[Federal Register: August 12, 1999 (Volume 64, Number 155)]
[Notices]
[Page 43990-43992]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12au99-49]
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CONSUMER PRODUCT SAFETY COMMISSION
[CPSC Docket No. 99-C0007]
Consolidated Electrical Distributors, Inc., a Domestic
Corporation, 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
1115.20(b)(4). Published below is a provisionally-accepted Settlement
Agreement with Consolidated Electrical Distributors, Inc., containing a
civil penalty of $1,500,000.
DATES: Any interested person may ask the Commission not to accept this
agreement or otherwise comment on it contents by filing a written
request with the Office of the Secretary by August 27, 1999.
ADDRESSES: Persons wishing to comment on this Settlement Agreement
should send written comments to the Comment 99-C0007, Office of the
Secretary, Consumer Product Safety Commission, Washington, DC 20207.
FOR FURTHER INFORMATION CONTACT: Howard N. Tarnoff, Trial Attorney,
Office of Compliance and Enforcement, Consumer Product Safety
Commission, Washington, DC 20207; telephone (301) 504-0626, 1346.
SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears
below.
Dated: August 5, 1999.
Sadye E. Dunn,
Secretary.
UNITED STATES OF AMERICA
Consumer Product Safety Commission
In the Matter of Consolidated Electrical Distributors, Inc.;
Respondent
CPSC DOCKET NO. 99-C0007
Consent Agreement
This Consent Agreement is made by and between the staff of the
Consumer Product Safety Commission, and Consolidated Electrical
Distributors, Inc., a domestic corporation, to settle the staff's
allegations that Consolidated Electrical Distributors, Inc.,
distributed in commerce certain allegedly defective in-wall electric
heaters manufactured by Cadet Manufacturing Company (``Cadet''), a
domestic corporation, with its principal place of business located
at 2500 West Fourth Plain Boulevard, Vancouver, Washington 98660.
Parties
1. The ``staff'' is the staff of the Consumer Product Safety
Commission (``CPSC'' or ``the Commission''), an independent
regulatory agency of the United States of America, established by
Congress pursuant to Section 4 of the Consumer Product Safety Act
(``CPSA''), 15 U.S.C. 2053, as amended.
2. Respondent Consolidated Electrical Distributors, Inc.
(``CED'') is a corporation organized and existing under the laws of
the State of Delaware, with its principal place of business located
at 31356 Via Colinas, Westlake Village, California 91362. CED is a
distributor of electrical materials and products.
Subject Matter
3. Since approximately 1978, Cadet has allegedly manufactured,
sold and/or distributed in commerce in-wall electric heaters for use
in homes and residences under the brand names ``Cadet'' and
``Encore.'' These include all models and variants within each model
of the series FW (including models FW-051, FW-101, FW-122, FW-202,
and FW-751), manufactured between 1978 and 1987; series FX
(including models FX-051, FX-052, FX-071, FX-072, FX-101, FX-102,
FX-122, FX-151, FX-152, FX-202, FX-242), manufactured between 1985
and 1994; series LX (including models LX-242, LX-302, LX-402, and
LX-482), manufactured between 1985 and 1994; series TK (including
models TK-051, TK-071, TK-072, TK-101, TK-102, TK-151, and TK-152),
manufactured between 1984 and 1998; series ZA (including models ZA-
051, ZA-052, ZA-071, ZA-072, ZA-101, ZA-102, ZA-122, ZA-151, ZA-152,
ZA-202, and ZA-242), manufactured between 1985 and 1994; series Z
(including models ZA-072, ZA-101, ZA-102, ZA-151, ZA-152, ZA-202,
and ZA-208), manufactured between 1993 and 1999; and all series and
models of the same or functionally identical heaters manufactured
and distributed by Cadet under the Encore brand name, including
series RX (including models RX-072, RX-101, RX-102, RX-151, RX-152,
RX-202, and RX-242), manufactured between 1985 and 1994; series RLX
(including models RLX-302, RLX-402, and RLX-482) manufactured
between 1985 and 1994; series RK (including models RK-101 and RK-
102), manufactured between 1984 and 1998; series RA (including
models RA-101, RA-102, RA-151, RA-152, RA-202), manufactured between
1985 and 1994; and series ZC (including models ZC-072, ZC-101, ZC-
102, ZC-151, ZC-152, ZC-202, and ZC-208), manufactured between 1993
and 1999. For each of these heaters, the variants signified by the
suffix T (with thermostat), W (white color), and TW (with thermostat
and white color) found after the model number are included. All the
heaters and variants referred to in this paragraph shall hereinafter
be collectively referred to as ``the Heaters.'' The Heaters were
sold and/or distributed to consumers principally in the States of
California, Idaho, Montana, Oregon, and Washington. Since
approximately 1978, CED has allegedly sold and/or distributed
certain of the Heaters in commerce.
