Remember Buckyballs, the office desktop toy, the U.S. Consumer Product Safety Commission (CPSC) regulated out of business? Not only did they force business to close their doors for good, the CPSC is suing the former CEO personally for the entire cost of the Buckyball recall. A staggering $57 million.
Why? Because, the Buckyball CEO Craig Zucker hurt the poor government workers feelings. No, really, that is what happened.
Maxfield & Oberton resolved to take to the public square. On July 27, just two days after the commission filed suit, the company launched a publicity campaign to rally customers and spotlight the commission’s nanny-state excesses. The campaign’s tagline? “Save Our Balls.”
Online ads pointed out how, under the commission’s reasoning, everything from coconuts (“tasty fruit or deadly sky ballistic?”) to stairways (“are they really worth the risk?”) to hot dogs (“delicious but deadly”) could be banned. Commission staff were challenged to debate Mr. Zucker, and consumers were invited to call Commissioner Inez Tenenbaum’s “psychic hotline” to find out how it was that “the vote to sue our company was presented to the Commissioners on July 23rd, a day before our Corrective Action Plan was to be submitted.”
“It was a very successful campaign,” says Mr. Zucker, “just not successful enough to keep us in business.” On Dec. 27, 2012, the company filed a certificate of cancellation with the State of Delaware, where Maxfield & Oberton was incorporated, and the company was dissolved.
“The inventory was sold and the business ended,” says Mr. Zucker. He thought it was an “honest and graceful exit” to a broken entrepreneurial dream.
Apparently bureaucrats at the CPSC don’t have much of a sense of humor and decided to strike back. Hard…
But in February the Buckyballs saga took a chilling turn: The commission filed a motion requesting that Mr. Zucker be held personally liable for the costs of the recall, which it estimated at $57 million, if the product was ultimately determined to be defective.
This was an astounding departure from the principle of limited liability at the heart of U.S. corporate law. Normally corporate officers aren’t liable for the obligations of a company, and courts are loath to pierce the shield of limited liability unless it can be shown that the corporate entity was a mere facade—that corporate formalities weren’t adhered to, the officers commingled personal and corporate funds, and so on.
No such allegations were made against Mr. Zucker. Instead, the commission seeks to extend the holding of United States v. Park, a 1975 Supreme Court case in which the CEO of a food retailer was held criminally liable under the Food and Drug Act for rodent infestation at company warehouses. The CEO, the court ruled, was the “responsible corporate officer” by virtue of being in a position of authority when the health violations occurred.
Don’t cross those Obama bureaucrats.