Greg Shelton v. Consumer Products , 277 F.3d 998 ( 2002 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 99-1450
___________
Greg Shelton, Shelton Wholesale, Inc., *
National Fireworks Association, Inc., *
*
Plaintiffs-Appellants, *
*
v. *
*
Consumer Products Safety Commission;*
United States; Ann Brown, Chairman, *
U.S. Consumer Product Safety *
Commission; Eric B. Ault, Director, *
Central Regional Center, U.S. Consumer*
Product Safety Division, *
*
Defendants-Appellees. *
*
____________
Appeals from the United States
No. 01-1599 District Court for the
____________ Western District of Missouri
United States of America, *
*
Plaintiff-Appellee, *
*
v. *
*
Shelton Wholesale, Inc., a Missouri *
corporation, doing business as *
Shelton Fireworks, Inc., doing *
business as Polaris Fireworks; *
Polaris Fireworks, Inc., a Missouri *
corporation; Gregory P. Shelton, *
*
Defendants-Appellants. *
___________
Submitted: September 10, 2001
Filed: January 23, 2002
___________
Before McMILLIAN, BEAM and HANSEN, Circuit Judges.
___________
McMILLIAN, Circuit Judge.
Shelton Wholesale, Inc., and Polaris Fireworks, Inc., (together, the “corporate
parties”) are Missouri businesses that import and distribute fireworks from Hong
Kong, and Gregory Shelton is president and owner of both corporate parties. Gregory
Shelton and the corporate parties (collectively, "the Shelton parties") appeal from two
final orders granting summary judgment, a final bench verdict, and a bench ruling in
favor of the United States and the Consumer Product Safety Commission ("CPSC")
(together, the “Government”), entered in the United States District Court for the
Western District of Missouri1 in two related cases. United States v. Shelton
Wholesale, Inc., No. 96-6131-CV-SJ-6 (W.D. Mo. filed Oct. 2, 1996) ("the Fine
Case"); Shelton v. Consumer Products Safety Comm'n., No. 97-6021-CV-SJ-6) (W.D.
Mo. filed Feb. 14, 1997) ("the NFA Case"). For reversal in both cases, the Shelton
parties argue that the district court (1) erred in holding that the CPSC did not exceed
its jurisdiction because the Federal Hazardous Substances Act ("FHSA") does not
extend to common fireworks, (2) erred in holding that the CPSC did not violate the
1
The Honorable Howard F. Sachs, United States District Judge for the Western
District of Missouri.
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Shelton parties' due process rights by destroying the Shelton parties’ fireworks
without providing an opportunity for a full administrative hearing, (3) abused its
discretion in admitting into evidence laboratory test reports offered by the
Government under the business exception to the hearsay rule, and (4) abused its
discretion in denying a jury trial to the corporate parties. For the reasons discussed
below, we affirm the orders of the district court.
The district court had jurisdiction pursuant to 28 U.S.C. § 1331. This Court
has jurisdiction pursuant to 28 U.S.C. § 1291.
I. Factual and Procedural Background
In the Fine Case, the United States sought civil penalties and injunctive relief
against the Shelton parties for violations of the FHSA, 15 U.S.C. § 1261 et seq.
Between 1992 and 1996, the Shelton parties imported fireworks from Hong Kong that
the Government contended were defective under fireworks regulations enacted
pursuant to the FHSA and enforced by the CPSC. The United States originally filed
suit in the Fine Case against the corporate parties – but not Gregory Shelton – on
October 2, 1996, and filed an amended complaint on November 7, 1996.2 On
February 20, 1997, the United States moved to amend its complaint to add Gregory
Shelton. On May 20, 1997, the district court granted the United States' motion; on
the same day, the United States filed its second amended complaint adding Gregory
Shelton. On June 11, 1997, all three defendants comprising the Shelton parties
answered the second amended complaint and, for the first time, demanded a jury trial.
2
The United States amended its complaint to reduce the list of Shelton’s
products it contended were defective from twenty-two products to nineteen products,
and to add more specific information about which of the regulations the other
products violated.
-3-
On February 14, 1997, the Shelton parties and a nonprofit trade association,
National Fireworks Association, Ltd. ("NFA"), filed suit in the NFA Case against the
CPSC seeking a declaratory judgment that the CPSC (1) had no jurisdiction over
common fireworks, (2) had denied the Shelton parties’ due process rights, and (3) had
improperly tested the fireworks.