4. On January 14, 1999, the staff filed an Administrative
Complaint (``Complaint'') against Cadet, seeking a determination
that certain of the Heaters present a substantial product hazard
within the meaning of Section 15(a)(2) of the CPSA, 15 U.S.C.
2064(a)(2), and public notice and a recall of certain of the Heaters
pursuant to Sections 15(c) and (d) of the CPSA, 15 U.S.C. 2064(c)
and (d). The Complaint alleged that certain of the Heaters are
defective and present a substantial product hazard within the
meaning of Section 15(a)(2) of the CPSA, 15 U.S.C. 2064(a)(2),
because their design and/or manufacture causes them to overheat,
fail, and catch fire; and/or allows lint, dirt, or debris to build
up within the heaters and catch fire. The Complaint also alleged
that the design of certain of the Heaters can cause the Heaters to
spew flames and/or burning or molten particles, or eject sparks into
the living space of a home or residence, or energize the Heaters
creating a risk of electric shock. The staff has agreed with Cadet
to the terms of a corrective action plan for notification to
consumers and for the replacement of the Heaters (``the Corrective
Action Plan'' or ``the Plan''). The Corrective Action Plan is
incorporated in a Consent Agreement and Order between Cadet and the
staff, which was executed by Cadet on June 17, 1999 and executed by
the staff on June 18, 1999, and will be submitted to the Commission
for final approval.
Agreement of the Parties
5. It is the express purpose of the parties entering this
Consent Agreement to protect the public safety by assisting Cadet's
recall and replacement of the Heaters.
6. Fulfillment of the terms of this Consent Agreement and the
attached Order (hereinafter ``Order'' or ``the Order''), which is
hereby incorporated by reference, shall resolve all potential
obligations of CED (and each of CED's predecessors, successors,
assigns, parents, subsidiaries, affiliated entities, agents,
representatives, attorneys, employees, officers, directors,
stockholders, and principals) (collectively ``the CED Releasees'')
under Section 15(c) and (d) of the CPSA, 15 U.S.C. 2064(c) and (d),
to give public notice of the alleged hazard presented by the
Heaters, and to repair, replace, or refund the purchase price of the
Heaters. Fulfillment of the terms of this Consent Agreement and
Order shall also resolve all potential obligations and liabilities
of the CED Releasees for all other claims and causes of action which
could have been alleged by the CPSC against the CED Releasees
relating to the Heaters, based upon information known to the CPSC,
or otherwise in the CPSC's possession, at the time the CPSC staff
signs this Consent Agreement. Nothing in this Paragraph 6 is
intended to limit the CPSC's rights under Paragraph 21 of this
Consent Agreement.
7. The staff believes that this Consent Agreement and Order is
an equitable resolution of consumer claims against CED for
replacement heaters, and the staff has concluded that the Corrective
Action Plan, and CED's participation in that Plan, will provide an
effective, fair, reasonable and adequate remedy for consumers
throughout the United States who own or are otherwise exposed to the
heaters by notifying
[[Page 43991]]
consumers of the alleged hazard and providing replacement heaters to
them, and that this Agreement is, therefore, in the best interests
of consumers.
