[00:00:00] Speaker 00:
Number 22-1300, Window Covering Manufacturers Association Petitioner versus Consumer Product Safety Commission.

[00:00:09] Speaker 00:
Ms.

[00:00:09] Speaker 00:
Saharsky for the petitioner, Mr. Myers for the respondent.

[00:00:13] Speaker 03:
Good morning, Council.

[00:00:14] Speaker 03:
Ms.

[00:00:14] Speaker 03:
Saharsky, please proceed when you're ready.

[00:00:16] Speaker 00:
Good morning.

[00:00:17] Speaker 04:
My name is Nicole Saharsky, representing WCMA.

[00:00:20] Speaker 04:
With the court's indulgence, I'd just like to take a minute to frame the discussion about what this rule does.

[00:00:25] Speaker 04:
There are three types of corded operating systems that are used for window covering.

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First is the traditional cord lock system where there's a free hanging cord and you pull it to make the covering go up and down.

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The second is the retractable, the retractable lift system, where there's a wand and you pull the wand to make the product go up and down.

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There is a cord attached to the wand, but it's like up at the top of the window covering.

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It retracts into the top rail when not in use.

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And then the third is called the continuous loop system.

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That's where there's a cord or a beaded chain that's in a loop.

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It's attached to the wall.

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It's kept under tension.

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You use it like a pulley system to make the product go up and down.

[00:01:04] Speaker 04:
And none of those are used anymore for stock products as of 2018.

[00:01:08] Speaker 02:
Can I just ask a question?

[00:01:10] Speaker 02:
Does the rule also cover the device that is used if it's a shade to, or I'm sorry, blinds to open or close the blinds?

[00:01:23] Speaker 02:
Which is sometimes a twist wand, sometimes two cords.

[00:01:27] Speaker 04:
Those are tilt cords or tilt ones.

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Those aren't covered.

[00:01:30] Speaker 04:
That's not covered by the rule.

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They're not an issue here.

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There are also inner cords in some of the products.

[00:01:36] Speaker 04:
Those aren't covered either.

[00:01:37] Speaker 04:
It's only what are called operating cords that make the product basically go up and down or from side to side.

[00:01:42] Speaker 06:
Thank you.

[00:01:43] Speaker 04:
Okay, so these operating cords were eliminated from stock products in 2018, but the industry needed some time to deal with that for custom products, because sometimes you need cords in custom products.

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We're talking about windows that are sometimes bigger than 10 feet tall, and so it's just difficult with a cordless solution to get the product up and down.

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And so the rule at issue here is regulating custom products, and we think it has pretty significant problems both in terms of the substance and the effective date.

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And in terms of the substance,

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What the statute requires the agency to do is to figure out the degree of risk that remains in light of the measures the industry has taken.

[00:02:21] Speaker 04:
And if we go back to those three types of window coverings, we have first the traditional free hanging cord system.

[00:02:26] Speaker 04:
Well, those are not allowed even for custom products as of the 2022 industry standard.

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So those are off the table.

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Then you have the second type, which is the retractable, where you pull the wand.

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There have never been any safety incidents on those.

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The government doesn't cite me.

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They've been used for 25 years.

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No safety incidents.

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And that's not super surprising because the cord is way at the top of the product there and it retracts when it's not in use.

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So that leads us with this third type of system, which is the pulley system with the continuous loop and there the government and the industry have a disagreement about how that how those products should be addressed.

[00:03:04] Speaker 04:
But what the government had to do here was to look at really this like, small subset of products that issue and say, there's an unreasonable risk remaining.

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Here's what the degree of risk is and here's a cost benefit analysis.

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And there's a lot of problems we think with the way they handle that.

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But the two main problems are that they rely on data and incidents that are just decades old.

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They just don't account for any of these new safety measures.

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And then there are some parts of products like the retractable or the commercial segment where there are no safety incidents whatsoever.

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The government did not find any and it didn't even consider costs for the commercial product.

[00:03:40] Speaker 04:
And I just want to say 1, I'm sure the questions, but just 1 note about the effective date, because this is really an independent problem that the commissioners decided to override the staff's recommendation here and put in place a 6 month effective date.

[00:03:53] Speaker 04:
And that's why we came to this court and sort of say, because it's going to cause just hundreds of millions of dollars of disruption for this industry, which is 97% small businesses.

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The staff said, based on hundreds of comments, that the staff found credible that the industry can't create new compliant products in the 6 months.

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They said it can't be done.

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We've looked at our own knowledge of supply chain.

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We think these comments are credible.

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They got comments from the small business administration.

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They said it can't be done and the commissioners overrode that and with no independent risk or feasibility analysis and you know, really the problem here is that this is a pretty unique statute.

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It puts unique burdens on the agency in terms of the kind of findings they have to make, including substantial evidence to support that effective date.

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So the government on the effective date one, I just have a question about the effective date.

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On the effective date,

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point, the government makes the argument that under the way you're looking at the two provisions at both reference effective date, that you're rendering a good cause one superfluous or nukatory because it does establish a default that says that

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As long as you're within 180 days, it's okay.

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You go outside 180 days, the Commission has to show good cause.

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What's your response to that?

[00:05:13] Speaker 04:
Actually, we think it's the government's view that would cause one of them to become superfluous, but let me explain why.

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There are these two independent provisions.

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They were put in the statute at the same time.

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They have to be read together, right?

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The one that the government relies on says that there's 180 day effective date, unless there's good cause.

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And then there's a separate requirement that says that the agency has to justify, including the effective date, justify that the effective date is reasonably necessary using substantial evidence.

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And so what that means is, you know that there is 180 day effective date, but if it's not reasonably default effective date, but if it's not, you know, reasonably necessary based on the substantial evidence in the record that that effective date isn't allowed under that separate provision of the statute.

[00:05:55] Speaker 04:
And so that's that's the provision in section.

[00:05:57] Speaker 02:
It isn't the best way to read those two together.

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That you don't pick something.

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Shorter than 180 days unless you have.

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you know, some good cause, but that the default is 180 days and you only have to have good cause to go to delay further.

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Why isn't that?

[00:06:23] Speaker 04:
Well, I mean, Zach here found that there was good cause to go beyond 180 days.

[00:06:28] Speaker 02:
That's a different argument as to like whether they had good cause or there's substantial evidence in the record to support disagreeing with the staff.

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But you seem to be making a different argument also, which is that they had to make a finding that 180 days was

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and they didn't make that finding.

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Aren't you making that argument?

[00:06:50] Speaker 04:
Yes, that is exactly the argument we're making, that there are both of those provisions and that the court's job is to give effect to both of those provisions, right?

[00:06:57] Speaker 04:
And so the first provision that the government relies on says 180-day effective date, but that's not an upper limit if it's something other than 180 days is allowed for good cause, and there was a good cause finding here.

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But there is this separate requirement that we think the government is really overlooking and it's really an important requirement just to kind of frame this.

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The most important things that the agency has to do here are all in the findings that are required in Section 2058.

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There's the provisions F1 and F3 and it says the government has to make these specific findings.

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They actually have to be part of the rule itself, not just evidence to support the rule, but they have to be in the rule itself.

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And then the judicial review provision says that all of them have to be supported by substantial evidence.

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And so one of the findings that has to be made is the rule, I'm reading from 2058 F3A, the rule, including its effective date, is reasonably necessary to eliminate or reduce an unreasonable risk of injury associated with such product.

[00:07:53] Speaker 03:
And then the judicial review provision says that those particular findings have to be supported by... So is there any situation in which the commission would make the reasonable necessity, whatever the exact words is right there, and as to the effective date, and the effective date, let's say, is a year, so it's beyond 180 days, then does that necessarily establish good cause?

[00:08:18] Speaker 04:
I don't know that I don't know if there are any cases addressing those provisions.

[00:08:22] Speaker 04:
I think it probably would establish good cause because the cause would be that it's necessary to serve the.

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Or to address the risk that is supposed to be addressed.

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So, I think the point is that these are.

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The default provision is just the default.

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And we think the government is giving very short shrift to this separate provision, which is that these very particular findings have to be made to justify the rule.

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And I just think it's notable that this effective date provision, it's in here as part of the findings that Congress said the rule, including its effective date, has to be reasonably necessary.

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And when you're talking about pretty significant consumer products that take a while to get the supplies, to design them, to manufacture, it's not surprising

[00:09:02] Speaker 03:
that there would be effective dates um of longer and ask one question about the implications of the effective date argument so let's let's suppose just for arguments purposes the government was resist this um but arguing if we ruled in your favor on the effective date and vacated the rule because of the effective date then what happens to your constitutional challenge about the removal of the

[00:09:29] Speaker 04:
Well, I mean, first of all, if there's a problem with the effective date, we think the entire rule should be vacated because the judicial review provision says that the rule shall not be affirmed unless all of the findings are supported by substantial evidence.

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So we think the entire rule should be vacated and sent back.

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And in those circumstances, the court would not need to address any constitutional argument because the rule would be vacated.

[00:09:52] Speaker 03:
Can we not vacate?

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In a lot of situations when we have a circumstance like this, if there's one particular part of the rule that's problematic, we'll try to do what's effectively severability analysis to figure out whether the remainder of the rule stays intact, given the problems with the one.