On April 28, 1998, after noting that the parties incorporated into their briefs
in the Fine Case many of the same arguments raised in the NFA Case, the district
court ruled on summary judgment in both cases that the FHSA extends to common
fireworks and that the Shelton parties’ due process rights had not been violated. See
United States v. Shelton Wholesale, Inc., No. 96-6131-CV-SJ-6/97-6021-CV-SJ-4-6,
1998 WL 251273, at *1, 3 n.7 (W.D. Mo. Apr. 28, 1998) (Shelton I) (granting partial
summary judgment in Fine Case and NFA Case, reserving questions of fact for trial).
The district court noted that the uncontroverted evidence showed that the CPSC had
selected nineteen samples representing various fireworks products for testing from
twelve shipments imported by the Shelton parties from Hong Kong to a United States
Customs Port. See id. at *1. All of the fireworks products were common fireworks
(e.g. toy paper caps, cone fountains, cylinder fountains, whistles without report, and
sparklers), and were intended only to be used outdoors. See id. at *4. The CPSC
transported the samples to its laboratory to conduct performance tests to determine
whether the fireworks products were safe for consumers based on the standards
outlined in the fireworks regulations. See id. at *2. When the samples of all of the
nineteen fireworks products failed at least one (and in some cases more than one) of
the performance tests conducted, the CPSC determined that each of the fireworks
products was a banned hazardous substance under the FHSA. See id. at *3, 4.
On May 1, 1998, the district court ruled that the corporate parties were not
entitled to a jury trial because the corporate parties did not make a timely demand for
a jury trial, but that a separate jury trial for Gregory Shelton, who had timely invoked
his right to a jury, was appropriate. See United States v. Shelton Wholesale, Inc., No.
-4-
96-6131-CV-SJ-6/97-6021-CV-SJ-4-6 (May 1, 1998 (order denying jury trial to
corporate parties)).
At the bench trial, the Government called CPSC Director of Laboratory
Sciences Warren Porter to introduce the laboratory test results for each of the
nineteen products. Porter testified on direct examination that the CPSC always uses
the following procedures when it tests fireworks: First, each fireworks performance
test is conducted by a chemist and a technician, who contemporaneously record the
test results on a standard form. Next, the secretary enters the test results recorded on
the form into a database and prints out a report. The report is checked for accuracy
by the same chemist and technician who performed the test, then the report is brought
to Porter, who conducts a final review for accuracy. The district court admitted the
test reports into evidence under the business records exception over the Shelton
parties’ objection that the laboratory reports were not produced in the regular course
of business because Porter did not personally conduct all of the testing and less
experienced analysts helped with the testing on occasion. The Shelton parties’ expert
witness, Dr. Roger L. Schneider, testified that the CPSC test methods were imprecise
in his opinion because human error was not considered to the extent he deemed
sufficient. See Shelton I, 1998 WL 251273, at *10.
The evidence further showed that each time the CPSC determined that one of
the Shelton parties’ fireworks products violated the fireworks regulations, the CPSC
informed the Shelton parties by sending a letter of advice (“LOA”), itemizing the
violations and explaining the procedures for submitting contrary evidence or views.
See id. at *3-4. With respect to the first seven products, the CPSC sent LOAs to
Polaris Fireworks, Inc., addressed to Gregory Shelton, that stated “[i]f you disagree
with our decision regarding these . . . banned fireworks devices, you may submit your
views as to why you disagree with our conclusion. You should submit any
information that you wish to offer into evidence within 10 days of your receipt of this
letter.”
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For products eight through nineteen, the LOAs were accompanied by a copy
of the CPSC’s Regulated Products Handbook and referred to the relevant chapter
therein describing what importers and distributors should do if they disagreed with
the CPSC’s conclusions. Chapter Two of the Regulated Products Handbook explains:
In response to the LOA, you may submit to the [CPSC] staff evidence
and arguments that the product is not violative, not covered by a specific
regulation, or should not be refused admission into the U.S. . . . Such
evidence may consist of:
• results of tests indicating the product complies
with the applicable regulation;
• marketing data indicating the product is not
intended for the population group protected by
the regulation;
• any other type of information.
Each LOA specified the individual to whom any responses should be directed, and
included that individual’s address and telephone number. In total, the Shelton parties
submitted one letter challenging the CPSC’s finding with respect to two of the
nineteen products for which they received LOAs. See Shelton I, 1998 WL 251273,
at *9.
On January 6, 1999, at the conclusion of the bench trial, the district court
issued a joint memorandum and order, ruling in both cases that the fireworks products
in question were banned hazardous substances under the FHSA and that the Shelton
parties’ due process rights had not been violated. See United States v. Shelton, 34 F.
