[Federal Register: April 24, 2009 (Volume 74, Number 78)]
[Notices]
[Page 18695-18697]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ap09-39]
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CONSUMER PRODUCT SAFETY COMMISSION
[CPSC Docket No. 09-C0018]
Mega Brands America, Inc. f/k/a Rose Art Industries, Inc.,
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 1118.20(e).
Published below is a provisionally accepted Settlement Agreement with
Mega Brands America, Inc. f/k/a Rose Art Industries, Inc., containing a
civil penalty of $1,100,000.00.
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 11, 2009.
ADDRESSES: Persons wishing to comment on this Settlement Agreement
should send written comments to the Comment 09-C0018, Office of the
Secretary, Consumer Product Safety Commission, 4330 East West Highway,
Room 502, Bethesda, Maryland 20814-4408.
FOR FURTHER INFORMATION CONTACT: Michelle Faust Gillice, Trial
Attorney, Division of Compliance, Office of the General Counsel,
Consumer Product Safety Commission, 4330 East West Highway, Bethesda,
Maryland 20814-4408; telephone (301) 504-7667.
SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears
below.
Dated: April 20, 2009.
Todd A. Stevenson,
Secretary.
In the Matter of: Mega Brands America, Inc. f/k/a Rose Art Industries,
Inc.; Settlement Agreement
1. This Settlement Agreement (``Agreement'') is made by and between
the staff (the ``staff'') of the U.S. Consumer Product Safety
Commission (the ``Commission'') and Mega Brands America, Inc., f/k/a
Rose Art Industries, Inc., in accordance with 16 CFR 1118.20 of the
Commission's Procedures for Investigations, Inspections and Inquiries
under the Consumer Product Safety Act (``CPSA''). This Agreement and
the incorporated attached Order resolve the staff's allegations set
forth below.
The Parties
2. The Commission is an independent federal regulatory agency
responsible for the enforcement of the CPSA, 15 U.S.C. 2051-2089.
3. Mega Brands America, Inc. (``Mega Brands America'') f/k/a Rose
Art Industries, Inc. (``Rose Art'') is a New Jersey corporation, with
its principal office located in Livingston, NJ. Rose Art was wholly
owned by Jeffrey Rosen, Lawrence Rosen, and Sydney Rosen until
purchased by Mega Bloks, Inc. (a Canadian corporation) on July 26,
2005. Pursuant to the terms of the purchase agreement, Mega Bloks, Inc.
could not assume operational control of Rose Art until December 31,
2005. Thereafter, Jeffrey Rosen and Lawrence Rosen remained in senior
management positions at Rose Art until their respective departures on
April 3, 2006 and May 9, 2006. On June 15, 2006, Rose Art was renamed
``Mega Brands America''.
4. Mega Brands, Inc. f/k/a Mega Bloks, Inc. (``Mega Brands'') is a
Canadian corporation located in Montreal, Quebec, Canada. Mega Brands
is the parent company of Mega Brands America.
5. At all times relevant herein, Rose Art designed and manufactured
the Magnetix magnet toys subject to this Settlement Agreement and
Order.
Staff Allegations
6. Between January 2003 and December 2005, Rose Art manufactured
and/or imported Magnetix magnetic building sets (hereinafter ``Magnetix
set(s)'' or ``the set(s).'' \1\
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\1\ Magnetix sets continued to be manufactured after 2005,
however due to manufacturing and design improvements instituted by
Mega Brands America, these sets are not the subject of the
allegations set forth in this Agreement.
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7. Magnetix sets are ``children's product[s]'' and ``consumer
product[s]'' and, at the times relevant herein, Rose Art was a
``manufacturer'' of ``children's product[s]'' and ``consumer
product[s]'' which were ``distributed in commerce'' as those terms are
defined in sections 3(a)(2), (5), (8), and (11) of the CPSA, 15 U.S.C.
2052(a)(2), (5), (8) and (11).
8. The Magnetix sets are defective because magnets embedded in
small plastic pieces contained in the sets could come loose and fall
out of the plastic casing.
9. This defect creates a substantial risk of injury to children
under section 15(c) of the Federal Hazardous Substances Act, 15 U.S.C.
1274(c) because, if two or more magnets (or one magnet and one metallic
ball) from a set are ingested by a child, they can attract each other
through intestinal walls, causing perforations, twisting and/or
blockage of the intestines, infection, blood poisoning and death.
