On November 20, 2016, a Wisconsin federal district court ruled in favor of the Government and held that Spectrum Brands Inc. (“Spectrum”) failed to timely report defective coffee pots to the Consumer Product Safety Commission (“Commission”).
The case, filed in June 2015, stems from a complaint filed by the U.S. Department of Justice on behalf of the Commission against Spectrum alleging that the company and its former subsidiary, Applica Consumer Products, failed to timely report a hazardous defect involving handles that suddenly detach from coffee pots, resulting in burns to consumers. The suit alleged that approximately 1600 reports were filed by consumers about the detaching handles from early 2009 through April 2012, before Applica notified the Commission about the defect and agreed to a recall. The complaint charged that the companies knowingly violated the reporting requirements of the Consumer Product Safety Act (“CPSA”) and sought civil penalties and permanent injunctive relief. The complaint also alleged that, in addition to failing to notify the Commission immediately, a small number of the defective coffeemakers were still distributed to retailers after announcement of the recall in June 2012.
In rejecting Spectrum’s procedural and substantive arguments, the court held the Commission’s claims were not time barred, the CPSA’s reporting requirements are not unconstitutionally vague, and the Government’s imposition of a civil penalty pursuant to the CPSA was not in violation of Spectrum’s statutory or constitutional due process rights.
The Government and Spectrum will next litigate the parameters of the civil penalty to be imposed. The decision may have future ramifications in the product safety industry, particularly as it relates to the Commission’s reporting requirement and enforcement authority. Companies cannot afford to wait to report until a product defect causes a serious injury, but rather must report when the company first appreciates that a product may contain a defect that could injure consumers.