Outboard Marine Corp., a Corporation; Provisional Acceptance of a Settlement Agreement and Order

CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 95-C0011]

Outboard Marine Corp., a Corporation; Provisional Acceptance of a

Settlement Agreement and Order

AGENCY: Consumer Product Safety Commission.

ACTION: Provisional Acceptance of a Settlement Agreement Under the

Consumer Product Safety Act.

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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

Outboard Marine Corporation, a corporation.

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 May 8, 1995.

ADDRESSES: Persons wishing to comment on this Settlement Agreement

should send written comments to the Comment 95-C0011, Office of the

Secretary, Consumer Product Safety Commission, Washington, DC 20207.

FOR FURTHER INFORMATION CONTACT:

Michael J. Gidding, Trial Attorney, Office of Compliance and

Enforcement, Consumer Product Safety Commission, Washington, DC 20207;

telephone (301) 504-0626.

SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears

below.

Dated: April 14, 1995.

Sadye E. Dunn,

Secretary.

Settlement Agreement

In the matter of: Outboard Marine Corporation; a corporation.

CPSC Docket No. 95-C0011.

1. This Settlement Agreement, entered into between the Outboard

Marine [[Page 19895]] Corporation, a corporation (hereinafter ``OMC''),

and the staff of the Consumer Product Safety Commission (hereinafter

``the staff'') is a compromise resolution of the matter described

herein, without a hearing or determination of issues of law or fact.

I. The Parties

2. Outboard Marine Corporation is a manufacturer of boats and

boating equipment. During the period of time relevant to this matter,

OMC also owned subsidiaries that manufactured lawn and garden

equipment. From 1987 to May, 1989, OMC owned and operated a division

known as Lawn-Boy, Inc. (hereinafter ``Lawn-Boy''), a manufacturer and

distributor of various models of lawn mowers. From June, 1989 until

November 7, 1989, when Lawn-Boy was sold to the Toro Company, Lawn-Boy

operated as a wholly-owned corporate subsidiary of OMC.

3. The staff of the Consumer Product Safety Commission (hereinafter

``the Commission'') are those members of the Commission's staff

responsible for enforcing the laws administered by the Commission. The

Commision is an independent federal regulatory agency established by

Congress pursuant to section 4 of the Consumer Product Safety Act

(hereinafter, ``the CPSA'' or ``the Act''), 15 U.S.C. 2053.

II. Jurisdiction

4. Lawn-Boy, acting in its capacity as a division and, after June

4, 1989, as a wholly-owned corporate subsidiary of OMC, manufactured

the lawn mowers at issue in this proceeding for sale to consumers for

use around permanent or temporary households or residences. These lawn

mowers are ``consumer products'' within the meaning of subsection

3(a)(1) of the CPSA, 15 U.S.C. 2051(a)(1).

5. Between approximately October 1, 1987 and August 29, 1989, Lawn-

Boy manufactured and distributed over 160,000 lawn mowers identified as

``L'' series lawn mowers for sale to consumers throughout the United

States. During 1989, Lawn-Boy also manufactured lawn mowers under the

``M'' series and ``Model 8157'' designations, respectively, for sale to

consumers throughout the United States. Lawn-Boy, therefore, is a

``manufacturer'' of consumer products which are ``distributed in

commerce'', as those terms are defined in sections 3(a)(4) and (11) of

the CPSA, 15 U.S.C. 2052(a)(4) and (11). With respect to lawn mowers

manufactured during the time prior to June, 1989 when Lawn Boy was a

division of OMC, OMC was also a ``manufacturer'' of consumer products

which were distributed in commerce, as those terms are defined in

sections 3(a)(4) and (11) of the CPSA.

III. The Products

6. The products at issue in this matter are walk-behind lawn

mowers.

IV. Staff Allegations

7. OMC was responsible for controlling the acts and practices of

Lawn-Boy, both as a division and subsequently as a corporate subsidiary

of OMC, including complying with the requirements of section 15(b) of

the CPSA, 15 U.S.C. 2064(b), and the regulations issued thereunder, 16

CFR 1115, et seq.

8. Section 15(b) of the Consumer Product Safety Act, 15 U.S.C.

2064(b), requires a manufacturer of a consumer product who obtained

information that reasonably supported the conclusion that the product

contained a defect which could create a substantial product hazard to

inform the Commission immediately of the defect or risk.