[00:10:08] Speaker 03:
The effective date provision, you started out by saying it's an independent argument.

[00:10:10] Speaker 03:
And so if the effective date part of the rule is problematic, then could we not vacate the rule as to the effective date?

[00:10:21] Speaker 04:
Well, as you indicated, the court certainly has decisions that talk about partial vacature and when that might be appropriate.

[00:10:27] Speaker 04:
We think that the language of the judicial review provision here suggests perhaps that this is not an area where there should be partial vacature because it uses language that's pretty unique in the US code that the consumer product safety rule shall not be affirmed.

[00:10:41] Speaker 04:
Unless the commission's findings under sections one eight fifty eight f one and f three of this title are supported by substantial evidence in the record taken as a whole.

[00:10:49] Speaker 04:
The way we read that in light of all of the very specific findings that are required is that the rule, the entire rule should be vacated.

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I of course understand that the court has cases addressing other statutes where there is consideration of partial vacatur.

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But, you know, to be to be fair, we don't think.

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To kind of address another issue, we don't think that partial vacatur would make sense for independent reasons, which is the analysis of the court failed to do with respect to the risk and with the cost benefit analysis.

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And we're not coming to this court and second guessing judgment calls that the agency made.

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We're talking about data that is either fundamentally skewed or just missing.

[00:11:23] Speaker 04:
I mean missing analysis and what I mean by skewed is the use of incident data that goes back to 2002 and just doesn't account for the safety improvements that have occurred over decades where this industry has been working so hard to make those safety improvements over decades.

[00:11:38] Speaker 02:
Maybe you answered the question but let me just ask the Chief Judge's question a little differently.

[00:11:45] Speaker 02:
So assume for the sake of argument that we agree that either on the effective date or one of the other arguments that you prevail and assume that we agree with you that that means that we vacate the entire rule.

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Should we though address all of your arguments so that when the commission redoes the rule, if we were to do all of that, they'll know

[00:12:14] Speaker 02:
Oh, their cost-benefit analysis was, you know, we thought that that was either fine or not for all of the other ones.

[00:12:23] Speaker 02:
Does it make sense for us to address all of those arguments so that the Commission knows what we think of them or you think that

[00:12:31] Speaker 02:
Once we find one, we just vacate the whole thing and send it back.

[00:12:35] Speaker 02:
And it's akin to an advisory opinion or something for us to final any of the other.

[00:12:41] Speaker 04:
Well, I mean, of course, it's up to the court in terms of how it wants to proceed.

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But the court does have all of the arguments before it in terms of the various problems with the rule, including the constitutional problems.

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And so with respect to the problems under the Administrative Procedure Act and the Special Consumer Product Safety Act, we think that the court should go through and address those.

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We think that those problems are pretty obvious.

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and actually very similar to many of the problems that caused the 10th Circuit to invalidate the rule in Zen Magnet.

[00:13:06] Speaker 04:
I think Chief Judge Srinivasan's question was looking more towards the constitutional issue if the rule were vacated.

[00:13:13] Speaker 04:
That, I think, might be a tougher call for the court.

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Of course, it's up to the court, but normally the court tries to avoid constitutional questions if it can.

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Although, of course, if the court saw a problem with the structure of the agency here, the solution would be to make those folks removable at will going forward.

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And then send the rule back or send it back with them to consider it again.

[00:13:35] Speaker 05:
So, so if we found a problem with the effective date and remanded to address that.

[00:13:43] Speaker 05:
That wouldn't reopen all the other issues, which is the cost benefit analysis.

[00:13:48] Speaker 05:
You didn't give us the data for this, but that would not be touched.

[00:13:52] Speaker 05:
Correct?

[00:13:52] Speaker 05:
And then you would just appeal again.

[00:13:54] Speaker 05:
Those issues after the effective date is.

[00:13:56] Speaker 04:
Address, I mean, I think it's it's up to the court in terms of partial in terms of what kind of.

[00:14:02] Speaker 04:
Guidance that would want to give, I mean, we would urge the court to address those issues now, because we think those failures are pretty glaring.

[00:14:08] Speaker 04:
And I should say, you know, the industry here has been wanting to work and has been working in partnership with the agency for decades.

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And so getting the agency to look not only at the effective date, but some of the other real failures with the rule we think would be is very important.

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And let me just give one example, which is the incident data on which the agency relies.

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You know, this is something where there was a real failure of the administrative process.

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And where, you know, the industry wanted it to be more of a notice and comment and a collaborative process, because the agency said, you know, we've got some incident reports dating back to 2009 that we think show an unreasonable risk associated with courted products.

[00:14:45] Speaker 04:
And our response to that is, okay, like, tell us what those are, because a lot of the courted products have been eliminated.

[00:14:51] Speaker 04:
The ones that everyone was most concerned about with the freeing in courts have now been eliminated.

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For all products as of 2022 and so we want to know of these incidents.

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Are they want are they products that complied with the new standards or are they or are they older products?

[00:15:05] Speaker 04:
You know, we want to know if there's still risk there and the agency would not provide the reports at all during rulemaking.

[00:15:11] Speaker 04:
It was not until well after rulemaking when we were 5 days before.

[00:15:15] Speaker 04:
Submitting our brief and we said like, look, you told us these are part of the administrative record and we see these reports and they provided a spreadsheet.

[00:15:22] Speaker 04:
It's very small and hard to read and also doesn't really provide the data to know whether these are newer products or older products and whether the risk.

[00:15:30] Speaker 03:
You started out by saying that some of the incidents that are the predicate for the rule are outdated.

[00:15:37] Speaker 03:
But I guess you don't know that, right?

[00:15:40] Speaker 03:
I mean, that's the point of not having the underlying incident stuff is that you don't necessarily know because you don't necessarily know what kind of mechanism was used in the circumstances.

[00:15:52] Speaker 03:
underlying the incidents that gave rise to the rule.

[00:15:55] Speaker 03:
And so it may be a problem that you don't have the incident reports, the underlying information, but you can't necessarily say whether they're outdated or not.

[00:16:02] Speaker 04:
Well, we do have some information.

[00:16:04] Speaker 04:
So let me tell you what information we do have and what we don't have and what we can tell from the information that we do have.

[00:16:09] Speaker 04:
We have that there were 209 incident reports.

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They indicated whether they were stock or custom products or unknown.

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This rule that we're talking about only regulates custom products.

[00:16:19] Speaker 04:
So, of course, we wanted to know how many are custom products.

[00:16:22] Speaker 04:
They identified only 36 of those that are custom products.

[00:16:26] Speaker 04:
And then actually 3 of them didn't involve operating courts.

[00:16:29] Speaker 03:
They involve not 36 of the 209, but because it was 36 of.

[00:16:34] Speaker 03:
There was 36 that were definitively custom, but that doesn't mean that it's only 36 of the 209 that were custom, because there were several for which it was unclear whether it was custom or not.

[00:16:42] Speaker 04:
There's some provision that there's some amount known, actually like 60%, they said were unknown.

[00:16:47] Speaker 04:
And they did indicate what, to the extent that they knew what type of chords were involved.

[00:16:51] Speaker 04:
And so for some of them, they did indicate on this spreadsheet that they provided well after the rulemaking process that they were the traditional free hanging chords.

[00:16:58] Speaker 04:
So we know that those are ones that have been eliminated.

[00:17:01] Speaker 04:
And then actually in the in the rule, the agency acknowledged that they think that half of the 33 custom incidents would no longer occur under the new voluntary standards.

[00:17:12] Speaker 04:
We don't know exactly how they know that because we don't they have more information about the products and we do.

[00:17:16] Speaker 04:
So the point is, we do know something about these 209 incident reports, which tells us that it's really not 209 that involve customs.

[00:17:23] Speaker 04:
That it also involves a lot of stock products, that some of them involve the free hanging cords that don't exist anymore, and that the agency itself tells us that of the ones they know are custom, they think at least half would be eliminated by the new voluntary standard measures.

[00:17:38] Speaker 04:
And our response to that is great.

[00:17:40] Speaker 04:
Then let's focus on what remains, but they're not focusing on what remains.

[00:17:43] Speaker 04:
in their cost-benefit analysis, for example, when they're figuring out the benefits of the rule, they're using old numbers from 2002.

[00:17:50] Speaker 04:
And they're using numbers that don't account for even their own acknowledgement that the voluntary standard would decrease the risk and eliminate about half the product.

[00:18:01] Speaker 04:
So I know that this gets awfully technical, but this is an area in which I think Congress wanted that kind of technical analysis to happen because it put these very specific findings in the rule.

[00:18:11] Speaker 04:
And I think it comes from a recognition

[00:18:13] Speaker 04:
that the agency has power to regulate here certainly but if it has to really determine the degree of risk that remains in light of the voluntary standards and then also to determine what the what the what the costs are and whether the costs outweigh the benefits.

[00:18:27] Speaker 03:
So I have one question one technical question about the cost benefits so

[00:18:30] Speaker 03:
On the cost part, the argument that you started with in both your opening brief and your reply brief has to do with a baseline against which the cost factor is applied.

[00:18:38] Speaker 03:
And your point is that, well, the baseline was off because it's either exclusively or at least largely made up of stock products as opposed to custom products.

