Honeywell Consumer Products, Inc. (Formerly Known as Duracraft
Corp.) Provisional Acceptance of a Settlement Agreement and Order
[Federal Register: November 1, 2001 (Volume 66, Number 212)]
[Notices]
[Page 55163-55165]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01no01-48]
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CONSUMER PRODUCT SAFETY COMMISSION
[CPSC Docket No. 02-C0001]
Honeywell Consumer Products, Inc. (Formerly Known as Duracraft
Corp.) Provisional Acceptance of a Settlement Agreement and Order
AGENCY: Consumer Product Safety Commission.
ACTION: Notice.
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SUMMARY: It is the policy of the Commission to publish settlements
which it provisionally accepts under the Consumer Product Safety Act in
the Federal Register in accordance with the terms of 16 CFR 1118.20.
Published below is a provisionally-accepted Settlement Agreement with
Honeywell Consumer Products, Inc. (formerly known as Duracraft Corp.),
a corporation containing a civil penalty of $800,000.
DATES: Any interested person may ask the Commission not to accept this
agreement or otherwise comment on its contents by filing a written
request with the Office of the Secretary by November 16, 2001.
ADDRESSES: Persons wishing to comment on this Settlement Agreement
should send written comments to the Comment 02-C0001, Office of the
Secretary, Consumer Product Safety Commission, Washington, DC 20207.
FOR FURTHER INFORMATION CONTACT: Jimmie L. Williams, Jr., Trial
Attorney, Office of the General Counsel, Consumer Product Safety
Commission, Washington, DC 20207; telephone (301) 504-0980, 1376.
SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears
below.
Dated: October 29, 2001.
Todd A. Stevenson,
Acting Secretary.
[CPSC Docket No. 02-C0001]
In the Matter of Honeywell Consumer Products, Inc. (formerly known
as Duracraft Corp.); Settlement Agreement and Order
1. Honeywell Consumer Products, Inc. (``HCP''), formerly known as
Duracraft Corp. (``Duracraft''), enters into this Settlement Agreement
and Order with the staff (``staff'') of the U.S. Consumer Product
Safety Commission (``Commission'') in accordance with 16 CFR part 1118,
section 20 of the Commission's Procedures for Investigations,
Inspections, and Inquiries under the Consumer Product Safety Act
(``CPSA'').
I. The Parties
2. The Commission is an independent federal regulatory agency
responsible for the enforcement of the CPSA, 15 U.S.C. 2051-2084.
3. HCP is a corporation organized and existing under the laws of
the State of Massachusetts. HCP's principal offices are located at 250
Turnpike Road, Southborough, Massachusetts 01772. Duracraft was a
corporation organized under the laws of the State of Massachusetts.
Honeywell Inc. (``Honeywell'') is a corporation organized and existing
under the laws of the State of Delaware.
4. On February 16, 1996, Honeywell made a tender offer to acquire
the corporate stock of Duracraft. On May 1, 1996, Duracraft became a
wholly-owned subsidiary. In November 1996, Duracraft changed its name
to Honeywell Consumer Products, Inc. Duracraft currently exists as a d/
b/a for HCP.
II. Staff Allegations
DH 3000/DH 900 Humidifiers
5. From 1990 through May, 1996, and in June 1996, after it was
acquired by Honeywell, Duracraft imported and distributed approximately
1 million DH 3001-3006 and DH 901-904 warm mist humidifiers in the
United States. These humidifiers were then sold to consumers throughout
the U.S. for use in or around a household or residence. Therefore,
Duracraft and Honeywell were ``manufacturers'' of a ``consumer
product'' ``distributed in commerce'' pursuant to 15 U.S.C. 2052(a)(1),
(4) and (11).
6. The humidifiers contained a water tank, base, heating element,
and a mist chamber. Water passed from the tank into the base, and the
heating element, located in the mist chamber, heated the water to
vaporization temperature. The water vapor rose through the mist chamber
where it mixed with cooler air, and was discharged into the surrounding
environment by a blower and natural convection. A sensor rod or float
switch shut the humidifier off when the water reservoir tank became
empty.
7. Duracraft manufactured the DH 3000 series humidifiers until
1991. In 1991, Duracraft redesigned the humidifier because of leakage
from the water tank, and re-named it the DH 900 series. The DH 900
series was manufactured without significant design change until October
1994. Duracraft informed CPSC staff that the units redesigned in 1991
did not exhibit any safety related defects during the firm's functional
or life testing, and that no changes had been made to address any
safety related defects.
