[Federal Register Volume 66, Number 172 (Wednesday, September 5, 2001)]
[Notices]
[Pages 46434-46437]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-22162]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 01-C0011]


HMB Corporation (f/k/a Taylor Electric Supply, Inc.), Respondent 
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(b)(4). Published below is a provisionally-accepted Settlement 
Agreement with HMB Corporation (f/k/a Taylor Electric Supply, Inc.) 
requiring that HMB Corporation pay between $87,500 through $175,000 for 
the remediation of certain in-wall electric heaters it distributed that 
were manufactured by Cadet Manufacturing Company.

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 September 20, 2001.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to the Comment 01-C0011, Office of the 
Secretary, Consumer Product Safety Commission, Washington, DC 20207.

FOR FURTHER INFORMATION CONTACT: Howard N. Tarnoff, Trial Attorney, 
Office of Compliance, Consumer Product Safety Commission, Washington, 
DC 20207; telephone (301) 504-0626, 1382.

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

    Dated: August 29, 2001.
Todd A. Stevenson,
Acting Secretary.

Consent Agreement

    This Consent Agreement is made by and between the staff of the 
Consumer Product Safety Commission, and HMB Corporation (f/k/a Taylor 
Electric Supply, Inc.) ``HMB''), a domestic corporation, to settle the 
staff's allegations that HMB, doing business as Taylor Electric Supply, 
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 HMB is a corporation organized and existing under the 
laws of the State of Oregon. HMB owns and maintains two commercial 
buildings and the property on which they are located at 1709 S.E. 3rd 
Ave., and 240 S.E. Clay Blvd., Portland, Oregon. HMB leases the 
property to Rexel Taylor Corporation, which, through its subsidiary 
Summers Group, Inc., purchased HMB's wholesale electrical distribution 
business in 1997.

Subject Matter

    3. Since approximately 1978, Cadet 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

[[Page 46435]]

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 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 modes 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; series ZC 
(including models ZC-072, ZC-101 ZC-102, ZC-151, ZC-152, ZC-202, and 
ZC-208), manufactured between 1993 and 1999; and series RW, 
manufactured between 1978 and 1981. 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. Between approximately 1982 and 1997, Taylor Electric Supply 
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''). The Plan became 
effective on February 17, 2000. As of April 30, 2001, consumers had 
ordered 332,857 replacement heaters under the Cadet Corrective Action 
Plan.

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 HMB (and each of HMB's successors, assigns, parents, 
subsidiaries, affiliated entities, agents, representatives, attorneys, 
employees, officers, directors, stockholders, and principals) 
(collectively ``the HMB 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 HMB Releasees for all other claims 
and causes of action which could have been alleged by the CPSC against 
the HMB 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 HMB for replacement 
heaters, and the staff has concluded that the Cadet Corrective Action 
Plan, and HMB'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 HMB or as evidence: (a) Of any violation 
of law or regulation by HMB; (b) of other wrongdoing by HMB; (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 HMB 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. HMB (f/k/a Taylor Electric Supply) was a ``distributor'' of 
``consumer product[s],'' which were ``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 HMB 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 Sec. 2064.
    12. For purposes of this settlement only, HMB agrees not to contest 
the staff's allegation, which HMB 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, HMB 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

[[Page 46436]]

