Consolidated Electrical Distributors, Inc., a Domestic Corporation, Provisional Acceptance of a Settlement Agreement and Order

CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 99-C0007]

Consolidated Electrical Distributors, Inc., a Domestic

Corporation, 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

1115.20(b)(4). Published below is a provisionally-accepted Settlement

Agreement with Consolidated Electrical Distributors, Inc., containing a

civil penalty of $1,500,000.

DATES: Any interested person may ask the Commission not to accept this

agreement or otherwise comment on it contents by filing a written

request with the Office of the Secretary by August 27, 1999.

ADDRESSES: Persons wishing to comment on this Settlement Agreement

should send written comments to the Comment 99-C0007, Office of the

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

FOR FURTHER INFORMATION CONTACT: Howard N. Tarnoff, Trial Attorney,

Office of Compliance and Enforcement, Consumer Product Safety

Commission, Washington, DC 20207; telephone (301) 504-0626, 1346.

SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears

below.

Dated: August 5, 1999.

Sadye E. Dunn,

Secretary.

UNITED STATES OF AMERICA

Consumer Product Safety Commission

In the Matter of Consolidated Electrical Distributors, Inc.;

Respondent

CPSC DOCKET NO. 99-C0007

Consent Agreement

This Consent Agreement is made by and between the staff of the

Consumer Product Safety Commission, and Consolidated Electrical

Distributors, Inc., a domestic corporation, to settle the staff's

allegations that Consolidated Electrical Distributors, Inc.,

distributed in commerce certain allegedly defective in-wall electric

heaters manufactured by Cadet Manufacturing Company (``Cadet''), a

domestic corporation, with its principal place of business located

at 2500 West Fourth Plain Boulevard, Vancouver, Washington 98660.

Parties

1. The ``staff'' is the staff of the Consumer Product Safety

Commission (``CPSC'' or ``the Commission''), an independent

regulatory agency of the United States of America, established by

Congress pursuant to Section 4 of the Consumer Product Safety Act

(``CPSA''), 15 U.S.C. 2053, as amended.

2. Respondent Consolidated Electrical Distributors, Inc.

(``CED'') is a corporation organized and existing under the laws of

the State of Delaware, with its principal place of business located

at 31356 Via Colinas, Westlake Village, California 91362. CED is a

distributor of electrical materials and products.

