[Federal Register Volume 65, Number 51 (Wednesday, March 15, 2000)]
[Notices]
[Pages 13949-13952]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6280]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 00-C0007]


Tacoma Electric, Provisional Acceptance of a Settlement Agreement 
and Order

AGENCY: Consumer Product Safety Commission.

ACTION: Notice.

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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 1115.20(4). 
Published below is a provisionally-accepted Settlement Agreement with 
Tacoma Electric Supply, Inc., containing monetary payments totalling 
between $205,000 and $375,000.

DATES: Any interested person may ask the Commission not to accept this 
agreement or otherwise comments on its contents by filing a written 
request with the Office of the Secretary by March 30, 2000.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comment to the Comment 00-C0007, Office of the 
Secretary, Consumer Product Safety Commission, Washington, DC 20207.

FOR FURTHER INFORMATION CONTACT: Margaret H. Plank, Trial Attorney, 
Office of Compliance and Enforcement, Consumer Product Safety 
Commission, Washington, DC 20207; telephone (301) 504-0626, 1450.

SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears 
below.

    Dated: March 9, 2000.
Sadye E. Dunn,
Secretary.

Consent Agreement

    This Consent Agreement is made by and between the staff of the 
Consumer Product Safety Commission, and Tacoma Electric Supply, Inc. 
(``Tacoma''), a domestic corporation, to settle the staff's allegations 
that Tacoma distributed in commerce certain allegedly defective in-wall 
electric heaters manufactured by Cadet Manufacturing Company 
(``Cadet''), a domestic corporation, with its principal place of 
business located at 2500 West Fourth Plain Boulevard, Vancouver, 
Washington 98660.

Parties

    1. The ``staff'' is the staff of the Consumer Product Safety 
Commission (``the CPSC'' or ``the Commission''), an independent 
regulatory agency of the United States of America, established by 
Congress pursuant to Section 4 of the Consumer Product Safety Act 
(``CPSA''), 15 U.S.C. 2053, as amended.
    2. Respondent Tacoma is a corporation organized and existing under 
the laws of the State of Washington, with its principal place of 
business located at 1311 South Tacoma Way, Tacoma, WA 98409. Tacoma is 
a distributor of electrical materials and products.

Subject Matter

    3. Since approximately 1978, Cadet has allegedly manufactured, sold 
and/or distributed in commerce in-wall electric heaters for use in 
homes and residences under the brand names ``Cadet'' and ``Encore.'' 
These include all models and variants within each model of the series 
FW (including models FW-051, FW-101, FW-122, FW-202, and FW-751), 
manufactured between 1978 and 1987, series FX (including models FX-051, 
FX-052, FX-071, FX-072, FX-101, FX-102, FX-122, FX-151, FX-152, FX-202, 
and FX-242), manufactured between

[[Page 13950]]

