The Consumer Product Safety Commission (CPSC) has reached a provisional settlement agreement with Burlington Coat Factory Corp. over allegations that the retailer knowingly sold children’s garments with hood and neck drawstrings after they had been recalled. According to CPSC, its staff notified Burlington that the garments in question did not comply with a May 19, 2006, directive declaring all children’s upper outwear with hood and neck drawstrings “defective” and “a substantial risk” to young children under Federal Hazardous Substances Act section 15(c), 15 U.S.C. § 1274(c). The commission also claimed that Burlington not only “had presumed and actual knowledge that the Garments distributed in commerce posed a strangulation hazard,” but continued to offer these items for sale “on repeated occasions” between September 2008 and January 2012 while failing to inform CPSC as required by the Consumer Product Safety Act (CPSA) sections 15(b)(3) and (4), 15 U.S.C. § 2064(b)(3) and (4).
Burlington, however, apparently denied these allegations, pointing to procedures that it “reasonably believed prevented the purchase of children’s upper outwear products with drawstrings” as well as “an extensive manual audit of all its stores to determine whether it had unknowingly purchased other products subject to the Guidelines.” Although the company has agreed to pay a civil penalty of $1.5 million to settle the matter “without the expense of litigation,” it stressed that the agreement is not “an admission of liability of any kind, whether legal or factual” or a determination by CPSC that Burlington knowingly violated the CPSA. See Law360, July 26, 2012; Federal Register, July 30, 2012.
CPSC has provisionally accepted a $400,000 settlement with the company that makes Rose Art Magnetix Building Block Sets®. According to CPSC’s complaint against Battat Inc., the company distributed 132,000 sets over a four-year period in the United States and issued a recall for certain model numbers in March 2008. CPSC claims that the products, labeled for children ages three and older, “are defective because small, powerful magnets can loosen and fall out of the components with normal use.” Young children can swallow or aspirate these magnets, and, if more than one is swallowed, “the magnets can attract each other and cause intestinal perforations or blockages, which can be fatal.”
CPSC apparently announced a recall of the sets in 2006, after finding that they had been involved in one death, four serious injuries and 34 other incidents. The agency then re-announced the recall a year later when recalling additional toys containing small magnets. The company apparently failed to notify CPSC or customers about the defect and potential hazard until late 2007. The company denies that it knowingly or otherwise violated federal reporting requirements, contending that it complied with all existing CPSC standards in manufacturing the toys and that they were labeled with a choking hazard warning for children younger than 3. It also purportedly believed that “its magnets were better retained in its toys and much less likely to come out even under foreseeable misuse and abuse.” The company also claims that it had not received consumer complaints about its products.
The company denies that it knowingly or otherwise violated federal reporting requirements, contending that it complied with all existing CPSC standards in manufacturing the toys and that they were labeled with a choking hazard warning for children younger than 3.
Thus, the company agreed to settle CPSC’s allegations only because it wished “to avoid the negative publicity associated with CPSC pursuit of a penalty through litigation with its business activities that would likely result from such litigation even if pursued to a successful conclusion.” Battat will have one year in which to pay CPSC the $400,000 civil penalty agreed to and waives any rights to judicial or administrative review. The public had until August 6, 2012, to object to the agreement. See Federal Register, July 20, 2012.