[Federal Register Volume 59, Number 157 (Tuesday, August 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19800]


[[Page Unknown]]

[Federal Register: August 16, 1994]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 94-C0013]

 

The Toro Company, Inc., a Corporation; Provisional Acceptance of 
a Settlement Agreement and Order

AGENCY: Consumer Product Safety Commission.

ACTION: Provisional Acceptance of a Settlement Agreement under the 
Consumer Product Safety Act.

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SUMMARY: It is the policy of the Commission to publish settlements 
which it provisionally accepts under the Consumer Product Safety Act in 
the Federal Register in accordance with the terms of 16 CFR Part 
1118.20(e)-(h). Published below is a provisionally-accepted Settlement 
Agreement with The Toro Company, Inc., a corporation.

DATES: Any interested person may ask the Commission not to accept this 
agreement or otherwise comment on its contents by filing a written 
request with the Office of the Secretary by August 31, 1994.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to the Comment 94-C0013, Office of the 
Secretary, Consumer Product Safety Commission, Washington, D.C. 20207.

FOR FURTHER INFORMATION CONTACT:
Michael J. Gidding, Trial Attorney, Office of Compliance and 
Enforcement, Consumer Product Safety Commission, Washington, D.C. 
20207; telephone (301) 504-0626.

SUPPLEMENTARY INFORMATION: The text of the settlement agreement and 
order appears below.

    Dated: August 8, 1994.
Sadye E. Dunn,
Secretary.

Settlement Agreement and Order

    1. This Settlement Agreement and Order, entered into between The 
Toro Company, a corporation (hereinafter ``Toro''), and the staff of 
the Consumer Product Safety Commission (hereinafter ``the staff'') 
is a compromise resolution of the matter described herein, without a 
hearing or determination of issues of law or fact.

I. The Parties

    2. The Toro Company is a corporation organized and existing 
under the laws of the state of Delaware, with its principal 
corporate offices located at 8111 Lyndale Avenue South, Bloomington, 
Minnesota 55420-1196.
    3. The staff of the Consumer Product Safety Commission 
(hereinafter ``the Commission'') are those members of the 
Commission's staff responsible for enforcing the laws administered 
by the Commission. The Commission is an independent federal 
regulatory agency established by Congress pursuant to section 4 of 
the Consumer Product Safety Act (hereinafter, ``the CPSA'' or ``the 
Act''), 15 U.S.C. Sec. 2053.

II. Jurisdiction

    4. On November 7, 1989, Toro acquired Lawn-Boy. Inc, 
(hereinafter ``Lawn-Boy''), a manufacturer and distributor of 
various models of lawn mowers. Lawn-Boy manufactured the lawn mowers 
at issue in this proceeding for sale to consumers for use around 
permanent or temporary households or residences. These lawn mowers 
are ``consumer products'' within the meaning of section 3(a)(1) of 
the CPSA, 15 U.S.C. Sec. 2051(a)(1).
    5. Between approximately October 1, 1987 and August 29, 1989, 
Lawn-Boy manufactured and distributed over 160,000 lawn mowers, 
identified as ``L'' series lawn mowers, for sale to consumers 
throughout the United States. During 1989 and 1990, Lawn-Boy also 
manufactured lawn mowers under the ``M'' series and ``Model 8157'' 
designations, respectively, for sale to consumers throughout the 
United States. Lawn-Boy, therefore, is a ``manufacturer'' of 
consumer products which are ``distributed in Commerce'', as those 
terms are defined in sections 3(a)(4) and (11) of the CPSA, 15 
U.S.C. Sec. 2052(a)(4) and (11).
    6. After its acquisition by Toro, Lawn-Boy operated as a wholly-
owned subsidiary of Toro until July 31, 1992, when its assets and 
liabilities were transferred to Toro. Since its acquisition of Lawn-
Boy, Toro has been responsible for controlling the acts and 
practices of Lawn-Boy, including assuring that Lawn-Boy complied 
with the requirements of section 15(b) of the CPSA, 15 U.S.C. 
Sec. 2064(b), and the regulations issued thereunder, 16 C.F.R. 
Sec. 1115, et seq.