Subject Matter

3. Since approximately 1978, Cadet has allegedly manufactured,

sold and/or distributed in commerce in-wall electric heaters for use

in homes and residences under the brand names ``Cadet'' and

``Encore.'' These include all models and variants within each model

of the series FW (including models FW-051, FW-101, FW-122, FW-202,

and FW-751), manufactured between 1978 and 1987; series FX

(including models FX-051, FX-052, FX-071, FX-072, FX-101, FX-102,

FX-122, FX-151, FX-152, FX-202, FX-242), manufactured between 1985

and 1994; series LX (including models LX-242, LX-302, LX-402, and

LX-482), manufactured between 1985 and 1994; series TK (including

models TK-051, TK-071, TK-072, TK-101, TK-102, TK-151, and TK-152),

manufactured between 1984 and 1998; series ZA (including models ZA-

051, ZA-052, ZA-071, ZA-072, ZA-101, ZA-102, ZA-122, ZA-151, ZA-152,

ZA-202, and ZA-242), manufactured between 1985 and 1994; series Z

(including models ZA-072, ZA-101, ZA-102, ZA-151, ZA-152, ZA-202,

and ZA-208), manufactured between 1993 and 1999; and all series and

models of the same or functionally identical heaters manufactured

and distributed by Cadet under the Encore brand name, including

series RX (including models RX-072, RX-101, RX-102, RX-151, RX-152,

RX-202, and RX-242), manufactured between 1985 and 1994; series RLX

(including models RLX-302, RLX-402, and RLX-482) manufactured

between 1985 and 1994; series RK (including models RK-101 and RK-

102), manufactured between 1984 and 1998; series RA (including

models RA-101, RA-102, RA-151, RA-152, RA-202), manufactured between

1985 and 1994; and series ZC (including models ZC-072, ZC-101, ZC-

102, ZC-151, ZC-152, ZC-202, and ZC-208), manufactured between 1993

and 1999. For each of these heaters, the variants signified by the

suffix T (with thermostat), W (white color), and TW (with thermostat

and white color) found after the model number are included. All the

heaters and variants referred to in this paragraph shall hereinafter

be collectively referred to as ``the Heaters.'' The Heaters were

sold and/or distributed to consumers principally in the States of

California, Idaho, Montana, Oregon, and Washington. Since

approximately 1978, CED has allegedly sold and/or distributed

certain of the Heaters in commerce.

4. On January 14, 1999, the staff filed an Administrative

Complaint (``Complaint'') against Cadet, seeking a determination

that certain of the Heaters present a substantial product hazard

within the meaning of Section 15(a)(2) of the CPSA, 15 U.S.C.

2064(a)(2), and public notice and a recall of certain of the Heaters

pursuant to Sections 15(c) and (d) of the CPSA, 15 U.S.C. 2064(c)

and (d). The Complaint alleged that certain of the Heaters are

defective and present a substantial product hazard within the

meaning of Section 15(a)(2) of the CPSA, 15 U.S.C. 2064(a)(2),

because their design and/or manufacture causes them to overheat,

fail, and catch fire; and/or allows lint, dirt, or debris to build

up within the heaters and catch fire. The Complaint also alleged

that the design of certain of the Heaters can cause the Heaters to

spew flames and/or burning or molten particles, or eject sparks into

the living space of a home or residence, or energize the Heaters

creating a risk of electric shock. The staff has agreed with Cadet

to the terms of a corrective action plan for notification to

consumers and for the replacement of the Heaters (``the Corrective

Action Plan'' or ``the Plan''). The Corrective Action Plan is

incorporated in a Consent Agreement and Order between Cadet and the

staff, which was executed by Cadet on June 17, 1999 and executed by

the staff on June 18, 1999, and will be submitted to the Commission

for final approval.

Agreement of the Parties

5. It is the express purpose of the parties entering this

Consent Agreement to protect the public safety by assisting Cadet's

recall and replacement of the Heaters.

6. Fulfillment of the terms of this Consent Agreement and the

attached Order (hereinafter ``Order'' or ``the Order''), which is

hereby incorporated by reference, shall resolve all potential

obligations of CED (and each of CED's predecessors, successors,

assigns, parents, subsidiaries, affiliated entities, agents,

representatives, attorneys, employees, officers, directors,

stockholders, and principals) (collectively ``the CED Releasees'')

under Section 15(c) and (d) of the CPSA, 15 U.S.C. 2064(c) and (d),

to give public notice of the alleged hazard presented by the

Heaters, and to repair, replace, or refund the purchase price of the

Heaters. Fulfillment of the terms of this Consent Agreement and

Order shall also resolve all potential obligations and liabilities

of the CED Releasees for all other claims and causes of action which

could have been alleged by the CPSC against the CED Releasees

relating to the Heaters, based upon information known to the CPSC,

or otherwise in the CPSC's possession, at the time the CPSC staff

signs this Consent Agreement. Nothing in this Paragraph 6 is

intended to limit the CPSC's rights under Paragraph 21 of this

Consent Agreement.

7. The staff believes that this Consent Agreement and Order is

an equitable resolution of consumer claims against CED for

replacement heaters, and the staff has concluded that the Corrective

Action Plan, and CED's participation in that Plan, will provide an

effective, fair, reasonable and adequate remedy for consumers

throughout the United States who own or are otherwise exposed to the

heaters by notifying

[[Page 43991]]

consumers of the alleged hazard and providing replacement heaters to

them, and that this Agreement is, therefore, in the best interests

of consumers.

