Hunton Retail Law Resource

April was an historic month for the CPSC. The agency approved a $27.25 million civil penalty—the largest in CPSC history. The significance of this record amount cannot be overstated. The previous record was held by a $15.45 million civil penalty approved in March of 2016. In fact, except for in 2016, the CPSC has never approved civil penalties that totaled $27.25 million in each of the last ten calendar years. Now, it is has done so in 2018 with just one civil penalty.

This massive civil penalty stems from a manufacturer’s alleged failure to immediately report defects in two types of recreational off-road vehicles (“ROVs”). For the first ROV type, the manufacturer only reported the alleged defect after receiving reports of 150 fires and 11 burn injuries, including the death of a passenger and a 10-acre land fire. For the second ROV type, the manufacturer issued a recall for one model but only reported the alleged defect in a later model after receiving reports of five fires. As part of the settlement, the manufacturer further agreed to maintain an enhanced compliance program and a related system of internal controls and procedures designed to ensure timely reporting in the future. The settlement agreement also included an unusual release provision by CPSC standards: the agency agreed not to seek further civil penalties from the manufacturer for any late reporting claims covering ROVs it reported by June 29, 2017.

Although Acting Chairman Ann Marie Buerkle has voiced her opposition to large civil penalties under the “vague” defect reporting requirement, the CPSC unanimously approved this civil penalty. Buerkle even issued the CPSC statement, calling the recall and penalty agreement “the culmination of many years of hard work between [the manufacturer] and CPSC staff.” Given those years of work and Buerkle’s historic reticence related to penalties, it is hard to tell if the penalty size was more tied to the specific circumstances or to the 2018 Congressional action to increase the CPSC’s civil penalty authority. Now, the CPSC can seek $100,000 per violation (up from $8,000) with a maximum of $15 million (up from $1.85 million) per product adjusted for inflation.

Sadly, the unfavorable news for the manufacturer did not stop at the civil penalty announcement. In conjunction with the settlement, the manufacturer recalled another ROV model for similar fire hazards. Roughly two weeks later, the manufacturer issued two more recalls for ROV models with defects unrelated to fire hazards.

Only four months into 2018, the CPSC has imposed three civil penalties, totaling $33.75 million. At this pace, calendar year 2018 will break the previous record of $37.3 million total in calendar year 2016.

Total Recalls: 17

Hazards: Fire/Burn/Shock (7); Injury (3); Laceration (2); Crash (2); Fall (1); Choke (1); Violation of Lead Paint Standard (1)

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