[Federal Register Volume 80, Number 176 (Friday, September 11, 2015)]
[Notices]
[Pages 54769-54773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-22892]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 15-C0007]


phil&teds USA, 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 
phil&teds USA, Inc., containing a civil penalty of $3,500,000, with 
$3,300,000 of the total suspended, subject to the terms and conditions 
of the Settlement Agreement. phil&teds USA, Inc., shall pay the non-
suspended portion of the penalty, $200,000, in accordance with the 
terms set forth in the Settlement Agreement.\1\ The $200,000 Payment 
shall be paid within thirty (30) calendar days after the phil&teds USA, 
Inc., receives service of the Commission's final Order accepting the 
Agreement.
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    \1\ The Commission voted (4-1) to provisionally accept the 
Settlement Agreement and Order regarding phil&teds USA, Inc. 
Chairman Kaye, Commissioner Adler, Commissioner Robinson and 
Commissioner Buerkle voted to provisionally accept the Settlement 
Agreement and Order. Commissioner Mohorovic voted to take other 
action and reject the Settlement Agreement and Order and return to 
staff to seek higher payment.

DATES: Any interested person may ask the Commission not to accept this 
agreement or otherwise comment on its contents by filing a written 
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request with the Office of the Secretary by September 28, 2015.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to the Comment 15-C0007 Office of the 
Secretary, Consumer Product Safety Commission, 4330 East-West Highway, 
Room 820, Bethesda, Maryland 20814-4408.

FOR FURTHER INFORMATION CONTACT: Leah Wade, Trial Attorney, Office of 
the General Counsel, Division of Compliance, Consumer Product Safety 
Commission, 4330 East-West Highway, Bethesda, Maryland 20814-4408; 
telephone (301) 504-7225.

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

    Dated: September 8, 2015.
Todd A. Stevenson,
Secretary.

UNITED STATES OF AMERICA CONSUMER PRODUCT SAFETY COMMISSION

    In the Matter of: phil&teds USA, Inc.

CPSC Docket No.: 15-C0007

SETTLEMENT AGREEMENT

    1. In accordance with the Consumer Product Safety Act (``CPSA''), 
15 U.S.C. 2051-2089 and 16 CFR 1118.20, phil&teds USA, Inc. 
(``phil&teds USA'' or ``Firm''), and the U.S. Consumer Product Safety 
Commission (``Commission''), through its staff (``Staff''), hereby 
enter into this Settlement Agreement. The Settlement Agreement and 
Affidavit of Corporate Officer, attached at Exhibit A (collectively the 
``Agreement'') and the incorporated attached Order (``Order'') resolve 
Staff's charges set forth below.

THE PARTIES

    2. The Commission is an independent federal regulatory agency 
established pursuant to, and responsible for, the enforcement of the 
CPSA. By executing this Agreement, Staff is acting on behalf of the 
Commission, pursuant to 16 CFR Sec.  1118.20(b). The Commission issues 
the Order under the provisions of the CPSA.

[[Page 54770]]

    3. phil&teds USA is a corporation, organized and existing under the 
laws of the state of Colorado, with its principal corporate office 
located in Fort Collins, CO. phil&teds USA is an importer, distributor 
and retailer of children's strollers, child carriers and other baby 
products and accessories.