8. This Consent Agreement and Order shall not be deemed or

construed as an admission by CED or as evidence: (a) Of any

violation of law or regulation by CED; (b) of other wrongdoing by

CED; (c) that the Heaters are defective, create a substantial

product hazard, or are unreasonably dangerous; or (d) of the truth

of any claims or other matters alleged or otherwise stated by the

CPSC or any other person either against CED or with respect to the

Heaters. Except as specifically set forth in Paragraphs 9, 10, and

11, below, CED does not admit the factual allegations and other

statements, or any conclusions of law, as alleged or otherwise

stated in the Complaint or this Consent Agreement and Order which

relate to the Heaters.

9. The Heaters are ``consumer products'' within the meaning of

Section 3(a)(1) of the CPSA, 15 U.S.C. 2052(a)(1).

10. CED is a ``distributor'' of ``consumer product[s],'' which

are ``distributed in commerce,'' as those terms are defined in

Sections 3(a)(1), (5), and (11) of the CPSA, 15 U.S.C. 2052(a)(1),

(5), and (11).

11. The CPSC has jurisdiction over CED and the Heaters under

Sections 3(a)(1), (5), and (11) and Section 15 of the CPSA, 15

U.S.C. 2052(a)(1), (5), and (11) and Sec. 2064.

12. For purposes of this settlement only, CED agrees not to

contest the staff's allegation, which CED denies, that the Heaters

contain a ``defeat which creates a substantial product hazard,'' as

those terms are defined in Section 15(a) of the CPSA, 15 U.S.C.

2064(a).

13. Upon final acceptance by the CPSC of this Consent Agreement

and Order, CED knowingly, voluntarily, and completely waives and

relinquishes any past, present, and/or future right or rights in

this matter captioned In the Matter of Consolidated Electrical

Distributors, Inc., CPSC Docket No. 99-C0007: (a) To an

administrative or judicial hearing and to all further procedural

steps--including findings of fact and conclusions of law--to

determine whether the Heaters contain a defect which creates a

substantial product hazard within the meaning of Section 15 of the

CPSA; (b) to seek judicial review or otherwise challenge or contest

the validity of this Consent Agreement and Order as issued and

entered; (c) to seek judicial review of this or any past orders,

findings, and/or determinations of the CPSC in this matter, except

as set forth in Paragraphs 22 and 25 of this Consent Agreement; and

(d) to file any claim or to seek any remedy under the Equal Access

to Justice Act.

14. The Order is issued under Sections 15(c) and (d) of the

CPSA, 15 U.S.C. 2064(c) and (d), and a violation of this Consent

Agreement and Order is a prohibited act within the meaning of

Section 19(a)(5) of the CPSA, 15 U.S.C. 2068(a)(5), and may subject

CED to civil and/or criminal penalties under Sections 20 and 21 of

the CPSA, 15 U.S.C. 2069 and 2070.

15. The parties agree to fulfill all requirements of this

Consent Agreement and Order.

16. For all purposes, the Consent Agreement and Order shall

constitute an enforceable judgment obtained in an action or

proceeding by a governmental unit to enforce its police and

regulatory power. CED acknowledges and agrees that this Consent

Agreement and Order are pursuant to the CPSC's police and regulatory

power to remedy the alleged risk created by the Heaters, and that,

once CED signs the Consent Agreement and Order, the Consent

Agreement and Order will not be subject to an automatic stay in any

bankruptcy proceeding involving CED.

17. CED acknowledges that any interested person may bring any

action pursuant to Section 24 of the CPSA, 15 U.S.C. 2073, in the

United States District Court in which CED is found or transacts

business, to enforce the Order and to obtain appropriate injunctive

relief.

18. This Consent Agreement and Order shall be binding upon and

inure to the benefit of the parties hereto and their successors,

assigns, and any operating bankruptcy trustees or receivers. If,

prior to the termination of this Consent Agreement and Order, CED

merges with any other business entity or sells, assigns, or

otherwise transfers substantially all of its assets, CED shall

provide reasonable prior notice to the surviving corporation or to

the purchaser, assignee, or transferee of substantially all of CED's

assets, of this Consent Agreement and Order, and of its binding

effect upon said surviving corporation, purchaser, assignee, or

transferee. The existence of this Consent Agreement and Order and

its binding effect shall be noted in any agreement between CED and

such surviving corporation, purchaser, assignee, or transferee. It

shall be a condition of any such merger, sale, assignment, or

transfer that the surviving corporation or the purchaser, assignee,

or transferee shall execute a document agreeing to be bound by the

provisions of this Consent Agreement and Order and shall submit to

the jurisdiction of the CPSC for purposes of enforcement of this

Consent Agreement and Order. In the event of any merger, sale,

assignment, or transfer of substantially all of CED's assets, CED

shall provide written notice to the staff at least sixty (60) days

prior to any such merger, asset sale, assignment, or transfer.