Supp. 2d 1147, 1167 (W.D. Mo. 1999) (entering judgment in favor of Government
and against corporate parties; rejecting corporate parties' renewed due process claims
and attacks on precision of CPSC testing methods) (Shelton II).
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In the Fine Case, the district court assessed a $100,000 fine against Shelton
Wholesale, Inc., for knowingly importing as many as ten of the nineteen products at
issue in violation of the FHSA. See id. at 1166-67. The district court reasoned that
Shelton Wholesale, Inc., had failed to exercise due care when it imported those
fireworks, because Gregory Shelton was on notice that the fireworks he imported
through Polaris Fireworks, Inc., were hazardous after receiving the first group of
LOAs. See id. at 1163. The district court also enjoined the corporate parties from
knowingly or recklessly importing products in the future that violate the FHSA. See
id. at 1166-67.
On September 21, 1999, the district court held that there were no material facts
in dispute and granted summary judgment in favor of the Government against
Gregory Shelton based on its earlier ruling that the Shelton parties had violated the
FHSA. See United States v. Shelton Wholesale, Inc., No. 96-6131-CV-SJ-6, 1999
WL 825483, at *1 (W.D. Mo. Sept. 21, 1999) (Shelton III) (granting summary
judgment against Gregory Shelton because no genuine issue remained as to whether
Shelton parties violated FHSA; noting no additional legal or factual defenses, and no
challenges to previous summary judgment motions or evidence presented at corporate
parties' trial). The district court also enjoined Gregory Shelton from knowingly or
recklessly importing products in violation of the FHSA. See id. The Shelton parties
timely filed notices of appeal in the Fine Case and the NFA Case pursuant to Fed. R.
App. P. 4(a). This Court consolidated the Fine Case and the NFA Case for purposes
of appeal on April 2, 2001.
II. Interpretation of the FHSA
The Shelton parties argue that the district court erred in holding that the FHSA
confers to the CPSC jurisdiction over adequately labeled common fireworks. The
Shelton parties and the NFA argue that common fireworks are exempted from the
reach of the CPSC.
-7-
Because this question requires the legal interpretation of a statute, we review
this issue de novo. See Ragsdale v. Wolverine Worldwide, Inc., 218 F.3d 933, 936
(8th Cir. 2000) (Ragsdale); Boles Trucking, Inc. v. United States, 77 F.3d 236, 242
n.3 (8th Cir. 1996). When interpreting a statute, this Court first analyzes whether
congressional intent is clear from the plain meaning of the statute. See Chevron
U.S.A. v. Natural Res. Def. Couns., 467 U.S. 837, 842 (1984) (Chevron); Ragsdale,
218 F.3d at 936. If the intent is clear, that is the end of the inquiry. See Chevron, 467
U.S. at 842-43. If congressional intent is not clear, this Court defers to the agency
construction of the statute, provided that the construction is reasonable. See FDA v.
Brown & Williamson Tobacco Corp., 529 U.S. 120, 132 (2000) (holding that federal
agency charged with administering statute is accorded deference in interpreting
statute “because of the agency's greater familiarity with the ever-changing facts and
circumstances surrounding the subjects regulated”); Chevron, 467 U.S. at 843;
Ragsdale, 218 F.3d at 936. “The court need not conclude that the agency
construction was the only one it permissibly could have adopted to uphold the
construction, or even the reading the court would have reached if the question
initially had arisen in a judicial proceeding.” Chevron, 467 U.S. at 843 n.11; see also
Wittler v. Chater, 59 F.3d 95, 97 (8th Cir. 1995) (affirming agency’s interpretation
of statute because it reflected “a plausible construction of the plain language of the
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statute”).3 We hold that the district court correctly determined that the FHSA applies
to common fireworks based on the plain meaning of the statute.
The FHSA provides in pertinent part that:
[t]he term "banned hazardous substance" means (A) any toy, or other
article intended for use by children, which is a hazardous substance, or
which bears or contains a hazardous substance in such manner as to be
susceptible of access by a child to whom such toy or other article is
entrusted; or (B) any hazardous substance intended, or packaged in a
form suitable, for use in the household, which the [CPSC] by regulation
classifies as a "banned hazardous substance" on the basis of a finding
that, notwithstanding such cautionary labeling as is or may be required
under this Act for that substance, the degree or nature of the hazard
involved in the presence or use of such substance in households is such
that the objective of the protection of the public health and safety can be
adequately served only by keeping such substance, when so intended or
packaged, out of the channels of interstate commerce: Provided, That
the [CPSC], by regulation . . . (ii) shall exempt from clause (A), and
provide for the labeling of, common fireworks . . . to the extent that [it]
determines that such articles can be adequately labeled to protect the
purchasers and users thereof.