[00:18:48] Speaker 03:
Did you submit information or do we have a sense of what the delta would be?

[00:18:52] Speaker 03:
What's the difference between if you start with the baseline custom or start with the baseline stock?

[00:18:59] Speaker 04:
I think that there are comments talking about that custom products are more expensive.

[00:19:03] Speaker 04:
I think that the agency... How much more?

[00:19:05] Speaker 03:
I guess that's the question, because if it's not that much more, then the cost benefit analysis already is inevitable in this situation.

[00:19:13] Speaker 03:
There's going to be a big range, and it's going to be based on things that are very, very hard to value a child's life.

[00:19:18] Speaker 03:
So I guess the question I'm asking is, what leads us to think that it would actually be meaningful?

[00:19:24] Speaker 04:
Well, I mean, we're talking about products.

[00:19:26] Speaker 04:
I don't I don't have an exact number for you in terms of the Delta and respectfully, we don't think that that's like our burden here because the CPSC is the one who has to do the cost benefit analysis.

[00:19:34] Speaker 04:
I also would mention just off the top that there's some costs that aren't accounted for at all.

[00:19:38] Speaker 04:
Like the whole commercial side of the market, which is like 25%, this cost not accounted for.

[00:19:44] Speaker 04:
But let's let's take that off the table and let me directly answer your question.

[00:19:47] Speaker 04:
So, there's been an acknowledgement, I think, during this whole voluntary standard process, actually going back to 2018 and 2019, when the industry said, we're going to address stock products first.

[00:19:57] Speaker 04:
They're 80% of the market.

[00:19:59] Speaker 04:
They're smaller.

[00:19:59] Speaker 04:
They're simpler.

[00:20:00] Speaker 04:
They're easier for us to come up with cordless solutions, like the ones that have a spring where you can just push it up and down from the bottom.

[00:20:07] Speaker 04:
And everyone at that recognized at that point that custom solutions are going to be more difficult because of the bigger products.

[00:20:13] Speaker 04:
They're just they're bigger.

[00:20:15] Speaker 04:
They're heavier.

[00:20:15] Speaker 04:
They have to use different materials as a result.

[00:20:18] Speaker 04:
So there is a significant delta there.

[00:20:19] Speaker 04:
I don't have an exact number for you on the significant delta, but even the recognizes the cords.

[00:20:26] Speaker 04:
have to be used in some custom products, because some of the products are literally over 10 feet tall.

[00:20:32] Speaker 04:
For example, when the staff recommended their effective date, they picked a one-year effective date for under 10 feet tall, and another one, a two-year effective date for over 10 feet tall.

[00:20:41] Speaker 04:
It's because these are huge products that cost thousands of dollars.

[00:20:44] Speaker 04:
They're nothing like what we might buy at Home Depot for our homes.

[00:20:50] Speaker 04:
And so that's that I think from the cost perspective, just to kind of summarize from the cost perspective failure to consider whole categories of costs, like the commercial analysis from the, and then also the reliance on stock products from the benefits perspective.

[00:21:05] Speaker 04:
You know, we think that they've relied on kind of this idea of.

[00:21:08] Speaker 04:
20 years ago instance that's not worn out by by the more recent data and I guess I know I'm over my time, but if I can just make 1 other point with the court's indulgence.

[00:21:17] Speaker 04:
You know, we really do think that this is like the Zen magnets case that was faced in the 10th circuit where they invalidated a rule about magnets.

[00:21:24] Speaker 04:
It actually has some of the same problems in terms of not recognizing and accounting for a trend in the data.

[00:21:30] Speaker 04:
relying on incident reports that weren't clearly about the products at issue, and then had the same problem of not accounting for a category of costs, where there was the cost that the rule would impose on the scientific and educational community.

[00:21:44] Speaker 04:
I guess just the last thing I would say is, you know, I understand that these are important products, and we've worked very hard over decades to make them safer and safer, but Congress put in demanding requirements here, and when it has wanted to give them agency more discretion, it's done so.

[00:21:57] Speaker 04:
This court had a case about eight months ago called Finbin and involved infant products.

[00:22:03] Speaker 04:
And in that case, the court recognized that the CPSC requirements are demanding, that there's a demanding cost benefit analysis and that when Congress wants to give the agency more leeway, it does specifically in different provisions like the ones that applied to infant products.

[00:22:16] Speaker 04:
So we just think that, you know, what the agency did here didn't come close to meeting its burdens.

[00:22:21] Speaker 02:
So let's suppose we don't find merit in any of those arguments and we

[00:22:31] Speaker 02:
structural argument.

[00:22:35] Speaker 02:
Why isn't this case controlled by Collins v Yellen in that there's no compensable harm here.

[00:22:45] Speaker 02:
And so we, we don't even really have to reach the merits of whether the for-cause provision violates the Constitution.

[00:22:59] Speaker 04:
So we think that Collins is pretty distinguishable because the court there limited its decision to retrospective relief and we're seeking perspective relief.

[00:23:07] Speaker 04:
There is a rule that is causing harm billions of dollars or I'm sorry, hundreds of millions of dollars to the industry if the effective date goes into effect and if the rule goes into effect in six months.

[00:23:16] Speaker 04:
So that is perspective ongoing harm as a result of the rule.

[00:23:19] Speaker 04:
Collins addressed a very different and frankly kind of weird situation.

[00:23:23] Speaker 04:
Collins was limited to retrospective relief because there were shareholders in Fannie Mae and Freddie Mac who were seeking to invalidate the third amendment, this dividend formula that was used in a contract, but actually that had been superseded by another contract.

[00:23:37] Speaker 04:
And so there wasn't an ongoing problem that the shareholders were arguing about.

[00:23:42] Speaker 04:
They just wanted to invalidate this dividend formula and get money going

[00:23:45] Speaker 04:
Money back going backwards and then the situation was a little more complicated by that than that, because there were 2 directors of the involved.

[00:23:54] Speaker 04:
There was 1, an acting director who chose to put that that 3rd amendment in place in the 1st place who adopted the contract.

[00:24:02] Speaker 04:
And then there was another director that implemented that contract.

[00:24:06] Speaker 04:
And so the first acting director was removable at will, so there wasn't a constitutional problem.

[00:24:12] Speaker 04:
But then the second director had a constitutional problem that the court identified under SEALA law, because it had been the one implementing this.

[00:24:19] Speaker 04:
And so the Supreme Court, I think, was understandably in kind of a weird position there, that there was kind of like a half constitutional problem and half not constitutional problem, and only a claim for backward voguing relief and not prospective relief.

[00:24:31] Speaker 03:
I'm not sure that those...

[00:24:31] Speaker 03:
principle in Collins, it's true that it involved backward-looking relief, but the principle there is limited to backward-looking relief.

[00:24:37] Speaker 03:
And there's other courts of appeals that have applied Collins in the same context as this case, right?

[00:24:43] Speaker 04:
Right, so we think that the relevant rule comes actually from the court's decision in free enterprise fund versus PCAOB.

[00:24:50] Speaker 04:
That was perspective relief, that was a case involving inferior officers, but the court found that there was a problem with removal restrictions.

[00:24:57] Speaker 04:
And the court said we have to provide declaratory relief going forward to make sure that, you know, going forward that the rules are applied in a constitutional manner.

[00:25:05] Speaker 04:
And so we think that is the relevant decision.

[00:25:07] Speaker 04:
Now, you're right that there are cases, there was a decision from the 5th circuit, the 2nd circuit, and the 6th circuit that have applied Collins to the situation of perspective relief.

[00:25:17] Speaker 04:
Respectfully, we think that they're wrong.

[00:25:19] Speaker 04:
Now, the 5th circuit case has gone to the Supreme Court now on a different issue about the funding of the CFPB.

[00:25:25] Speaker 04:
The 2nd one is very recent.

[00:25:26] Speaker 04:
We don't know what's going to happen with that.

[00:25:28] Speaker 04:
The 6 circuit 1 is actually up on petition for search at the Supreme Court right now, although it has 2 issues and the government confessed there on the other issues.

[00:25:36] Speaker 04:
So, whether the Supreme Court ever reaches the remedy issue is a question mark.

[00:25:39] Speaker 04:
I guess the point is, you know, this part isn't bound by by any of those other court decisions.

[00:25:43] Speaker 04:
It's bound by the decisions of the Supreme Court and the Supreme Court, I think, has told us 2 things that are pretty relevant here.

[00:25:49] Speaker 04:
The first is under the Seal of Law decision that there is absolutely a constitutional violation here.

[00:25:54] Speaker 04:
The Supreme Court said that the general rule for principal executive officers is that they have to be removable at will.

[00:26:01] Speaker 04:
It said that the court has said it's recognized two exceptions to that that are the outermost limits of the constitutional authority.

[00:26:06] Speaker 04:
The government relies on one of them here that involves multi-member expert agencies, but the Supreme Court didn't say the exception was for any multi-member expert agency.

[00:26:15] Speaker 04:
It's that only those that don't exercise substantial executive authority.

[00:26:19] Speaker 04:
So we think that under seal law, the constitutional violation is clear under.

[00:26:23] Speaker 04:
Then the question is what the remedy is, and we need to look at what the most relevant Supreme Court decision is on that point.

