WASHINGTON -- The tiny, shiny magnets known as Buckyballs have always been a lot more powerful than they look, and now they are at the center of a high-stakes legal dispute over whether the federal government can hold a business owner personally liable for a consumer recall.
New York entrepreneur Craig Zucker thought he had the most successful venture of his young career when he developed the desk toy in 2009, consisting of pellets that can be twisted and stacked into infinite shapes.
Since then, many children, perhaps more than 1,000, have swallowed various brands of small magnets and required surgery, prompting the Consumer Product Safety Commission to appeal to retailers to stop selling the products and initiate a recall aimed at Mr. Zucker's company and two others.
But Mr. Zucker dissolved his business in December 2012, so the commission took the unusual step of filing a lawsuit to hold him personally responsible for a potential recall that could cost up to $57 million, assuming every buyer of the desk toys claims reimbursement. Zen Magnets and Star Networks USA, which sell similar products, were also named as defendants.
In addition to the lawsuit, the commission has proposed a new regulation that would prohibit the sale of small toy magnets exceeding a certain level of attractive force. The agency's four-member board of commissioners will decide this year whether to adopt the rule.
Mr. Zucker, 34, is fighting back. He filed a complaint in federal court in November arguing that regulators cannot hold an individual responsible for alleged product-safety issues. In a statement, he called the commission's effort an "egregious attempt at rewriting our cherished laws of limited liability."
Zen Magnets and Star Networks also are fighting the lawsuit and continue to sell their products online. "I think it's ridiculous that they want to make these magnets harder to obtain than ammunition in America," said Zen Magnets founder Shihan Qu. Star Networks declined to comment for this story.
Mr. Zucker's case is rare, not only because the lawsuit names him personally, but because businesses typically cooperate with recall efforts. Before the Buckyballs lawsuit, more than a decade had passed since the commission had resorted to litigation over such a matter. The last case involved airgun maker Daisy Manufacturing, which ended with a settlement in 2003, according to the agency.
In order to force a recall, the agency's staff must obtain permission from the commissioners to file a lawsuit and then convince an administrative judge that a product is defective.
Pamela Gilbert, who led the commission during the Clinton administration, said regulators consider a product's potential for misuse along with its necessity before taking action. "Part of the calculus that would go on at the commission is that this is a toy," she said. "It's for fun."
Advocacy groups have taken sides in the Buckyballs case, and Mr. Zucker has launched a media campaign arguing that the commission has overreached its authority by naming him individually. He claims the agency is trying to silence him.
The commission denies that it named Mr. Zucker in its lawsuit because of a personal vendetta, saying it had to hold him personally responsible for the proposed recall after he closed down his company. "This is an issue about safety and children, not about one individual," said spokesman Scott Wolfson.
Ms. Gilbert said companies that dissolve can be problematic for the commission, which has no money for refunds after recalling hazardous products. "That type of situation is very dangerous for the public," she said.
The agency can recommend that consumers throw away hazardous items, but Ms. Gilbert said that solution is not as effective as providing refunds.
Mr. Zucker said his former company, Maxfield and Oberton, sold about 2.5 million small-magnet sets. He declined to say how much his company earned, but Cause of Action, a conservative legal group aiding his defense, said the product sold at wholesale prices between $7.50 and $17.50.
Mr. Zucker placed about $260,000 into a trust to handle potential claims against his former company, according to a letter the commission sent to the trust's administrator saying the amount would be "insufficient to compensate consumers if staff prevails in its action."
Maxfield and Oberton was the fifth start-up for Mr. Zucker. His previous companies sold items such as bottled New York City tap water and gourmet honey from The Hamptons, the tony section of New York's Long Island.
In 2010, Mr. Zucker collaborated with the commission to mitigate the dangers that Buckyballs might pose to children. Along with other actions, he added "keep away from children" labels to his product, appeared in a commission-sponsored video about the harm of swallowing magnets and created a website dedicated to magnet safety.
Regulators determined that those efforts were not enough after an uptick in medical emergencies relating to various brands of small magnets. The commission estimates that 1,700 incidents involving children and teens occurred between 2009 and 2011, based on a sampling from hospitals across the country.