The ``L'' Series Lawn Mowers

9. Between October, 1987 and August, 1989, Lawn-Boy/OMC ``L''

series lawn mowers were equipped with gas tanks that were susceptible

to leakage and thus were defective because of improper bonding of the

tank halves during a hot-plate welding process. Lawn-Boy/OMC learned of

the leakage problem in 1988 and replaced leaking gas tanks on lawn

mowers brought in for service through 1988 and 1989. In early 1989,

Lawn-Boy's/OMC's fuel tank supplier modified the tank design to improve

bonding of the gas tank halves. In August, 1989, Lawn-Boy/OMC

authorized its tank supplier to build new machinery to improve the hot-

welding process to correct the leakage problem.

10. Both as the manufacturer of the lawn mowers that are the

subject of paragraph 9 and, after June, 1989, in its capacity as

corporate parent of its wholly-owned subsidiary, Lawn-Boy, OMC knew or,

with the exercise of due diligence, should have known that the tanks on

the ``L'' series lawn mowers were defective and that the defect could

expose consumers to a substantial risk of injury from fire.

11. Despite the pattern of ``L'' series tank seam failures that

occurred prior to the sale of Lawn-Boy, OMC failed to provide any

information concerning the failures to the Commission.

12. OMC's failure to report information relating to gas tank seam

failures on ``L'' series mowers to the Commission violated section

15(b) of the CPSA, as amended, 15 U.S.C. 2064(b).

The ``M'' Series Lawn Mowers

13. During 1989, Lawn-Boy/OMC manufactured and distributed ``M''

series lawn mowers that experienced gas tank leakage. The method of

mounting and attaching the tanks to the mower engines resulted in wear

on the tanks that caused the tanks to leak. Lawn-Boy/OMC received

complaints of fuel leakage caused by the defective mounting method.

14. Both as the manufacturer of lawn mowers that are the subject of

paragraph 13 and, after June, 1989, in its capacity as the corporate

parent of its wholly-owned subsidiary, Lawn-Boy, OMC knew, or with the

exercise of due diligence, should have known that the method of

mounting the tanks was defective and could expose consumers to a

substantial risk of injury from fire. Despite the pattern of ``M''

series tank failures, OMC failed to provide any information concerning

the failures to the Commission.

15. OMC's failure to report information relating to gas tank

failures on the ``M'' series lawn mowers to the Commission violated the

requirements section 15(b) of the CPSA, as amended, 15 U.S.C. 2064(b).

The ``Model 8157'' Series Lawn Mowers

16. From 1987 to 1989, Lawn-Boy/OMC manufactured and distributed

Model 8157 series lawn mowers. In 1989, Lawn-Boy/OMC received

complaints that the gas tanks on these lawn mowers were experiencing

gas leakage as a result of fractures in the fuel tank nipples.

17. Both as a manufacturer of the lawn mowers that are the subject

of paragraph 16 and, after June, 1989, in its capacity as the corporate

parent of its wholly-owned subsidiary, Lawn-Boy, OMC knew, or, with the

exercise of due diligence, should have known that the fracturing gas

tank fuel nipples were defective and could expose consumers to a

substantial risk of injury from fire. Despite the pattern of Model 8157

tank failures, OMC failed to provide any information concerning the

failures to the Commission.

18. OMC's failure to report information relating to gas tank

failures on the Model 8157 series lawn mowers to the Commission

violated section 15(b) of the CPSA, as amended, 15 U.S.C. 2064(b).

V. Response of OMC

19. OMC denies and does not accept as factual each and all of the

staff [[Page 19896]] allegations with respect to the mowers identified

in this agreement, nor does OMC admit to any liability in this matter.

Further, OMC denies the allegations that the Lawn-Boy ``L'' series lawn

mowers identified in paragraph 9 of this agreement, the ``M'' series

lawn mowers identified in paragraph 13, and the ``Model 8157'' series

lawn mowers identified in paragraph 16 contained defects which created

or could have created a substantial product hazard within the meaning

of section 15(a) of the CPSA, 15 U.S.C. 2064(a). Accordingly, OMC

contends that no obligation to report to the Commission under section

15(b) existed with respect to any of these lawn mowers.

