Settlement agreements: Royal Sovereign Corp.,

[Federal Register: August 9, 2000 (Volume 65, Number 154)]

[Notices]

[Page 48680-48682]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr09au00-42]

CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 00-C0011]

In the Matter of Royal Sovereign Corp., a Corporation; Settlement Agreement and Order

1. This Settlement Agreement and Order between Royal Sovereign Corporation (``Royal Sovereign''), a New Jersey corporation, and the staff of the United States Consumer Product Safety Commission (``the CPSC''), pursuant to 16 CFR 1118.20 of the Commission's Procedures for Investigations, Inspections, and Inquiries under the Consumer Product Safety Act (``CPSA''), reflects a compromise resolution of the matter described herein, entered without a hearing or determination of issues of law and fact.

   1. The Parties

2. The staff is the staff of the United States Consumer Product Safety Commission, an independent federal regulatory agency responsible for the enforcement of the Consumer Product Safety Act. 15 U.S.C. 2051- 2084.

3. Royal Sovereign is a corporation organized and existing under the laws of the State of New Jersey. Its principal corporate offices are located at 100 West Sheffield Ave., Englewood, NJ 07631. Royal Sovereign is an importer and distributor of small electronic appliances, including portable ceramic heaters.

   2. Staff Allegations

4. Section 15(b) of the CPSA, 15 U.S.C. 2064(b) requires a manufacturer of a consumer product who, inter alia, obtains information that reasonably supports the conclusion that the product contains a defect which could create a substantial product hazard or creates an unreasonable risk of serious injury or death, to immediately inform the Commission of the defect or risk.

5. Between 1992 and 1996, Royal Sovereign imported and distributed within the United States approximately 39,300 model RST1200 oscillating ceramic portable heaters (``RST 1200 heaters''). The portable heaters are ``consumer products'' and Royal Sovereign is a ``distributor'' of ``consumer products'' that are ``distributed in commerce'' as those terms are defined in sections 3(a)(1), (4), (11) of the CPSA, 15 U.S.C. 2052(a)(1), (4), (11).

6. The RST 1200 heaters are defective because the mechanism that rotates the heater side-to-side can wear through the insulation of electrical wiring inside the heater's base. In addition, some of the connections between the electrical wires and other components inside the heater are faulty. Either of these conditions can cause a fire.

7. Between 1994 and 1997, Royal Sovereign received at least thirteen reports of fires involving RST 1200 heaters. The fires resulted in property damage claims in excess of $70,000.

8. On October 24, 1995, CPSC field investigator William Robinson inspected the facilities of Royal Sovereign, and interviewed firm officials, seeking information about a fire involving an RST 1200 heater that had been reported to the Commission by the consumer. Mr. Robinson shared the staff's engineering evaluation of the unit involved in the fire, which concluded that faulty crimp connections may have led to arcing and overheating within the unit that caused ignition of the plastic housing. Firm officials informed Mr. Robinson at that time that they believed the RST 1200 heater involved in the fire had been tampered with, and that the faulty crimps were not of Royal Sovereign's manufacture.

9. Royal Sovereign also informed Mr. Robinson on October 24, 1995, that Royal Sovereign had received reports of two additional fires involving RST 1200 heaters. Firm officials stated that one of those fires resulted from the heater being placed too close to combustibles, and that they believed the other fire had been deliberately set. Mr. Robinson was told that the other complaints the firm had received concerning the RST 1200 related to mechanical failures or product dissatisfaction.

10. At the conclusion of his inspection, Mr. Robinson left with Royal Sovereign copies of the CPSC statutes and regulations setting forth a distributor's obligations to report potential safety hazards to the Commission.

11. In 1996, Royal Sovereign undertook an ``upgrade'' program, pursuant to which it contacted those consumers of RST 1200 heaters from whom the firm had received warranty cards and informed them that they could return their heaters for ``reconfiguration to 1996 standards.'' The ``upgrade'' involved opening the units to evaluate the crimp connections and the installation of a sleeve over the power cord, which entered the unit in

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    such a way as to rub up against an internal metal disc that provided the oscillating motion for the unit. The addition of the protective sleeve guarded against abrasion of the cord. Abrasion of the cord could result in the exposure of current-carrying wires, which, in turn, could result in arcing and fire. Royal Sovereign did not notify the staff to ifs upgrade program.

12. Between October 1995 and April 1997, Royal Sovereign became aware of ten additional fires involving RST 1200 heaters.

13. Royal Sovereign did not report the additional incidents of fire involving RST 1200 heaters to the Commission.

14. In October 1997, the staff executed an administrative search warrant on the facilities of Royal Sovereign and recovered several burned units of RST 1200 heaters, as well as a number of additional returned units exhibiting indicia of fire. The staff also collected new samples of RST 1200 heaters for evaluation. In addition, the staff collected documentation of fire incidents involving RST 1200 heaters, including insurance claim documentation, internal tracking records, and correspondence with consumers. Finally, the staff collected over 100 consumer complaints noting incidents of sparking, smoking, or flaming RST 1200 heaters.

15. The staff's evaluation of the returned units, as well as the new samples, indicated that the units utilized crimp connections similar to those identified as potentially hazardous by the staff in 1995. The staff also noted evidence of abrasion of the power cords in the burned units.

