[Federal Register Volume 66, Number 212 (Thursday, November 1, 2001)]
[Notices]
[Pages 55163-55165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27483]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 02-C0001]


Honeywell Consumer Products, Inc. (Formerly Known as Duracraft 
Corp.) 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 1118.20. 
Published below is a provisionally-accepted Settlement Agreement with 
Honeywell Consumer Products, Inc. (formerly known as Duracraft Corp.), 
a corporation containing a civil penalty of $800,000.

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 November 16, 2001.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to the Comment 02-C0001, Office of the 
Secretary, Consumer Product Safety Commission, Washington, DC 20207.

FOR FURTHER INFORMATION CONTACT: Jimmie L. Williams, Jr., Trial 
Attorney, Office of the General Counsel, Consumer Product Safety 
Commission, Washington, DC 20207; telephone (301) 504-0980, 1376.

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

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

[CPSC Docket No. 02-C0001]

In the Matter of Honeywell Consumer Products, Inc. (formerly known 
as Duracraft Corp.); Settlement Agreement and Order

    1. Honeywell Consumer Products, Inc. (``HCP''), formerly known as 
Duracraft Corp. (``Duracraft''), enters into this Settlement Agreement 
and Order with the staff (``staff'') of the U.S. Consumer Product 
Safety Commission (``Commission'') in accordance with 16 CFR part 1118, 
section 20 of the Commission's Procedures for Investigations, 
Inspections, and Inquiries under the Consumer Product Safety Act 
(``CPSA'').

I. The Parties

    2. The Commission is an independent federal regulatory agency 
responsible for the enforcement of the CPSA, 15 U.S.C. 2051-2084.
    3. HCP is a corporation organized and existing under the laws of 
the State of Massachusetts. HCP's principal offices are located at 250 
Turnpike Road, Southborough, Massachusetts 01772. Duracraft was a 
corporation organized under the laws of the State of Massachusetts. 
Honeywell Inc. (``Honeywell'') is a corporation organized and existing 
under the laws of the State of Delaware.
    4. On February 16, 1996, Honeywell made a tender offer to acquire 
the corporate stock of Duracraft. On May 1, 1996, Duracraft became a 
wholly-owned subsidiary. In November 1996, Duracraft changed its name 
to Honeywell Consumer Products, Inc. Duracraft currently exists as a d/
b/a for HCP.

II. Staff Allegations

DH 3000/DH 900 Humidifiers

    5. From 1990 through May, 1996, and in June 1996, after it was 
acquired by Honeywell, Duracraft imported and distributed approximately 
1 million DH 3001-3006 and DH 901-904 warm mist humidifiers in the 
United States. These humidifiers were then sold to consumers throughout 
the U.S. for use in or around a household or residence. Therefore, 
Duracraft and Honeywell were ``manufacturers'' of a ``consumer 
product'' ``distributed in commerce'' pursuant to 15 U.S.C. 2052(a)(1), 
(4) and (11).
    6. The humidifiers contained a water tank, base, heating element, 
and a mist chamber. Water passed from the tank into the base, and the 
heating element, located in the mist chamber, heated the water to 
vaporization temperature. The water vapor rose through the mist chamber 
where it mixed with cooler air, and was discharged into the surrounding 
environment by a blower and natural convection. A sensor rod or float 
switch shut the humidifier off when the water reservoir tank became 
empty.
    7. Duracraft manufactured the DH 3000 series humidifiers until 
1991. In 1991, Duracraft redesigned the humidifier because of leakage 
from the water tank, and re-named it the DH 900 series. The DH 900 
series was manufactured without significant design change until October 
1994. Duracraft informed CPSC staff that the units redesigned in 1991 
did not exhibit any safety related defects during the firm's functional 
or life testing, and that no changes had been made to address any 
safety related defects.
    8. As of February, 1996, 68 claims had been reported to Duracraft 
in which a DH 3000 series humidifier or a pre-1995 DH 900 series 
humidifier unit either emitted smoke or sparks or caught on fire. 
Nineteen of these incidents occurred in a child's room.
    9. The humidifier's float switch could fail, and not shut down the 
product. The humidifiers also included a high-limit switch. When the 
temperature at the location of the switch reached a certain level, the 
high-limit switch activated, breaking the electrical circuit within the 
humidifier and turning off the heating element. However, the high-limit 
switch could also fail. If both the float switch and the high-limit 
switch failed, the heating element could remain on, and the humidifier 
could overheat and catch on fire.
    10. Immediately following Honeywell's February, 1996 tender offer, 
referred to in paragraph 4, Honeywell began a due diligence 
investigation of Duracraft's business. The Disclosure Schedule to the 
Merger Agreement between Duracraft and Honeywell disclosed that 
``[u]nder cover of a letter dated November 30, 1995, the United States 
Consumer Product Safety Commission (`CPSC') provided the Company 
(`Duracraft') with product-related reports regarding certain of the 
Company's humidifier models. The Company has also received notice of 
requests for information regarding these models submitted to the CPSC 
under the Freedom of Information Act.'' On May 1, 1996, Honeywell 
completed its acquisition of Duracraft.
    11. On May 31, 1996, Duracraft submitted a telephone report under