[00:26:30] Speaker 04:
Whatever you think of the reasoning in Collins, the Supreme Court was absolutely clear that it did not involve prospective relief.

[00:26:35] Speaker 04:
It only involved the situation of retrospective relief and the case that the Supreme Court has had that's about perspective relief in this context is the PCA OB case re Enterprise fund.

[00:26:45] Speaker 04:
And that one provides a remedy here, and I guess I don't know.

[00:26:48] Speaker 02:
How do we know what is what the court meant by substantial executive authority?

[00:26:56] Speaker 02:
Well, how does that map on to this commission?

[00:27:00] Speaker 04:
I think the court has given examples in the Collins case that will making authority is substantial executive authority in Kaiser.

[00:27:08] Speaker 04:
I think the Kaiser versus welcome from a few years back.

[00:27:10] Speaker 04:
The court said that adjudicatory authority is substantial executive authority in steal a lot.

[00:27:15] Speaker 04:
The court looked at the ability of the agency there to bring.

[00:27:18] Speaker 04:
bring actions, civil actions in court and seek penalties as substantial executive authority.

[00:27:23] Speaker 04:
And here the CFPB has all those things and more.

[00:27:26] Speaker 04:
It can issue recalls.

[00:27:27] Speaker 04:
It can affect over a trillion dollars of the U.S.

[00:27:29] Speaker 04:
economy.

[00:27:30] Speaker 04:
And I don't think the government is making any argument that they don't have substantial executive authority.

[00:27:35] Speaker 02:
So do you think that in effect Humphrey's executive has been overruled?

[00:27:40] Speaker 04:
No, the Supreme Court has said very carefully, very, very carefully that it's not overruled.

[00:27:46] Speaker 04:
And the reason that they said that it is within the exception that the court identified is because there the Supreme Court believed that the 1935 FTC was not exercising substantial executive authority.

[00:27:58] Speaker 04:
That's what the court said in its 1935 opinion.

[00:28:01] Speaker 04:
It described the authority as quasi-judicial and quasi-legislative.

[00:28:05] Speaker 04:
And then the Supreme Court in seal of law, I think, had a very telling, I think it's put in a four, a very telling put note, and it said, look, we're taking Humphrey's executor on its own terms, the way that the court described the 1935 FTC's power.

[00:28:17] Speaker 04:
We're not going to look behind it to see if there were latent powers that the Supreme Court should have recognized and didn't rely on.

[00:28:23] Speaker 04:
We're going to take Humphrey's executor as it stands.

[00:28:26] Speaker 04:
And so in that case, which the Supreme Court is characterized and seal a lot is not exercising any significant executive authority.

[00:28:33] Speaker 04:
You know, that's just very different from the case here where I think the agency is admitting that there's an exercise of very significant executive authority.

[00:28:39] Speaker 04:
I guess I just if it's right, I'm going to say one quick point on the remedy question, which is I think it would be extraordinary to say that there's an ongoing constitutional violation and really, you know, no prospect of a remedy available.

[00:28:51] Speaker 04:
The idea that we would need to show some make some kind of

[00:28:55] Speaker 04:
Showing to get actually get a remedy here.

[00:28:57] Speaker 04:
I mean, we're talking about a rule that is in place.

[00:29:00] Speaker 04:
It's affecting an entire industry.

[00:29:01] Speaker 04:
It's, you know, we showed at the stage that we're talking from the effective date of millions of dollars, hundreds of millions of dollars hurt to this industry.

[00:29:09] Speaker 04:
We also know that it's 97% small businesses.

[00:29:12] Speaker 04:
the Small Business Administration came to the agency here and said, don't do this six month effective day, you're going to hurt people.

[00:29:18] Speaker 04:
And so the idea that there's this here and now injury, as the Supreme Court has called it, that doesn't have a remedy, we think would be really pretty extraordinary.

[00:29:27] Speaker 03:
My colleagues don't have additional questions for you.

[00:29:29] Speaker 05:
I actually have a question.

[00:29:31] Speaker 05:
I'd like to go back a moment to the incident.

[00:29:35] Speaker 05:
Because I, assuming that that is problematic, that they didn't disclose that to you earlier, I understand that our caseload requires you to show that you were prejudiced by that.

[00:29:44] Speaker 05:
And I didn't see you arguing that, the prejudice point in your opening brief.

[00:29:48] Speaker 05:
I'm kind of wondering if that's forfeited, the prejudice arguments, and also what actually, how actually were you prejudiced?

[00:29:56] Speaker 05:
Maybe that's kind of implied by the problems you've had with it, but I haven't heard exactly how you were prejudiced.

[00:30:00] Speaker 04:
What would you have done if you would have

[00:30:03] Speaker 04:
I think we would have had an opportunity to provide comment and to address the risks under the rule during the notice and comment process.

[00:30:09] Speaker 04:
So I think that because the risk analysis has to be part of the findings under the rule, under the CPSA, that this is the agency's burden with respect to notice and comment, that it has to provide notice of what's the basis for those findings and give us a chance to comment on it.

[00:30:26] Speaker 04:
And so I don't think that there is a prejudice requirement there, but I think the prejudice is actually pretty obvious in terms of that.

[00:30:33] Speaker 04:
There was absolutely no ability for the public for the industry to comment on this during the notice and comment process.

[00:30:40] Speaker 04:
And this is just not like some small part of the rule.

[00:30:42] Speaker 04:
This is like their whole justification for the rule is we see a safety risk here.

[00:30:46] Speaker 04:
And what they're relying on is, oh, we're concerned about free hanging courts.

[00:30:50] Speaker 04:
Well, those were eliminated in the 2018 and 2022 voluntary standard.

[00:30:54] Speaker 04:
So, you know, the industry is very interested to know, like, what else the agency is concerned about, because after all, it's been the industry that's been addressing these things for decades and decades.

[00:31:02] Speaker 04:
So the idea that there was just like absolutely no opportunity to comment during the rulemaking process and that it resulted in a rule that is requiring the industry to develop completely new products.

[00:31:14] Speaker 04:
We haven't really had a chance to talk about this, but what the industry requires for both the retractable systems and the loop systems, products that don't exist now.

[00:31:22] Speaker 04:
They are products that you have to come up with from scratch, which is why when the staff did its effective data analysis, it said, OK, the commenter said they need time to get the materials.

[00:31:32] Speaker 04:
Anytime to do the design anytime to do the manufacturing and then they have to get these products to consumers.

[00:31:37] Speaker 04:
They tell us that that's going to take 2 years.

[00:31:39] Speaker 04:
We think that that's credible.

[00:31:40] Speaker 04:
It's consistent with our own view of the supply chain.

[00:31:42] Speaker 04:
It's what the SBA is saying, et cetera.

[00:31:44] Speaker 04:
And so I think the prejudice clear both in terms of.

[00:31:47] Speaker 04:
It's the complete sandbagging during the administrative process.

[00:31:50] Speaker 04:
And I don't say that lately, but I think that's what occurred here.

[00:31:52] Speaker 04:
And then the result of that sandbagging, which is now we're subject to a rule that we can't comply with in six months and that we just don't think is even close to just at the time of the rulemaking were the voluntary standards for custom lines in place.

[00:32:07] Speaker 04:
So the 2018 standard had made some changes for custom products, including defaulting to cordless products, limiting the length of cords in products, some requirements for tension devices in the loop product.

[00:32:20] Speaker 04:
So there were several custom requirements put in place in 2018.

[00:32:24] Speaker 04:
Those were in effect.

[00:32:26] Speaker 04:
The 2022 voluntary standard was not yet in effect.

[00:32:29] Speaker 04:
But the revision to the standard for 2022 started in 2019 and the agency was involved every step of the way.

[00:32:37] Speaker 02:
We officially opened and a process under ANSI... But under the statute, doesn't the statute say that the agency has to consider voluntary standards that are in place, right?

[00:32:50] Speaker 02:
Isn't that the way that the statute is written?

[00:32:53] Speaker 04:
Yes, there's a whole bunch of requirements in the statute.

[00:32:56] Speaker 04:
We're not relying on that one with respect to the 2022 volunteer standard.

[00:33:00] Speaker 04:
We're relying on a different provision that says that the agency has to find that the rule imposes the least burdensome requirement that prevents or adequately reduce the risk.

[00:33:10] Speaker 04:
And here the agency actually recognized that the 2022 voluntary standard, which it had been involved in coming up with in partnership with the industry, it recognized that that was a potential less burdensome alternative.

[00:33:22] Speaker 04:
It actually considered that as a less burdensome alternative.

[00:33:25] Speaker 04:
You can look at that in the final rule in JA 22.

[00:33:28] Speaker 04:
So it recognized an obligation to consider it.

[00:33:30] Speaker 04:
It wasn't under the provision that your honor was citing, but it was under this different provision.

[00:33:35] Speaker 04:
It's F20-2058-F3.

[00:33:39] Speaker 04:
and you know there we just think there was you know no real consideration of the risk that remained under the 2020s.

[00:33:45] Speaker 05:
And can I come back to the effective date for a moment because the commission balanced the risk of severe harm and death to young children over the entire service life of non-compliant window coverings against the possibility that some styles of custom window coverings may be less available during a transition period.