STAFF'S CHARGES

    4. From May 2009 through January 2011, phil&teds USA imported and 
sold in the United States, approximately 13,500 clip-on high chairs 
under the brand name, MeToo Chairs (``Chairs''). The Firm sold the 
Chairs online and through independent retailers nationwide.
    5. The Chairs are ``consumer products,'' and, at all relevant 
times, phil&teds USA was either the importer, ``distributor'' or 
``retailer'' of these consumer products, which were ``distributed in 
commerce,'' as those terms are defined or used in sections 3(a)(5), 
(7), (8),and (13) of the CPSA, 15 U.S.C. 2052(a)(5), (7), (8), and 
(13).
    6. The Chairs are defective and create an unreasonable risk of 
serious injury because the clamps on the Chairs can detach from the 
table, posing a fall hazard. If only one side of the Chair detaches, 
the lack of space between the metal cross bar and the clamps creates a 
finger pinching, laceration, and amputation hazard.
    7. Between September 2009 and October 2010, the Firm obtained 
sufficient information that reasonably supported the conclusion that 
the Chairs contained a defect that could create a substantial product 
hazard or created an unreasonable risk of serious injury. Specifically, 
the Firm was aware of reports of incidents and injuries, including 
reports of fingertip amputations to children. The Firm was also aware 
that two design changes had been implemented to address the defects in 
the Chair.
    8. Despite having information regarding the Chair's defect or risk, 
the Firm failed to inform the Commission immediately, as required by 
sections 15(b)(3) and (4) of the CPSA, 15 U.S.C. Sec. Sec.  2064(b)(3) 
and (4).
    9. Because the information in the Firm's possession constituted 
actual and presumed knowledge, the Firm 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).
    10. When the Firm filed its Full Report, the Firm:
    a. underreported the total number of incidents and injuries 
involving the Chairs, stating that it was aware of 10 ``instances'' 
involving the product, but provided no details on the instances and 
failed to indicate that the Firm was aware of two amputation injuries;
    b. failed to notify staff that the Chairs posed an amputation 
hazard; and
    c. withheld information that the Chair had been redesigned to 
address the hazard and that the sample product supplied with the Full 
Report was manufactured differently than the Chairs involved in the 
incident and injury reports.
    11. The Firm's failure to report this information resulted in 
delayed implementation of the corrective action and recall of the 
product, which was not publicly announced until August 17, 2011.
    12. By making these inaccurate and incomplete statements in the 
Full Report, the Firm knowingly committed a material misrepresentation 
to an officer or employee in the course of an investigation under the 
CPSA, which violates section 19(a)(13) of the CPSA, 15 U.S.C. Sec.  
2068(a)(13), as the term ``knowingly'' is defined in section 20(d) of 
the CPSA, 15 U.S.C. Sec.  2069(d).
    13. Under section 20 of the CPSA, 15 U.S.C. Sec.  2069, the Firm is 
subject to civil penalties for its knowing violation of section 
19(a)(4) of the CPSA, 15 U.S.C. Sec.  2068(a)(4) and for the Firm's 
knowing material misrepresentations in violation of section 19(a)(13) 
of the CPSA, 15 U.S.C. Sec.  2068(a)(13).

FIRM'S RESPONSE

    14. This Agreement does not constitute an admission by the Firm to 
the charges set forth in paragraphs 4 through 13, including charges 
that phil&teds USA violated any statute or regulation, failed to timely 
report, or committed a material misrepresentation in violation of the 
CPSA. In fact, phil&teds USA took the initiative in reporting incidents 
surrounding the Chair to the CPSC, disclosed the number of those 
incidents, and further explained that unreasonable misuse of the 
product was the cause of serious injuries.

AGREEMENT OF THE PARTIES

    15. Under the CPSA, the Commission has jurisdiction over the matter 
involving the Chairs and over phil&teds USA, Inc.
    16. In settlement of Staff's charges, and to avoid the cost, 
distraction, delay, uncertainty, and inconvenience of protracted 
litigation or other proceedings, the Firm shall pay a civil penalty in 
the amount of three million, five hundred thousand dollars ($3,500,000) 
(``Total Civil Penalty Amount''). In reliance on the accuracy and 
completeness of the Firm's representations and warranties in this 
Agreement, the Commission agrees to suspend all but two hundred 
thousand dollars ($200,000) of the Total Civil Penalty Amount 
(``$200,000 Payment''), on the terms and conditions set forth in this 
Agreement. The $200,000 Payment shall be paid within thirty (30) 
calendar days after the Firm receives service of the Commission's final 
Order accepting the Agreement. All payments to be made under the 
Agreement shall constitute debts owing to the United States and shall 
be made by electronic wire transfer to the United States via: http://www.pay.gov for allocation to and credit against the payment 
obligations of the Firm under this Agreement.
    17. phil&teds USA represents and warrants that the financial 
statements of phil&teds USA provided to the Commission in connection 
with the matters addressed in this Agreement (``Financial Statements'') 
are complete, accurate and current and have been prepared on a 
consistent basis throughout the periods indicated except as otherwise 
noted therein, and that the Financial Statements fairly present the 
financial condition and results of operations and cash flow of the Firm 
as of the dates, and for the periods, indicated therein, all 
consistently applied during the periods involved except as noted 
therein, and subject, in the case of the unaudited interim financial 
statements, to the absence of notes and normal year-end adjustments.
    18. The Firm represents and warrants that the information supplied 
by the Firm to the Commission in connection with the matters addressed 
in the Agreement (including information about the Firm's financial 
resources and ability to pay the Total Civil Penalty Amount) did not, 
at the time provided to the Commission, contain any untrue statement of 
a material fact or omit to state any material fact required to be 
stated therein or necessary in order to make the statements therein, in 
light of the circumstances under which they are made, not misleading.
    19. The parties agree that an amount equal to Total Civil Penalty 
Amount minus any amounts paid by phil&teds USA pursuant to this 
Agreement shall become due and payable immediately upon the occurrence 
of an ``Event of Default,'' without notice or further action by any 
party. An ``Event of Default'' means:
    a. a failure of phil&teds USA to pay the $200,000 Payment (or any 
portion thereof) when due and payable;
    b. the breach or inaccuracy of any representation or warranty of 
phil&teds USA in this Agreement;