8. This Consent Agreement and Order shall not be deemed or
construed as an admission by CED or as evidence: (a) Of any
violation of law or regulation by CED; (b) of other wrongdoing by
CED; (c) that the Heaters are defective, create a substantial
product hazard, or are unreasonably dangerous; or (d) of the truth
of any claims or other matters alleged or otherwise stated by the
CPSC or any other person either against CED or with respect to the
Heaters. Except as specifically set forth in Paragraphs 9, 10, and
11, below, CED does not admit the factual allegations and other
statements, or any conclusions of law, as alleged or otherwise
stated in the Complaint or this Consent Agreement and Order which
relate to the Heaters.
9. The Heaters are ``consumer products'' within the meaning of
Section 3(a)(1) of the CPSA, 15 U.S.C. 2052(a)(1).
10. CED is a ``distributor'' of ``consumer product[s],'' which
are ``distributed in commerce,'' as those terms are defined in
Sections 3(a)(1), (5), and (11) of the CPSA, 15 U.S.C. 2052(a)(1),
(5), and (11).
11. The CPSC has jurisdiction over CED and the Heaters under
Sections 3(a)(1), (5), and (11) and Section 15 of the CPSA, 15
U.S.C. 2052(a)(1), (5), and (11) and Sec. 2064.
12. For purposes of this settlement only, CED agrees not to
contest the staff's allegation, which CED denies, that the Heaters
contain a ``defeat which creates a substantial product hazard,'' as
those terms are defined in Section 15(a) of the CPSA, 15 U.S.C.
2064(a).
13. Upon final acceptance by the CPSC of this Consent Agreement
and Order, CED knowingly, voluntarily, and completely waives and
relinquishes any past, present, and/or future right or rights in
this matter captioned In the Matter of Consolidated Electrical
Distributors, Inc., CPSC Docket No. 99-C0007: (a) To an
administrative or judicial hearing and to all further procedural
steps--including findings of fact and conclusions of law--to
determine whether the Heaters contain a defect which creates a
substantial product hazard within the meaning of Section 15 of the
CPSA; (b) to seek judicial review or otherwise challenge or contest
the validity of this Consent Agreement and Order as issued and
entered; (c) to seek judicial review of this or any past orders,
findings, and/or determinations of the CPSC in this matter, except
as set forth in Paragraphs 22 and 25 of this Consent Agreement; and
(d) to file any claim or to seek any remedy under the Equal Access
to Justice Act.
14. The Order is issued under Sections 15(c) and (d) of the
CPSA, 15 U.S.C. 2064(c) and (d), and a violation of this Consent
Agreement and Order is a prohibited act within the meaning of
Section 19(a)(5) of the CPSA, 15 U.S.C. 2068(a)(5), and may subject
CED to civil and/or criminal penalties under Sections 20 and 21 of
the CPSA, 15 U.S.C. 2069 and 2070.
15. The parties agree to fulfill all requirements of this
Consent Agreement and Order.
16. For all purposes, the Consent Agreement and Order shall
constitute an enforceable judgment obtained in an action or
proceeding by a governmental unit to enforce its police and
regulatory power. CED acknowledges and agrees that this Consent
Agreement and Order are pursuant to the CPSC's police and regulatory
power to remedy the alleged risk created by the Heaters, and that,
once CED signs the Consent Agreement and Order, the Consent
Agreement and Order will not be subject to an automatic stay in any
bankruptcy proceeding involving CED.
17. CED acknowledges that any interested person may bring any
action pursuant to Section 24 of the CPSA, 15 U.S.C. 2073, in the
United States District Court in which CED is found or transacts
business, to enforce the Order and to obtain appropriate injunctive
relief.