8. As of February, 1996, 68 claims had been reported to Duracraft
in which a DH 3000 series humidifier or a pre-1995 DH 900 series
humidifier unit either emitted smoke or sparks or caught on fire.
Nineteen of these incidents occurred in a child's room.
9. The humidifier's float switch could fail, and not shut down the
product. The humidifiers also included a high-limit switch. When the
temperature at the location of the switch reached a certain level, the
high-limit switch activated, breaking the electrical circuit within the
humidifier and turning off the heating element. However, the high-limit
switch could also fail. If both the float switch and the high-limit
switch failed, the heating element could remain on, and the humidifier
could overheat and catch on fire.
10. Immediately following Honeywell's February, 1996 tender offer,
referred to in paragraph 4, Honeywell began a due diligence
investigation of Duracraft's business. The Disclosure Schedule to the
Merger Agreement between Duracraft and Honeywell disclosed that
``[u]nder cover of a letter dated November 30, 1995, the United States
Consumer Product Safety Commission (`CPSC') provided the Company
(`Duracraft') with product-related reports regarding certain of the
Company's humidifier models. The Company has also received notice of
requests for information regarding these models submitted to the CPSC
under the Freedom of Information Act.'' On May 1, 1996, Honeywell
completed its acquisition of Duracraft.
11. On May 31, 1996, Duracraft submitted a telephone report under
[[Page 55164]]
Section 15(b) of the CPSA to staff regarding a DH 900 series humidifier
that failed in the room of a 1\1/2\ year old child. The product
overheated and melted. The child suffered smoke inhalation, and was
treated in an emergency room.
12. Thereafter, Commission staff confirmed Duracraft's oral report,
and requested a full report under Section 15(b) of the CPSA regarding
Duracraft's warm mist humidifiers.
13. Commission staff initiated a site inspection of the Duracraft
facilities in the summer of 1996. During this inspection, Duracraft
managers stated that the company was not aware of any float switch
failures. Moreover, the managers stated that the company had never
observed any failures of the humidifier's safety devices.
14. Duracraft responded on October 9, 1996 and submitted its
Section 15(b) report. Within its submission, Duracraft reported that it
discovered on or about August, 1993, the DH 900 series humidifiers
could fail. The DH 3000 series also had the same failure mode as the DH
900 series. However, Duracraft did not offer to recall the product.
15. In November 1996, a 6-year-old child died during a fire, which
CPSC attributes to a failed humidifier. HCP first received notice of
the fire on or about May 25, 1997.
16. In mid-April, 1997, Duracraft (which was then named Honeywell
Consumer Products) received a preliminary determination letter from the
CPSC, and a request for a recall of the DH 3000 and the pre-1995 DH 900
series humidifiers.
17. On June 4, 1997, HCP advised the CPSC that it would voluntarily
recall the DH 3000 and DH 900 series humidifiers, and presented its
corrective action plan to CPSC staff. At that time, approximately
eighty-five (85) failures had taken place, with twenty-two (22)
incidents occurring in a child's room.
CZ 520 Baseboard Heater
18. From September, 1995 through March, 1996, Duracraft imported
and distributed 58,584 CZ 520 portable baseboard heaters in the United
States. The CZ 520 heater was a movable baseboard heater that contained
two heating assemblies, a selector switch, and a thermostat. Each
heating assembly included a motor, a fan, a heating device, and a
temperature-limiting device. The fan motor shafts were aligned on a
central axis, and the temperature limiting devices were designed to
shut down the product if the internal temperature reached 90 deg. C.
When the selector switch was turned on ``LOW'', only one heating
assembly was activated. Both heating assemblies were activated when the
switch was turned on ``HIGH''.
19. In December, 1995, Duracraft began to receive reports from
consumers who observed some CZ-520 units smoking or flaming. There were
no reports of personal injury. As of February, 1996, Duracraft's
testing on seven failed returns revealed that all of the heaters were
experiencing low fan speeds.
20. The Disclosure Schedule to the Merger Agreement between
Duracraft and Honeywell indicated that ``the company [`Duracraft'] has
received complaints concerning the company's CZ-520 heater model,
relating to incidents of flames or smoke emanating from the unit. The
Company has had a number of returns of this model and has received a
claim for several hundred dollars involving the unit.''