[[Page 54771]]

    c. the breach or failure by phil&teds USA to observe or perform any 
of its obligations, covenants or agreements set forth in the Agreement; 
or
    d. a failure of phil&teds USA to comply with all CPSC statutes or 
regulations for three (3) years after the effective date of this 
Agreement.
    20. All unpaid amounts, if any, due and owing under the Agreement 
shall constitute a debt due and immediately owing by phil&teds USA to 
the United States, and interest shall accrue and be paid by phil&teds 
USA at the federal legal rate of interest set forth at 28 U.S.C. Sec.  
1961(a) and (b) from the date of Event of Default until all amounts due 
have been paid in full (hereinafter ``Default Payment Amount'' and 
``Default Interest Balance''). phil&teds USA shall consent to a Consent 
Judgment in the amount of the Default Payment Amount and Default 
Interest Balance, and the United States, at its sole option, may 
collect the entire Default Payment Amount and Default Interest Balance 
or exercise any other rights granted by law or in equity, including but 
not limited to referring such matters for private collection, and 
phil&teds USA agrees not to contest, and hereby waives and discharges 
any defenses to, any collection action undertaken by the United States 
or its agents or contractors pursuant to this paragraph. phil&teds USA 
shall pay the United States all reasonable costs of collection and 
enforcement under this paragraph, respectively, including reasonable 
attorney's fees and expenses.
    21. phil&teds USA shall notify CPSC in writing if any financial 
information supplied or to be supplied in writing by phil&teds USA to 
the Commission in connection with the Agreement is, in any material 
respect, discovered not to be true, accurate or complete; is no longer 
true, accurate or complete as a result of subsequent events; is 
discovered to contain an untrue statement of a material fact or to omit 
a material fact required to be stated therein or necessary in order to 
make the statements therein, in light of the circumstances under which 
they were made, not misleading; or contains as a result of subsequent 
events an untrue statement of a material fact or an omission of a 
material fact required to be stated, not misleading.
    22. After Staff receives this Agreement executed on behalf of 
phil&teds USA, Staff shall promptly submit the Agreement to the 
Commission for provisional acceptance. Promptly following the 
Commission's provisional acceptance of the Agreement, the Agreement 
shall be placed on the public record and published in the Federal 
Register, in accordance with the procedures set forth in 16 CFR Sec.  
1118.20(e). If within fifteen (15) calendar days the Commission does 
not receive any written request not to accept the Agreement, the 
Agreement shall be deemed finally accepted on the sixteenth (16th) 
calendar day after the date the Agreement is published in the Federal 
Register, in accordance with 16 CFR Sec.  1118.20(f).
    23. This Agreement is conditioned upon, and subject to, the 
Commission's final acceptance, as set forth above, and is subject to 
the provisions of 16 CFR Sec.  1118.20(h). Upon the later of: (i) The 
Commission's final acceptance of this Agreement and service of the 
accepted Agreement upon phil&teds USA, and (ii) the date of issuance of 
the final Order, this Agreement shall be in full force and effect, and 
shall be binding upon the parties.
    24. Effective upon the later of: (i) The Commission's final 
acceptance of the Agreement and service of the accepted Agreement upon 
phil&teds USA, and (ii) the date of issuance of the final Order, for 
good and valuable consideration, phil&teds USA hereby expressly and 
irrevocably waives and agrees not to assert any past, present, or 
future rights to the following, in connection with the matter described 
in the Agreement: (a) An administrative or judicial hearing; (b) 
judicial review or other challenge or contest of the validity of the 
Order or of the Commission's actions; (c) a determination by the 
Commission of whether phil&teds USA 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.
    25. phil&teds USA shall implement and maintain a compliance program 
designed to ensure compliance with the statutes and regulations 
enforced by the Commission that, at a minimum, contains the following 
elements:
    a. written standards and policies concerning products sold by 
phil&teds USA in the United States that may relate to, or impact, CPSA 
compliance;
    b. procedures for verifying the accuracy and completeness of 
information conveyed to the Commission;
    c. procedures for implementing corrective and preventive actions 
when compliance deficiencies or violations are identified;
    d. procedures for collecting information from phil&teds USA's 
affiliates on incidents and injuries occurring outside the United 
States;
    e. a mechanism for confidential employee reporting of compliance-
related questions or concerns to either a compliance officer or to 
another senior manager with authority to act as necessary;
    f. effective communication of company compliance-related policies 
and procedures to all employees through training programs or otherwise;
    g. senior manager responsibility for compliance and accountability 
for violations of the statutes and regulations enforced by the 
Commission;
    h. board oversight of compliance; and
    i. retention of all compliance-related records for at least five 
(5) years and availability of such records to Staff, upon request.
    26. phil&teds USA shall implement, maintain and enforce a system of 
internal controls and procedures designed to ensure that:
    a. information required to be disclosed by phil&teds USA to the 
Commission is recorded, processed and reported in accordance with 
applicable law;
    b. all reporting made to the Commission is timely, truthful, 
complete and accurate; and
    c. prompt disclosure is made to phil&teds USA's management of any 
significant deficiencies or material weaknesses in the design or 
operation of such internal controls that are reasonably likely to 
adversely affect in any material respect phil&teds USA's ability to 
record, process, and report to the Commission in accordance with 
applicable law.
    27. Upon Staff's request, phil&teds USA shall provide written 
documentation of its compliance program and system of internal controls 
and procedures, including, but not limited to, the effective dates of 
the program, controls and procedures and improvements thereto. 
phil&teds USA shall cooperate fully and truthfully with Staff and shall 
make available all information, materials, and personnel deemed 
necessary by Staff to evaluate phil&teds USA's compliance with the 
terms of the Agreement.
    28. phil&teds USA agrees that any settlement agreements with 
consumers involving products over which the Commission has 
jurisdiction, and which include a confidentiality clause, must include 
an exception to the confidentiality clause that allows consumers to 
discuss any issues related to their settlement agreement with officers 
and employees of the Commission and other local, state and federal 
government representatives.
    29. The parties acknowledge and agree that the Commission may make 
public disclosure of the terms of the Agreement and Order.

