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$3.1 Million Penalty for Untimely Reporting of Defects with Walk-In Closet Ladders

Tuesday, June 10, 2014
Sandler, Travis & Rosenberg Trade Report

The Consumer Product Safety Commission has provisionally accepted an agreement under which an Ohio-based retailer of home furnishings has agreed to pay a $3.1 million civil penalty to settle charges that it failed to timely notify the CPSC that certain two- and three-step ladders designed for use in walk-in closets had steps than can break unexpectedly. The company will also be required to implement and maintain a formal compliance program designed to ensure compliance with the laws and regulations enforced by the CPSC, maintain and enforce a system of internal controls and procedures designed to ensure proper defect and hazard reporting, and provide written documentation of such improvements, processes and controls to the CPSC upon request.

The Commission alleges that the company received notice of the defect shortly after sales of the ladders began in 2005 and over the next five years received hundreds of reports of step breakage during first and early use. During that same time the company implemented design changes to eliminate the hazard and paid out claims filed by consumers who reported that they had been injured when the ladders broke during use. The company also allegedly provided consumers who had contacted it regarding their broken ladders with replacement ladders that it knew were just as likely to break.

The CPSC thus charges that as of September 2007 the company had sufficient information that reasonably supported the conclusion that the ladders contained a defect that could create a substantial product hazard or created an unreasonable risk of serious injury or death. While the law requires the CPSC to be notified immediately about such defects or risks, the CPSC asserts, the company did not file its full report until July 2010, by which time there had been more than 1,200 returns and notice of at least two dozen injuries.

Any interested person may ask the CPSC not to accept this agreement or otherwise comment on its contents by filing a written request no later than June 25.

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