Eoff Electric Company, Provisional Acceptance of a Settlement Agreement and Order

CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 00-C0003]

Eoff Electric Company, 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 Eoff Electric Company, containing monetary payments

totalling between $205,000 and $369,000.

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 January 6, 2000.

ADDRESSES: Persons wishing to comment on this Settlement Agreement

should send written comments to the Comment 00-C0003, Office of the

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

FOR FURTHER INFORMATION CONTACT:

Howard N. Tarnoff, Trial Attorney, Office of Compliance, Consumer

Product Safety Commission, Washington, DC 20207; telephone (301) 504-

0626, 1382.

SUPPLEMENTARY INFORMATION: The test of the Agreement and Order appears

below.

Dated: December 16, 1999.

Sadye E. Dunn,

Secretary.

Consent Agreement

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

Consumer Product Safety Commission, and Eoff Electric Company

(``Eoff''), a domestic corporation, to settle the staff's allegations

that Eoff 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 (``the 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. Sec. 2053, as amended.

2. Respondent Eoff is a corporation organized and existing under

the laws of the State of Oregon, with its principal place of business

located at 131 Pine Street NE, Salem, OR 97303. Eoff 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,

and 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 Z-072, Z-101, Z-102, Z-151, Z-152,

Z-202, and Z-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

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1985 and 1994; series RK (including models RK-101 and RX-102),

manufactured between 1984 and 1998; series RA (including models RA-101,

RA-102, RA-151, RA-152, and 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 1988, Eoff

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 produce hazard within the meaning of

Section 15(a)(2) of the CPSA, 15 U.S.C. Sec. 2064(a)(2), and public

notice and a recall of certain of the Heaters pursuant to Section 15(c)

and (d) of the CPSA, 15 U.S.C. Secs. 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. Sec. 2064(a)(2), because their design and/or

manufacture causes them to overheat, fail, and catch fire; and/or allow

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.

On July 30, 1999, the CPSC approved a Consent Agreement and Order

(``the Cadet Order'') between the Staff and Cadet which, inter alia,

required Cadet to undertake a remediation program for notification to

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

Corrective Action Plan'' or ``the Plan''), upon final approval of the

Plan by the United States Bankruptcy Court for the Western District of

Washington at Tacoma (the date of final approval being referred to

herein as the ``Effective Date'' of the Cadet Order).

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 Eoff (and each of Eoff's predecessors, successors,

assigns, parents, subsidiaries, affiliated entities, agents,

representatives, attorneys, employees, officers, directors,

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

under Sections 15(c) and (d) of the CPSA, 15 U.S.C. Secs. 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

Eoff Releasees for all other claims and causes of action which could

have been alleged by the CPSC against the Eoff Releasees relating to

the Heaters, based upon information 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 20

of this Consent Agreement.

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

equitable resolution of consumer claims against Eoff for replacement

heaters, and the staff has concluded that the Cadet Corrective Action

Plan, and Eoff'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 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 Eoff or as evidence: (a) of any violation

of law or regulation by Eoff; (b) of other wrongdoing by Eoff; (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 Eoff or with respect to the Heaters.

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

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

10. Eoff 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. Secs. 2052(a)(1), (5),

and (11).

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

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

Secs. 2052(a)(1), (5), and (11) and Sec. 2064.

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

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

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

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

Sec. 2064(a).

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

Order, Eoff knowingly, voluntarily, and completely waives and

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

matter: (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 21 and 24 of this Consent Agreement; (d) to the issuance of

a proposed complaint in accordance with 16 CFR Sec. 1115.20(b); and (e)

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. Secs. 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 Eoff to

civil and/or criminal penalties under Sections 20 and 21 of the CPSA,

15 U.S.C. Secs. 2069 and 2070.

15. Eoff agrees to fulfill all requirements of this Consent

Agreement and Order.

16. for all purposes, this 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. Eoff

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,

[[Page 71739]]

once Eoff signs the Consent Agreement and Order, the Consent Agreement

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

proceeding involving Eoff.

17. Eoff acknowledges that any interested person may bring an

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

United States District Court in which Eoff 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, Eoff merges

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

transfers substantially all of its assets, Eoff shall provide

reasonable prior notice to the surviving corporation or to the

purchaser, assignee, or tranferee of substantially all of Eoff's

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

upon said surviving corporation, purchaser, assignee, or tranferee. The

existence of this Consent Agreement and Order and its binding effect

shall be noted in any agreement between Eoff 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 Eoff's assets, Eoff 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 Eoff may disclose terms of this

Consent Agreement and Order to the public.