1985 and 1994; series LX (including models LX-242, LX-302, LX-402, and 
LX-482), manufactured between 1985 and 1994; series TK (including 
models TK-051, TK-071, TK-072, TK-101, TK-102, TK-151, and TK-152), 
manufactured between 1984 and 1998; series ZA (including models ZA-051, 
ZA-052, ZA-071, ZA-072, ZA-101, ZA-102, ZA-122, ZA-151, ZA-152, ZA-202, 
and ZA-242), manufactured between 1985 and 1994; series Z (including 
models Z-072, Z-101, Z-102, Z-151, Z-152, Z-202, and Z-208), 
manufactured between 1993 and 1999; and all series and models of the 
same or functionally identical heaters manufactured and distributed by 
Cadet under the Encore brand name, including series RX (including 
models RX-072, RX-101, RX-102, RX-151, RX-152, RX-202, and RX-242), 
manufactured between 1985 and 1994; series RLX (including models RLX-
302, RLX-402, and RLX-482) manufactured between 1985 and 1994; series 
RK (including models RK-101 and RK-102), manufactured between 1984 and 
1998; series RA (including models RA-101, RA-102, RA-151, RA-152, and 
RA-202), manufactured between 1985 and 1994, and series ZC (including 
models ZC-072, ZC-101, ZC-102, ZC-151, ZC-152, ZC-202, and ZC-208) 
manufacture between 1993 and 1999. For each of these heaters, the 
variants signified by the suffix T (with thermostat), W (white color), 
and TW (with thermostat and white color) found after the model number 
are included. All the heaters and variants referred to in this 
paragraph shall hereinafter be collectively referred to as ``the 
Heaters.'' The Heaters were sold and/or distributed to consumers 
principally in the States of California, Idaho, Montana, Oregon, and 
Washington. Since approximately 1982, Tacoma has allegedly sold and/or 
distributed certain of the Heaters in commerce.
    4. On January 14, 1999, the staff filed an Administrative Complaint 
(''Complaint'') against Cadet, seeking a determination that certain of 
the Heaters present a substantial product hazard within the meaning of 
Section 15(a)(2) of the CPSA, 15 U.S.C. 2064(a)(2), and public notice 
and a recall of certain of the Heaters pursuant to Sections 15(c) and 
(d) of the CPSA, 15 U.S.C. 2064(c) and (d). The Complaint alleged that 
certain of the Heaters are defective and present a substantial product 
hazard within the meaning of Section 15(a)(2) of the CPSA, 15 U.S.C. 
2064(a)(2), because their design and/or manufacture causes them to 
overheat, fail, and catch fire, and/or allows lint, dirt, or debris to 
build up within the heaters and catch fire. The Complaint also alleged 
that the design of certain of the Heaters can cause the Heaters to spew 
flames and/or burning or molten particles, or eject sparks into the 
living space of a home or residence, or energize the Heaters creating a 
risk of electric shock. On July 30, 1999, the CPSC approved a Consent 
Agreement and Order (``the Cadet Order'') between the Staff and Cadet 
which, inter alia, required Cadet to undertake a remediation program 
for notification to consumers and for the replacement of the Heaters 
(``the Cadet Corrective Action Plan'' or ``the Plan''), upon final 
approval of the Plan by the United States Bankruptcy Court for the 
Western District of Washington at Tacoma (the date of final approval 
being referred to herein as the ``Effective Date'' of the Cadet Order).