3
Gregory Shelton argues that the CPSC construction is not entitled to
deference because the FHSA is also a criminal statute and, therefore, is subject to the
rule of lenity. See United States v. Thompson/Ctr. Arms Co., 504 U.S. 505, 518 n.10
(1992) (plurality). However, the rule of lenity is applied only where there still exists
an ambiguity after the reviewing court applies traditional methods of statutory
construction. See id. at 517-18; United States v. Galloway, 976 F.2d 414, 421 n.5
(8th Cir. 1992) (declining to invoke rule of lenity because no ambiguity in statute);
see also Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515
U.S. 687, 704 n.18 (1995) (“We have never suggested that the rule of lenity should
provide the standard for reviewing facial challenges to administrative regulations
whenever the governing statute authorizes criminal enforcement.”). Here, the rule of
lenity has no application because there is no ambiguity with respect to the relevant
provisions in the FHSA.
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15 U.S.C. § 1261(q)(1) (emphasis added). The Shelton parties argue erroneously that
Clause B does not apply because Clause A, which bans toys containing hazardous
substances, completely exempts adequately labeled common fireworks from
classification as banned hazardous substances. However, it is clear from the plain
language of the statute that Congress intended Clause A and Clause B to serve two
different purposes. Clause A, on its face and through subsection (ii) of the proviso,
expressly bans hazardous products that are intended solely for use by children unless
those products can be adequately labeled. Therefore, any hazardous products that are
not intended solely for use by children, and products that are adequately labeled, are
not governed by Clause A. That does not mean that such hazardous products are
immune from the jurisdiction of the CPSC – only that they cannot be banned pursuant
to that particular clause. Clause B serves the more general purpose of banning
hazardous substances regardless of whether they are intended for children or adults,
and “notwithstanding . . . cautionary labeling.” 15 U.S.C. § 1261(q)(1)(B). The
clauses do not conflict with one another, as the Shelton parties seem to suggest;
rather, the clauses complement one another.
Clause B does not provide a list of banned products. Instead, the clause
requires the CPSC to develop rules governing the banning of hazardous substances,
which the CPSC did in developing the fireworks regulations. Accord Chevron, 467
U.S. at 843-44 (“If Congress has explicitly left a gap for the agency to fill, there is an
express delegation of authority to the agency to elucidate a specific provision of the
statute by regulation. Such legislative regulations are given controlling weight unless
they are arbitrary, capricious, or manifestly contrary to the statute.”). The fireworks
regulations were promulgated to fill the gap in Clause B – not Clause A – in order to
determine which products cannot be made safe even with cautionary labeling. As the
fireworks regulations explain,
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[u]nder the authority of section 2(q)(1)(B) of the [FHSA], the [CPSC]
declares as banned hazardous substances the following articles because
they possess such a degree or nature of hazard that adequate cautionary
labeling cannot be written and the public health and safety can be served
only by keeping such articles out of interstate commerce: . . . (9) All
fireworks devices, other than firecrackers, including kits and
components intended to produce such fireworks, not otherwise banned
under the act, that do not comply with the applicable requirements of
part 1507 of this chapter. . .
16 C.F.R. § 1500.17(a). The CPSC has specifically determined that products that fail
the performance standards outlined in its regulations must be banned. See 16 C.F.R.
§ 1507.1 (“This part 1507 prescribes requirements for those fireworks devices … not
otherwise banned under the [FHSA]. Any fireworks device … which fails to conform
to applicable requirements is a banned hazardous substance and is prohibited from
the channels of interstate commerce. Any fireworks device not otherwise banned
under the [FHSA] shall not be a banned hazardous substance by virtue of the fact that
there are no applicable requirements prescribed herein.”). Thus, neither the FHSA
nor the fireworks regulations completely ban common fireworks; they ban only
common fireworks that violate certain performance standards, as the Shelton parties’
fireworks did in this case.