20. OMC further contends that the Commission's acceptance of a

$170,000 civil penalty from the Toro Company for the failure to report

to the Commission information relating to the gas tank failures

identified in paragraphs 9, 13, and 16 of this Settlement Agreement and

Order constitutes an election of remedies by the Commission which

extinguishrs any alleged liability on the part of OMC.

21. OMC further asserts that it received no reports of injuries

from the use of any of the products enumerated in this agreement prior

to and after the sale of Lawn-Boy to Toro. OMC makes no admission

whatsoever of any fault, liability, or statutory violation in the event

any person should claim injuries resulting from the use of these

products.

VI. Agreement of the Parties

22. The parties enter this agreement solely for the purposes of

settlement. OMC and the staff agree that the Commission has

jurisdiction in this matter for purposes of entry and enforcement of

this Settlement Agreement and Order.

23. OMC shall pay the Commission a civil penalty in the amount of

seventy-five thousand dollars ($75,000) payable within twenty (20) days

after service of the Final Order. Payment of the full amount of the

penalty shall settle fully the staff's allegations set forth in

paragraphs 9 through 18 above. OMC shall have no further liability to

the Commission for any corrective action concerning the leaking gas

tanks described in paragraphs 9, 13, and 16 of this complaint.

24. For the purposes of settlement, OMC waives any rights it may

have in this matter under section 6(b)(1) through (5) of the CPSA, 15

U.S.C. 2055(a)(1)-(5).

25. Upon provisional acceptance of this Settlement Agreement and

Order, the agreement and order shall be placed on the public record and

shall be published in the Federal Register in accordance with the

procedure set forth in 16 CFR 1118.20(e). If, within 15 days of

publication, the Commission has not received any written request not to

accept the Settlement Agreement and Order, the Settlement Agreement and

Order will be deemed to be finally accepted on the 16th day after the

date it is published in the Federal Register (16 CFR 1118.20(f)). Upon

final acceptance, the Commission shall issue and serve upon OMC the

attached Order incorporated herein by reference.

26. Upon final acceptance of this Settlement Agreement and Order by

the Commission, OMC knowingly, voluntarily, and completely waives any

rights it might have: (1) To an administrative or judicial hearing with

respect to the Commission's claim for a civil penalty, (2) to judicial

review or other challenge to or contest of the validity of the

Commission's action with regard to its claim for a civil penalty, (3)

to 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, and (4) to

a statement of findings of fact and conclusions of law with regard to

the Commission's claim for a civil penalty.

27. The parties further agree that the Commission shall issue the

incorporated Order under the CPSA, 15 U.S.C. 2051 et seq., and that a

violation of the Order will subject OMC to appropriate legal action.

28. No agreement, understanding, representation, or interpretation

not contained in this Settlement Agreement may be used to vary or

contradict its terms.

Outboard Marine Corporation.

Dated: April 12, 1995.

Michael A. Brown,

Counsel.

The Consumer Product Safety Commission.

Dated: April 12, 1995.

David Schmeltzer,

Associate Executive Director, Office of Compliance and Enforcement.

Eric C. Stone,

Director, Division of Administrative Litigation, Office of Compliance

and Enforcement.

Michael J. Gidding,

Attorney, Division of Administrative Litigation, Office of Compliance

and Enforcement.

Order

In the matter of: Outboard Marine Corporation; a corporation.

CPSC Docket No. 95-C0011.

Upon consideration of the Settlement Agreement entered between

respondent Outboard Marine Corporation, a corporation, and the staff of

the Consumer Product Safety Commission; and the Commission having

jurisdiction over the subject matter and Outboard Marine Corporation;

and it appearing the Settlement Agreement is in the public interest, it

is

Ordered, that the Settlement Agreement be and hereby is accepted,

as indicated below; and it is

Further Ordered, that upon final acceptance of the Settlement

Agreement, Outboard Marine Corporation shall pay to the order of the

Consumer Product Safety Commission a civil penalty in the amount of

seventy-five thousand dollars ($75,000), within twenty (20) days after

receipt of the Final Order and Decision in this matter.

Provisionally accepted and Provisional Order issued on the 14th

day of April, 1995.

By order of the Commission.

Sadye E. Dunn,

Secretary, Consumer Product Safety Commission.

[FR Doc. 95-9848 Filed 4-20-95; 8:45 am]

BILLING CODE 6355-01-M