[[Page 55164]]

Section 15(b) of the CPSA to staff regarding a DH 900 series humidifier 
that failed in the room of a 1\1/2\ year old child. The product 
overheated and melted. The child suffered smoke inhalation, and was 
treated in an emergency room.
    12. Thereafter, Commission staff confirmed Duracraft's oral report, 
and requested a full report under Section 15(b) of the CPSA regarding 
Duracraft's warm mist humidifiers.
    13. Commission staff initiated a site inspection of the Duracraft 
facilities in the summer of 1996. During this inspection, Duracraft 
managers stated that the company was not aware of any float switch 
failures. Moreover, the managers stated that the company had never 
observed any failures of the humidifier's safety devices.
    14. Duracraft responded on October 9, 1996 and submitted its 
Section 15(b) report. Within its submission, Duracraft reported that it 
discovered on or about August, 1993, the DH 900 series humidifiers 
could fail. The DH 3000 series also had the same failure mode as the DH 
900 series. However, Duracraft did not offer to recall the product.
    15. In November 1996, a 6-year-old child died during a fire, which 
CPSC attributes to a failed humidifier. HCP first received notice of 
the fire on or about May 25, 1997.
    16. In mid-April, 1997, Duracraft (which was then named Honeywell 
Consumer Products) received a preliminary determination letter from the 
CPSC, and a request for a recall of the DH 3000 and the pre-1995 DH 900 
series humidifiers.
    17. On June 4, 1997, HCP advised the CPSC that it would voluntarily 
recall the DH 3000 and DH 900 series humidifiers, and presented its 
corrective action plan to CPSC staff. At that time, approximately 
eighty-five (85) failures had taken place, with twenty-two (22) 
incidents occurring in a child's room.

CZ 520 Baseboard Heater

    18. From September, 1995 through March, 1996, Duracraft imported 
and distributed 58,584 CZ 520 portable baseboard heaters in the United 
States. The CZ 520 heater was a movable baseboard heater that contained 
two heating assemblies, a selector switch, and a thermostat. Each 
heating assembly included a motor, a fan, a heating device, and a 
temperature-limiting device. The fan motor shafts were aligned on a 
central axis, and the temperature limiting devices were designed to 
shut down the product if the internal temperature reached 90 deg. C. 
When the selector switch was turned on ``LOW'', only one heating 
assembly was activated. Both heating assemblies were activated when the 
switch was turned on ``HIGH''.
    19. In December, 1995, Duracraft began to receive reports from 
consumers who observed some CZ-520 units smoking or flaming. There were 
no reports of personal injury. As of February, 1996, Duracraft's 
testing on seven failed returns revealed that all of the heaters were 
experiencing low fan speeds.
    20. The Disclosure Schedule to the Merger Agreement between 
Duracraft and Honeywell indicated that ``the company [`Duracraft'] has 
received complaints concerning the company's CZ-520 heater model, 
relating to incidents of flames or smoke emanating from the unit. The 
Company has had a number of returns of this model and has received a 
claim for several hundred dollars involving the unit.''
    21. On June 4, 1997, HCP notified Commission staff that it had 
decided to recall the heater. At that time, Duracraft had received 
twenty (20) claims, some involving minor property damage, and 12% 
warranty returns (7,295 heaters). On July 22, 1997, HCP submitted a 
full report under Section 15(b) of the CPSA.