When all of the Shelton parties’ nineteen tested products failed the minimum
performance standards set forth by the regulations, the CPSC determined that the
fireworks in question could not be made safe for use in the household by the general
public regardless of whether the products had cautionary labeling. These are the
types of circumstances for which Clause B – not Clause A – was intended. The plain
reading of the statute leaves no other plausible interpretation.4 Hence, we conclude
4
The Shelton parties also suggest that Clause B could not possibly pertain to
common fireworks because (1) common fireworks are toys, which are subject only
to Clause A and exempted by that clause, and (2) their fireworks are intended for
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outdoor use, and therefore not intended to be used “in households.” Both arguments
fail. With respect to the first argument, we adopt the reasoning of the Third Circuit:
This court previously has noted the likely combination of children and
fireworks. See Suchomajcz v. Hummel Chem. Co., 524 F.2d 19, 26 (3d
Cir. 1975). Furthermore, the statute itself treats fireworks as toys. See 15
U.S.C. § 1261(q)(1) (1982) (exempting from the § 1261(q)(1)(A) ban
any common fireworks to the extent the Secretary deems adequate labels
can be devised). It should be noted, however, that the Secretary
promulgated the bans on fireworks pursuant to 15 U.S.C.
§ 1261(q)(1)(B), not pursuant to (q)(1)(A). See 16 C.F.R. § 1500.17(a)
(1988). Therefore, they ban fireworks that have been deemed a threat to
society at large. Id. Any focus upon children is misplaced.
United States v. Focht, 882 F.2d 55, 61 n.15 (3d Cir. 1989) (emphasis added).
Similarly, the CPSC determined in the present case that the Shelton parties’ products
were dangerous enough to constitute a threat to the general population, not just to
children, and accordingly proceeded under Clause B.
The Shelton parties’ next argument, suggesting that Clause B’s reference to
households means that it applies only to products used indoors and not outdoors, is
also without merit because the FHSA makes no such distinction. Indeed, 16 C.F.R.
§ 1500.3(c)(10)(i), qualifying the language in the FHSA, precisely refutes this
contention. Specifically, § 1500.3(c)(10)(i) provides:
[h]azardous substances intended, or packaged in a form suitable, for use
in the household means any hazardous substance, whether or not
packaged, that under any customary or reasonably foreseeable condition
of purchase, storage, or use may be brought into or around a house,
apartment, or other place where people dwell, or in or around any related
building or shed including, but not limited to, a garage, carport, barn, or
storage shed. . . . Size of unit or container is not the only index of
whether the article is suitable for use in or around the household; the test
shall be whether under any reasonably foreseeable condition of
purchase, storage, or use the article may be found in or around a
dwelling.
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that the district court did not err in holding that the Shelton parties’ fireworks were
subject to Clause B of the FHSA and to the jurisdiction of the CPSC.
III. Due Process Claim
The Shelton parties next argue that the district court erred in ruling that their
due process rights were not violated. The Shelton parties and the NFA accordingly
request that this Court reverse the district court’s ruling in the Fine Case that the
Shelton parties violated the FHSA. We review the Shelton parties’ claim that they
were denied due process de novo because it is a constitutional claim, requiring legal
interpretation. See McNary v. Haitian Refugee Ctr., Inc., 498 U.S. 479 (1991).
The Shelton parties argue that the CPSC should have provided a full
administrative hearing before destroying the fireworks it determined were banned
hazardous substances. As an initial matter, the Supreme Court has held that due
process does not always require a full administrative hearing. See Cleveland Bd. of
Educ. v. Loudermill, 470 U.S. 532 (1985) (holding that due process requirements
vary, that generally something less than full evidentiary hearing is sufficient, and that
essential requirements of due process are notice and opportunity for response); United
States v. Florida East Coast Ry. Corp., 410 U.S. 224, 241 (1973) (holding that
“hearing” under the Administrative Procedure Act requires that parties have fair
notice of what agency intends to do and that parties have opportunity to comment;
but “hearing” does not require oral testimony, cross-examination, or oral argument).
The Shelton parties concede that the FHSA itself does not specify that the hearing
must be a full administrative hearing.5
5
The relevant portion of the FHSA, 15 U.S.C. § 1273(a), provides:
Delivery of samples to [CPSC]; examination; refusal of admission. The
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The Shelton parties argue that they were entitled to a full administrative
hearing because the Consumer Product Safety Act, 15 U.S.C. § 2066, (“CPSA”), a
statute that is also administered by the CPSC, requires a full administrative hearing
before an administrative law judge before a product is refused admission into the
United States. However, the CPSA is a separate statute that has no application in this
case. The United States brought this action against the Shelton parties pursuant to the
Secretary of the Treasury shall deliver to the [CPSC], upon [its] request,
samples of hazardous substances which are being imported or offered
for import into the United States, giving notice thereof to the owner or
consignee, who may appear before the [CPSC] and have the right to
introduce testimony. If it appears from the examination of such samples
or otherwise that such hazardous substance is a misbranded hazardous
substance or banned hazardous substance or in violation of section 4(f)
[15 U.S.C.S. § 1263(f)], then such hazardous substance shall be refused
admission, except as provided in subsection (b) of this section. The
Secretary of the Treasury shall cause the destruction of any such
hazardous substance refused admission unless such hazardous substance
is exported, under regulations prescribed by the Secretary of the
Treasury, within ninety days of the date of notice of such refusal or
within such additional time as may be permitted pursuant to such
regulations.