19. The CPSC, the staff, and/or CED may disclose terms of this

Consent Agreement and Order to the public.

20. The staff is entering into this Consent Agreement and Order

upon reliance on CED's representation that CED and Cadet have

executed a settlement agreement dated June 22, 1999 (``the CED/Cadet

Settlement Agreement'') that provides, inter alia: (a) For the

payment by CED to Cadet, subject to the terms of the CED/Cadet

Settlement Agreement, of Six Hundred and Fifty-One Thousand Dollars

($651,000) in satisfaction of CED's pre- and post-bankruptcy

petition accounts receivable debts claimed by Cadet; and (b) for CED

to purchase Two Million Dollars ($2,000,000) worth of products from

Cadet, at market prices, over the next two years following the

effective date of this Consent Agreement and Order, subject to the

terms and conditions of the CED/Cadet Settlement Agreement.

21. The CPSC, at its sole discretion and upon reasonable notice

to the staff and CED, may void, suspend, or rescind all, or any

part, of this Consent Agreement and Order if, in CED's letter to the

staff dated March 10, 1999, CED materially and knowingly

misrepresented the dollar amount of the products it purchased from

Cadet from 1989 through 1998, or if CED and Cadet have not executed

the CED/Cadet Settlement Agreement referred to in Paragraph 20 of

this Consent Agreement. In no event shall a default by Cadet under

the CED/Cadet Settlement Agreement or any termination resulting from

a default by Cadet affect the CPSC's and CED's rights and

obligations under this Consent Agreement and Order. Notwithstanding

the provisions of Paragraph 32 of this Consent Agreement, the CPSC

may exercise its rights under this Paragraph 21 within, and not

later than, three (3) years after the date on which the CPSC finally

accepts this Consent Agreement and enters the Order.

22. If any provision of this consent Agreement and Order is held

to be illegal, invalid, or unenforceable under present or future

laws effective during the term of this Consent Agreement and Order,

such provision shall be fully severable. In such event, there shall

be added as part of this consent Agreement and Order a provision as

similar in terms to such illegal, invalid, or unenforceable

provision as may be possible and be legal, valid, and enforceable.

The effective date of the added provision shall be the date upon

which the prior provision was held to be invalid, illegal, or

unenforceable. the rest of the Consent Agreement and Order shall

remain in full effect, unless the CPSC determines, after providing

CED with notice and a reasonable opportunity to comment, that

severing the provision materially impacts the Corrective Action Plan

or remediation program set forth in this Consent Agreement and

Order. The CPSC determination shall constitute the final agency

decision and shall be subject to judicial review, such review to be

based upon the record of any such CPSC proceeding and according to

law.

23. This Consent Agreement and Order have been negotiated by the

parties. CED is not relying on the advice of the staff, nor anyone

associated with the staff, as to legal, tax, or other consequences

of any kind arising out of this Consent Agreement and Order, and CED

specifically assumes the risk of all legal, tax, and other

consequences.

24. CED acknowledges that this Consent Agreement and Order have

been negotiated between unrelated, sophisticated, and knowledgeable

parties acting in their own self-interest and represented by

counsel, and the provisions of this Consent Agreement and Order

shall not be interpreted or construed against any person or entity

because that person or entity or any of its attorneys or

representatives drafted or participated in drafting this Consent

Agreement and Order.