[[Page 54772]]

    30. phil&teds USA represents that the Agreement: (i) Is entered 
into freely and voluntarily, without any degree of duress or compulsion 
whatsoever; (ii) has been duly authorized; and (iii) constitutes the 
valid and binding obligation of phil&teds USA, and each of its 
successors, transferees, and/or assigns.
    31. The signatories represent that they are authorized to execute 
this Agreement.
    32. The Agreement is governed by the laws of the United States.
    33. The Agreement and the Order shall apply to, and be binding 
upon, phil&teds USA and each of its successors, transferees, and/or 
assigns, and a violation of the Agreement or Order may subject 
phil&teds USA and each of its successors, transferees, and/or assigns 
to appropriate legal action.
    34. The Agreement and the Order constitute the complete agreement 
between the parties on the subject matter.
    35. The Agreement may be used in interpreting the Order. 
Understandings, agreements, representations, or interpretations apart 
from those contained in the Agreement and the Order may not be used to 
vary or contradict their terms. For purposes of construction, the 
Agreement shall be deemed to have been drafted by both of the parties, 
and therefore, shall not be construed against any party for that reason 
in any subsequent dispute.
    36. The Agreement shall not be waived, amended, modified, or 
otherwise altered, except as in accordance with the provisions of 16 
CFR 1118.20(h). The Agreement may be executed in counterparts.
    37. If any provision of the Agreement or the Order is held to be 
illegal, invalid, or unenforceable under present or future laws 
effective during the terms of the Agreement and the Order, such 
provision shall be fully severable. The balance of the Agreement and 
the Order shall remain in full force and effect, unless the Commission 
and phil&teds USA agree that severing the provision materially affects 
the purpose of the Agreement and Order.
PHIL&TEDS USA, INC.

Dated:-----------------------------------------------------------------
8/12/15

By:--------------------------------------------------------------------
Michael Grant, President,
phil&teds USA, Inc.,
221 Jefferson Street, Suite 100
Fort Collins, Colorado 80524

Dated:-----------------------------------------------------------------
8/13/15

By:--------------------------------------------------------------------
Jonathan Judge,
Schiff Hardin LLP,
233 Wacker Drive, Suite 6600
Chicago, Illinois 60606
Counsel for phil&teds USA, Inc.