21. On June 4, 1997, HCP notified Commission staff that it had
decided to recall the heater. At that time, Duracraft had received
twenty (20) claims, some involving minor property damage, and 12%
warranty returns (7,295 heaters). On July 22, 1997, HCP submitted a
full report under Section 15(b) of the CPSA.
Ceramic Heaters
22. From January, 1989 through May 1, 1996 Duracraft and then from
May 1, 1996 through March, 1998, HCP manufactured or purchased
approximately 1.6 million model CZ-303, CZ-304, CZ-308, CZ-318, CZ-319,
and CER-1 ceramic heaters for Duracraft and HCP's importation and
distribution. The heaters are cubed shaped 7\1/2\ inch tall portable
air heaters with a ceramic heating element. The controls consist of a
slide switch, which adjusts the heat output from 800 watts to 1,500
watts, a rocker switch, which turns the unit on and off or turns on a
internal fan, and a manual/automatic slide switch, which allows the
user to set the heat output at a certain level or vary the output to
maintain a consistent temperature.
23. In January, 1990, Duracraft began to receive complaints about
the heaters smoking or flaming. As of February, 1996, Duracraft had
notice of at least thirty-three (33) incidents. The CPSC had knowledge
of an additional twelve (12) incidents. There were no reports of
personal injury. Nearly all of the complaints noted the above type of
damage.
24. Duracraft's product tests on several failed units, conducted
after Honeywell's acquisition of Duracraft, between May, 1996 and June,
1997, confirmed the units could fail. Honeywell was informed of the
reports by HCP's general counsel, outside counsel, and Duracraft's
management in June, 1997.
25. On July 22, 1997, a consultant hired by Honeywell concluded
that a defective rocker switch, or the seepage of a foreign substance
into the rocker switch, could create an internal electrical arc and
ignite the unit. Honeywell sent this report to the Commission. Thus,
the heaters could present a fire hazard to the consumer.
26. On October 10, 1997, as a result of a Commission staff
initiated investigation, staff requested a report under section 15(b)
of the CPSA for the heaters. HCP provided this report on December 2,
1997. On March 16, 1998, HCP agreed to voluntarily recall the products.
By that time, Duracraft and HCP had received fifty-six (56) complaints
of these ceramic heaters smoking and melting. HCP had received one
complaint of smoke inhalation, and was notified that several failures
had caused extensive property damage.
27. Duracraft failed to report the defects to the Commission in a
timely manner, as required by Section 15(b) of the CPSA, 15 U.S.C.
2064(b). Honeywell received information concerning product failures at
the time it acquired Duracraft, and continued to obtain information
after that time. After the acquisition, Honeywell and HCP failed to
report the defects to the Commission in a timely manner, as required by
Section 15(b) of the CPSA, 15 U.S.C. 2064(b). A failure to furnish
information under section 15(b) of the CPSA is a prohibited act under
15 U.S.C. 2068(a)(4). Duracraft and HCP ``knowingly'' failed to report,
as that term is defined in 15 U.S.C. Sec. 2069(d), and are subject to a
civil penalty, pursuant to 15 U.S.C. 2069(a)(1).
III. Response of HCP
28. HCP denies all of the allegations of the staff set forth in
paragraphs 5-27 above. HCP states that the products described in
paragraphs 5-27 above do not contain any defect that would create a
substantial product hazard pursuant to Section 15(a) of the CPSA, 15
U.S.C. 2064(a). These products do not create an unreasonable risk of
serious injury or death pursuant to Section 15(b) of the CPSA, 15
U.S.C. 2064(b). HCP did not violate the reporting requirements of
Section 15(b) of the CPSA, 15 U.S.C. 2064(b), or 16 CFR part 1115. No
other violation of law occurred warranting imposition of a civil
penalty. In settling this matter, HCP does not admit any fault,
liability or statutory or regulatory violation.
29. For each of the products at issue, as soon as HCP received the
information and knowledge necessary to trigger a
[[Page 55165]]
Section 15(b) report, it acted promptly to file the report in a timely
manner.
30. Honeywell has consistently taken responsibility for any
potential safety problems in connection with its products. The staff's
allegations relate directly to Honeywell's acquisition of Duracraft.
