BY PETER HICKSThis article originally appeared in the april 20, 2016, edition of the Cascade Business News
On March 25, 2016, Gree Electric Appliances, Inc. (“Gree”) agreed to pay a record $15.45 million civil penalty to the U.S. Government. The Consumer Product Safety Commission (“CPSC”) alleged that Gree’s dehumidifiers, sold under 13 different brand names (Frigidaire, Kenmore, GE, etc.), had a defect that caused them to overheat and catch fire. These dehumidifiers were sold from January 2005 to August 2013, and were eventually recalled, with a series of recalls starting in September 2013.
In dealing with the potential product defects, Gree made several missteps. Below are four tips to avoid similar missteps and possibly the substantial settlement imposed on Gree by the CPSC.
1. Be Expedient in ReportingThe CPSC claims that Gree knowingly failed to report the product defect within the required window of time. It is not enough to simply implement design changes when manufactureres receive reports of a defective product. The CPSC must be notified on any such defects within 24 hours.
2. Do Not Knowingly Misrepresent Anything to the CPSCAccording to the CPSC, Gree knowingly made several misrepresentations to CPSC staff on multiple occasions. It is obvious that being caught lying to investigators will not bode well for you, but choosing to be ignorant to avoid lying will not save you. The legal definition of “knowingly” is somewhat different from the lay definition commonly used. 15 U.S.C. §2069(d)(2) defines “knowingly” to include, “the presumed having of knowledge deemed to be possessed by a reasonable man who acts in the circumstances, including knowledge obtainable upon the exercise of due care to ascertain the truth of representations.” Given this definition, it is imperative for you to obtain the knowledge that a reasonable person would be expected to have in a similar situation rather than ignore a pressing situation and stick your head in the sand.
3. Be Aware of the Certifications on all of your ProductsThe dehumidifiers sold by Gree had a UL safety certification mark, despite Gree possessing knowledge that the products were potentially unsafe. Clearly, it is not acceptable to knowingly sell a dangerous product. Knowingly selling a dangerous product that includes a certification that the product does not actually meet digs the hole deeper. Once it is discovered that your product falls below a certification level but still meets the requirements of the law, it is not acceptable to continue selling the product as certified. In such situations, claims of certification must be removed before additional products are sold.
4. Institute a Compliance ProgramPart of the settlement required that, in addition to paying the $15.45 million, Gree create a Consumer Product Safety Act (“CPSA”) compliance program. Among other things, Gree is required to institute a mechanism for confidential employee reporting and retain CPSA compliance-related records for at least five years. The underlying purpose of this requirement is to implement a program designed to avoid poor reporting of future incidents. Adopting a similar policy in your organization may help minimize future liability even if a CPSA compliance program is not mandated for your company.
Peter Hicks is an employment and commercial litigation attorney at Jordan Ramis PC. He can be reached at 541-550-7900 or firstname.lastname@example.org.