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FHSA and the fireworks regulations promulgated pursuant to the FHSA.6 Thus, the
Shelton parties’ arguments with respect to the CPSA are irrelevant.7
Citing 16 C.F.R. § 1500.268, the Shelton parties argue that the regulations
promulgated pursuant to the FHSA also require a full administrative hearing. In so
arguing, the Shelton parties misconstrue the plain language of 16 C.F.R. § 1500.268
(titled “hearing,” and defining “hearing” in context of FHSA).
6
Pursuant to 15 U.S.C. § 2079(d), the CPSC can only regulate a product
that is subject to the FHSA under the CPSA if it makes a specific finding that it is in
the public interest to do so, which the CPSC did not do in this case. 15 U.S.C. §
2079(d) provides:
[r]egulation by Commission of consumer products in accordance with
other provisions of law. A risk of injury which is associated with a
consumer product and which could be eliminated or reduced to a
sufficient extent by action under the Federal Hazardous Substances Act
. . . may be regulated under this Act only if the Commission by rule finds
that it is in the public interest to regulate such risk of injury under this
Act. …
7
The Shelton parties argue further that the CPSC specifically applied the
CPSA to the importation of fireworks in this case, referring to the following language
in some of the LOAs: “Sections 15 and 37 of the CPSA contain requirements for
reporting to the Commission information on certain products which you manufacture,
import, or distribute.” However, while importers and distributors are obligated under
the CPSA to report potentially hazardous products, that requirement is separate from
the provisions in the FHSA, under which the Government proceeded in this action.
See Ex. 12 (Regulated Products Handbook, Ch. 5, at 10-11) (“This chapter contains
information to familiarize companies with their reporting obligations under the
Consumer Product Safety Act (CPSA). Companies that distribute consumer products
subject to the Federal Hazardous Substances Safety Act (FHSA) . . . also must comply
with these reporting requirements.”).
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Subsection (a) of 16 C.F.R. § 1500.268 requires, first, that “[i]f it appears that
the hazardous substance may be subject to refusal of admission, the area office
director shall give the owner or consignee a written notice to that effect, stating the
reasons therefor.” It is undisputed that the products appeared to the CPSC to be
subject to refusal of admission because all of the products failed the tests the CPSC
conducted. It is further undisputed that written LOAs to that effect were sent to the
Shelton parties, and that the LOAs identified the specific performance standards that
the products failed.
The regulation next requires that “[t]he notice shall specify a place and a period
of time during which the owner or consignee shall have an opportunity to introduce
testimony.” Id. In this case, the LOAs explained that the Shelton parties should
introduce any evidence to the CPSC staff, provided the address, and stipulated that
the time period was within ten days from receipt of the LOA.
The regulation continues: “[u]pon timely request, giving reasonable grounds
therefor, such time and place may be changed.” Id. The Shelton parties argue that,
because the fireworks were being held by the United States Customs Department
(“U.S. Customs”), the Shelton parties could not conduct their own testing, and that
it is insufficient for the Government to argue that the Shelton parties could have
requested an extension of time to respond to the LOAs or obtained approval from
U.S. Customs to sample the products. However, 16 C.F.R. § 1500.268(a) speaks
explicitly to the contrary. See also Shelton II, 34 F. Supp. 2d at 1152 (pointing to
uncontroverted testimony that CPSC granted only request to take samples from
shipment held under customs bond, and, that 19 C.F.R. § 19.8 permits examination
and sampling of goods held in bonded warehouse). At no point did the Shelton
parties attempt to take advantage of the provision that allowed them to request that
either the time or place be changed.
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Finally, the regulation provides that “[s]uch testimony shall be confined to
matters relevant to the admissibility of the hazardous substance, and may be
introduced orally or in writing.” 16 C.F.R. § 1500.268(a). The Shelton parties
actually did respond to one of the LOAs by submitting written evidence to rebut the
conclusion of the CPSC – albeit with respect to only one product out of the nineteen
products for which LOAs were received – evincing that Gregory Shelton had notice
of his opportunity to submit evidence. Accordingly, the district court properly held
that the CPSC had not violated the Shelton parties’ due process rights.