U.S. CONSUMER PRODUCT SAFETY COMMISSION STAFF

Dated:-----------------------------------------------------------------
8/13/15

By:--------------------------------------------------------------------
Stephanie Tsacoumis,
General Counsel
Mary T. Boyle,
Deputy General Counsel
Mary B. Murphy,
Assistant General Counsel
Leah Wade,
Trial Attorney

EXHIBIT A

AFFIDAVIT OF CORPORATE OFFICER MICHAEL GRANT

    I, the undersigned, swear and affirm that I am employed by 
phil&teds USA, Inc., that I hold the position indicated below, and, by 
reason of my position, I am authorized and qualified to make the 
following statements. All capitalized terms not defined in this 
affidavit shall have the meanings given to them in the Agreement 
between phil&teds USA, Inc. and the U.S. Consumer Product Safety 
Commission, of which this Affidavit is a part.
    1. The financial statements of phil&teds USA provided to the 
Commission in connection with the matters addressed in this Agreement 
(``Financial Statements'') are complete, accurate and current and have 
been prepared on a consistent basis throughout the periods indicated 
except as otherwise noted therein, and that the Financial Statements 
fairly present the financial condition and results of operations and 
cash flow of phil&teds USA as of the dates, and for the periods, 
indicated therein, all consistently applied during the periods involved 
except as noted therein, and subject, in the case of the unaudited 
interim financial statements, to the absence of notes and normal year-
end adjustments.
    2. phil&teds USA has supplied all documents and information 
responsive to CPSC's requests.
    3. The information supplied by phil&teds USA to the Commission in 
connection with the matters addressed in the Agreement (including 
information about the Firm's financial resources and ability to pay the 
Total Civil Penalty Amount) did not, at the time provided to the 
Commission, contain any untrue statement of a material fact or omit to 
state any material fact required to be stated therein or necessary in 
order to make the statements therein, in light of the circumstances 
under which they are made, not misleading.
    4. For each of the fiscal years ended March 31, 2015, 2014 and 
2013, the net income, the net worth/stockholder's equity and working 
capital of phil&teds USA, Inc., was negative and to satisfy 
liabilities, phil&teds USA, Inc. relied on payments from its parent 
entity, Most Excellent World Holdings, Limited (``MEW''), pursuant to 
an intercompany agreement.
    5. phil&teds USA, Inc. has insufficient cash or other liquid assets 
to satisfy a civil penalty payment in excess of $200,000, has no 
sources of funding that could be used to provide the liquidity to make 
such a payment, and is unable to secure funds from MEW to fulfill a 
civil penalty payment obligation.
    6. phil&teds USA, Inc. will not directly or indirectly receive 
reimbursement, indemnification, insurance-related payment or other 
payment in connection with the matters addressed in the Agreement.
    7. Any civil penalty payment by phil&teds USA, Inc. in excess of 
$200,000 will require phil&teds USA, Inc. to cease operations as an 
ongoing business.
    I declare under penalty of perjury that the foregoing is true and 
correct. I understand that any intentional false statement in this 
declaration may be a criminal offense under 18 U.S.C. Sec.  1001.

Executed on August 12, 2015

Signed:----------------------------------------------------------------

Michael Grant
President, phil&teds USA, Inc.

UNITED STATES OF AMERICA

CONSUMER PRODUCT SAFETY COMMISSION

    In the Matter of: phil&teds USA, Inc.

CPSC Docket No.: 15-C0007

ORDER

    Upon consideration of the Settlement Agreement entered into between 
phil&teds USA, Inc. (``phil&teds USA''), and the U.S. Consumer Product 
Safety Commission (``Commission''), and the Commission having 
jurisdiction over the subject matter and over phil&teds USA, and it 
appearing that the Settlement Agreement and the Order are in the public 
interest, it is
    ORDERED that the Settlement Agreement be, and is, hereby, accepted; 
and it is
    FURTHER ORDERED, that phil&teds USA shall comply with the terms of 
the Settlement Agreement and shall pay a civil penalty of $3,500,000, 
with $3,300,000 of the total suspended, subject to the terms and 
conditions of the Settlement Agreement. phil&teds USA shall pay the 
non-suspended portion of the penalty, $200,000, in

[[Page 54773]]

accordance with the terms set forth in the Settlement Agreement. Upon 
the occurrence of an Event of Default, as set forth in the Settlement 
Agreement, an amount equal to $3,500,000 (representing the entire civil 
penalty, including the suspended portion), plus any accrued and unpaid 
interest, minus any penalty amounts paid by phil&teds USA, shall 
immediately become due and payable.

Provisionally accepted and provisional Order issued on the 8th day 
of September , 2015.

 BY ORDER OF THE COMMISSION:
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Todd A. Stevenson,
Secretary U.S. Consumer Product Safety Commission

[FR Doc. 2015-22892 Filed 9-10-15; 8:45 am]
 BILLING CODE 6355-01-P