Ceramic Heaters

    22. From January, 1989 through May 1, 1996 Duracraft and then from 
May 1, 1996 through March, 1998, HCP manufactured or purchased 
approximately 1.6 million model CZ-303, CZ-304, CZ-308, CZ-318, CZ-319, 
and CER-1 ceramic heaters for Duracraft and HCP's importation and 
distribution. The heaters are cubed shaped 7\1/2\ inch tall portable 
air heaters with a ceramic heating element. The controls consist of a 
slide switch, which adjusts the heat output from 800 watts to 1,500 
watts, a rocker switch, which turns the unit on and off or turns on a 
internal fan, and a manual/automatic slide switch, which allows the 
user to set the heat output at a certain level or vary the output to 
maintain a consistent temperature.
    23. In January, 1990, Duracraft began to receive complaints about 
the heaters smoking or flaming. As of February, 1996, Duracraft had 
notice of at least thirty-three (33) incidents. The CPSC had knowledge 
of an additional twelve (12) incidents. There were no reports of 
personal injury. Nearly all of the complaints noted the above type of 
damage.
    24. Duracraft's product tests on several failed units, conducted 
after Honeywell's acquisition of Duracraft, between May, 1996 and June, 
1997, confirmed the units could fail. Honeywell was informed of the 
reports by HCP's general counsel, outside counsel, and Duracraft's 
management in June, 1997.
    25. On July 22, 1997, a consultant hired by Honeywell concluded 
that a defective rocker switch, or the seepage of a foreign substance 
into the rocker switch, could create an internal electrical arc and 
ignite the unit. Honeywell sent this report to the Commission. Thus, 
the heaters could present a fire hazard to the consumer.
    26. On October 10, 1997, as a result of a Commission staff 
initiated investigation, staff requested a report under section 15(b) 
of the CPSA for the heaters. HCP provided this report on December 2, 
1997. On March 16, 1998, HCP agreed to voluntarily recall the products. 
By that time, Duracraft and HCP had received fifty-six (56) complaints 
of these ceramic heaters smoking and melting. HCP had received one 
complaint of smoke inhalation, and was notified that several failures 
had caused extensive property damage.
    27. Duracraft failed to report the defects to the Commission in a 
timely manner, as required by Section 15(b) of the CPSA, 15 U.S.C. 
2064(b). Honeywell received information concerning product failures at 
the time it acquired Duracraft, and continued to obtain information 
after that time. After the acquisition, Honeywell and HCP failed to 
report the defects to the Commission in a timely manner, as required by 
Section 15(b) of the CPSA, 15 U.S.C. 2064(b). A failure to furnish 
information under section 15(b) of the CPSA is a prohibited act under 
15 U.S.C. 2068(a)(4). Duracraft and HCP ``knowingly'' failed to report, 
as that term is defined in 15 U.S.C. Sec. 2069(d), and are subject to a 
civil penalty, pursuant to 15 U.S.C. 2069(a)(1).

III. Response of HCP

    28. HCP denies all of the allegations of the staff set forth in 
paragraphs 5-27 above. HCP states that the products described in 
paragraphs 5-27 above do not contain any defect that would create a 
substantial product hazard pursuant to Section 15(a) of the CPSA, 15 
U.S.C. 2064(a). These products do not create an unreasonable risk of 
serious injury or death pursuant to Section 15(b) of the CPSA, 15 
U.S.C. 2064(b). HCP did not violate the reporting requirements of 
Section 15(b) of the CPSA, 15 U.S.C. 2064(b), or 16 CFR part 1115. No 
other violation of law occurred warranting imposition of a civil 
penalty. In settling this matter, HCP does not admit any fault, 
liability or statutory or regulatory violation.
    29. For each of the products at issue, as soon as HCP received the 
information and knowledge necessary to trigger a

[[Page 55165]]

Section 15(b) report, it acted promptly to file the report in a timely 
manner.
    30. Honeywell has consistently taken responsibility for any 
potential safety problems in connection with its products. The staff's 
allegations relate directly to Honeywell's acquisition of Duracraft. 
The majority of the events at issue transpired prior to Honeywell's 
acquisition of Duracraft or its involvement in Duracraft's product-
safety matters. Honeywell's due diligence review of Duracraft was 
customary in the context of public company acquisitions and did not 
reveal all issues or details about specific products. Information about 
consumer claims that Honeywell did receive during its due diligence 
review was not unusual for a consumer products company. Honeywell did 
not receive information about the extent of the consumer claims until 
it completed the acquisition.
    31. HCP is entering into this Settlement Agreement for settlement 
purposes only, to avoid incurring additional legal costs and expenses.