18. This Consent Agreement and Order shall be binding upon and
inure to the benefit of the parties hereto and their successors,
assigns, and any operating bankruptcy trustees or receivers. If,
prior to the termination of this Consent Agreement and Order, CED
merges with any other business entity or sells, assigns, or
otherwise transfers substantially all of its assets, CED shall
provide reasonable prior notice to the surviving corporation or to
the purchaser, assignee, or transferee of substantially all of CED's
assets, of this Consent Agreement and Order, and of its binding
effect upon said surviving corporation, purchaser, assignee, or
transferee. The existence of this Consent Agreement and Order and
its binding effect shall be noted in any agreement between CED and
such surviving corporation, purchaser, assignee, or transferee. It
shall be a condition of any such merger, sale, assignment, or
transfer that the surviving corporation or the purchaser, assignee,
or transferee shall execute a document agreeing to be bound by the
provisions of this Consent Agreement and Order and shall submit to
the jurisdiction of the CPSC for purposes of enforcement of this
Consent Agreement and Order. In the event of any merger, sale,
assignment, or transfer of substantially all of CED's assets, CED
shall provide written notice to the staff at least sixty (60) days
prior to any such merger, asset sale, assignment, or transfer.
19. The CPSC, the staff, and/or CED may disclose terms of this
Consent Agreement and Order to the public.
20. The staff is entering into this Consent Agreement and Order
upon reliance on CED's representation that CED and Cadet have
executed a settlement agreement dated June 22, 1999 (``the CED/Cadet
Settlement Agreement'') that provides, inter alia: (a) For the
payment by CED to Cadet, subject to the terms of the CED/Cadet
Settlement Agreement, of Six Hundred and Fifty-One Thousand Dollars
($651,000) in satisfaction of CED's pre- and post-bankruptcy
petition accounts receivable debts claimed by Cadet; and (b) for CED
to purchase Two Million Dollars ($2,000,000) worth of products from
Cadet, at market prices, over the next two years following the
effective date of this Consent Agreement and Order, subject to the
terms and conditions of the CED/Cadet Settlement Agreement.
21. The CPSC, at its sole discretion and upon reasonable notice
to the staff and CED, may void, suspend, or rescind all, or any
part, of this Consent Agreement and Order if, in CED's letter to the
staff dated March 10, 1999, CED materially and knowingly
misrepresented the dollar amount of the products it purchased from
Cadet from 1989 through 1998, or if CED and Cadet have not executed
the CED/Cadet Settlement Agreement referred to in Paragraph 20 of
this Consent Agreement. In no event shall a default by Cadet under
the CED/Cadet Settlement Agreement or any termination resulting from
a default by Cadet affect the CPSC's and CED's rights and
obligations under this Consent Agreement and Order. Notwithstanding
the provisions of Paragraph 32 of this Consent Agreement, the CPSC
may exercise its rights under this Paragraph 21 within, and not
later than, three (3) years after the date on which the CPSC finally
accepts this Consent Agreement and enters the Order.
22. If any provision of this consent Agreement and Order is held
to be illegal, invalid, or unenforceable under present or future
laws effective during the term of this Consent Agreement and Order,
such provision shall be fully severable. In such event, there shall
be added as part of this consent Agreement and Order a provision as
similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
The effective date of the added provision shall be the date upon
which the prior provision was held to be invalid, illegal, or
unenforceable. the rest of the Consent Agreement and Order shall
remain in full effect, unless the CPSC determines, after providing
CED with notice and a reasonable opportunity to comment, that
severing the provision materially impacts the Corrective Action Plan
or remediation program set forth in this Consent Agreement and
Order. The CPSC determination shall constitute the final agency
decision and shall be subject to judicial review, such review to be
based upon the record of any such CPSC proceeding and according to
law.
23. This Consent Agreement and Order have been negotiated by the
parties. CED is not relying on the advice of the staff, nor anyone
associated with the staff, as to legal, tax, or other consequences
of any kind arising out of this Consent Agreement and Order, and CED
specifically assumes the risk of all legal, tax, and other
consequences.
24. CED acknowledges that this Consent Agreement and Order have
been negotiated between unrelated, sophisticated, and knowledgeable
parties acting in their own self-interest and represented by
counsel, and the provisions of this Consent Agreement and Order
shall not be interpreted or construed against any person or entity
because that person or entity or any of its attorneys or
representatives drafted or participated in drafting this Consent
Agreement and Order.