10. On December 14, 2005, Rose Art filed an ``initial report''
pursuant to section 15(b) of the CPSA, 15 U.S.C. 2064(b), concerning
the death of a 22 month old child who died on November 24, 2005. The
child had ingested multiple magnets from a Magnetix set on separate
occasions which subsequently joined together in his small intestine,
causing a blockage and sepsis, which led to his death. Rose Art's
report identified the product as a Magnetix ``X-treme Combo Flashing
Lights Castle.'' The firm attributed the release of magnets from the
plastic pieces to unusually abusive play by the decedent's older
siblings. The initial report essentially contained no other
information.
11. At the time of its initial report, Rose Art was in possession
of at least one report of a child suffering an unspecified injury from
ingesting a magnet from a Magnetix set and over 1100 consumer
complaints that magnets had come loose or fallen out of plastic pieces
from dozens of different Magnetix models, but failed to include that
information in its report as required by section 15(b) of the CPSA, 15
U.S.C. 2064(b).
12. On January 13, 2006, CPSC staff sent Rose Art a letter
requesting a Full Report pursuant to 16 CFR 1115.13(d). Requested
information included copies of the following: Product liability suits
and/or claims of personal injury;
[[Page 18696]]
consumer complaints, dealer complaints, warranty claims, an
identification of the products, and the total number of products
involved. In addition, the letter advised the firm that it had a
continuing obligation to supplement or correct its full report if the
firm learned of other incidents or injuries or information that
affected the scope, prevalence or seriousness of the defect of hazard.
13. On February 1, 2006, Rose Art submitted an incomplete and
inadequate Full Report. The firm provided limited information about the
``X-treme Combo Flashing Lights Castle'' despite relevant knowledge
that the population of affected products included over 255 different
Magnetix set models. In addition, the firm failed to provide any
information regarding complaints involving magnets falling out of
Magnetix pieces.
14. On March 28, 2006, Rose Art provided staff with a chart
entitled ``Consumer Calls/Warranty'' claims in response to the staff's
repeated requests for complaint and incident data. The chart lacked
detail and critical information rendering it effectively useless. The
CPSC staff requested all source documents used in the creation of the
chart. The staff was told that the firm did not retain any source
documents regarding complaint and incident data.
15. On March 31, 2006, CPSC and Rose Art announced a voluntary
recall whereby the firm agreed to provide replacement products for
consumers with children under the age of 6. The press release announced
that CPSC was aware of one child who died and four children who were
seriously injured as a result of ingesting or aspirating magnets that
fell out of Magnetix pieces.
16. Following the recall, CPSC staff sought additional product
information from the firm including complaint data. In September 2006,
the staff came across information which indicated the firm did in fact
retain records of consumer complaints with some level of detail.
17. On October 16, 2006, the Commission issued a Special Order and
Subpoena to Mega Brands America compelling the firm to produce all
injury and incident records pertaining to Magnetix.
18. On December 1, 2006, Mega Brands submitted a response for Mega
Brands America. According to documents provided, between January 2004
and December 14, 2005 (the date on which Rose Art reported the death of
the child), Rose Art had received over 1,100 complaints of magnets
falling out or otherwise liberating from the plastic pieces in over 67
different models of Magnetix. In addition, Rose Art had received notice
of a child being injured from ingesting a magnet a few weeks prior to
the child's death. According to the documents, by the time the recall
was announced in March 2006, Rose Art had received over 1,500
complaints about magnets falling out of Magnetix pieces.
19. The information eventually obtained by the Subpoena was
required by statute to be included in Rose Art's Full Report and
supplemented on an ongoing basis thereafter. The firm's failure to
provide full complaint and incident data directly and detrimentally
affected the staff's ability to assess the hazard and implement an
effective corrective action program commensurate with the risk created.
20. Pursuant to section 19(a)(3) of the CPSA, 15 U.S.C. 2068(a)(3),
it is unlawful to ``* * * fail or refuse to * * * provide information *
* * as required under this Act or rule there under.'' Under section
19(a)(4) of the CPSA, 15 U.S.C. 2068(a)(4), it is unlawful to fail to
furnish information required by section 15(b) of the Act.
21. In failing to provide or furnish information as required under
the CPSA and as set forth above, Mega Brands America ``knowingly''
violated sections 19(a)(3) and (4) of the CPSA, 15 U.S.C. 2068(a)(3)
and (4), as the term ``knowingly'' is defined in section 20(d) of the
CPSA, 15 U.S.C. 2069(d).
22. Pursuant to section 20 of the CPSA, 15 U.S.C. 2069, Mega Brands
America is subject to civil penalties for failure to provide or furnish
information in violation of section 19 of the CPSA, 15 U.S.C. 2068.
