the Commission had based its claim on the same underlying factual events and on the same wrong as had been involved in previous litigation between Athlone and the Commission in the United States District Court for the District of Columbia. By order of September 9, 1983, the district court dismissed this suit.

The undisputed facts are as follows.

A. The Prior Litigation - The "Imminent Hazard" Suit

Advance Machine and its wholly-owned subsidiary, Commercial Mechanisms, Inc., manufactured the automatic baseball pitching machines bought by Athlone and distributed by Dudley. The Consumer Product Safety Commission conducted an inspection of Advance Machine in February of 1977 during the course of which, the Commission obtained information regarding a possible defect in the automatic pitching machine. After receiving injury data from Advance Machine and verifying the presence of a defect through an engineering analysis of the pitching machine, Joint Appendix ("J.A.") at 49-54, the Commission, on June 29, 1977, inspected Dudley Sports Company. The Commission informed Athlone that it was investigating the baseball pitching machine and requested information concerning the defect.

On July 28, 1977, the Commission filed an action in the United States District Court for the District of Columbia, pursuant to section 12 of the Consumer Product Safety Act, 15 U.S.C. § 2061, against Athlone, Advance, Dudley and six other defendants, seeking an injunction and a declaration that the automatic baseball pitching machines they manufactured and distributed in interstate commerce were "imminently hazardous" consumer products causing numerous severe injuries. The suit also sought repair of all existing machines. The Commission alleged that the pitching machine, even when disconnected from its power source, retained such a high degree of tension in its spring and cable that at the slightest vibration, the pitching arm would unexpectedly swing forward and downward at great speed, striking any person within its range.

On May 8, 1978, the United States District Court for the District of Columbia approved a consent judgment which set forth a corrective plan to be undertaken by the defendants. During the consent decree negotiations, the Commission attempted to insert language which would have reserved its right to proceed against the defendants "to determine if there has been a failure to comply with reporting obligations under Section 15(b) of the Consumer Product[s] [sic] Safety Act." J.A. at 176. The defendants refused to agree to such a provision, and the final consent judgment contained no such reservation.

B. The Present Litigation - The "Civil Penalty" Suit

The civil penalty suit which is the subject of this appeal arises out of the Commission's unsuccessful attempts to also impose civil penalties administratively upon the manufacturer and distributor of the hazardous baseball pitching machine.

On May 24, 1979, the Commission notified Athlone, Dudley, and Advance of its investigation into their failure to provide information as mandated by the reporting requirement of section 15(b) of the Consumer Product Safety Act, 15 U.S.C. § 2064(b). Harold Miller, the President of Athlone, was notified by letter that the Commission staff believed that the companies involved, Athlone and Dudley, as well as their respective presidents, had sufficient information as of May, 1973 upon which to make a consumer product safety report as required by Section 15(b)(2) of the Consumer Product Safety Act, 15 U.S.C. § 2064(b)(2). J.A. at 29, 176-177. The May 24th letter stated that this could subject Athlone, Dudley and the president of each company to civil penalties up to $500,000. J.A. at 90-91.

On May 15, 1980, the Commission also notified Advance Machine that it had voted to issue an administrative complaint seeking a civil penalty for the violation of the reporting requirement at the expiration of 30 days, unless a settlement was reached. In response, Advance Machine and others filed suit on June 19, 1980, in the United States District Court for the District of Minnesota, to enjoin the Commission from issuing the administrative complaint and asking for a declaration that the Commission lacked the authority to administratively assess a civil penalty. The district court upheld the Commission's authority to proceed administratively. Advance Machine Company v. Consumer Product Safety Commission, 510 F. Supp. 360, 364-365 (D.Minn. 1981).

The Eighth Circuit Court of Appeals, however, reversed the Minnesota district court's ruling on December 14, 1981, holding that the Commission did not have administrative authority under the Act to assess civil penalties. Advance Machine Company v. Consumer Product Safety Commission, 666 F.2d 1166 (8th Cir. 1981).

