NFIB Legal Center Defends Entrepreneur in 54 Million Dollar Personal Liability Claim

The NFIB Small Business Legal Center recently announced that it was coming to the defense of an entrepreneur in his lawsuit against the federal agency that destroyed his company and then came after his personal assets—despite the fact he was never accused of a crime. At the center of the case is Craig Zucker, co-founder of Maxfield Oberton and inventor of its novelty product, Buckyballs.  They are little magnetic balls that can be manipulated into various formations—often bought as gift for executives and office workers as a harmless distraction.

Of course, they are not harmless if swallowed by children. For this reason, they drew the attention of the U.S. Consumer Product Safety Commission (CPSC). In response to the Commission’s concerns, Maxfield Oberton made changes to the product’s label. The company even offered to sell the product in childproof containers, and to give the Buckyballs a bitter taste to discourage children from putting them in their mouths. But the CPSC never seriously considered those measures. Instead the Commission took the unusual step of ordering a total recall, and banning the sale of Buckyballs. This quickly led to the demise of Maxfield Oberton, which had previously thrived on the sale of Buckyballs.

The company soon went out of business. That is when CPSC turned its eye to Craig Zucker. The Commission brought an action against him seeking to hold him personal liable for the costs of the recall—an estimated 54 million dollars.

“There’s a bright, bold line between regulatory enforcement and regulatory abuse, and in this case the federal government crossed it without slowing down,” said Karen Harned, Director of the NFIB Small Business Legal Center.  “The government acted so aggressively, so abruptly, so inflexibly and so arbitrarily that the company was destroyed.  Then it took the highly unusual and, we believe, unlawful step of filing a personal lawsuit against Mr. Zucker even though no one, including the CPSC, ever accused him of committing a crime.”

“You read the news every day and find another tragic story about kids being injured by common products that the CPSC hasn’t recalled or banned,” said Harned.  “But for some reason it treated this company differently and it did so with very little justification.”

Even more dangerous for entrepreneurs, said Harned, was the agencies attempt to hold Zucker personally responsible for the cost of the recall.  “That kind of dramatic action is permissible under the law only when a corporate officer is accused of criminal wrongdoing, or where the company is clearly set up as a sham,” she said. 

Zucker is now suing the CPSC, seeking a court order preventing the Commission from going after his personal asserts. NFIB filed a motion in the U.S. Federal District Court of Maryland last week voicing small business concerns over CPSC’ conduct, and cautioning the court against accepting the Commission’s expansive veil piercing theory. As NFIB Legal Center frequently argues to the courts, it is important that judges respect corporate formalities.

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About Luke Wake

Luke A. Wake is a senior staff attorney at the NFIB Small Business Legal Center. Wake has particular expertise on environmental and land use issues, and has worked on numerous other constitutional issues and matters of importance to small business owners. He is an ardent defender of private property rights, which he believes are essential to the free enterprise system and the foundation of American liberty. As a strong advocate of individual rights and economic liberties, he has built his career defending small business interests. Since joining the NFIB Legal Center, Wake has focused on a whole host of issues, from employment law matters to regulatory compliance. In addition to serving as a resource for small business owners, Wake remains committed to the Legal Center’s pledge to ensure that the voice of small business is heard in the nation’s courts. He is also working to advance small business interests in law review articles, including publications in the Berkeley Journal of Law & Ecology, the Texas Journal of Law and Politics, and Competition Magazine. See R.S. Radford & Luke A. Wake, Deciphering and Extrapolating: Searching for Sense in Penn Central, 38 Ecology L.Q. 731, 746-747 (2011); Damien M. Schiff, Luke A. Wake, Leveling the Playing Field in David v. Goliath: Remedies to Agency Overreach, 17 Tex. L. Rev. & Pol. 97 (2012); Jarod M. Bona and Luke A. Wake, The Market-Participant Exception to State-Action Immunity From Antitrust Liability, J. of Antitrust and Unfair Competition of the State Bar of Ca., Vol. 23, No. 1, 156 (Spring 2014); James S. Burling and Luke A. Wake, Takings and Torts: The Role of Intention and Foreseeability in Assessing Takings Damages, in Condemnation 101: Making the Complex Simple in Eminent Domain 449-51 (ALI-ABA Committee on Continuing Professional Education eds. 2011). Before joining the Legal Center’s team, Wake completed a prestigious two-year fellowship as an attorney in the Pacific Legal Foundation’s (PLF) College of Public Interest Law. Wake is a graduate of Case Western Reserve University School of Law in Cleveland Ohio. He is a member of the California Bar, the District of Columbia Bar, and the U.S. Supreme Court Bar. He completed his undergraduate studies at Elon University in North Carolina in 2006 where he focused on political theory and corporate communications.
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