Agreement of the Parties

    5. It is the express purpose of the parties entering this Consent 
Agreement to protect the public safety by assisting Cadet's recall and 
replacement of the Heaters.
    6. Fulfillment of the terms of this Consent Agreement and the 
attached Order (hereinafter ``Order'' or ``the Order''), which is 
hereby incorporated by reference, shall resolve all potential 
obligations of Tacoma (and each of Tacoma's predecessors, successors, 
assigns, parents, subsidiaries, affiliated entities, agents, 
representatives, attorneys, employees, officers, directors, 
stockholders, and principals) (collectively ``the Tacoma Releasees'') 
under Sections 15(c) and (d) of the CPSA, 15 U.S.C. 2064(c) and (d), to 
give public notice of the alleged hazard presented by the Heaters, and 
to repair, replace, or refund the purchase price of the Heaters. 
Fulfillment of the terms of this Consent Agreement and Order shall also 
resolve all potential obligations and liabilities of the Tacoma 
Releasees for all other claims and causes of action which could have 
been alleged by the CPSC against the Tacoma Releasees relating to the 
Heaters, based upon information known to the CPSC, or otherwise in the 
CPSC's possession, at the time the CPSC staff signs this Consent 
Agreement. Nothing in this Paragraph 6 is intended to limit the CPSC's 
rights under Paragraph 20 of this Consent Agreement.
    7. The staff believes that this Consent Agreement and Order is an 
equitable resolution of consumer claims against Tacoma for replacement 
heaters, and the staff has concluded that the Cadet Corrective Action 
Plan, and Tacoma's participation in that Plan, will provide an 
effective, fair, reasonable and adequate remedy for consumers 
throughout the United States who own or are otherwise exposed to the 
Heaters by notifying consumers of the alleged hazard and providing 
replacement heaters to them, and that this Agreement is, therefore, in 
the best interests of consumers.
    8. This Consent Agreement and Order shall not be deemed or 
construed as an admission by Tacoma or as evidence: (a) Of any 
violation of law or regulation by Tacoma; (b) of other wrongdoing by 
Tacoma; (c) that the Heaters are defective, create a substantial 
product hazard, or are unreasonably dangerous; or (d) of the truth of 
any claims or other matters alleged or otherwise stated by the CPSC or 
any other person either against Tacoma or with respect to the Heaters.
    9. The Heaters are ``consumer products'' within the meaning of 
Section 3(a)(1) of the CPSA, 15 U.S.C.. 2052(a)(1).
    10. Tacoma is a ``distributor'' of ``consumer product[s],'' which 
are ``distributed in commerce,'' as those terms are defined in Sections 
3(a)(1), (5), and (11) of the CPSA, 15 U.S.C. 2052(a)(1), (5), and 
(11).
    11. The CPSC has jurisdiction over Tacoma and the Heaters under 
Sections 3(a)(1), (5), and (11) and Section 15 of the CPSA, 15 U.S.C. 
2052(a)(1), (5), and (11) and 2064.
    12. For purposes of this settlement only, Tacoma agrees not to 
contest the staff's allegation, which Tacoma denies, that the Heaters 
contain a ``defect which creates a substantial product hazard,'' as 
those terms are defined in Section 15(a) of the CPSA, 15 U.S.C. 
2064(a).
    13. Upon final acceptance by the CPSC of this Consent Agreement and 
Order, Tacoma knowingly, voluntarily, and completely waives and 
relinquishes any past, present, and/or future right or rights in this 
matter: (a) To the issuance of a proposed complaint in accordance with 
16 CFR 1115.20(6), to an administrative or judicial hearing, and to all 
further procedural steps--including findings of fact and conclusions of 
law--to determine whether the Heaters contain a defect which creates a 
substantial product hazard within the meaning of Section 15 of the 
CPSA; (b) to seek judicial review or otherwise challenge or contest the 
validity of this Consent Agreement and Order as issued and entered; (c) 
to seek judicial review of this or any past orders, findings, and/or 
determinations of the CPSC in this matter, except as set forth in 
Paragraphs 21 and 24 of this Consent Agreement, and (d) to file any

[[Page 13951]]