25. The provisions of this Consent Agreement and Order shall be
interpreted in a reasonable manner to effect its purpose to remedy
the alleged hazard that the Heaters pose and to resolve potential
claims by the CPSC against CED with respect to the
[[Page 43992]]
Heaters. In the event of a dispute between the parties arising under
this Consent Agreement and Order, the parties agree to submit the
dispute to non-binding arbitration by a panel of three arbitrators,
according to the rules of the American Arbitration Association then
in effect. The CPSC and CED shall each have the right to select one
arbitrator, and shall jointly select the third arbitrator. If the
CPSC and CED are unable to agree on the selection of the third
arbitrator, that arbitrator shall be selected by the American
Arbitration Association. Either party may institute an action,
following the non-binding decision rendered by the arbitration
panel, in the United States District Court for the District Court
for the District of Columbia. Notwithstanding the foregoing, neither
the arbitrators nor the CPSC shall have authority to resolve dispute
arising under the CED/Cadet Settlement Agreement, including but not
limited to those provisions referred to in Paragraph 20, above, nor
may any rights or obligations arising out of the CED/Cadet
Settlement Agreement be enforced through this Consent Agreement and
Order.
26. The existence of a dispute between the staff and CED over
any provision of this Consent Agreement and Order shall not excuse,
toll, or suspend any obligation or deadline imposed upon CED or the
staff under this Consent Agreement and Order, other than the
specific provisions in dispute.
27. This Consent Agreement and Order shall not be waived,
changed, amended, modified, or otherwise altered, except in writing
executed by the parties and approved by the CPSC.
28. This Consent Agreement and Order contain the entire
agreement, understanding, representation, and interpretation of the
parties herein, and nothing else may be used to vary or contradict
its terms.
29. CED and the staff consent to the entry of the Order attached
hereto.
30. Upon provisional acceptance of this Consent Agreement and
Order by the CPSC, this Consent Agreement and Order shall be placed
on the public record and shall be published in the Federal Register
in accordance with the procedures set forth in 16 CFR 1115.20(b)(4).
If the CPSC does not receive any written request not to accept this
Consent Agreement and Order within fifteen (15) calendar days, this
Consent Agreement and Order shall be deemed finally accepted on the
twentieth (20th) calendar day after the date it is published in the
Federal Register, in accordance with 16 CFR 1115.20(b)(5).
31. Upon final acceptance by the CPSC of this Consent Agreement
and Order, the CPSC shall issue the incorporated Order. This Consent
agreement and Order shall become effective upon service of the
signed Order upon CED.
32. CED's obligations under this Consent Agreement and Order
shall terminate when CED makes the final payment required under
Paragraphs 4 and 5 of the Order.
33. CED makes the monetary payments described in Paragraphs 4
and 5 of the Order solely as restitution to fund the Corrective
Action Plan and thereby to settle claims arising out of its alleged
distribution of the Heaters. CED makes the monetary payment
described in paragraph 20 of this Consent Agreement solely to
satisfy Cadet's claims against CED for pre- and post-bankruptcy
petition accounts receivable debts claimed by Cadet. No payment made
pursuant to or referred to in this Consent Agreement and Order is a
fine or other penalty paid with respect to any violation of any law
or regulation. Payment hereunder does not constitute, nor shall it
be construed or treated as, payment in lieu of a fine or other
penalty, punitive recovery, or forfeiture.
34. Each party shall cooperate fully to implement its obligation
under the terms and conditions of this Consent Agreement and Order.
35. The parties have executed two (2) identical copies of this
Consent Agreement and the two copies shall be treated as one and the
same executed Consent Agreement.
Dated: July 19, 1999.
Howard N. Tarnoff, Trial Attorney,
Magaret H. Plank, Trial Attorney
Eric L. Stone, Director, Legal Division, Alan H. Schoem, Assistant
Executive, Director, Office of Compliance, U.S. Consumer Product
Safety Commission, 4330 East West Highway, Bethesda, MD 20814,
Telephone: (301) 504-0626
Dated July 19, 1999.
Blake A. Biles, Esq., Jamellah L. Braddock, Esq., Arnold & Porter,
555 Twelfth Street, NW, Washington, DC 20004-1206, Telephone: (202)
942-5836
Counsel for Respondent, Consolidated Electrical Distributors, Inc.
