[Federal Register Volume 77, Number 201 (Wednesday, October 17, 2012)]
[Notices]
[Pages 63801-63803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-25507]



[[Page 63801]]

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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 13-C0001]


Aqua-Leisure Industries, Inc., 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(e). 
Published below is a provisionally-accepted Settlement Agreement with 
Aqua-Leisure Industries, Inc., containing a civil penalty of 
$650,000.00, within twenty (20) days of service of the Commission's 
final Order accepting the Settlement Agreement.

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 1, 2012.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to the Comment 13-C0001, Office of the 
Secretary, Consumer Product Safety Commission, 4330 East West Highway, 
Room 820, Bethesda, Maryland 20814-4408.

FOR FURTHER INFORMATION CONTACT: Jennifer W. Feinberg, Trial Attorney, 
Division of Compliance, Office of the General Counsel, Consumer Product 
Safety Commission, 4330 East West Highway, Bethesda, Maryland 20814-
4408; telephone (301) 504-7843.

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

    Dated: October 12, 2012.
Todd A. Stevenson,
 Secretary.

UNITED STATES OF AMERICA CONSUMER PRODUCT SAFETY COMMISSION

In the Matter of: Aqua-Leisure Industries, Inc.
CPSC Docket No.: 13-C0001

SETTLEMENT AGREEMENT AND ORDER

    1. In accordance with 16 C.F.R. Sec.  1118.20, Aqua-Leisure 
Industries, Inc. (``Aqua Leisure'') and staff (``Staff'') of the 
United States Consumer Product Safety Commission (``Commission'' or 
``CPSC'') hereby enter into this Settlement Agreement 
(``Agreement'') under the Consumer Product Safety Act (``CPSA''), 15 
U.S.C. Sec. Sec.  2051-2089. The Agreement and the attached Order 
resolve Staff's allegations set forth below.

THE PARTIES

    2. Staff is the staff of the Commission, an independent federal 
regulatory agency established pursuant to, and responsible for, 
enforcement of the CPSA.
    3. Aqua Leisure is a privately-held company, organized and 
existing under the laws of the state of Massachusetts, with its 
principal office located at 525 Bodwell Street, Avon, Massachusetts 
02322-1098.