The majority of the events at issue transpired prior to Honeywell's
acquisition of Duracraft or its involvement in Duracraft's product-
safety matters. Honeywell's due diligence review of Duracraft was
customary in the context of public company acquisitions and did not
reveal all issues or details about specific products. Information about
consumer claims that Honeywell did receive during its due diligence
review was not unusual for a consumer products company. Honeywell did
not receive information about the extent of the consumer claims until
it completed the acquisition.
31. HCP is entering into this Settlement Agreement for settlement
purposes only, to avoid incurring additional legal costs and expenses.
IV. Agreement of the Parties
32. The Commission has jurisdiction over this matter under the
Consumer Product Safety Act (CPSA), 15 U.S.C. 2051 et seq.
33. HCP knowingly, voluntarily and completely waives any rights it
may have to:
a. the issuance of a complaint in this matter;
b. an administrative or judicial hearing with respect to the staff
allegations discussed in paragraphs 5 through 27 above;
c. judicial review or other challenge or contest of the validity of
the Commission's Order;
d. a determination by the Commission as to whether a violation of
Section 15(b) of the CPSA, 15 U.S.C. 2064(b) has occurred;
e. a statement of findings of fact and conclusion of law with
regard to the staff allegations; and
f. to any claims under The Equal Access to Justice Act.
34. Upon provisional acceptance of this Settlement Agreement and
Order by the Commission, this Settlement Agreement and Order shall be
published in the Federal Register in accordance with 16 CFR part 1118,
section 20, and the Commission may further publicize the terms of the
Settlement Agreement and Order.
35. The Settlement Agreement and Order becomes effective upon final
acceptance of the Commission and service of the Order upon HCP.
36. HCP agrees to pay to the United States Treasury a civil penalty
in the amount of Eight Hundred Thousand Dollars ($800,000.00) within 30
calendar days of HCP's receiving service of the final Settlement
Agreement and Order.
37. HCP agrees to the entry of the attached Order, which is
incorporated herein by reference, and to be bound by its terms.
38. This Settlement Agreement and Order are entered into for
settlement purposes only and shall not constitute a determination of
any fault, liability or statutory or regulatory violation by HCP.
39. Compliance by HCP with the Settlement Agreement and Order in
the above-captioned case fully resolves and settles the allegations of
violations of Section 15(b) of the CPSA set out above.
40. The Commission's Order in this matter is issued under the
provisions of the CPSA, 15 U.S.C. 2051, et seq., and 16 CFR part 1118,
section 20, and a violation of this Order may subject HCP to
appropriate legal action.
41. This Settlement Agreement and Order is binding upon and shall
inure to the benefit of HCP and its corporate parents, assigns or
successors.
42. Agreements, understandings, representations, or interpretations
made outside of this Settlement Agreement and Order may not be used to
vary or to contradict its terms.
Honeywell Consumer Products, Inc.
Dated:----------------------------------------------------------------
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U.S. Consumer Product Safety Commission.
Alan H. Schoem,
Assistant Executive Director, Office of Compliance.
Eric L. Stone,
Director, Legal Division, Office of Compliance.
Dated: September 17, 2001.
Jimmie L. Williams, Jr.,
Trial Attorney, Legal Division, Office of Compliance.
[CPSC Docket No. 02-C0001]
In the Matter of Honeywell Consumer Products, Inc. (formerly known
as Duracraft Corp.); Order
Upon consideration of the Settlement Agreement entered into between
Honeywell Consumer Products, Inc., formerly known as Duracraft Corp.,
and the staff of the U.S. Consumer Product Safety Commission; and the
Commission having jurisdiction over the subject matter and Honeywell
Consumer Products, Inc., and it appearing that the Settlement Agreement
and Order is in the public interest, it is
Ordered, that the Settlement Agreement be, and hereby is, accepted,
and it is
Further Ordered, that upon final acceptance of the Settlement
Agreement and Final Order, Honeywell Consumer Products, Inc. shall pay
the Commission a civil penalty in the amount of Eight Hundred Thousand
Dollars ($800,000.00) within 30 calendar days after service of this
Final Order upon Honeywell Consumer Products, Inc.
Provisionally accepted and Provisional Order issued on the 29th
day of October, 2001.
By Order of the Commission.
Todd A. Stevenson,
Acting Secretary, U.S. Consumer Product Safety Commission.
[FR Doc. 01-27483 Filed 10-31-01; 8:45 am]
BILLING CODE 6355-01-M