H. Dean Bursch, President & Chief Executive Officer, Consolidated
Electrical Distributors, Inc.
Order
Upon Consideration of the Consent Agreement entered into between
Respondent Consolidated Electrical Distributors, Inc. (``CED'') and
the staff of the Consumer Product Safety Commission (``the staff'')
(collectively ``the parties''); and
The Consumer Product Safety Commission (``CPSC'' or ``the
Commission'') having jurisdiction over the subject matter and CED;
It is hereby ordered that:
1. The Consent Agreement between CED and the staff is
incorporated herein by reference and accepted, and CED shall comply
with all obligations of the Consent Agreement and this Order.
2. Based on the Consent Agreement, the CPSC finds that the
Consent Agreement and this Order are necessary to protect the public
from the alleged hazard presented by Cadet's series FW, FX, LX, TK,
ZA, and Z in-wall electric heaters, and the functionally identical
heaters manufactured and distributed by Cadet under the Encore brand
name, including series RX, RLX, RK, RA, and ZC. These heaters shall
hereinafter be collectively referred to as ``the Heaters.''
3. CED shall immediately cease and desist offering for sale and/
or distributing in commerce any of the Heaters, whether by itself or
through its subsidiaries, affiliates, CED-owned distribution
centers, or any other persons or entities over whom CED has control.
4. CED shall pay into a staff-designated, interest-bearing
escrow account (``the escrow account''), the sum of ONE MILLION FIVE
HUNDRED THOUSAND DOLLARS ($1,500,000), according to the following
schedule:
a. TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000) upon the
CPSC's final acceptance of this Order.
b. FIVE HUNDRED THOUSAND DOLLARS ($500,000) on or before the
later of August 1, 1999, or upon the CPSC's final acceptance of this
Order.
c. FIVE HUNDRED THOUSAND DOLLARS ($500,000) on or before the
later of October 1, 1999, or upon the CPSC's final acceptance of
this Order.
d. TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000) on or
before the later of December 1, 1999, or upon the CPSC's final
acceptance of this Order.
5. CED shall pay into the escrow account a contingent
contribution of an additional FIVE DOLLARS ($5.00) for every heater
in excess of two hundred and fifty thousand (250,000) heaters
ordered by consumers under the Consent Agreement and Order between
Cadet and the staff executed by Cadet on June 17,1999 and by the
staff on June 18, 1999 (the ``Cadet Consent Agreement and Order'');
provided, CED's contingent contribution shall be capped at FIVE
HUNDRED THOUSAND DOLLARS ($500,000), and in no event shall CED be
required to make more than one contingent contribution payment. CED
shall pay its contingent contribution within fifteen (15) days of
CED's receipt of written notice from the staff either: (a) That
consumers have ordered at least 350,000 total replacement heaters
under the Cadet Consent Agreement and Order; or (b) specifying the
number of replacement heaters in excess of 250,000 ordered by
consumers within twenty-four (24) months after the Effective Date of
the Cadet Consent Agreement and Order.
6. The monetary payments referred to in Paragraphs 4 and 5,
above, may be distributed by the CPSC to offset expenses directly
related to Cadet's CPSC-approved Corrective Action Plan.
7. In addition to any penalty it may incur pursuant to Paragraph
14 of the Consent Agreement, if CED fails to make timely
contributions to the escrow account, as required by Paragraphs 4 and
5 of this Order, CED shall be liable for additional contributions to
the escrow account. Such additional contributions shall include the
following:
a. Interest at the percentage rate established by the Department
of the Treasury pursuant to 31 U.S.C. 3717, for any period after the
due date; and
b. A five percent (5%) per month penalty charge if the deposit
is not made within thirty (30) days after the due date.
Provisionally accepted and Provisional Order issued on the 5th day
of August, 1999.
By order of the Commission.
Sadye E. Dunn,
Secretary, Consumer Product Safety Commission.
[FR Doc. 99-20803 Filed 8-11-99; 8:45 am]
BILLING CODE 6355-01-M