STAFF ALLEGATIONS

    4. The Subject Products are ``consumer products'' and, at all 
relevant times, Aqua Leisure was a ``manufacturer'' of ``consumer 
products,'' which were ``distribute[d] in commerce,'' as those terms 
are defined or used in sections 3(a)(5), (8), and (11) of the CPSA, 
15 U.S.C. Sec.  2052(3)(a)(5), (8), and (11).
    5. The Subject Products are defective because the leg straps in 
the seat of the inflatable baby boat can tear with normal use, 
causing children to unexpectedly fall into or under the water, 
posing a risk of drowning.
    6. Aqua Leisure received its first complaint of sudden tearing 
of the seat crotch of certain models of its inflatable baby boats in 
2001, and announced a recall of 90,000 of those boats on November 
28, 2001 (the ``2001 Recall''). The 2001 Recall disclosed that Aqua 
Leisure and CPSC had received 12 reports of sudden tearing of the 
seat, including four reports that children were submerged completely 
under water before a caregiver was able to rescue the child.
    7. For two years following the July 2001 recall, Staff monitored 
Aqua Leisure's execution of its Corrective Action Plan. On July 14, 
2003, Staff notified Aqua Leisure of its decision to close the case, 
but reserved the right to reopen the matter if Staff determined that 
the public had not been adequately protected from the risk of injury 
presented by the product. Staff further advised that Aqua Leisure 
had a ``continuing obligation to inform the Commission of defects 
associated with this product * * *.''
    8. After the 2001 Recall, the Firm continued to produce 
different versions of the inflatable baby boats, which also became 
the subject of consumer complaints. Between December 2002 and June 
2009, Aqua Leisure distributed approximately 4 million of these 
inflatable baby boats (``Subject Products'') in U.S. commerce. The 
Subject Products came in 18 different models, and sold for 
approximately $8 to $15 each through nationwide retailers.
    9. Between July 14, 2003, and July 31, 2006, Aqua Leisure became 
aware of 17 incidents in which these post-2001 Recall inflatable 
baby boat seats ``fell out''; ``ripped''; ``failed''; ``tore''; 
``split''; and/or ``separated,'' including four incidents in which a 
baby boat seat ripped, causing children to fall into the water 
unexpectedly.
    10. By July 2006, Aqua Leisure had information that the leg 
straps of the Subject Products were not being produced in accordance 
with the width and thickness specifications of the replacement 
product that had been evaluated by Staff as a part of the 2001 
Recall and Corrective Action Plan.
    11. In August 2008, Aqua Leisure senior executives raised 
concerns internally about a ``potential problem'' with the Subject 
Products, and began investigating the Subject Products and 
contemplating its obligation to report and the possibility of 
enforcement action by the CPSC. Aqua Leisure did not report to the 
CPSC at that time, however.
    12. On October 31, 2008, CPSC Staff notified Aqua Leisure of an 
incident involving a 6-month-old girl who was completely submerged 
in a pool when the bottom of her inflatable baby boat seat ``broke 
completely.'' However, Aqua Leisure had previously received notice 
of this incident on July 25, 2008 yet the firm took no steps to 
report to the CPSC.
    13. In addition, by October 31, 2008, Aqua Leisure was aware of 
at least 24 consumer complaints regarding the seats of the Subject 
Products since the 2001 Recall, including nine reports in which 
children fell through the Subject Products suddenly and were 
completely submerged underwater.
    14. Aqua Leisure waited until March 12, 2009 to report to the 
CPSC, just hours before the publication of a news story by a Boston 
news team about problems with the Subject Products and Aqua 
Leisure's handling of complaints and potential failure to report to 
the Commission.
    15. Aqua Leisure's initial report to the Commission on March 12, 
2009, and its subsequent Full Report on April 17, 2009, incorrectly 
reported the scope and severity of the hazard: both reports 
identified only four incidents and only one model of boat affected 
by the potential problem, instead of the actual 28 complaints 
received for 18 different models.
    16. On May 21, 2009, Aqua Leisure filed a Supplemental Full 
Report in which it reported that the Firm had received at least 28 
consumer complaints regarding 18 different models of baby boats.
    17. On July 2, 2009, Aqua Leisure announced a recall for the 
Subject Products. The recall disclosed 31 reports of inflatable baby 
boat seats tearing, causing children to fall into or under the 
water.
    18. Although well before May 21, 2009, Aqua Leisure had obtained 
sufficient information to reasonably support the conclusion that the 
Subject Products contained a defect that could create a substantial 
product hazard, or created an unreasonable risk of serious injury or 
death, Aqua Leisure failed to inform the Commission immediately of 
such defect or risk, as required by sections 15(b)(3) and (4) of the 
CPSA, 15 U.S.C. Sec.  2064(b)(3) and (4). In failing to inform the 
Commission immediately of the defect or advising that the defect 
involved the Subject Products, Aqua Leisure knowingly violated 
section 19(a)(4) of the CPSA, 15 U.S.C. Sec.  2068(a)(4), as the 
term ``knowingly'' is defined in section 20(d) of the CPSA, 15 
U.S.C. Sec.  2069(d).
    19. Pursuant to section 20 of the CPSA, 15 U.S.C. Sec.  2069, 
Aqua Leisure is subject to civil penalties for its knowing failure 
to report, as required under section 15(b) of the CPSA, 15 U.S.C. 
Sec.  2064(b).