III. The Products

    7. The products at issue in this matter are walk-behind lawn 
mowers.

IV. Staff Allegations Concerning the ``L'' Series, ``M'' Series and 
``Model 8157'' Lawn Mowers and the Failure of Toro To Assure That 
its Subsidiary, Lawn-Boy Complied With the Reporting Requirements 
of Section 15(b) of the CPSA

    8. Section 15(b) of the Consumer Product Safety Act, 15 U.S.C. 
Sec. 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 that the product creates an 
unreasonable risk of serious injury or death to inform the 
Commission immediately of the defect or risk.

The ``L'' Series Lawn Mowers

    9. Between October, 1987 and August, 1989, Lawn-Boy's ``L'' 
series lawn mowers were equipped with gas tanks that were 
susceptible to leakage because of improper bonding of the tank 
halves during a hot-plate welding process. Lawn-Boy learned of the 
leakage problem in 1988 and replaced leaking gas tanks on lawn 
mowers brought in for service through 1990. In early 1989, Lawn-
Boy's fuel tank supplier modified the tank design to improve bonding 
of the gas tank halves. In August 1989, Lawn-Boy authorized its tank 
supplier to build new machinery to improve the hot-welding process 
to correct the leakage problem.
    10. After Toro's acquisition of Lawn-Boy in 1989, Lawn-Boy 
continued to receive complaints about seam leakage on ``L'' series 
mower gas tanks, and Lawn-Boy dealers continued to replace leaking 
tanks on mowers brought in for service. In its capacity as corporate 
parent of its wholly-owned subsidiary, Lawn-Boy, Toro knew or, with 
the exercise of due diligence, should have known that the tanks were 
defective and that the defect could expose consumers to a 
substantial risk of injury from fire.
    11. Despite the pattern of tank seam failures that continued 
after Toro's acquisition of Lawn-Boy, Toro failed to provide any 
information concerning the failures to the Commission until a 
Commission investigator inspected Lawn-Boy in November, 1990. Toro 
did not file an initial report under section 15(b) until March, 
1991.
    12. Toro failed to report information concerning gas tank seam 
failures on ``L'' series mowers to the Commission in a timely manner 
as required by section 15(b) of the CPSA, as amended, 15 U.S.C. 
Sec. 2064(b).

The ``M'' Series Lawn Mowers

    13. During 1989 and 1990, Lawn-Boy manufactured and distributed 
``M'' series lawn mowers that experienced gas tank leakage. The 
method of mounting and attaching the tanks to the mower engines 
resulted in wear on the tanks that caused the tanks to fail and 
leak. Lawn-Boy received complaints of leakage after its acquisition 
by Toro, redesigned the mounting system, and, in 1990, included 
redesigned brackets and tanks in an ``upgrade kit'' to be installed 
by Lawn-Boy distributors and dealers on ``M'' series mowers brought 
in for service.
    14. In its capacity as the corporate parent of its wholly-owned 
subsidiary, Lawn-Boy, Toro knew, or with the exercise of due 
diligence, should have known that the method of mounting the tanks 
caused wear on the tanks and could expose consumers to a substantial 
risk of injury from fire. Despite the pattern of tank failures, Toro 
failed to provide any information concerning the failures to the 
Commission until a Commission investigator inspected Lawn-Boy in 
November, 1990.
    15. Toro failed to report information relating to gas tank 
failures on the ``M'' series lawn mowers to the Commission in a 
timely manner as required by section 15(b) of the CPSA, as amended, 
15 U.S.C. Sec. 2064(b).

