Entrepreneurs / Small Business  March 24, 2016

Zen Magnets loses court battle

BOULDER — A federal judge on Wednesday ordered a Denver-based company founded in Boulder to stop selling and recall powerful, small magnets that can cause fatal injuries when swallowed.

The magnets are typically sold in sets of hundreds and are commonly marketed and sold as “sculptural” desk toys.

According to the U.S. Consumer Product Safety Commission, when a person ingests more than one of the powerful small magnets, the magnets are attracted to each other in the digestive system, creating the potential for serious damage to the intestinal tissue trapped in between or even death.

On Tuesday, U.S. District Court Judge Christine M. Arguello of the District of Colorado made an injunction against the sale of the magnets permanent, ordered Zen Magnets to conduct a recall in which the company must provide refunds to consumers who return the magnets and directed Zen Magnets to destroy the remaining magnets in the company’s inventory.

Arguello previously had issued a preliminary injunction that prohibited Zen Magnets LLC and its owner, Shihan Qu, from further sale of the magnets.

The court found that Zen Magnets purchased approximately 917,000 small magnets at a substantial discount from another company that one week later agreed to recall the magnets as part of an agreement with the Consumer Product Safety Commission. Arguello ruled that Zen Magnets violated the Consumer Product Safety Act when it subsequently resold the magnets.

The company had argued that by placing the magnets in different packaging and selling the magnets under different names, the magnets were no longer covered by the recall.

Arguello rejected that argument, saying that Zen Magnets’ interpretation “would allow manufacturers and importers of consumer products to simply circumvent (and effectively disarm)” the Consumer Product Safety Act “by merely repackaging recalled products as they saw fit.”

Arguello said in court documents that Qu knew when his company purchased the magnets in July 2014 that the seller was about to enter into an agreement with the CPSC to recall the magnets and that it was likely that it would soon be illegal to sell the magnets.

Zen Magnets ignored repeated warnings by the CPSC and continued to sell the magnets until the court issued the preliminary injunction last year. Arguello stated that allowing consumers to return the magnets “will reduce the likelihood that such consumers are injured by those products” and would deter future violations of the law by forcing Zen Magnets to issue refunds.

“Of the three cases we’ve had to face, it’s especially saddening to me that the one to drown Zen Magnets LLC was the one that does not consider whether the magnets are actually dangerous,” Qu said in an email.

“We agree that merely repackaging a product does not make it safe. The difference between our product and those that have been recently recalled by the CPSC (some laptops, flywheels, floor lamps, and bicycle wheels, among others), is that the other products were recalled because of design flaws, not simply because they were misused,” Qu said.

“Though we respectfully disagree that Zen has violated a provision of the CPSA regarding a prior recall, we accept that the court has made its ruling and we will abide the court’s orders.”  Qu said Thursday that the company continues to operate and sell its other products.

CPSC’s chairman Elliot F. Kaye said the judge’s decision “puts the rule of law and the safety of children above the profits sought by Zen Magnets. Far too many children have been rushed into hospital emergency rooms to have multiple, high-powered magnets surgically removed from their stomachs. Young children have suffered infections and one child tragically died from swallowing loose magnets that often look like candy.”

Zen Magnets is separately challenging a rule issued by the CPSC that prohibits the sale of magnets or magnet sets that are small enough to be swallowed and that have a high degree of magnetic attraction.  That rule went into effect and applies only to magnets sold after April 1, 2015.  That case remains pending on appeal.

BOULDER — A federal judge on Wednesday ordered a Denver-based company founded in Boulder to stop selling and recall powerful, small magnets that can cause fatal injuries when swallowed.

The magnets are typically sold in sets of hundreds and are commonly marketed and sold as “sculptural” desk toys.

According to the U.S. Consumer Product Safety Commission, when a person ingests more than one of the powerful small magnets, the magnets are attracted to each other in the digestive system, creating the potential for serious damage to the intestinal tissue trapped in between or even death.

On Tuesday, U.S. District Court Judge Christine M.…

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