On Appeal from the United States District Court for the Western District of Pennsylvania, D.C. Civil No. 88-1217.
Gibbons, Chief Judge, Hutchinson, Circuit Judge, and Reed, District Judge.*fn*
The United States Consumer Products Safety Commission appeals from a denial of its motion to the court under 15 U.S.C. § 1263(a) to preliminarily enjoin Charles and Mark Focht, doing business as Liberty Industries, from distributing firework components in interstate commerce. The Government contends that the district court misconstrued the statute to require application a subjective standard to the Fochts' actions. We will reverse.
Charles and Mark Focht own and operate Liberty Industries, located in Slippery Rock, Pennsylvania. Liberty sells component parts used to assemble fireworks.*fn1 Liberty markets its goods nationally using a catalog. The catalog not only lists Liberty's components but also offers "how-to" books*fn2 and is sent with a list of chemical suppliers bearing the note: "We hope this list helps you to fill your chemical needs, while Liberty continues to serve all of your other needs!" App. 168, 268.*fn3
The Consumer Product Safety Commission ("CPSC") began to investigate Liberty in March, 1987. Between March and July of that year, five CPSC employees from various parts of the country requested and received catalogs from Liberty. The catalogs contained referral cards to Chemco of Virginia. App. 272-73, 338-39, 379-82, 441-42, 483-84. Six CPSC employees then each placed an order for tubes, twice as many end plugs, and fuses. App. 289, 318, 365, 425, 458, 517. Liberty filled the orders.*fn4
Based on the sales to its employees,*fn5 the government filed a complaint against Liberty on May 27, 1988 seeking to enjoin Liberty's interstate sale of tubes, end plugs, and fuses.*fn6 The complaint theorizes that the sales violated 15 U.S.C. § 1261 because the components shipped were intended for use in illegal fireworks. It raises a question of first impression.
The district court held a hearing on the motion on September 13, 1988. There the government introduced the testimony of two experts; Liberty presented the testimony of one. All three agreed that traditional filling of the number 12 tube sold by Liberty would result in a firework over 1,000 times more powerful than allowed by law. The government witness conceded that the same tube also could be used to assemble a less powerful firework by displacing the end plugs. He also testified that the components could be used to manufacture legitimate Class C fireworks, which are sold to the general public. Both sides agreed that the tubes also could be used to construct mortars to loft stars or other fireworks, another legitimate use.*fn7 After the hearing, the district court consolidated the government's requests for preliminary and permanent injunctions pursuant to Fed.R.Civ.P. 65(a).
The court rendered its decision in an memorandum opinion and order entered September 26, 1988. United States v. Focht, 694 F. Supp. 1199 (W.D. Pa. 1988) (hereinafter Dist. Ct. Op.). It found that the components could be used to assemble legal firecrackers and fireworks. Therefore, the goods per se did not violate the Act. Holding that the regulatory language prohibiting sale of components intended to be used in banned fireworks contemplates the subjective, rather than the objective, intent of the purchaser, the district court denied the government's motion and entered judgment for Liberty. Based on its finding that no statutory violation had occurred, it never examined whether recurrent violations were likely, the second half of the statutory injunction test. See Commodity Futures Trading Comm'n. v. British Am. Commodity Options Corp., 560 F.2d 135, 141 (2d Cir. 1977), cert. denied, 438 U.S. 905, 57 L. Ed. 2d 1147, 98 S. Ct. 3123 (1978). On appeal, the government asserts the district court misconstrued 16 C.F.R. § 1500.17(a)(3), (8) when it held the regulation's "intended to produce" language imposes a subjective consumer standard on sales of fireworks components to determine whether a violation has occurred. Our review of this question of law is plenary. Dent v. Cunningham, 786 F.2d 173, 175 (3d Cir. 1986).
The Federal Hazardous Substances Act, ("FHSA" or "the Act"), 15 U.S.C. §§ 1261-77 (1982 & Supp. V 1987), makes illegal "the introduction or delivery for introduction into interstate commerce of any . . . banned hazardous substance." 15 U.S.C. § 1263(a) (1982); see also id. at § 1264 (penalties; exceptions); United States v. Scharstein, 531 F. Supp. 460, 465 (E.D. Ky. 1982) (FHSA meant "to protect the general public . . . from extremely hazardous products"). Neither the parties nor the district court disputes this. The Act contains the following definition of "banned hazardous substance":
(q)(1) The term "banned hazardous substance" means (A) any toy, or other article intended for use by children, which is a hazardous substance, or which bears or contains a hazardous substance in such manner as to be susceptible of access by a child to whom such toy or other article is entrusted; or (B) any hazardous substance intended, or packaged in a form suitable, for use in the household, which the Secretary by regulation classifies as a "banned hazardous substance" on the basis of a finding that, notwithstanding such cautionary labeling as is or may be required under this chapter for that substance, the degree or nature of the hazard involved in the presence or use of such substance in households is such that the objective of the protection of the public health and safety can be adequately served only by keeping such substance, when so intended or packaged, out of the channels of interstate commerce: Provided, That the Secretary, by regulation, . . . (ii) shall exempt from clause (A), and provide for ...