claim or to seek any remedy under the Equal Access to Justice Act.
    14. The Order is issued under Sections 15(c) and (d) of the CPSA, 
15 U.S.C. 2064(c) and (d), and a violation of this Consent Agreement 
and Order is a prohibited act within the meaning of Section 19(a)(5) of 
the CPSA, 15 U.S.C. 2068(a)(5), and may subject Tacoma to civil and/or 
criminal penalties under Sections 20 and 21 of the CPSA, 15 U.S.C. 2069 
and 2070.
    15. Tacoma agrees to fulfill all requirements of this Consent 
Agreement and Order.
    16. For all purposes, this Consent Agreement and Order shall 
constitute an enforceable judgment obtained in an action or proceeding 
by a governmental unit to enforce its police and regulatory power. 
Tacoma acknowledges and agrees that this Consent Agreement and Order 
are pursuant to the CPSC's police and regulatory power to remedy the 
alleged risk created by the Heaters, and that, once Tacoma signs the 
Consent Agreement and Order, the Consent Agreement and Order will not 
be subject to an automatic stay in any bankruptcy proceeding involving 
Tacoma.
    17. Tacoma acknowledges that any interested person may bring an 
action pursuant to Section 24 of the CPSA, 15 U.S.C. 2073, in any 
United States District Court in which Tacoma is found or transacts 
business, to enforce the Order and to obtain appropriate injunctive 
relief.
    18. This Consent Agreement and Order shall be binding upon and 
inure to the benefit of the parties hereto and their successors, 
assigns, and any operating bankruptcy trustees or receivers. If, prior 
to the termination of this Consent Agreement and Order, Tacoma merges 
with any other business entity or sells, assigns, or otherwise 
transfers substantially all of its assets, Tacoma shall provide 
reasonable prior notice to the surviving corporation or to the 
purchaser, assignee, or transferee of substantially all of Tacoma's 
assets, of this Consent Agreement and Order, and of its binding effect 
upon said surviving corporation, purchaser, assignee, or transferee. 
The existence of this Consent Agreement and Order and its binding 
effect shall be noted in any agreement between Tacoma and such 
surviving corporation, purchaser, assignee, or transferee. It shall be 
a condition of any such merger, sale, assignment, or transfer that the 
surviving corporation or the purchaser, assignee, or transferee shall 
execute a document agreeing to be bound by the provisions of this 
Consent Agreement and Order and shall submit to the jurisdiction of the 
CPSC for purposes of enforcement of this Consent Agreement and Order. 
In the event of any merger, sale, assignment, or transfer of 
substantially all of Tacoma's assets, Tacoma shall provide written 
notice to the staff at least sixty (60) days prior to any such merger, 
asset sale, assignment, or transfer.
    19. The CPSC, the staff, and/or Tacoma may disclose terms of this 
Consent Agreement and Order to the public.
    20. The CPSC, at its sole discretion and upon reasonable notice to 
the staff and Tacoma, may void, suspend, or rescind this Consent 
Agreement and Order if, in Tacoma's submissions to the staff dated 
March 4, 1999 and June 18, 1999, Tacoma materially misrepresented the 
quantity of Heaters is sold. Notwithstanding the provision of Paragraph 
28 of this Consent Agreement, the CPSC may exercise its rights under 
this Paragraph 20 within, and not later than, three (3) years after the 
date on which the CPSC finally accepts this Consent agreement and 
enters the Order.
    21. If any provisions of this Consent Agreement and Order is held 
to be illegal, invalid, or unenforceable under present or future laws 
effective during the term of this Consent Agreement and Order, such 
provision shall be fully severable. In such event, there shall be added 
as part of this Consent Agreement and Order a provision as similar in 
terms to such illegal, invalid, or unenforceable provision as may be 
possible and be legal, valid, and enforceable. The effective date of 
this added provision shall be the date upon which the prior provision 
was held to be invalid, illegal, or unenforceable. The rest of the 
Consent Agreement and Order shall remain in full effect, unless the 
CPSC determines, after providing Tacoma with notice and a reasonable 
opportunity to comment, that severing the provision materially impacts 
the Cadet Corrective Action Plan. The CPSC determination shall 
constitute the final agency decision and shall be subject to judicial 
review, such review to be based upon the record of any such CPSC 
proceeding and according to law.
    22. This Consent Agreement and Order have been negotiated by the 
parties. Tacoma is not relying on the advice of the staff, nor anyone 
associated with the staff, as to legal, tax, or other consequences of 
any kind arising out of this Consent Agreement and Order, and Tacoma 
specifically assumes the risk of all legal, tax, and other 
consequences.
    23. Tacoma acknowledges that this Consent Agreement and Order have 
been negotiated between unrelated, sophisticated, and knowledgeable 
parties acting in their own self-interest and represented by counsel, 
and the provisions of this Consent Agreement and Order shall not be 
interpreted or construed against any person or entity because that 
person or entity or any of its attorneys or representatives drafted or 
participated in drafting this Consent Agreement and Order.
    24. The provisions of this Consent Agreement and Order shall be 
interpreted in a reasonable manner to effect its purpose to remedy the 
alleged hazard that the Heaters pose and to resolve potential claims by 
the CPSC against Tacoma with respect to the Heaters. In the event of a 
dispute between the parties arising under this Consent Agreement and 
Order, the parties agree to submit the dispute to non-binding 
arbitration by a panel of three arbitrators, according to the rules of 
the American Arbitration Association then in effect. The CPSC and 
Tacoma shall each have the right to select one arbitrator, and shall 
jointly select the third arbitrator. If the CPSC and Tacoma are unable 
to agree on the selection of the third arbitrator, that arbitrator 
shall be selected by the American Arbitrator Association. Either party 
may institute an action arising under this Consent Agreement and order, 
following the non-binding decision rendered by the arbitration panel, 
in the United States District Court for the District of Columbia.
    25. The existence of a dispute between the staff and Tacoma over 
any provision of this Consent Agreement and Order shall not excuse, 
toll, or suspend any obligation of deadline imposed upon Tacoma under 
this Consent Agreement and Order, other than the specific provision in 
dispute.
    26. This Consent Agreement and Order shall not be waived, changed, 
amended, modified, or otherwise altered, except in writing executed by 
the parties and approved by the CPSC.
    27. This Consent Agreement and Order contain the entire agreement, 
understanding, representation, and interpretation of the parties 
herein, and nothing else may be used to vary or contradict its terms.
    28. Tacoma's obligations under this Consent Agreement and Order 
shall terminate when Tacoma makes the final payment required under 
Paragraphs 4 and 5 of the Order.
    29. Tacoma makes the monetary payments described in Paragraphs 4 
and 5 of the Order solely as restitution to fund the Cadet Corrective 
Action Plan and thereby to settle claims arising out of its alleged 
distribution of the Heaters. No payment made pursuant to or referred to 
in this Consent Agreement