IV. Agreement of the Parties

    32. The Commission has jurisdiction over this matter under the 
Consumer Product Safety Act (CPSA), 15 U.S.C. 2051 et seq.
    33. HCP knowingly, voluntarily and completely waives any rights it 
may have to:
    a. the issuance of a complaint in this matter;
    b. an administrative or judicial hearing with respect to the staff 
allegations discussed in paragraphs 5 through 27 above;
    c. judicial review or other challenge or contest of the validity of 
the Commission's Order;
    d. a determination by the Commission as to whether a violation of 
Section 15(b) of the CPSA, 15 U.S.C. 2064(b) has occurred;
    e. a statement of findings of fact and conclusion of law with 
regard to the staff allegations; and
    f. to any claims under The Equal Access to Justice Act.
    34. Upon provisional acceptance of this Settlement Agreement and 
Order by the Commission, this Settlement Agreement and Order shall be 
published in the Federal Register in accordance with 16 CFR part 1118, 
section 20, and the Commission may further publicize the terms of the 
Settlement Agreement and Order.
    35. The Settlement Agreement and Order becomes effective upon final 
acceptance of the Commission and service of the Order upon HCP.
    36. HCP agrees to pay to the United States Treasury a civil penalty 
in the amount of Eight Hundred Thousand Dollars ($800,000.00) within 30 
calendar days of HCP's receiving service of the final Settlement 
Agreement and Order.
    37. HCP agrees to the entry of the attached Order, which is 
incorporated herein by reference, and to be bound by its terms.
    38. This Settlement Agreement and Order are entered into for 
settlement purposes only and shall not constitute a determination of 
any fault, liability or statutory or regulatory violation by HCP.
    39. Compliance by HCP with the Settlement Agreement and Order in 
the above-captioned case fully resolves and settles the allegations of 
violations of Section 15(b) of the CPSA set out above.
    40. The Commission's Order in this matter is issued under the 
provisions of the CPSA, 15 U.S.C. 2051, et seq., and 16 CFR part 1118, 
section 20, and a violation of this Order may subject HCP to 
appropriate legal action.
    41. This Settlement Agreement and Order is binding upon and shall 
inure to the benefit of HCP and its corporate parents, assigns or 
successors.
    42. Agreements, understandings, representations, or interpretations 
made outside of this Settlement Agreement and Order may not be used to 
vary or to contradict its terms.
Honeywell Consumer Products, Inc.
Dated:----------------------------------------------------------------
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U.S. Consumer Product Safety Commission.

Alan H. Schoem,
Assistant Executive Director, Office of Compliance.

Eric L. Stone,
Director, Legal Division, Office of Compliance.

    Dated: September 17, 2001.
Jimmie L. Williams, Jr.,
Trial Attorney, Legal Division, Office of Compliance.

[CPSC Docket No. 02-C0001]

In the Matter of Honeywell Consumer Products, Inc. (formerly known 
as Duracraft Corp.); Order

    Upon consideration of the Settlement Agreement entered into between 
Honeywell Consumer Products, Inc., formerly known as Duracraft Corp., 
and the staff of the U.S. Consumer Product Safety Commission; and the 
Commission having jurisdiction over the subject matter and Honeywell 
Consumer Products, Inc., and it appearing that the Settlement Agreement 
and Order is in the public interest, it is
    Ordered, that the Settlement Agreement be, and hereby is, accepted, 
and it is
    Further Ordered, that upon final acceptance of the Settlement 
Agreement and Final Order, Honeywell Consumer Products, Inc. shall pay 
the Commission a civil penalty in the amount of Eight Hundred Thousand 
Dollars ($800,000.00) within 30 calendar days after service of this 
Final Order upon Honeywell Consumer Products, Inc.

    Provisionally accepted and Provisional Order issued on the 29th 
day of October, 2001.
By Order of the Commission.
Todd A. Stevenson,
Acting Secretary, U.S. Consumer Product Safety Commission.
[FR Doc. 01-27483 Filed 10-31-01; 8:45 am]
BILLING CODE 6355-01-M