25. The provisions of this Consent Agreement and Order shall be

interpreted in a reasonable manner to effect its purpose to remedy

the alleged hazard that the Heaters pose and to resolve potential

claims by the CPSC against CED with respect to the

[[Page 43992]]

Heaters. In the event of a dispute between the parties arising under

this Consent Agreement and Order, the parties agree to submit the

dispute to non-binding arbitration by a panel of three arbitrators,

according to the rules of the American Arbitration Association then

in effect. The CPSC and CED shall each have the right to select one

arbitrator, and shall jointly select the third arbitrator. If the

CPSC and CED are unable to agree on the selection of the third

arbitrator, that arbitrator shall be selected by the American

Arbitration Association. Either party may institute an action,

following the non-binding decision rendered by the arbitration

panel, in the United States District Court for the District Court

for the District of Columbia. Notwithstanding the foregoing, neither

the arbitrators nor the CPSC shall have authority to resolve dispute

arising under the CED/Cadet Settlement Agreement, including but not

limited to those provisions referred to in Paragraph 20, above, nor

may any rights or obligations arising out of the CED/Cadet

Settlement Agreement be enforced through this Consent Agreement and

Order.

26. The existence of a dispute between the staff and CED over

any provision of this Consent Agreement and Order shall not excuse,

toll, or suspend any obligation or deadline imposed upon CED or the

staff under this Consent Agreement and Order, other than the

specific provisions in dispute.

27. This Consent Agreement and Order shall not be waived,

changed, amended, modified, or otherwise altered, except in writing

executed by the parties and approved by the CPSC.

28. This Consent Agreement and Order contain the entire

agreement, understanding, representation, and interpretation of the

parties herein, and nothing else may be used to vary or contradict

its terms.

29. CED and the staff consent to the entry of the Order attached

hereto.

30. Upon provisional acceptance of this Consent Agreement and

Order by the CPSC, this Consent Agreement and Order shall be placed

on the public record and shall be published in the Federal Register

in accordance with the procedures set forth in 16 CFR 1115.20(b)(4).

If the CPSC does not receive any written request not to accept this

Consent Agreement and Order within fifteen (15) calendar days, this

Consent Agreement and Order shall be deemed finally accepted on the

twentieth (20th) calendar day after the date it is published in the

Federal Register, in accordance with 16 CFR 1115.20(b)(5).

31. Upon final acceptance by the CPSC of this Consent Agreement

and Order, the CPSC shall issue the incorporated Order. This Consent

agreement and Order shall become effective upon service of the

signed Order upon CED.

32. CED's obligations under this Consent Agreement and Order

shall terminate when CED makes the final payment required under

Paragraphs 4 and 5 of the Order.

33. CED makes the monetary payments described in Paragraphs 4

and 5 of the Order solely as restitution to fund the Corrective

Action Plan and thereby to settle claims arising out of its alleged

distribution of the Heaters. CED makes the monetary payment

described in paragraph 20 of this Consent Agreement solely to

satisfy Cadet's claims against CED for pre- and post-bankruptcy

petition accounts receivable debts claimed by Cadet. No payment made

pursuant to or referred to in this Consent Agreement and Order is a

fine or other penalty paid with respect to any violation of any law

or regulation. Payment hereunder does not constitute, nor shall it

be construed or treated as, payment in lieu of a fine or other

penalty, punitive recovery, or forfeiture.

34. Each party shall cooperate fully to implement its obligation

under the terms and conditions of this Consent Agreement and Order.

35. The parties have executed two (2) identical copies of this

Consent Agreement and the two copies shall be treated as one and the

same executed Consent Agreement.

Dated: July 19, 1999.

Howard N. Tarnoff, Trial Attorney,

Magaret H. Plank, Trial Attorney

Eric L. Stone, Director, Legal Division, Alan H. Schoem, Assistant

Executive, Director, Office of Compliance, U.S. Consumer Product

Safety Commission, 4330 East West Highway, Bethesda, MD 20814,

Telephone: (301) 504-0626

Dated July 19, 1999.

Blake A. Biles, Esq., Jamellah L. Braddock, Esq., Arnold & Porter,

555 Twelfth Street, NW, Washington, DC 20004-1206, Telephone: (202)

942-5836

Counsel for Respondent, Consolidated Electrical Distributors, Inc.