16. Although Royal Sovereign had obtained sufficient information to reasonably support the conclusion that the RST 1200 heaters contained a defect which could create a substantial product hazard, or created an unreasonable risk of serious injury or death, it failed to report such information to the Commission, as required by section 15(b) of the CPSA. This is a violation of section 19(a)(4) of the CPSA, 15 U.S.C. 2068(a)(4).

17. Royal Sovereign's failure to report to the Commission, as required by section 15(b) of the CSA, was committed ``knowingly,'' as that term is defined in section 20(d) of the CPSA, and Respondent is subject to civil penalties under section 20 of the CPSA.

    3. Response of Royal Sovereign

18. Royal Sovereign denies it violated the CPSA. Royal Sovereign also denies that the RST 1200 heaters contain a defect which could create a substantial product hazard, or create an unreasonable risk of injury or death. Royal Sovereign also denies that the RST 1200 heaters caused any of the fires referred to in this document, or could cause a fire. Royal Sovereign also denies that it violated the reporting requirements of the CPSA.

    4. Agreement of the Parties

19. The Commission has jurisdiction over this matter under the CPSA, 15 U.S.C. 2051-2084.

20. Royal Sovereign agrees to pay to the Commission a civil penalty in the amount of $20,000, to be paid in four equal installments of $5000. The first payment shall become due immediately upon the CPSC's final acceptance of the attached Order. Subsequent payments shall be made thirty (30), sixty (60), and ninety (90) days after that date.

21. Respondent knowingly, voluntarily and completely waives any rights it my have (1) to an administrative or judicial hearing, (2) to judicial review or other challenge or contest of the validity of the Commission's Order, (3) to a determination by the Commission as to whether Respondent failed to comply with section 15(b) of the CPSA, as alleged, (4) to a statement of findings of fact and conclusions of law, and (5) to any claims under the Equal Access to Justice Act.

22. This Settlement Agreement and Order shall not be deemed or construed as an admission of liability or wrongdoing by Royal Sovereign or as evidence: (a) Of any violation of law or regulation by Royal Sovereign; (b) of other wrongdoing by Royal Sovereign; (c) that RST 1200 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 Royal Sovereign or with respect to RST 1200 heaters.

23. Upon provisional acceptance of this Settlement Agreement and Order by the Commission, this Settlement 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 1118.20(e). If the Commission does not receive any written request not to accept the Settlement Agreement and Order within 15 days, the Settlement Agreement and Order shall be deemed finally accepted on the 16th day after the date it is published in the Federal Register, in accordance with 16 CFR 1118.20(f).

24. This Settlement Agreement and Order becomes effective upon its final acceptance by the Commission and service upon Respondent.

25. The Commission may publicize the terms of the Settlement Agreement and Order.

26. The provisions of this Settlement Agreement and Order shall apply to Respondent, its successors and assigns, agents, representatives, and employees, directly or through any corporation, subsidiary, division, or other business entity, or through any agency, device or instrumentality.

27. Royal Sovereign agrees to immediately inform the Commission if it learns of any additional incidents involving the RST 1200 heaters, or any additional information regarding the alleged defect and hazard identified in paragraph six, herein.

28. Nothing in this Settlement Agreement and Order shall be construed to preclude the Commission from taking such other and further actions as the Commission deems necessary to protect the public health and safety and to comply with the CPSA.

29. This Settlement Agreement may be used in interpreting the Order. Agreements, understandings, representations, or interpretations made outside of this Settlement Agreement and Order may not be used to vary or contradict its terms.

    Dated: May 16, 2000. Ta K. Lin, Royal Sovereign Corporation.

    Dated: May 10, 2000. Alan Schoem, Assistant Executive Director, Office of Compliance. Eric Stone, Director, Legal Division, Office of Compliance. Margaret H. Plank, Attorney, Legal Division, Office of Compliance.

    Order

    Upon consideration of the Settlement Agreement entered into between Royal Sovereign Corporation, a corporation, and the staff of the U.S. Consumer Product Safety Commission; and the Commission having jurisdiction over the subject matter and Royal Sovereign Corporation, 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, Royal Sovereign Corporation shall pay the Commission a civil penalty in the amount of TWENTY THOUSAND AND 00/100 dollars ($20,000). The penalty shall be paid in four equal installments of FIVE

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    THOUSAND AND 00/100 dollars ($5000). The first payment shall be due within ten (10) days after service of this Final Order upon Royal Sovereign Corporation. Subsequent payments shall be due thirty (30), sixty (60), and ninety (90) days thereafter.

    In the event that Royal Sovereign Corporation fails to make a payment in accordance with the terms of this Order, or makes a payment that is at least five days late, the outstanding balance of the civil penalty shall become due and payable within five days, and the interest on the outstanding balance shall accrue and be paid at the federal legal rate of interest under the provisions of 28 U.S.C. 1961(a) and (b).

    Provisionally accepted and Provisional Order issued on the 3rd day of August, 2000.

    By Order of the Commission. Sadye E. Dunn, Secretary, U.S. Consumer Product Safety Commission.

    [FR Doc. 00-20008Filed8-8-00; 8:45 am]

    BILLING CODE 6355-01-M