[[Page 13952]]

and Order is a fine or other penalty paid with respect to any violation 
of any law or regulation. Payment hereunder does not constitute, nor 
shall it be construed or treated as, payment in lieu of a fine or other 
penalty, punitive recovery, or forfeiture.
    30. Tacoma may request appropriate verification from the staff, 
including record review, of the number of replacement heaters ordered 
from Cadet under the Cadet Corrective Action Plan. Upon receipt of a 
request from Tacoma, the staff shall provide such verification, subject 
to appropriate protective orders preserving the confidentiality of 
business records obtained from Cadet. In the event that such 
verification demonstrates the number of replacement heaters represented 
by the CPSC to Tacoma pursuant to Paragraph 5 of the Order to be 
incorrect, thus rendering Tacoma's payment into the escrow account 
incorrect, the staff shall direct the Escrow Agent to refund the 
overpayment to Tacoma in the amount of $0.85 per heater. A dispute as 
to the proper amount of contingent contribution shall be resolved in 
accordance with Paragraph 24 of this Consent Agreement.
    31. Tacoma and the staff consent to the entry of the Order attached 
hereto.
    32. Upon provisional acceptance of this Consent Agreement and Order 
by the CPSC, this Consent Agreement and Order shall be placed on the 
public record and shall be published in the Federal Register in 
accordance with the procedures set forth in 16 CFR 1115.20(b)(4). If 
the CPSC does not receive any written request not to accept this 
Consent Agreement and Order within fifteen (15) calendar days, this 
Consent Agreement and Order shall be deemed finally accepted on the 
twentieth (20th) calendar day after the date it is published in the 
Federal Register, in accordance with 16 CFR 1115.20(b)(5).
    33. Upon final acceptance by the CPSC of this Consent Agreement and 
Order, the CPSC shall issue the incorporated Order. This Consent 
Agreement and Order shall become effective upon service of the signed 
Order upon Tacoma.
    34. The parties have executed two (2) identical copies of this 
Consent Agreement and the two copies shall be treated as one and the 
same executed Consent Agreement.

    Dated: February 7, 2000. Original fax transmission signed and 
dated February 3, 2000.
Howard N. Tarnoff,
Trial Attorney.
Margaret H. Plank,
Trial Attorney.
Eric L. Stone,
Director, Legal Division.
Alan H. Schoem,
Assistant Executive Director, Office of Compliance, U.S. Consumer 
Product Safety Commission, 4330 East West Highway, Bethesda, MD 20814, 
Telephone: (301) 504-0626, Facsimile: (301) 504-0359.
    Dated: February 2, 2000.
Randy Mauerman,
President, Tacoma Electric Supply, Inc., 1311 South Tacoma Way, Tacoma, 
WA 98409, Telephone: (253) 627-3982, Facsimile: (253) 383-7122.