H. Dean Bursch, President & Chief Executive Officer, Consolidated

Electrical Distributors, Inc.

Order

Upon Consideration of the Consent Agreement entered into between

Respondent Consolidated Electrical Distributors, Inc. (``CED'') and

the staff of the Consumer Product Safety Commission (``the staff'')

(collectively ``the parties''); and

The Consumer Product Safety Commission (``CPSC'' or ``the

Commission'') having jurisdiction over the subject matter and CED;

It is hereby ordered that:

1. The Consent Agreement between CED and the staff is

incorporated herein by reference and accepted, and CED shall comply

with all obligations of the Consent Agreement and this Order.

2. Based on the Consent Agreement, the CPSC finds that the

Consent Agreement and this Order are necessary to protect the public

from the alleged hazard presented by Cadet's series FW, FX, LX, TK,

ZA, and Z in-wall electric heaters, and the functionally identical

heaters manufactured and distributed by Cadet under the Encore brand

name, including series RX, RLX, RK, RA, and ZC. These heaters shall

hereinafter be collectively referred to as ``the Heaters.''

3. CED shall immediately cease and desist offering for sale and/

or distributing in commerce any of the Heaters, whether by itself or

through its subsidiaries, affiliates, CED-owned distribution

centers, or any other persons or entities over whom CED has control.

4. CED shall pay into a staff-designated, interest-bearing

escrow account (``the escrow account''), the sum of ONE MILLION FIVE

HUNDRED THOUSAND DOLLARS ($1,500,000), according to the following

schedule:

a. TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000) upon the

CPSC's final acceptance of this Order.

b. FIVE HUNDRED THOUSAND DOLLARS ($500,000) on or before the

later of August 1, 1999, or upon the CPSC's final acceptance of this

Order.

c. FIVE HUNDRED THOUSAND DOLLARS ($500,000) on or before the

later of October 1, 1999, or upon the CPSC's final acceptance of

this Order.

d. TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000) on or

before the later of December 1, 1999, or upon the CPSC's final

acceptance of this Order.

5. CED shall pay into the escrow account a contingent

contribution of an additional FIVE DOLLARS ($5.00) for every heater

in excess of two hundred and fifty thousand (250,000) heaters

ordered by consumers under the Consent Agreement and Order between

Cadet and the staff executed by Cadet on June 17,1999 and by the

staff on June 18, 1999 (the ``Cadet Consent Agreement and Order'');

provided, CED's contingent contribution shall be capped at FIVE

HUNDRED THOUSAND DOLLARS ($500,000), and in no event shall CED be

required to make more than one contingent contribution payment. CED

shall pay its contingent contribution within fifteen (15) days of

CED's receipt of written notice from the staff either: (a) That

consumers have ordered at least 350,000 total replacement heaters

under the Cadet Consent Agreement and Order; or (b) specifying the

number of replacement heaters in excess of 250,000 ordered by

consumers within twenty-four (24) months after the Effective Date of

the Cadet Consent Agreement and Order.

6. The monetary payments referred to in Paragraphs 4 and 5,

above, may be distributed by the CPSC to offset expenses directly

related to Cadet's CPSC-approved Corrective Action Plan.

7. In addition to any penalty it may incur pursuant to Paragraph

14 of the Consent Agreement, if CED fails to make timely

contributions to the escrow account, as required by Paragraphs 4 and

5 of this Order, CED shall be liable for additional contributions to

the escrow account. Such additional contributions shall include the

following:

a. Interest at the percentage rate established by the Department

of the Treasury pursuant to 31 U.S.C. 3717, for any period after the

due date; and

b. A five percent (5%) per month penalty charge if the deposit

is not made within thirty (30) days after the due date.

Provisionally accepted and Provisional Order issued on the 5th day

of August, 1999.

By order of the Commission.

Sadye E. Dunn,

Secretary, Consumer Product Safety Commission.

[FR Doc. 99-20803 Filed 8-11-99; 8:45 am]

BILLING CODE 6355-01-M