RESPONSE OF AQUA LEISURE

    20. The Firm denies staff's allegations that it knew that the 
Subject Products contained

[[Page 63802]]

defects which could create a substantial product hazard pursuant to 
section 15(a) of the CPSA, 15 U.S.C. 2064(a), and further denies 
that it knowingly violated the reporting requirements of section 
15(b) of the CPSA, 15 U.S.C. 2064(b).
    21. Like all inflatable pool toys, the Subject Products degrade 
over time. Section 1115.6 of Title 16 of the Code of Federal 
Regulations directs the Commission to consider, among other things, 
``the level of exposure of consumers to the risk'' before 
determining that a reportable product defect exists. The reported 
failure rate for Subject Product leg straps was 0.0000063%. Of 
millions of units sold, Aqua Leisure received only 6 consumer 
reports (including suspect reports) in 2004, only 2 reports in 2005, 
only 7 reports in 2006, 3 in 2007, and 5 in 2008. The number of 
substantiated injuries is zero.
    22. In addition, Section 1115.4 of title 15 of the Code of 
Federal Regulations requires the Commission to ``consider, as 
appropriate: * * * the adequacy of warnings and instructions to 
mitigate such risk'' before it determines that a product is 
defective. Each baby boat is accompanied by a warning that instructs 
parents to supervise their children, as follows: ``This is not a 
life saving device. Do not leave child unattended while in use. Only 
to be used in water in which the child is within its depth and under 
adult supervision. NEVER leave a child unattended. DO NOT 
overinflate or use high pressure air to inflate. Under NO 
circumstances should a child be left in or around water unless a 
competent adult swimmer is present supervising the child. DO NOT use 
with a baby who cannot sit confidently. The possibility DOES exist 
that a baby could tip the unit over. To reduce the risk of this 
happening, the water must be deep enough so that the baby cannot 
touch the bottom. Always exercise caution when babies are teething 
as they could puncture the baby boat. Do not give any playing 
accessories that have the potential to damage this product. Not 
suitable for children under 6 months.'' For these reasons, Aqua 
Leisure did not believe the leg straps tears were reportable events 
under Section 15(b).