The ``Model 8157'' Series Lawn Mowers

    16. In 1987 and 1988, Lawn-Boy manufactured and distributed 
Model 8157 series lawn mowers. In 1989, Lawn-Boy received complaints 
that the gas tanks on these lawn mowers were experiencing gas 
leakage as a result of fractures in the fuel tank nipples. In 1990, 
a revised fuel tank nipple was incorporated in replacement tanks for 
the Model 8157 series.
    17. In its capacity as the corporate parent of its wholly-owned 
subsidiary, Lawn-Boy, Toro knew, or, with the exercise of due 
diligence, should have known that gas tank fuel nipples were 
fracturing and could expose consumers to a substantial risk of 
injury from fire. Despite the pattern of tank failures, Toro failed 
to provide any information concerning the failures to the Commission 
until a Commission investigator inspected Lawn-Boy in November, 
1990.
    18. Toro failed to report information relating to gas tank 
failures on the Model 8157 series lawn mowers to the Commission in a 
timely manner as required by section 15(b) of the CPSA, as amended, 
15 U.S.C. Sec. 2064(b).

V. Response of Toro

    19. Toro denies each and all of the staff allegations with 
respect to the mowers identified in this agreement. Further, Toro 
denies the allegations that the Lawn-Boy ``L'' series lawn mowers 
identified in paragraph 9 of this agreement, the ``M'' series lawn 
mowers identified in paragraph 13, and the ``Model 8157'' series 
lawn mowers identified in paragraph 16 contained defects which 
created or could have created a substantial product hazard within 
the meaning of section 15(a) of the CPSA, 15 U.S.C. 2064(a). Toro 
further denies that any of these lawn mowers created an unreasonable 
risk of death or serious injury. Accordingly, Toro contends that it 
had no obligation to report to the Commission under section 15(b).
    20. Toro contends further that the complaints relating to the 
Model 8157 mowers were as a result of a local manufacturer-
distributor dispute and that no unusual reports of problems were 
received when the same mowers were redistributed to other parts of 
the country.
    21. Toro further asserts that it has received no reports of 
injuries from the use of any of the products enumerated in this 
agreement. Toro makes no admission whatsoever of any fault, 
liability, or statutory violation in the event any person should 
claim injuries resulting from the use of these products.
    22. Toro further contends that, to the extent there were any 
leakage problems with any of these lawn mowers, those problems arose 
prior to Toro's acquisition of Lawn-Boy. Lawn-Boy's prior corporate 
parent, Outboard Marine Corporation, failed to disclose any such 
problem to Toro, despite representing in the agreement with Toro to 
purchase the stock of Lawn-Boy that (1) Lawn-Boy had no liabilities 
or obligations which would be required to be disclosed on a 
Financial Statement prepared in conformity with generally accepted 
accounting principles, (2) Lawn-Boy was not in violation of any 
applicable law, statute, order, rule or regulation, which, if 
violated, would be reasonably likely to have a material adverse 
effect, and (3) since September 30, 1988, no material adverse change 
or event that was reasonably likely to result in a material adverse 
change in the assets, liabilities, financial condition, or business 
of Lawn-Boy had occurred. Toro acted reasonably and with due 
diligence in relying on these representations to conclude that its 
newly acquired subsidiary, Lawn-Boy, was in full compliance with the 
requirements of section 15(b) of the CPSA.