[00:34:03] Speaker 05:
That's how they justify the

[00:34:06] Speaker 05:
And your position is that's not justified by substantial evidence.

[00:34:11] Speaker 05:
And it seems to me what they're saying is that during this period, before we, I guess after the effective date, but before the industry is ready, I guess, to change their offerings, there's gonna be these non-compliant window coverings being produced.

[00:34:32] Speaker 05:
And these non-compliant window coverings are dangerous because once you install them, they're there for decades, potentially.

[00:34:40] Speaker 05:
And so that presents a risk of harm to children.

[00:34:44] Speaker 05:
And they're balancing that against, and during this transition period, you're just saying you're not ready, we're not gonna have these available, it's burdensome to you.

[00:34:54] Speaker 05:
And they're saying, well, it's more important to us that we protect the children than

[00:34:59] Speaker 05:
make sure that we have all these window coverings ready on day one.

[00:35:02] Speaker 05:
And so I guess I'd like to understand in more detail why you think that's not supported by the evidence.

[00:35:08] Speaker 04:
Right.

[00:35:08] Speaker 04:
I mean, that's the problem is that it's, you know, conclusory statements that are supported by the evidence.

[00:35:12] Speaker 04:
And let me start with the risk to children because that is absolutely our number one concern here, something the industry has been working on for decades.

[00:35:18] Speaker 04:
So the staff actually did its own analysis and said that any benefit from a six month rule, as opposed to a two year rule,

[00:35:25] Speaker 04:
that any safety benefit would be very small.

[00:35:28] Speaker 04:
That was the staff's analysis after looking through all the comments.

[00:35:31] Speaker 04:
I mean, this is the staff that even relied on those 209 incident reports that we think don't even make sense here.

[00:35:37] Speaker 04:
But even in light of that, the staff said that any safety benefit would be very small between six months and two years.

[00:35:44] Speaker 04:
And then the staff balanced that.

[00:35:45] Speaker 04:
The other side was against the cost of compliance.

[00:35:48] Speaker 04:
There were conclusory statements that the commissioners made

[00:35:50] Speaker 04:
that they think that the costs of compliance are overblown, but there wasn't evidence to support that.

[00:35:56] Speaker 04:
Only the staff went through the evidence and found these hundreds and hundreds of comments that the statements were credible and that it was going to be very disruptive to the industry, that there was going to be a significant impact on small businesses, and I'd urge the court to take a look at that analysis.

[00:36:11] Speaker 04:
That's in a J or 28 or 95 a couple other places because the staff looked at evidence and relied on the evidence and the commissioners didn't.

[00:36:21] Speaker 04:
It's just they made some conclusory statements.

[00:36:23] Speaker 04:
You know, you identified one of them, but they're just not supported by the evidence.

[00:36:27] Speaker 04:
And here, you know, this is a statute that says that the effective date is one of the findings that has to be supported by the evidence.

[00:36:32] Speaker 04:
And we just don't think it is here.

[00:36:34] Speaker 04:
I mean, the staff said these are credible comments and the commissioners never came back with any reason to say that they they weren't.

[00:36:45] Speaker 03:
There's no additional questions.

[00:36:47] Speaker 03:
Thank you, counsel.

[00:36:47] Speaker 03:
We'll give you some time for rebuttal.

[00:36:50] Speaker 03:
We'll hear from the government now.

[00:36:52] Speaker 01:
Mr. Myers.

[00:36:55] Speaker 01:
Good morning, your honors.

[00:36:56] Speaker 01:
May it please the court?

[00:36:57] Speaker 01:
I'm Stephen Myers on behalf of the Consumer Product Safety Commission.

[00:37:01] Speaker 01:
I think it's important to understand that the safety standard that's at issue in this case is virtually identical to the stock standard that the industry itself adopted and successfully implemented, again, for stock products in 2018.

[00:37:15] Speaker 01:
And the industry adopted that voluntary standard because it is undisputed that operating cords on window coverings have the potential to be extremely hazardous to young children.

[00:37:25] Speaker 01:
And so properly framed, the overarching question in this case is whether the commission had a lawful basis for determining that products that pose an equivalent risk of strangling and killing children, custom products, could be subject to the same standard or whether the commission had to be satisfied with half measures offered up by the industry.

[00:37:46] Speaker 01:
Again, it is not disputed that these products can be extremely dangerous.

[00:37:51] Speaker 01:
I want to talk about the incident reports and the data on which the Commission relied, because my friend on the other side suggests that the Commission was wrongfully relying on data that related to products that are no longer at issue or that rely on free-hanging courts.

[00:38:07] Speaker 01:
What the commission did here was take the universe of incidents, of which it was aware, and then narrow that down to incidents that would not be addressed by the stock standard.

[00:38:18] Speaker 01:
It tried to analyze only the incidents attributable to custom products.

[00:38:23] Speaker 01:
And so, yes, it relied at the outset on a larger universe of incidents, but then it narrowed that down.

[00:38:29] Speaker 01:
and only focused on the incidents that it thought were going to be governed by this.

[00:38:35] Speaker 03:
So why not give over the information about the incidents?

[00:38:40] Speaker 03:
Because it's pretty striking that the entire predicate for the rule as set up by the rule itself and totally understandably is these incidents because of the palpable horrifying safety risks.

[00:38:55] Speaker 03:
So I completely understand why the commission would have focused on that in detail and

[00:38:59] Speaker 03:
did the breakdown that the commission did.

[00:39:01] Speaker 03:
But it just seems like typically in these kinds of situations where there's underlying data, underlying analysis, underlying studies, that that's turned over so that it can give rise to the kinds of intelligent comments that then will assist the commission in forming the rule.

[00:39:17] Speaker 03:
And that just didn't happen here.

[00:39:20] Speaker 01:
Your honor, what the commission did here was offer a several page long discussion of the incident reports in the notice of proposed rulemaking.

[00:39:27] Speaker 01:
And that is in the record at JA61.

[00:39:32] Speaker 01:
And that was a lot of information for the industry to respond to.

[00:39:36] Speaker 01:
I think it's also, it's noteworthy here that even after the... That was some.

[00:39:40] Speaker 03:
That is some.

[00:39:41] Speaker 03:
That's true.

[00:39:42] Speaker 03:
But it's not the underlying materials.

[00:39:44] Speaker 03:
And we know that because, I mean, you did produce a spreadsheet later on that had additional information.

[00:39:50] Speaker 03:
But isn't it, what's the problem, other than the confidentiality point, which we can get to, but some of it is based on newspaper reports and there's nothing confidential about a newspaper report.

[00:40:01] Speaker 03:
And so why not give over the information?

[00:40:05] Speaker 01:
Your honor, I can't speak to why that wasn't done during the rulemaking, but again, I think it's important to bear in mind that even after the industry did receive a much more detailed spreadsheet identifying the facts of which the commission was aware, the type of incident, the year, the age of the child, all of that information, it's not like the other side in their brief is going through line by line and suggesting that these individual facts really affect

[00:40:30] Speaker 01:
the commission's analysis.

[00:40:32] Speaker 01:
And so if there was an APA error there, and we would submit that there wasn't, it was not prejudicial to the industry.

[00:40:39] Speaker 03:
The industry received- Well, suppose the spreadsheet had never been produced.

[00:40:43] Speaker 03:
We'd be in exactly the same place, right?

[00:40:45] Speaker 03:
Vis-a-vis the rulemaking.

[00:40:46] Speaker 03:
Correct.

[00:40:46] Speaker 03:
Because that was all done in litigation.

[00:40:47] Speaker 03:
That's correct.

[00:40:48] Speaker 01:
Although I think the fact that even after receiving the spreadsheet, the industry didn't feel the need to discuss it really in any detail at all in their submissions to this court.

[00:40:57] Speaker 01:
is evidence that they didn't need it to intelligently comment on the rulemaking process.

[00:41:02] Speaker 03:
I would also just highlight- But maybe they just think that, well, we have some information for the spreadsheets and they could think one of two things, maybe both, one of which is that we have some but not a ton or line items.

[00:41:12] Speaker 03:
And secondly, that can't salvage the rulemaking process because it can't be that it's okay not to turn over everything and then after the rule is done,

[00:41:21] Speaker 03:
turn over everything in litigation and say, well, then there's no harm, no foul with the lack of turning information over because you didn't explain to us now what you would have done with it.

[00:41:31] Speaker 03:
Right.

[00:41:31] Speaker 03:
And I don't mean to suggest otherwise.

[00:41:33] Speaker 01:
What was in the rulemaking record is what was in the rulemaking record.

[00:41:36] Speaker 01:
We think that what was in the rulemaking record was sufficient because it gave the industry an adequate basis to comment on the rule.

[00:41:44] Speaker 01:
It provided the important factual information that they needed.

[00:41:47] Speaker 01:
But if the court is concerned about that and doesn't buy what I'm selling on what was provided during the rulemaking, then the fact that the industry did receive more data later in the process, in litigation, and didn't think that it was particularly noteworthy or noteworthy enough to discuss in its brief to this court is evidence that there was no prejudice from the purported APA error, an error that, again, we would submit.

[00:42:13] Speaker 03:
It's hard to know what the prejudice is in a situation in which the problem is we don't have information with which to make comments because it's hard to display prejudice when the whole problem is a lack of information.