IV. Admissibility into Evidence of Laboratory Reports
The Shelton parties argue that the district court erred in admitting the CPSC
laboratory test reports into evidence under the business records exception, and that
the laboratory reports were the only evidence offered to prove that the nineteen
fireworks were banned hazardous substances.8
We review a trial court's evidentiary rulings under the abuse of discretion
standard, see General Elec. Co. v. Joiner, 522 U.S. 136 (1997), affording the district
court substantial deference. See Sphere Drake Ins. PLC v. Trisko, 226 F.3d 951, 954
(8th Cir. 2000). For the reasons discussed below, we hold that the district court did
not abuse its discretion in admitting the laboratory reports into evidence as business
records.
8
The Shelton parties also argue that the reports were improperly admitted
expert testimony because the CPSC did not establish that the testers had the skill,
experience, training, or specialized knowledge required by Fed. R. Evid. 702. We do
not reach this argument because we hold that the district court did not abuse its
discretion by admitting the laboratory reports into evidence under Fed. R. Evid.
803(6).
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Fed. R. Evid 803(6) permits admission into evidence of “records of regularly
conducted activity.”9 The Shelton parties argue that the Government failed to meet
its burden of proving that the CPSC employees who conducted the testing did so in
the regular course of business. We disagree.
As an initial matter, laboratory test reports constitute business records and
therefore are admissible subject to the requirements of Fed. R. Evid. 803(6). See
United States v. Baker, 855 F.2d 1353, 1359-60 (8th Cir. 1988) (affirming district
court holding that regularly conducted laboratory reports were admissible as business
records under Fed. R. Evid 803(6)). It is undisputed that the CPSC tests fireworks
in the course of its regularly conducted activity. See Tr. of proceeding, May 11, 1998
(Trial Test. of Warren K. Porter, Jr.); see also United States v. Midwest Fireworks
Mfg. Co., 248 F.3d 563 (6th Cir. 2001) (finding that CPSC conducts at least 4,000-
5,000 tests on fireworks per year). It is further undisputed that every time the CPSC
9
The business records exception provides that the hearsay rule does not
exclude from evidence:
A memorandum, report, record, or data compilation, in any form, of acts,
events, conditions, opinions, or diagnoses, made at or near the time by,
or from information transmitted by, a person with knowledge, if kept in
the course of a regularly conducted business activity, and if it was the
regular practice of that business activity to make the memorandum,
report, record or data compilation, all as shown by the testimony of the
custodian or other qualified witness, or by certification that complies
with Rule 902(11), Rule 902(12), or a statute permitting certification,
unless the source of information or the method or circumstances of
preparation indicate lack of trustworthiness. The term "business" as
used in this paragraph includes business, institution, association,
profession, occupation, and calling of every kind, whether or not
conducted for profit.
Fed. R. Evid. 803(6).
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tests fireworks, the data is recorded in the same way, reviewed for accuracy in the
same way, and stored in the same way. See Tr. of proceeding, May 11, 1998 (Trial
Test. of Warren K. Porter, Jr.). Therefore, the Government met its initial burden of
showing that the laboratory test reports in question fell within the business records
exception.
The business records exception applies, and the records are deemed admissible,
unless problems of untrustworthiness appear. See Fed. R. Evid. 803(6) (providing
that records made in course of regularly conducted business will be taken as
admissible “unless the source of information or the method or circumstances of
preparation indicate lack of trustworthiness”); c.f. Kehm v. Proctor & Gamble Mfg.
Co., 724 F.2d 613 (8th Cir. 1983) (Kehm) (interpreting test for admissibility of public
records pursuant to Fed. R. Evid. 803(8)). The language of Fed. R. Evid. 803(6)
parallels the principles we articulated in Kehm, where we held that the public records
exception assumes admissibility in the first instance and provides that the party
opposing admission has the burden of proving inadmissibility. We therefore apply
the same principles to admission of business records that we articulated for admission
of public records in Kehm, and hold that once the offering party has met its burden
of establishing the foundational requirements of the business records exception, the
burden shifts to the party opposing admission to prove inadmissibility by establishing
sufficient indicia of untrustworthiness. See id. at 618; see also 4 Christopher B.
Mueller & Laird C. Kirkpatrick, Federal Evidence § 450 (2d ed. 1994) (arguing that
party objecting to admission of business record bears burden of raising
trustworthiness issue and showing that record is untrustworthy).