VI. Agreement of the Parties

    23. The parties enter this agreement solely for the purposes of 
settlement. Toro and the staff agree that the Commission has 
jurisdiction in this matter for purposes of entry and enforcement of 
this Settlement Agreement and Order.
    24. Toro agrees to pay the Commission a civil penalty in the 
amount of one hundred and seventy thousand dollars ($170,000) 
payable within twenty (20) days after service of the Final Order. 
This payment is made in settlement of the staff allegations that 
Toro violated the reporting requirements of section 15(b) of the 
CPSA with regard to the lawn mowers described above. In agreeing to 
this settlement, Toro affirms that it does not accept the Commission 
staff allegations as factual, nor does Toro admit to any liability 
in this matter.
    25. Toro further agrees to assist the Commission staff in any 
further investigation of this matter by providing, upon specific 
request and without the issuance of a subpoena duces tecum, such 
testimony and evidence as Toro would otherwise be required to 
produce if such a subpoena issued. Toro reserves the right to 
contest any specific request for information that it believes it 
would not be required to be produced in response to such a subpoena, 
and further reserves the right to assert any claims of 
confidentiality or privilege that would be available in the course 
of a proceeding by the staff to enforce such a subpoena.
    26. The agreement to settle this matter is based on the 
information provided to the Commission staff by Toro as of May 20, 
1994. The Commission reserves the right to seek an additional 
penalty if it acquires information that establishes that, between 
November 7, 1989 and November 28, 1990, Toro or its authorized 
representatives received information from its subsidiary, Lawn-Boy, 
that reasonably supported the conclusion that gas tank seam 
separation and leakage in the ``L'' series mowers (a) constituted a 
defect which could create a substantial product hazard, as that term 
is defined in section 15(a)(2) of the CPSA, 15 U.S.C. 
Sec. 2064(a)(2), or (b) created an unreasonable risk of serious 
injury or death.
    27. Payment of the full amount of the penalty shall settle fully 
the staff's allegations set forth in paragraphs 9 through 18 above, 
subject to the reservation contained in paragraph 26.
    28. For the purposes of section 6(b) of the CPSA, 15 U.S.C. 
Sec. 2055(b), this matter shall be treated as if a complaint had 
issued.
    29. Upon provisional acceptance of this Settlement Agreement and 
Order, the agreement and order shall be placed on the public record 
and shall be published in the Federal Register in accordance with 
the procedure set forth in 16 CFR 1118.20(e). If, within 15 days of 
publication, the Commission has not received any written request not 
to accept the Settlement Agreement and Order, The Settlement 
Agreement and Order will be deemed to be finally accepted on the 
16th day after the date it is published in the Federal Register (16 
CFR 1118.20(f)).
    30. Upon final acceptance of this Settlement Agreement and Order 
by the Commission, Toro knowingly, voluntarily, and completely 
waives any rights it might have: (1) to an administrative or 
judicial hearing with respect to the Commission's claim for a civil 
penalty, (2) to judicial review or other challenge to or contest of 
the validity of the Commission's action with regard to its claim for 
a civil penalty, (3) to a determination by the Commission as to 
whether a violation of section 15(b) of the CPSA, 15 U.S.C. 
Sec. 2064(b), has occurred, and (4) to a statement of findings of 
fact and conclusions of law with regard to the Commission's claim 
for a civil penalty.
    31. The parties further agree that the Commission shall issue 
the incorporated Order under the CPSA, 15 U.S.C. Sec. 2051 et seq,, 
and that a violation of the Order will subject Toro to appropriate 
legal action.
    32. No agreement, understanding, representation, or 
interpretation not contained in this Settlement Agreement may be 
used to vary or contradict its terms.

    Dated: June 13, 1994.

The Toro Company
J. David McIntosh,
Vice President and General Manager Consumer Division
The Consumer Product Safety Commission
David Schmeltzer
Associate Executive Director, Office of Compliance and Enforcement
Eric C. Stone
Director, Division of Administrative Litigation, Office of Compliance 
and Enforcement
Michael J. Gidding
Attorney, Division of Administrative Litigation, Office of Compliance 
and Enforcement

Order

    In the Matter of THE TORO COMPANY, INC., a corporation. CPSC 
Docket No. 94-C0013.
    Upon consideration of the Settlement Agreement entered between 
respondent The Toro Company, a corporation, and the staff of the 
Consumer Product Safety Commission; and the Commission having 
jurisdiction over the subject matter and The Toro Company; and it 
appearing the Settlement Agreement is in the public interest, it is
    Ordered, that the Settlement Agreement be and hereby is accepted, 
as indicated below; and it is
    Further Ordered, that upon final acceptance of the Settlement 
Agreement, The Toro Company shall pay to the order of the Consumer 
Product Safety Commission a civil penalty in the amount of one hundred 
and seventy thousand dollars ($170,000), within twenty (20) days after 
receipt of the Final Order and Decision in this matter.
    Provisionally accepted and Provisional Order issued on the 8th day 
of August, 1994.

    By order of the Commission.
Sadye E. Dunn,
Secretary, Consumer Product Safety Commission.
[FR Doc. 94-19800 Filed 8-15-94; 8:45 am]
BILLING CODE 6355-01-M