[00:42:25] Speaker 01:
And I think, Your Honor, again, the point I'm trying to make on prejudice is that

[00:42:30] Speaker 01:
is that having received more information, having received the spreadsheet following the initiation of litigation, the industry didn't think it was worth discussing in its briefs to this court, which suggests to us that they had received really the bulk of the information that they needed to make an intelligent presentation both to the commission.

[00:42:49] Speaker 01:
If I may take a step back and try to talk about some of the fundamental flaws in the voluntary standard that was in effect at the time

[00:42:58] Speaker 01:
that the commission was actually undertaking the rulemaking.

[00:43:02] Speaker 01:
And that was the 2018 voluntary standard, not the 2022 voluntary standard.

[00:43:07] Speaker 01:
I think the court appreciates this, but just to highlight the point, the 2022 voluntary standard did not exist as a draft piece of paper at the time of the notice of proposed rulemaking.

[00:43:18] Speaker 01:
And it didn't exist as an implemented or adopted standard at the time.

[00:43:23] Speaker 01:
So to start with the 2018 voluntary standard, that standard has several features that are highly dangerous to children with respect to custom products, which is what we're focused on here.

[00:43:35] Speaker 01:
First, the most meaningful really is that it doesn't impose a

[00:43:41] Speaker 01:
an actual enforceable limitation on the length of the operating cords.

[00:43:46] Speaker 01:
There's a default limitation of the cord length of 40%.

[00:43:50] Speaker 01:
That itself is dangerous, but more importantly, it can be overridden by the consumer.

[00:43:55] Speaker 01:
So the consumer or the installer can say, you know, thanks, that's very nice, but I'd actually like to buy a cord that's significantly longer.

[00:44:02] Speaker 01:
We don't take the industry to really disagree that the 2018 standard was inadequate since they have moved themselves to replace it, but it was hardly unreasonable for the commission to reach the same conclusion.

[00:44:14] Speaker 01:
Turning to the 2022 standard, which was again adopted following the approval of the final rule, it too includes numerous dangerous features, features that the industry itself would not permit to be sold on stock products.

[00:44:30] Speaker 01:
So, starting with continuous work that depend for their safety on the proper installation of external restraining devices.

[00:44:37] Speaker 01:
Again, the industry will not sell you that on a stock product.

[00:44:40] Speaker 01:
And the reason is that they're dangerous.

[00:44:42] Speaker 01:
First of all, those restraining devices, even though they're pre-installed, can be removed from the loop.

[00:44:48] Speaker 01:
And the Commission was aware of at least one specific issue.

[00:44:53] Speaker 01:
But even if the consumer doesn't take the step of actually removing the tension device, so long as that tension device is not properly installed on the wall or falls off the wall, it's still possible for the window covering to be operated partially.

[00:45:11] Speaker 01:
That is to say, you can raise the window covering, you know, halfway up.

[00:45:15] Speaker 01:
And again, the commission was aware of an instance

[00:45:18] Speaker 01:
in which a child was injured that had a tension device like that that was on the cord but not properly anchored to the wall.

[00:45:26] Speaker 01:
And so that demonstrated to the Commission's satisfaction based on real-world evidence that this was not a sufficient incentive for the consumer to actually properly install these devices on the wall and ensure the safety of the children who are meant to be protected by these devices.

[00:45:41] Speaker 02:
And that was spelled out.

[00:45:43] Speaker 02:
in the proposed rulemaking or that was spelled out in the final rule?

[00:45:49] Speaker 01:
Well, Your Honor, the sites that I'm offering are from the final rule.

[00:45:53] Speaker 01:
And that's because, again, the 2022 standard did not exist at the time of the notice of proposed rulemaking.

[00:46:01] Speaker 01:
It did not exist from that.

[00:46:05] Speaker 05:
So it seems to me that certainly your agency is entitled to make a judgment that

[00:46:12] Speaker 05:
what's in the voluntary standards isn't safe enough and you want to go further.

[00:46:16] Speaker 05:
The question is just whether the procedures you followed were appropriate to make this rule and whether the effective date you set.

[00:46:23] Speaker 05:
was reasonable.

[00:46:25] Speaker 05:
And it seems to me that the effective date is something that you should address because there are strong arguments that you needed to show that it was reasonably necessary to set this date in order to protect safety.

[00:46:40] Speaker 05:
But there's not substantial evidence to support that finding.

[00:46:44] Speaker 05:
And it does seem to me that your data about safety

[00:46:48] Speaker 05:
wasn't really geared towards this finding because this finding dealt with, she would do six months or a year or a year and a half or two years.

[00:46:57] Speaker 05:
We're talking about a short amount of time, but your data was based on over 10 years, all of the window coverings out there.

[00:47:06] Speaker 05:
We have yielded about eight deaths per year, and it's not clear to me what was the evidence to show that it was reasonably necessary to set the date that you set.

[00:47:16] Speaker 01:
Well, I think, as your honor alluded to earlier, the commission was concerned that every unsafe product that is installed in a home could remain there for decades.

[00:47:27] Speaker 01:
And so every month that elapses is more unsafe.

[00:47:31] Speaker 01:
but I think it's important to emphasize that Congress placed a heavy thumb on the scale of these voluntary, excuse me, of these standards coming from the commission, taking effect within 180 days.

[00:47:44] Speaker 01:
And Congress required that if the commission goes beyond that 180 days,

[00:47:50] Speaker 01:
it needs to make a finding of good cause in the public interest.

[00:47:54] Speaker 01:
And the commission explained at some length why there wasn't good cause in the public interest to deviate from the policy choice.

[00:48:01] Speaker 05:
I understand that, but what about the other requirement that you have to show that it's reasonably necessary?

[00:48:05] Speaker 01:
Your honor, the commission did make such a finding of reasonable necessity.

[00:48:08] Speaker 01:
That's at 16 CFR section 1260.4 at 6.

[00:48:12] Speaker 01:
So the commission did make that.

[00:48:15] Speaker 05:
No, I understand, but how was it supported by substantial evidence?

[00:48:18] Speaker 01:
Your honor, again, is supported by substantial evidence because of the risk of unsafe products being installed, which poses a continuing risk of suffocation and death to children.

[00:48:31] Speaker 05:
But I think that the question is, is there a meaningful difference for safety between setting it in six months versus in two years or in one year, given that there are a lot of countervailing

[00:48:44] Speaker 05:
considerations about how disruptive this was, and your own staff acknowledged that.

[00:48:49] Speaker 01:
Your Honor, the Commission was not persuaded by the industry comments or certain aspects of the staff analysis.

[00:48:55] Speaker 03:
It didn't explain much about that, I have to say.

[00:48:57] Speaker 03:
I mean, JA 34 is the relevant reference, and it walked through a handful of points, which are stated at a high level of generality, and only some of which you're relying on now, some of which you're not relying on now.

[00:49:09] Speaker 03:
But in terms of the benefits, there was indication from the staff that the benefits of having six months rather than two years were pretty minimal, given the amount of old equipment that was already out there.

[00:49:25] Speaker 03:
And there's no engagement with that.

[00:49:26] Speaker 03:
And so as far as I can tell in the

[00:49:29] Speaker 03:
Commission's explanation.

[00:49:31] Speaker 03:
The Commission's explanation is about costs.

[00:49:34] Speaker 01:
Again, Your Honor, I think the Commission's explanation was focused on the fact that Congress had told it to implement these safety standards within 180 days.

[00:49:43] Speaker 01:
And so principally, it was looking for good cause in the public interest for why it would tell Congress thanks but no thanks and not do what

[00:49:52] Speaker 01:
And it was not persuaded that there was any reason for it to deviate from Congress's.

[00:49:57] Speaker 05:
Instruction and again, just are you conceding them that you were really looking at the good cause provision and not really focused on the reasonably necessary?

[00:50:05] Speaker 01:
No, the commission, the commission made both findings, but we do think that it's important again, under the.

[00:50:11] Speaker 01:
Under the good cause provision to honor the statutory presumption that Congress enacted.

[00:50:16] Speaker 01:
Just to take a step back here, what the commission was looking for was not a moonshot.

[00:50:21] Speaker 01:
It was not expecting the industry to cure cancer in six months.

[00:50:24] Speaker 01:
It was saying that in six months, it needed to start adding a few pieces of plastic and metal to its window.

[00:50:31] Speaker 01:
And the commission was not persuaded if the industry was not capable of doing that.

[00:50:35] Speaker 01:
The Canadian example I think is particularly helpful here because the industry told the Canadian governments that there were no viable solutions to replace proven safe products on Canadian shelves.

[00:50:48] Speaker 01:
But then what the Commission found was that that was in fact not true.

[00:50:51] Speaker 01:
That the Canadian market was able to accommodate transition to safer products just as the American industry was able to accommodate the transition to safer products in the stock market.

[00:51:03] Speaker 01:
We've seen this movie before.

[00:51:04] Speaker 01:
How long was there to comply in Canada?

[00:51:06] Speaker 01:
It was a little bit longer.

[00:51:09] Speaker 01:
But with respect to the stock standard in the United States, that standard, I believe, was initially released in January, I think, of 2018.

[00:51:18] Speaker 01:
It was updated in May of 2018.