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

the staff and Eoff, may void, suspend, or rescind this Consent

Agreement and Order if: (a) Eoff has made material misrepresentations

regarding its financial condition as of the date of this Consent

Agreement and Order; or (b) in Eoff's submissions to the staff dated

May 12, 1999, July 7, 1999, July 9, 1999, and August 23, 1999, Eoff

materially misrepresented the quantity of Heaters it sold.

21. 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 Eoff with notice and a reasonable

opportunity to comment, that severing the provision materially impacts

the Cadet Corrective Action Plan. 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.

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

parties. Eoff 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 Eoff

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

consequences.

23. Eoff 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.

24. 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 Eoff with respect to the Heaters. In the event of a

dispute between the parties arising under this Consent Agreement and

Order, the parties agree to submit the issue for determination by the

CPSC. 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.

25. The existence of a dispute between the staff and Eoff over any

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

or suspend any obligation or deadline imposed upon Eoff under this

Consent Agreement and Order, other than the specific provision in

dispute.

26. 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.

27. 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.

28. Eoff's obligations under this Consent Agreement and Order shall

terminate when Eoff makes the final payment required under Paragraphs 4

and 5 of the Order.

29. Eoff makes the monetary payments described in Paragraphs 4 and

5 of the Order solely as restitution to find the Cadet Corrective

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

distribution of the Heaters. 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.

30. Eoff and the staff consent to the entry of the Order attached

hereto.

31. 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 C.F.R.

Sec. 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 C.F.R.

Sec. 1115.20(b)(5).

32. 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 Eoff.

33. 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.

[[Page 71740]]

Dated: November 12, 1999.

Howard N. Tarnoff,

Trial Attorney.

Margaret 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.

Dated: November 12, 1999.

Victor L. Bartlett,

CEO, Eoff Electric Company.

Order

Upon consideration of the Consent Agreement entered into between

Respondent Eoff Electric Company (``Eoff'') and the staff of the

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

parties''); and

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

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

It is hereby ordered that:

1. The Consent Agreement between Eoff and the staff is incorporated

herein by reference and accepted, and Eoff 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. Eoff 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, Eoff-owned distribution centers,

or any other persons or entities over whom Eoff has control.

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

account (``the Escrow Account''), the sum of TWO HUNDRED AND FIVE

THOUSAND DOLLARS ($205,000), according to the following schedule:

a. FIFTY ONE THOUSAND TWO HUNDRED AND FIFTY DOLLARS ($51,250) on or

before the later of December 15, 1999, or upon the CPSC's final

acceptance of this Order.

b. FIFTY ONE THOUSAND AND TWO HUNDRED AND FIFTY DOLLARS ($51,250)

on or before June 15, 2000.

c. FIFTY ONE THOUSAND AND TWO HUNDRED AND FIFTY DOLLARS ($51,250)

on or before December 15, 2000.

d. FIFTY ONE THOUSAND AND TWO HUNDRED AND FIFTY DOLLARS ($51,250)

on or before June 15, 2001.

5. Eoff shall pay into the Escrow Account contingent

contribution(s) of an additional EIGHTY-TWO CENTS ($0.82) for every

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

ordered by consumers under the Cadet Consent Agreement and Order, which

was approved by the CPSC on July 30, 1999 (``the Cadet Order'');

provided that the sum total of all of Eoff's contingent contribution(s)

shall be capped at ONE HUNDRED AND SIXTY-FOUR THOUSAND DOLLARS

($164,000), and in no event shall Eoff be required to make more than

two contingent contribution payments. Eoff shall pay a contingent

contribution within fifteen (15) days of Eoff's receipt of written

notice from the staff: (a) that consumers have ordered at least 350,000

total replacement heaters under the Cadet 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

Order.

6. The CPSC may authorize the distribution of the monetary payments

referred to in Paragraphs 4 and 5 above: (a) to offset expenses

directly related to Cadet's CPSC-approved Corrective Action Plan; and/

or (b) to otherwise remedy the alleged hazard posed by the Heaters.

7. In addition to any penalty it may incur pursuant to Paragraph 14

of the Consent Agreement, if Eoff fails to make timely contributions to

the Escrow Account, as required by Paragraphs 4 and 5 of this Order,

Eoff 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. Sec. 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 16th

day of December, 1999.

By Order of the Commission.

Sadye E. Dunn,

Secretary, Consumer Product Safety Commission.

[FR Doc. 99-33103 Filed 12-21-99; 8:45 am]

BILLING CODE 6355-01-M