AGREEMENT OF THE PARTIES

    23. For purposes of this Agreement, as a manufacturer of 
consumer products distributed in U.S. commerce, Aqua Leisure is 
subject to the Commission's jurisdiction.
    24. In settlement of Staff's allegations, Aqua Leisure consents 
to the entry of the attached Order (``Order'') as set forth below, 
and will pay a civil penalty in the amount of six hundred fifty 
thousand dollars ($650,000.00) (the ``Settlement Amount''), two 
hundred fifty thousand ($250,000.00) of which will be paid within 
twenty (20) days of the date this Order becomes final, and the 
remaining four hundred thousand ($400,000.00) of which will be paid 
within one hundred twenty (120) days of the date this Order becomes 
final. The payment shall be made to the CPSC via www.pay.gov.
    25. Aqua Leisure warrants that it has reviewed its financial 
situation and that it currently is solvent within the meaning of 11 
U.S.C. Sec. Sec.  547(b)(3) and 548(a)(1)(B)(ii)(I), and shall 
remain solvent following payment to the United States of the 
Settlement Amount. Further, the parties warrant that, in evaluating 
whether to execute this Agreement, they (a) have intended that the 
mutual promises, covenants, and obligations set forth constitute a 
contemporaneous exchange for new value given to Aqua Leisure, within 
the meaning of 11 U.S.C. Sec.  547(c)(1), and (b) conclude that 
these mutual promises, covenants and obligations do, in fact, 
constitute such contemporaneous exchange. Further, the parties 
warrant that the mutual promises, covenants, and obligations set 
forth herein are intended to, and do, in fact, represent a 
reasonably equivalent exchange of value that is not intended to 
hinder, delay, or defraud any entity to which Aqua Leisure was or 
became indebted to on or after the date of transfer, within the 
meaning of 11 U.S.C. Sec.  548(a)(1).
    26. If within 91 days of the effective date of this Agreement or 
of any payment made under this Agreement, Aqua Leisure commences, or 
a third party commences, any case, proceeding, or other action under 
any law relating to bankruptcy, insolvency, reorganization, or 
relief of debtors (a) seeking to have any order for relief of Aqua 
Leisure's debt's, or seeking to adjudicate Aqua Leisure as bankrupt 
or insolvent; or (b) seeking appointment of a receiver, trustee, 
custodian, or other similar official for Aqua Leisure or for all or 
any substantial part of Aqua Leisure's assets, Aqua Leisure agrees 
as follows:
    a. Aqua Leisure's obligations under this Agreement may not be 
avoided pursuant to 11 U.S.C. Sec.  547, and Aqua Leisure shall not 
argue or otherwise take the position in any such case, proceeding, 
or action that: (i) Aqua Leisure's obligations under this Agreement 
may be avoided under 11 U.S.C. Sec.  547; (ii) Aqua Leisure was 
insolvent at the time this Agreement was entered into, or became 
insolvent as a result of the payment made to the United States; or 
(iii) mutual promises, covenants, and obligations set forth in this 
Agreement do not constitute a contemporaneous exchange for new value 
given to Aqua Leisure.
    b. If Aqua Leisure's obligations under this Agreement are 
avoided for any reason, including, but not limited to, through the 
exercise of a trustee's avoidance powers under the Bankruptcy Code, 
the United States, at its sole option, may rescind the releases in 
this Agreement and bring any civil and/or administrative claim, 
action or proceeding against Aqua Leisure. Aqua Leisure agrees that 
(i) any such action or proceeding brought by the United States 
seeking payment according to the Order set forth herein are 
enforcement actions that are not subject to an ``automatic stay'' 
pursuant to 11 U.S.C. Sec.  362(a) as a result of the action, case 
or proceedings described in the first clause of this Paragraph and 
Aqua Leisure shall not argue or otherwise contend that the United 
States' action or proceeding is subject to an automatic stay and 
therefore barred; (ii) Aqua Leisure shall not plead, argue or 
otherwise raise any defenses under the theories of statute of 
limitations, laches, estoppels, or similar theories, to any such 
civil or administrative claims, actions or proceedings that are 
brought by the United States within 10 calendar days of written 
notification to Aqua Leisure that the releases have been rescinded 
pursuant to this Paragraph; and (iii) the United States has a valid 
claim against Aqua Leisure in the amount of $1.875 million and the 
United States may pursue its claim in the case, action or proceeding 
referenced in the first clause of this Paragraph, as well as in any 
other case, action or proceeding.
    c. The agreements in Paragraphs 26(a) and 26(b) shall apply only 
when the circumstances described in Paragraph 26 exist. Aqua Leisure 
acknowledges that the agreements, restrictions and claim 
enhancements in this Paragraph are provided in exchange for valuable 
consideration provided in this Agreement.
    27. The parties further agree that if Aqua Leisure fails to make 
timely payments as agreed to in paragraph 24, such conduct will be 
considered a violation of this Agreement and Order.
    28. Subject to Paragraphs 12 and 13, above, the Agreement is a 
full and complete resolution between Staff and Aqua Leisure, and its 
parents, shareholders, divisions, subdivisions, subsidiaries, 
partners, sister companies and their successors and assigns of all 
claims for civil penalties that have been or could have been 
asserted based on the facts contained in Staff's allegations above.
    29. The parties enter into this Agreement for settlement 
purposes only. The Agreement does not constitute an admission by 
Aqua Leisure, or a determination by the Commission, that Aqua 
Leisure violated the CPSA's reporting requirements.
    30. Upon provisional acceptance of the Agreement by the 
Commission, the Agreement shall be placed on the public record and 
published in the Federal Register, in accordance with the procedures 
set forth in 16 C.F.R. Sec.  1118.20(e). If the Commission does not 
receive any written request not to accept the Agreement within 
fifteen (15) calendar days, the Agreement shall be deemed finally 
accepted on the 16th calendar day after the date it is published in 
the Federal Register, in accordance with 16 C.F.R. Sec.  1118.20(f).
    31. Upon the Commission's final acceptance of the Agreement and 
issuance of the Order, Aqua Leisure knowingly, voluntarily, and 
completely waives any rights it may have in this matter to the 
following: (a) an administrative or judicial hearing; (b) judicial 
review or other challenge or contest of the Commission's actions; 
(c) a determination by the Commission of whether Aqua Leisure failed 
to comply with the CPSA and the underlying regulations; (d) a 
statement of findings of fact and conclusions of law; and (e) any 
claims under the Equal Access to Justice Act.
    32. The Commission may publicize the terms of the Agreement and 
the final Order.
    33. The Agreement and the final Order shall apply to, and be 
binding upon, Aqua Leisure, and each of its successors and/or 
assigns, until the obligation described in paragraph 24 has been 
fulfilled.
    34. The Commission issues the final Order under the provisions 
of the CPSA, and a violation of the final Order may subject Aqua 
Leisure, and each of its successors and/or assigns, to appropriate 
legal action.

