Last Friday, the CPSC announced that it had reached a settlement agreement with Cinmar LLC, resolving allegations that the company knowingly failed to report a defect involving its Frontgate foldaway step ladders. Under the terms of the agreement, Cinmar must pay a $3.1 million civil penalty – the highest in recent years for a single product – and implement a comprehensive compliance program and system of internal controls.
According to Commission staff, Cinmar received reports of unexpected step breakage, including reports of injuries, shortly after sales began in November 2005. The company implemented design changes and paid out injury claims until July 2010, when it finally filed its full Section 15(b) report. CPSC staff charges that Cinmar had sufficient information to support the conclusion that the ladders created a substantial product hazard or unreasonable risk of serious injury or death by September 28, 2007, by which point it had received more than 600 returns as a result of breakage and been notified of at least one personal injury lawsuit. When the company filed its Full Report almost three years later, it allegedly had received notice of at least two dozen injuries, two of which required surgery and hospitalization, and over 1,200 consumers had returned their ladders.
In addition to the civil penalty, Cinmar is required to implement and maintain a formal compliance program, as well as maintain and enforce a system of internal controls and procedures. Despite the joint statement issued by Chairman Tenenbaum and Commissioner Adler explaining that the CPSC would only require a compliance program and internal controls when a company has not voluntarily adopted them, indicating that these requirements would not be the standard for every civil penalty agreement, this is the fifth consecutive agreement imposing such requirements.