Order

    Upon consideration of the Consent Agreement entered into between 
Respondent Tacoma Electric Supply, Inc. (``Tacoma'') and the staff of 
the Consumer Product Safety Commission (``the staff``) (Collectively 
``the parties``); and
    The Consumer Product Safety Commission (``the CPSC`` or ``the 
Commission``) having jurisdiction over the subject matter and Tacoma;
    It is hereby ordered that:
    1. The Consent Agreement between Tacoma and the staff is 
incorporated herein by reference and accepted, and Tacoma shall comply 
with all obligations of the Consent Agreement and this Order.
    2. Based on the Consent Agreement, the CPSC finds that the Consent 
Agreement and this Order are necessary to protect the public from the 
alleged hazard presented by Cadet's series FW, FX, LX, TK, ZA, and Z 
in-wall electric heaters, and the functionally identical heaters 
manufactured and distributed by Cadet under the Encore brand name, 
including series RX, RLX, RK, RA, and ZC. These heaters shall 
hereinafter be collectively referred to as ``the Heaters.''
    3. Tacoma shall immediately cease and desist offering for sale and/
or distributing in commerce any of the Heaters, whether by itself or 
through its subsidiaries, affiliates, Tacoma-owned distribution 
centers, or any other persons or entities over whom Tacoma has control.
    4. Tacoma shall pay into an escrow account (Chase Manhattan Trust 
Company, National Association, Account #76609060682) established by the 
staff and Cadet for the purpose of remedying the alleged hazard posed 
by the heaters (``Escrow Account``) the sum of two hundred and five 
thousand dollars ($205,000) upon the CPSC's final acceptance of this 
Order.
    5. Tacoma shall pay into the Escrow Account contingent 
contribution(s) of an additional ($0.85) for every heater in excess of 
two hundred and fifty thousand (250,000) heaters ordered by consumers 
under the Cadet Consent Agreement and Order, which was approved by the 
CPSC on July 30, 1999 (``the Cadet Order''); provided that the sum 
total of all of Tacoma's contingent contribution(s) shall be capped at 
one hundred and seventy thousand dollars ($170,000). Tacoma shall pay 
contingent contributions quarterly within fifteen (15) days of Tacoma's 
receipt of written notice form the staff of the number of replacement 
heaters over 250,000 ordered by consumers during each quarter within 
twenty-four months of the Effective Date of the Cadet Order issued by 
the CPSC on July 30, 1999.
    6. The CPSC may authorize the distribution of the monetary payments 
referred to in Paragraphs 4 and 5 above: (a) To offset expenses 
directly related to Cadet's CPSC-approved Corrective Action Plan; and/
or (b) to otherwise remedy the alleged hazard posed by the Heaters.
    7. In addition to any penalty it may incur pursuant to Paragraph 14 
of the Consent Agreement, if Tacoma fails to make timely contributions 
to the Escrow Account, as required by Paragraphs 4 and 5 of this Order, 
Tacoma shall be liable for additional contributions to the Escrow 
Account. Such additional contributions shall consist of the follows:
    a. Interest at the percentage rate established by the Department of 
the Treasury pursuant to 31 U.S.C. 3717, for any period after the due 
date; and
    b. A five percent (5%) per month penalty charge if the deposit is 
not made within thirty (30) days after the due date.
    In no event shall a failure by Tacoma to make timely contributions 
to the Escrow Account result in an increase in the $170,000 cap on 
total contingent contributions by Tacoma to the Escrow Account.

    Provisionally accepted and Provisional Order issued on the 9th 
day of March, 2000.

    By order of the Commission.
Sadye E. Dunn,
Secretary, Consumer Product Safety Commission.
[FR Doc. 00-6280 Filed 3-14-00; 8:45 am]
BILLING CODE 6355-01-M