Meanwhile, the Commission had also issued an administrative complaint against Athlone, Dudley, and their presidents in their individual official capacities on August 5, 1980, charging that by January, 1974 the defendants had information that the pitching machine had caused numerous injuries and that it contained a defect which could create a substantial product hazard, that they failed to provide the Commission with this information as mandated by the Act and that they should therefore be assessed a civil penalty in the amount of $500,000. J.A. at 61-67.

Athlone and its individual officers instituted suit against the Commission on August 26, 1981, in the United States District Court for the District of Columbia seeking to enjoin the administrative proceedings on the grounds, inter alia, that the Commission lacked the authority to assess a civil penalty and that the administrative complaint was barred by res judicata and the statute of limitations.

On March 4, 1982, the District of Columbia court granted the United States' motion to dismiss the case, holding that the issues raised were not ripe for review. The district court then ordered the plaintiffs to exhaust their administrative remedies, Athlone Industries, Inc. v. Consumer Products Safety Commission, No. 81-2023 (D.D.C.), and a notice of appeal was filed on March 18, 1982.

On May 13, 1983, the District of Columbia Court of Appeals held that the Consumer Product Safety Commission lacked the authority to assess a civil penalty administratively. Athlone Industries, Inc. v. Consumer Product Safety Commission, 228 U.S. App. D.C. 80, 707 F.2d 1485 (D.C. Cir. 1983). In light of that holding, the Commission dismissed the administrative action against the defendants.

In the interim, the uncertainty surrounding the Commission's authority to assess civil penalties administratively prompted the United States to institute the instant action in the United States District Court for the District of New Jersey against Athlone, also doing business as Dudley Sports Company, on February 19, 1982. The government sought a civil penalty under section 20 of the Consumer Product Safety Act, 15 U.S.C. § 2069, for Athlone's failure to comply with the reporting requirements of Section 15 of the Act, 15 U.S.C. § 2064(b). A similar complaint was filed in the United States District Court for the District of Minnesota against Advance Machine.

In the Minnesota civil penalty action, the district court denied defendant Advance Machine's motion to dismiss or, alternatively, motion for summary judgment, on August 6, 1982. United States v. Advance Machine Co., 547 F. Supp. 1085 (D.Minn. 1982). The Minnesota district court held that the prior action seeking to have the baseball pitching machines declared hazardous products did not preclude the action for violation of the reporting requirements.

The Minnesota decision is in direct contrast to the decision reached by the district court in this parallel civil penalty action. The New Jersey district court granted defendant Athlone's motion for summary judgment on September 9, 1983, and dismissed the United States' civil penalty suit on the ground that it was barred by the res judicata effect of the earlier declaratory and injunctive imminent hazard suit brought in 1977 by the Commission against Advance Machine and Athlone, among others, in the District of Columbia.

This appeal followed.

II.

Our review of a grant or denial of summary judgment requires that we view the facts in the light most favorable to the party against whom judgment is sought and draw all reasonable inferences in favor of the nonmoving party, the United States. In order to affirm, we must conclude, as did the district court, that there are no genuine issues of material fact in dispute and that Athlone, the movant, is entitled to judgment as a matter of law. Fed. R. Civ. P. 56.

We hold that under these basic principles, Athlone's motion for summary judgment was improvidently granted because the prior judgment has no res judicata effect between the parties to the present action. 6 Pt.2 J. Moore & J. Wicker, Moore's Federal Practice P56.17 (2d ed. 1982). In reaching this result, we consider first, the statutory scheme and second, the doctrine of res judicata and the identity of the causes of action.*fn1

A. The Statutory Scheme

Congress enacted the Consumer Product Safety Act, 15 U.S.C. §§ 2051-2083 (1982), in 1972 to "protect the public against unreasonable risks of injury associated with consumer products." 15 U.S.C. § 2051(b)(1).

Section 15(b) of the Act provides that a manufacturer, distributor or retailer who obtains information reasonably supporting the conclusion that one of its products contains a defect which creates a "substantial product hazard"*fn2 must immediately inform the Commission, unless it has actual knowledge that the Commission had been adequately informed of the problem. 15 U.S.C. § 2064(b).This notification requirement was statutorily imposed upon manufacturers, ...


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