[00:51:21] Speaker 01:
And then there was compliance by the end of 2018.

[00:51:24] Speaker 01:
So that was somewhere in the range of six months to a year, depending on how it's.

[00:51:28] Speaker 01:
how it's defined.

[00:51:29] Speaker 01:
Here we're talking about six months, which is again, it's not that different from what the industry has shown it's been able to do in the past.

[00:51:36] Speaker 01:
And particularly here, we're in a universe in which these technologies have begun to be developed because the industry has come up with technologies that comply with the Canadian standard, comply with the stock standard.

[00:51:48] Speaker 01:
And so it's not starting from zero.

[00:51:50] Speaker 05:
Can I ask you kind of an actual window coverings question?

[00:51:53] Speaker 05:
It seems that your

[00:51:57] Speaker 05:
arguments about compliance seem very centered on the rigid cord shroud.

[00:52:01] Speaker 05:
And to you, that's like a piece of plastic.

[00:52:04] Speaker 05:
They can make that.

[00:52:04] Speaker 05:
That's not a big deal.

[00:52:06] Speaker 05:
But your friend on the other side says,

[00:52:09] Speaker 05:
You are trying to analogize to stock window coverings and there we have things that you can just lift up with no cord.

[00:52:15] Speaker 05:
We can't do that readily on a custom product because it's so much bigger and heavier.

[00:52:21] Speaker 05:
It's gonna be really hard for us and it's gonna take us some time to be able to develop products that are similar to the stock products and therefore your analogy to stock products is not really apt.

[00:52:32] Speaker 05:
And I guess my question is,

[00:52:35] Speaker 05:
If your position is rigid cord shrouds, do the trick and it's easy for them to do that.

[00:52:40] Speaker 05:
Is it true that they can do rigid cord shrouds for everything while they're

[00:52:45] Speaker 05:
developing the other types of things, like the self-lifting shades, et cetera?

[00:52:51] Speaker 01:
Yes, Your Honor.

[00:52:52] Speaker 01:
I'm looking to see if I have the site in my notes.

[00:52:54] Speaker 01:
But the commission did explain that rigid cord shrouds can be used to go to shroud, in effect, either the traditional cord-lock type of cord or the continuous loop type of cord.

[00:53:08] Speaker 01:
So a rigid cord shroud can be used for either type

[00:53:10] Speaker 05:
of covering and the commission explains that that works for everything that converts everything to compliance.

[00:53:15] Speaker 01:
The rigid core rigid core.

[00:53:17] Speaker 01:
Well, rigid core shroud, I don't think would be used with a retractable cord because that retracts into the headrail.

[00:53:23] Speaker 01:
But the commission did explain that a rigid core shroud can be used with either a continuous loop cord or with.

[00:53:30] Speaker 05:
And so how are they supposed to deal with the retractable one in the time frame that you proposed?

[00:53:37] Speaker 01:
Well, your honor, the commission does not require the industry to develop, you know, every mode of complying with the rule.

[00:53:45] Speaker 01:
So long as it's able to sell products that comply with the rule.

[00:53:47] Speaker 01:
I understand.

[00:53:48] Speaker 05:
But it's part of your reasonableness argument that they just have to make some plastic parts here and add it to the courts.

[00:53:53] Speaker 05:
And I'm just wondering how easy is it in terms of your reasonableness argument that they can address the retract.

[00:54:00] Speaker 01:
But what the commission said was that there already exists cordless products, cordless options for all kinds of products, but not for all kinds of sizes.

[00:54:11] Speaker 01:
Not for all sizes.

[00:54:12] Speaker 01:
My friend on the other side references very large window covers.

[00:54:16] Speaker 03:
For which rigid cord shrouds don't work, right?

[00:54:18] Speaker 01:
For which rigid cord shrouds do work.

[00:54:20] Speaker 03:
Excuse me, Your Honor.

[00:54:21] Speaker 03:
I thought there was a length after which they don't work.

[00:54:23] Speaker 01:
My understanding, your honor, is that they may need to be made of metal rather than plastic in order to satisfy the deformity requirements in the rule, but that a shroud can be made longer or shorter.

[00:54:34] Speaker 03:
And in terms of how I thought the staff, there's a statement in the record to the effect staff thought it would take two to two and a half years.

[00:54:41] Speaker 01:
The staff recommended a longer effect.

[00:54:44] Speaker 03:
But with respect to the manufacturing of the rigid cord shrouds in particular, not on just the general one to two years, but on how quickly the rigid cord shrouds could be.

[00:54:55] Speaker 01:
Your honor, that may well be, but the commission was not persuaded by that analysis.

[00:54:59] Speaker 01:
Again, against the backdrop, having seen the industry come into compliance with other similar standards over the past several years, it was not persuaded by that contention.

[00:55:12] Speaker 01:
I'm happy to jump really to any issue the court would like to talk about at this point, or if there are no additional questions.

[00:55:21] Speaker 03:
Any additional questions?

[00:55:27] Speaker 02:
I guess the jurisprudential question of assume for the sake of argument that we find

[00:55:41] Speaker 02:
merit in one of the arguments made by the petition.

[00:55:47] Speaker 02:
Is there grounds for partial vacature, or based on the statutory language, do we vacate the entire?

[00:55:57] Speaker 01:
I think it would be more consistent with this court's general practice to partially vacate on the issue where the court identifies a legal flaw, presuming it today.

[00:56:06] Speaker 01:
The language about the rule not being affirmed, unless various things are found by substantial evidence, simply suggests to us at least that the court wouldn't affirm the rule in its entirety.

[00:56:17] Speaker 01:
That wouldn't preclude the court from vacating it if that were the court.

[00:56:22] Speaker 03:
I take it from the commission's perspective though, put aside the constitutional argument for a second, the removal power argument.

[00:56:27] Speaker 03:
But from the commission's perspective, it would be more instructive to have

[00:56:33] Speaker 03:
of sense of how all these arguments shake out so that if we were in the world where the rule went back to the commission, then it would have an informed basis for putting together a resolution.

[00:56:47] Speaker 01:
Your honor, I don't know that we've expressed a preference on that one way or the other.

[00:56:50] Speaker 01:
I think, you know, we would defer the court as to how it writes the opinion except we would like it denied.

[00:56:55] Speaker 03:
Sure.

[00:56:57] Speaker 03:
That I would assume would be your favorite position.

[00:57:01] Speaker 05:
So if we found an issue

[00:57:04] Speaker 05:
For example, with your failure to provide the data underlying the incident reports, and we remanded to allow notice and comments on that.

[00:57:14] Speaker 05:
That would not reopen the process from your perspective on things like the cost benefit analysis.

[00:57:24] Speaker 02:
So doesn't that counsel towards us addressing all of the issues?

[00:57:33] Speaker 02:
because let's suppose we stopped at issue number one and we did what you would like us to do, only a partial vacatur and the commission adequately resolves issue number one.

[00:57:56] Speaker 02:
the petitioners can't come back to us on another mission and raise issue number two, which was raised before because that wasn't a part of this, this rulemaking or the order that's under review.

[00:58:15] Speaker 02:
So, so they, if, if there had been merit to issue number two, it would have been essentially overlooked and

[00:58:25] Speaker 02:
and they would have no opportunity to raise that issue in a subsequent petition.

[00:58:36] Speaker 01:
I take that point, Your Honor.

[00:58:37] Speaker 01:
I think what we'd like to avoid, assuming the court is inclined to remand at all, is a situation in which the court remands on one issue, and there's a fight about having to redo the entire ruling.

[00:58:48] Speaker 03:
We don't think about that.

[00:58:49] Speaker 03:
Right.

[00:58:49] Speaker 03:
I mean, you don't want to get a ping pong situation where it just keeps coming back up and going back down on the next issue.

[00:58:53] Speaker 03:
It comes back up and then goes back down to the next issue.

[00:58:55] Speaker 01:
Correct.

[00:58:55] Speaker 01:
Although it's not.

[00:58:56] Speaker 01:
We'd also like to avoid a situation where the industry continues to tweak its voluntary standard.

[00:59:01] Speaker 01:
Then the commission is expected to redo entire years long rulemaking.

[00:59:05] Speaker 01:
Uh, each time it gets, it gets remanded to the court.

[00:59:08] Speaker 01:
All the more reason for the support to deny the petition for review and get a say for the questions.

[00:59:16] Speaker 03:
Thank you, counsel.

[00:59:17] Speaker 03:
Thank you.

[00:59:18] Speaker 03:
Mr. Harsky will give you three minutes for rebuttal.

[00:59:23] Speaker 04:
Thank you, Your Honors.

[00:59:25] Speaker 04:
I think just a few quick points.

[00:59:26] Speaker 04:
First, to go back to one of Judge Sreenivasan's questions, this was about the additional cost of custom products.

[00:59:32] Speaker 04:
My co-counsel helpfully pointed out to me some pages in the JAA the court might look to.

[00:59:37] Speaker 04:
JAA pages 720 to 721 have very specific comments about how the custom products cost more than stock products.

[00:59:44] Speaker 04:
There are also some more general citations about custom products being costing more at JAA 735 and 850, and then I would also note

[00:59:52] Speaker 04:
that in the rule itself, 16 CFR 1260.4d4, the commission acknowledges that custom products cost more than stock products.