The Shelton parties failed to challenge the trustworthiness of the information
contained in the laboratory reports, or to suggest that the information was recorded
inaccurately or that the CPSC does not test fireworks regularly. Although the Shelton
parties argue that some of the laboratory technicians who tested the Shelton parties’
fireworks had less experience than others, this contention is irrelevant to the question
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of whether the records were kept in the regular course of business at the CPSC. The
testimony of the Shelton parties’ expert, Dr. Schnieder, opining that the tests
themselves did not actually prove that the fireworks were hazardous, goes to the
weight of the reports, not their admissibility. See Firemen's Fund Ins. Co. v. Thien,
63 F.3d 754, 757-58 (8th Cir. 1995) (finding no abuse of discretion when district
court admitted documents into evidence under business records exception because
arguments to contrary went to credibility of witnesses, not admissibility of evidence,
and thus were more appropriate for cross-examination than evidentiary objection);
Kehm, 724 F.2d at 624 (distinguishing weight of evidence from admissibility of
evidence).
V. Denial of Jury Trial
The corporate parties argue that the district court abused its discretion in
denying their demand for a jury trial. The corporate parties ask that this Court reverse
and remand to the district court for a new trial by jury. A district court's denial of a
jury trial is reviewed for an abuse of discretion. See Spear v. Dayton's, 771 F.2d
1140, 1144 (8th Cir. 1985).
The corporate parties argue that they demanded a jury trial within ten days from
the service of the “last pleading directed to such issue,” which they argue fulfills the
requirements of Fed. R. Civ. P. 38(b). The corporate parties contend that “the ‘last
pleading’ directed to the issues in this case was the Answer to Plaintiff’s Second
Amended Complaint in which the Shelton Corporations rightfully demanded their
jury trial.” Brief for Appellants at 33. However, the United States’ second amended
complaint presented no new issues triable of right to a jury as to the corporate parties.
The only thing new about the second amended complaint was that Gregory Shelton
was added to the complaint in his individual capacity. Thus, Gregory Shelton had the
right to a jury arising out of the second amended complaint, but the other parties to
the action did not. See First Wisconsin Nat’l Bank v. Klapmeier, 526 F.2d 77, 79-80
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(8th Cir. 1975) (holding that defendant already waived jury trial on issues raised in
original complaint, but could get jury trial solely on new issue raised in amended
answer). The corporate parties had already waived their right to a jury trial by not
demanding a jury trial within the required time period after the first amended
complaint. Because the second amended complaint contained no new triable issues
that pertained to them, the right to a jury trial under Rule 38 was not revived. See
Fed. R. Civ. P. 38(d) (“The failure of a party to serve and file a demand as required
by this rule constitutes a waiver by the party of trial by jury….”); see also In re Yukon
Energy Corp., 138 F.3d 1254, 1260 (8th Cir. 1998) (affirming district court ruling that
defendant waived right to jury trial because, “[e]ven if [defendant] requested a jury
trial within ten days of [plaintiff’s] final amended complaint, the essence of
[plaintiff’s] allegation against [defendant] was not changed by this amendment and
remained unchanged throughout the course of the litigation”).
Upon motion, a district court has the discretion under Fed. R. Civ. P. 39(b) to
order a jury trial “notwithstanding the failure of a party to demand a jury in an action
in which such demand might have been made out of right…” Here, the corporate
parties offered no justification for their failure to timely demand a jury trial. See
Littlefield v. Fort Dodge Messenger, 614 F.2d 581, 585 (8th Cir. 1980) (affirming
denial of relief from waiver of jury trial when party offered “no justification for the
failure to make an appropriate demand” for jury trial). The corporate parties’
argument that the district court should have excused their waiver because it was the
opposing party, and not them, that filed the amended pleadings is unpersuasive and
not supported by the law. See, e.g., Continental Bank & Trust Co. v. American
Bonding Co., 605 F.2d 1049, 1055 n.13 (8th Cir. 1979) (holding that defendant could
not revive waived right to jury trial because opposing party’s amended complaint did
not add new issues triable by jury). We hold that the district court did not abuse its
discretion in denying the corporate parties a jury trial.
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VI. Conclusion
We hold that the FHSA extends to common fireworks and confers jurisdiction
to the CPSC, that the Shelton parties’ due process rights had not been violated
because they had notice and opportunity for response, that the laboratory test reports
were properly admitted into evidence under the business exception to the hearsay
rule, and that the corporate parties waived their right to a jury trial because they did
not file a timely demand. Accordingly, we affirm the orders of the district court in
Shelton I and Shelton II.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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