[[Page 63803]]

    35. The Agreement may be used in interpreting the final Order. 
Understandings, agreements, representations, or interpretations 
apart from those contained in the Agreement and the Order may not be 
used to vary or contradict the terms or the Agreement and the final 
Order. The Agreement shall not be waived, amended, modified, or 
otherwise altered without written agreement thereto, executed by the 
party against whom such waiver, amendment, modification, or 
alteration is sought to be enforced.
    36. If any provision of the Agreement or the final Order is held 
to be illegal, invalid, or unenforceable under present or future 
laws effective during the terms of the Agreement and the final 
Order, such provision shall be fully severable. The balance of the 
Agreement and the final Order shall remain in full force and effect, 
unless the Commission and Aqua Leisure agree that severing the 
provision materially affects the purpose of the Agreement and final 
Order.
    37. This Agreement may be signed in counterparts.

AQUA-LEISURE INDUSTRIES, INC.

    Dated: 8/21/12

By:--------------------------------------------------------------------
    Steven Berenson, CEO
    Aqua-Leisure Industries, Inc.

    Dated: 8/21/12
By:--------------------------------------------------------------------
    George Gigounas, Esq.
    Counsel to Aqua-Leisure Industries, Inc.
    DLA Piper
    San Francisco, CA

U.S. CONSUMER PRODUCT SAFETY COMMISSION STAFF

    Cheryl A. Falvey
    General Counsel

    Mary B. Murphy
    Assistant General Counsel
    Division of Compliance

    Dated: 9/19/12
By:--------------------------------------------------------------------
    Jennifer W. Feinberg
    Trial Attorney
    Division of Compliance
    Office of the General Counsel

UNITED STATES OF AMERICA CONSUMER PRODUCT SAFETY COMMISSION

In the Matter of: Aqua-Leisure Industries, Inc.
CPSC Docket No.: 13-C0001

ORDER

    Upon consideration of the Agreement entered into between Aqua-
Leisure Industries, Inc. (``Aqua Leisure''), and U.S. Consumer 
Product Safety Commission (``Commission'') staff, and the Commission 
having jurisdiction over the subject matter and over Aqua Leisure, 
and it appearing that the Agreement and the Order are in the public 
interest, it is
    ORDERED that the Agreement be, and is, hereby, accepted; and it 
is
    FURTHER ORDERED, that Aqua Leisure shall pay a civil penalty in 
the total amount of six hundred fifty thousand dollars 
($650,000.00), with two hundred fifty thousand dollars ($250,000.00) 
paid within twenty (20) days of service of the Commission's Order 
upon counsel for Aqua Leisure, and the remaining four hundred 
thousand ($400,000.00) paid within one hundred twenty (120) days of 
service. The payments shall be made electronically to the CPSC via 
www.pay.gov. Upon the failure of Aqua Leisure to make the foregoing 
payments when due, interest on the unpaid amount shall accrue and be 
paid by Aqua Leisure at the federal legal rate of interest set forth 
at 28 U.S.C. Sec.  1961(a) and (b). If Aqua Leisure fails to make 
such payments as set forth in the Agreement, such conduct will be 
considered a violation of this Agreement and Order.

    Provisionally accepted and provisional Order issued on the 11th 
day of October, 2012.

    BY ORDER OF THE COMMISSION:

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Todd A. Stevenson, Secretary
U.S. Consumer Product Safety Commission

[FR Doc. 2012-25507 Filed 10-16-12; 8:45 am]
BILLING CODE 6355-01-P