[01:00:03] Speaker 04:
So just wanted to make sure we had that squared away.

[01:00:05] Speaker 04:
I'd also like to address the effective date and some of the questions that were asked about the rigid shroud.

[01:00:11] Speaker 04:
Just to be clear about that, the shroud is only a proposed solution for the cord loop type.

[01:00:16] Speaker 04:
So under the rule, there are two types of operating systems that are allowed.

[01:00:20] Speaker 04:
There's the retractable where you pull the wand and there's the cord loop.

[01:00:22] Speaker 04:
The idea for the shroud that the agency has is that it's a plastic piece that has to go over basically the whole loop.

[01:00:29] Speaker 04:
And so they estimated a cost for one shroud that they think will solve the whole problem.

[01:00:34] Speaker 04:
That doesn't address retractable because for retractable the products have to be remade with a different cord length.

[01:00:39] Speaker 04:
And also we don't think it just makes any sense to say that one shroud

[01:00:43] Speaker 04:
results all of the types of corded product, the cord loops that exist because the shrouds have to be like different sizes.

[01:00:50] Speaker 04:
I mean, some of these windows are 10 feet tall and you're talking about different pieces of plastic that have to be manufactured that haven't been, haven't ever been designed and manufactured before.

[01:00:58] Speaker 04:
So I just wanted to correct that, that it is the staff that said that the rigid shroud would take two years.

[01:01:04] Speaker 04:
They call it a little piece of plastic.

[01:01:06] Speaker 04:
We call it, you know, a requirement that's never been put on the industry before that no one has designed and manufactured.

[01:01:11] Speaker 04:
The staff said that that's going to take 2 years and that only addresses the core loop solution.

[01:01:17] Speaker 04:
It does not address the rules they put on retractable.

[01:01:20] Speaker 05:
And, you know, in the percentage are retractable.

[01:01:26] Speaker 04:
I don't know, I don't think that that exists that that information is in the record, but I mean, they are products that are allowed under the rule.

[01:01:33] Speaker 04:
I mean, we're talking about some windows that are so big that they need ports so that you can't use the cordless solution.

[01:01:39] Speaker 04:
And so retractable remains an option and then the core loop remains an option.

[01:01:43] Speaker 04:
And another thing I would just note about this retractable system, we've highlighted some of the process failures that we see here in terms of stuff showing up for the first time in the final rule, including new incident reports, including the analysis of 2022, et cetera.

[01:01:57] Speaker 04:
But one of the things that actually showed up for the first time in the final rule was the substantive requirement for retractable products.

[01:02:03] Speaker 04:
These are products that have had no known incidents.

[01:02:05] Speaker 04:
And for the first time in the final rule, the agency said, now the cord can only be 12 inches long.

[01:02:10] Speaker 04:
So we just think that that's another example of the process failures.

[01:02:13] Speaker 04:
here.

[01:02:14] Speaker 04:
And so I guess the last thing if I see my red lights, I'll be brief, you know, is, you know, obviously we're all orange right now, but it's about to be red.

[01:02:21] Speaker 04:
So we're all focused on risk here.

[01:02:25] Speaker 04:
And we just don't think that the agency has assessed it in the way that this particular demanding statute requires.

[01:02:31] Speaker 04:
Even today, the approach in court has been to talk about possible risks.

[01:02:34] Speaker 04:
But the case that we think that is most on point here is then Magnet's decision from the 10th Circuit

[01:02:39] Speaker 04:
says, no, it's not possible risk that you look at.

[01:02:42] Speaker 04:
It has to be a likelihood of risk here that you assess so that you can do this cost benefit analysis.

[01:02:47] Speaker 04:
And here you've got the agency admitting that it has found no risk for whole segments of the market.

[01:02:52] Speaker 04:
There were tractable products, no incidents.

[01:02:55] Speaker 04:
Commercial products, that's 25% of the market, no incidents.

[01:02:59] Speaker 04:
And so of course we're concerned about harms to children.

[01:03:02] Speaker 04:
That's why we've been working on this since 1996.

[01:03:04] Speaker 04:
And we've been the ones updating this voluntary standard.

[01:03:07] Speaker 04:
And so we're not saying that the agency doesn't have any ability to regulate here, but it has to go through and do what the statute demands.

[01:03:13] Speaker 04:
And it just didn't do it here.

[01:03:15] Speaker 04:
And it's not fair to subject this industry to a rule that would go into effect in six months and cause hundreds of millions of dollars of damage when they haven't even complied with those basic requirements.

[01:03:24] Speaker 05:
So on the cost benefit analysis, that seems to be a very commodious.

[01:03:28] Speaker 05:
This has to have a reasonable relationship.

[01:03:30] Speaker 05:
The benefits don't even have to outweigh the costs.

[01:03:32] Speaker 05:
It just seems to me that there's so much play and give in the standard that it's more difficult to make the argument that that cost benefit analysis what they did because they certainly spent time and did analysis and made ranges and said there are some other factors that we could consider.

[01:03:50] Speaker 05:
But it seems like they did the work and it's a very loose standard.

[01:03:54] Speaker 05:
Why is that cost benefit analysis not okay?

[01:03:56] Speaker 04:
Well, I think there's 3 responses and the bottom 1, I think is that we think they didn't do the work.

[01:04:00] Speaker 04:
So you're right that it's reasonable relationship, which we think requires some kind of proportionality.

[01:04:04] Speaker 04:
We think that the costs were skewed, the benefits were skewed and then even with those skewed numbers, they ran 30 scenarios and the benefits only exceeded the costs and 1 of them in some of the scenarios.

[01:04:16] Speaker 04:
But I'm just trying to say that, you know, it wasn't even like proportional and, you know, 29 of the 30 scenarios and I guess the problems that we see, you know, in terms of your question, what do you mean?

[01:04:26] Speaker 04:
It's not proportional.

[01:04:28] Speaker 05:
I mean, I know that the benefits outweigh the cost.

[01:04:32] Speaker 04:
There's a range in terms of how much the cost exceeded the benefits.

[01:04:38] Speaker 04:
Sometimes it's 135 percent, sometimes it's 400 percent, but it's a pretty significant range where I don't think like 400 percent more cost than benefits would be considered proportion.

[01:04:47] Speaker 04:
But I guess maybe the more fundamental point to go to your honor's question is that we don't think that they did the work here.

[01:04:53] Speaker 04:
This isn't like second guessing or nitpicking agencies analysis.

[01:04:56] Speaker 04:
It's that fundamental parts of the analysis where they're missing or skewed.

[01:05:00] Speaker 04:
And what I mean by missing is that you've got like a complete lack of safety incidents for retractable courts.

[01:05:06] Speaker 04:
No benefits there that they have identified, and yet they're regulating them in any way.

[01:05:11] Speaker 04:
You've got no consideration of cost for the commercial segment of the market.

[01:05:15] Speaker 04:
That's 25% of the market.

[01:05:17] Speaker 04:
That's like a part of the rule.

[01:05:19] Speaker 04:
It says that the agency has to figure out the number of products affected, and they didn't even do that because they, I think, acknowledged that they didn't even consider that 25%.

[01:05:27] Speaker 04:
And so that, we think that that's just like a missing analysis.

[01:05:30] Speaker 04:
And then when I talked about the skewed analysis,

[01:05:32] Speaker 04:
One of the things that I think the discussion identified earlier was to figure out the cost that it was all based on stock products and there were the questions about how much more expensive custom products are, etc.

[01:05:42] Speaker 04:
So assumptions being made that really skewed the cost in terms of basing them on stock products.

[01:05:48] Speaker 04:
and then also really skewed the benefits basing it on data from 2002 that even the agency is now admitting that the number of incidents that occurred decades ago don't occur anymore because of these voluntary standards.

[01:06:02] Speaker 04:
And so I take your honor's point that you don't want to be second guessing the agency here if it's doing a reasonable job with its cost benefit analysis.

[01:06:10] Speaker 04:
But this isn't a normal APA case where Congress just said like,

[01:06:14] Speaker 04:
Figure out what you want to do and give us some evidence that shows that it's reasonable.

[01:06:17] Speaker 04:
Congress said we want you to go through all these steps.

[01:06:20] Speaker 04:
We want you to figure out the degree and nature of the injury, the number of products affected, the cost-benefit analysis, less burden and some alternatives.

[01:06:27] Speaker 04:
Go through each of those steps.

[01:06:29] Speaker 04:
And when you have a cost-benefit analysis that skews the costs, skews the benefits, and then even doing it in 29 of the 30 scenarios, you really don't have proportional costs and benefits, or at least you don't have the benefits outweighing the costs.

[01:06:41] Speaker 04:
We just don't think that it meets that burden under the statute.

[01:06:44] Speaker 04:
It's just too far away from what Congress wanted to have happen here.

[01:06:48] Speaker 04:
And of course, where Congress has wanted to give more discretion to the agency, like with infant products like cribs and toddler products, it has asked different statutes to do that.

[01:06:57] Speaker 04:
But this statute is one that's more demanding on the agency.

[01:07:01] Speaker 03:
Thank you, counsel.

[01:07:02] Speaker 03:
Thank you to both counsel.

[01:07:03] Speaker 03:
We'll take this case under submission.