How a Kansas fireworks company sparked a challenge against an abusive federal regulator
In every state except Massachusetts, at least some types of fireworks are legal. As you prepare for your New Year’s Eve celebrations, however explosive, pour one out for the quarantined fireworks that are supposedly prohibited under a peculiar federal regulation, a challenge to which has taken a family-owned business all the way to the doors of the Supreme Court.
Jake’s Fireworks, a family-owned business headquartered in Pittsburg, Kansas, started as a small stand in 1938. They’re now the largest U.S. importer of fireworks and a leading wholesaler and retailer with locations in nine Southern and Midwestern states.
Unfortunately, that success has landed the company in the regulatory crosshairs of the U.S. Consumer Product Safety Commission (CPSC).
The CPSC sent compliance orders to Jake’s, stating that its fireworks are “hazardous” and must be destroyed. You’re probably thinking: The company’s fireworks must be too explosive, too flammable, or toxic. Not so: The problem with Jake’s, according to the federal government, is that the sound their fireworks make is more of a “bang” than a “pop.”
That’s the CPSC’s justification for ordering Jake’s to destroy millions of dollars’ worth of fireworks.
Here’s the back story: Fireworks are subject to several statutes and regulations, including the Federal Hazardous Substances Act, which regulates flammable and combustible products. Under this law, the CPSC is authorized to ban products it determines to be especially hazardous.
And, pursuant to its own so-called Audible Effects Regulation, the CPSC has banned consumer use of certain hand-held devices that contain a powerful explosive charge that causes an extremely loud “report.” Farmers often use such devices to scare pests away from crops. The aim of this regulation is to prevent consumers from using these devices.
But these are not the devices that Jake’s sells. Jake’s products are typical backyard fireworks, approved for use by consumers to launch 40 or 50 feet in the air and watch the show. And the CPSC has admitted in regulatory filings that these kinds of fireworks are not covered by the Audible Effects Regulation.
No matter. The CPSC has changed its mind without changing its regs. And in applying its new interpretation to consumer fireworks, the CPSC uses an “ear” test, colloquially known as the “poof/bang test.” Here’s how that test works: A CPSC employee sets off the fireworks, and if the resulting report is a “poof” or a “pop,” the product is acceptable under existing regulations. If the resulting report is a “bang” or a “boom,” the product is likely banned.
But this standard is impossible to apply equally in practice. One federal regulator may hear a “poof,” the other may hear a “pop,” while yet another may hear nothing but “bang.” The difference between a profit or financial disaster for your company hinges on nothing more than the hearing sensibilities of the regulator assigned to you that day.
In Jake’s case, the CPSC determined that Jake’s products leaned a little too heavily toward the “bang” side of the equation and, through many compliance notices, demanded the company destroy these “banned hazardous substances” at a loss to the tune of $2.6 million. Furthermore, the company’s employees have had to quarantine the fireworks caught in this legal dispute from the rest of the inventory. Should even one case of fireworks be sold to the public, Jake’s could be on the hook for substantial criminal and civil penalties of $15 million.
Of course, given the CPSC has previously admitted backyard fireworks are not subject to the Audible Effects Regulation, the CPSC has no business applying it to Jake’s products in the first place.
Jake’s, understandably, wants to challenge the CPSC’s interpretation and application of the law.
But when the company sued over the agency’s compliance orders in federal court, things got even more interesting.
In two separate court cases, the CPSC argued that its compliance orders were merely part of its “decision-making process.” According to the agency, despite the consistent, conclusive, and mandatory terms of its compliance notices, it had not yet made a final decision about Jake’s fireworks—and, indeed, might never arrive at a decision that can be reviewed in a court. Remarkably, two separate judges accepted this reasoning and declined to grant Jake’s Fireworks a hearing. And an appellate court affirmed.
As a result, Jake’s is trapped in legal purgatory, unable to challenge the agency’s decisions, but unwilling to sell their products and risk hefty penalties. (Remarkably, despite purporting to believe Jake’s products are hazardous, the latter option is the one the government recommends.) Rather than admitting their standard is faulty, or finding another solution, the CPSC is attempting to outlast Jake’s Fireworks by exhausting the company’s options, resources, and patience.
Federal agencies cannot hide behind decisions not being “final agency actions” while businesses are being crushed by those decisions’ consequences. Jake’s Fireworks is asking the U.S. Supreme Court to review whether they can even get through the courthouse doors to challenge the agency’s decision on the merits. When agency actions carry the threat of bankrupting financial penalties, Americans deserve the opportunity to seek judicial review. That’s what the Administrative Procedure Act provides and it is all Jake’s is asking for here.