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 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 9d), 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 HMB to civil and/or 
criminal penalties under sections 20 and 21 of the CPSA, 15 U.S.C. 2069 
and 2070.
    15. HMB 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 ana ction or proceeding 
by a governmental unit to enforce its police and regulatory power. HMB 
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 HMB signs the 
Consent Agreement and Order, the Consent Agreement and Order will not 
be subject to an automatic stay in any bankruptcy proceeding involving 
HMB.
    17. HMB 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 HMB 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, HMB merges with 
any other business entity or sells, assigns, or otherwise transfers 
substantially all of its assets. HMB shall provide reasonable prior 
notice to the surviving corporation or to the purchaser, assignee, or 
transferee of substantially all of HMB'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 HMB and such surviving corporation, 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 HMB's assets, HMB 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 HMB may disclose terms of this 
Consent Agreement and Order to the public.
    20. If any provision 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 
the 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 HMB 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.
    21. This Consent Agreement and Order have been negotiated by the 
parties. HMB 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 HMB 
specifically assumes the risk of all legal, tax, and other 
consequences.
    22. HMB 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.
    23. 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 HMB with respect to the Heaters.
    24. The existence of a dispute between the staff and HMB over any 
provision of this Consent Agreement and Order shall not excuse, toll, 
or suspend any obligation or deadline imposed upon HMB under this 
Consent Agreement and Order, other than the specific provision in 
dispute.
    25. 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.
    26. 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.
    27. HMB's obligations under this Consent Agreement and Order shall 
terminate when HMB makes the final payment required under Paragraphs 3 
and 4 of the Order.
    28. HMB makes the monetary payments described in Paragraphs 3 and 4 
of the Order solely as restitution to find 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 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.
    29. HMB 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 HMB, 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 HMB pursuant to Paragraph 5 of the Order to be 
incorrect, thus rendering HMB's payment into the escrow account 
incorrect, the staff shall direct the Escrow Agent to refund the 
overpayment to HMB in the amount of $0.875 per heater. A dispute as to 
the proper amount of contingent contribution shall be resolved in 
accordance with Paragraph 24 of this Consent Agreement.
    30. HMB and the staff consent to the entry of the Order attached 
hereto.
    31. Upon provisional acceptance of this Consent Agreement and Order 
by

[[Page 46437]]

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).
    32. 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 HMB.
    33. 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: July 12, 2001.

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: July 23, 2001.

William H. Taylor,
President, HMB Corporation, P.O. Box 15198, Portland, OR 97293. 
Telephone: (503) 233-5321.

Order

    Upon consideration of the Consent Agreement entered into between 
Respondent HMB Corporation (``HMB'') 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 HMB;
    It is hereby ordered that:
    1. The Consent Agreement between HMB and the staff is 
incorporated herein by reference and accepted, and HMB 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, RW, and ZC. These heaters 
shall hereinafter be collectively referred to as ``the Heaters.''
    3. HMB 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 EIGHTY--SEVEN 
THOUSAND FIVE HUNDRED DOLLARS ($87.500) upon the CPSC's final 
acceptance of this Order.
    4. HMB shall pay into the Escrow Account contingent 
contribution(s) of an additional ($0.875) for every heater in excess 
of three hundred and fifty thousand (350,000) heaters ordered by 
consumers on or before February 17, 2002, under the Cadet Consent 
Agreement and Order, which was approved by the CPSC on July 30, 1999 
(``the Cadet Order''). HMB's contingent contribution(s) shall be 
capped at EIGHTY--SEVEN THOUSAND FIVE HUNDRED DOLLARS ($87,500). HMB 
shall pay contingent contributions quarterly within fifteen (15) 
days of HMB's receipt of written notice from the staff of the number 
of replacement heaters over 350,000 ordered by consumers on or 
before February 17, 2002, and shipped by Cadet under the terms of 
the Cadet Order.
    5. The CPSC may authorize the distribution of the monetary 
payments referred to in Paragraphs 3 and 4 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.
    6. In addition to any penalty it may incur pursuant to Paragraph 
14 of the Consent Agreement, if HMB fails to make timely 
contributions to the Escrow Account, as required by Paragraphs 4 and 
5 of this Order, HMB shall be liable for additional contributions to 
the Escrow Account. Such additional contributions shall consist of 
the following:
    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.
    Provisionally accepted and Provisional Order issued on the 29th 
day of August, 2001.
    By order of the commission.

Todd A. Stevenson,
Acting Secretary, Consumer Product Safety Commission.
[FR Doc. 01-22162 Filed 9-4-01; 8:45 am]
BILLING CODE 6355-01-M