Response of Mega Brands America
23. Mega Brands America and its parent, Mega Brands, contend that
Mega Brands did not know of the Magnetix defects at the time Mega
Brands acquired Rose Art in June 2005. Documentary evidence establishes
that Rose Art's prior owners knew, since at least late 2003 or early
2004, that there were design and manufacturing defects in Magnetix
which caused magnets to detach. Rose Art's prior owners have admitted
under oath, at no point in time did they ever advise anyone at Mega
Brands of the Magnetix problems.
24. On May 24, 2005, when CPSC staff sent a letter requesting Rose
Art to provide information concerning choking and near choking
incidents involving Magnetix sets as well as ``copies of all consumers
or dealer complaints, including electronic records warranty claims and
reports of injury related to the products being investigated
[Magnetix]'', Rose Art had the opportunity to disclose hundreds of
incidents involving magnets coming loose, but it failed to do so.
Notably, at that point in time, Rose Art was negotiating a civil
penalty with CPSC for a reporting violation concerning another of its
products, and was fully cognizant of its reporting obligations under
the law. Mega Brands believes that had Rose Art disclosed all Magnetix
consumer complaints in its response to the May 24, 2005 letter, the
defect of magnets coming loose would have come to light much earlier.
25. Mega Brands claims that once it learned these facts, it
promptly agreed to a more comprehensive recall of the product, which
occurred in April 2007.
26. Nevertheless, Mega Brands America understands that, regardless
of the reason, Rose Art and Mega Brands America failed to provide and/
or furnish information to the CPSC as required under the CPSA.
Agreement of the Parties
27. The Commission has jurisdiction over this matter and over Mega
Brands America under the CPSA.
28. The parties enter this Agreement for settlement purposes only.
The Agreement does not constitute an admission by Mega Brands America
nor a determination by the Commission that Mega Brands America violated
the CPSA's reporting requirements.
29. In settlement of the staff's allegations, Mega Brands America
agrees to pay a civil penalty of $1.1 million ($1,100,000.00) in three
installments. The first installment of $400,000 shall be paid within
twenty (20) calendar days of service of the Commission's final Order
accepting this Agreement. The second installment of $350,000 shall be
paid within three (3) months of service of the Commission's final Order
accepting this Agreement. The third and final installment of $350,000
shall be paid within six (6) months of service of the Commission's
final Order accepting this Agreement. Each payment shall be made by
check payable to the order of the United States Treasury.
30. The Commission agrees to take no further action involving Mega
Brands America with respect to CPSC File Nos. CA080229 (Magtastik and
Magnetix Jr. Pre-School Magnetic Toys) and CA070073 (MagnaMan-Magnetic
Action Figures.)
31. Upon provisional acceptance of this Agreement by the
Commission, the Commission shall place this Agreement on the public
record and shall publish it in the Federal Register in accordance with
the procedures set forth in 16 CFR 1118.20(e). In accordance with 16
CFR
[[Page 18697]]
1118.20(f), if the Commission does not receive any written requests not
to accept the Agreement within 15 calendar days, the Agreement shall be
deemed finally accepted on the 16th calendar day after the date it is
published in the Federal Register.
32. Upon final acceptance of this Agreement by the Commission and
issuance of the final Order, Mega Brands America knowingly, voluntarily
and completely waives any rights it may have in this matter to the
following: (i) An administrative or judicial hearing; (ii) judicial
review or other challenge or contest of the validity of the
Commission's Order or actions; (iii) a determination by the Commission
as to whether Mega Brands America failed to comply with the CPSA and
the underlying regulations; (iv) a statement of findings of fact and
conclusions of law; and (v) any claims under the Equal Access to
Justice Act.
33. The Commission may publicize the terms of the Agreement and
Order.
34. The Agreement and Order shall apply to, and be binding upon
Mega Brands America and each of its successors and assigns.
35. The Commission issues the Order under the provisions of the
CPSA, and a violation of the Order may subject those referenced in
paragraph 34 above to appropriate legal action.
36. This Agreement may be used in interpreting the Order.
Understandings, agreements, representations, or interpretations apart
from those contained in the Agreement and the Order may not be used to
vary or contradict their terms. The Agreement shall not be waived,
amended, modified, or otherwise altered without written agreement
thereto executed by the party against whom such waiver, amendment,
modification, or alteration is sought to be enforced.
37. If any provision of this Agreement and Order is held to be
illegal, invalid, or unenforceable under present or future laws
effective during the terms of the Agreement and Order, such provision
shall be fully severable. The balance of the Agreement and Order shall
remain in full force and effect, unless the Commission and Mega Brands
America determine that severing the provision materially affects the
purpose of the Agreement and Order.
MEGA BRANDS AMERICA, INC.
Dated: 3/19/09
By:--------------------------------------------------------------------
Vic Bertrand
President
Mega Brands America, Inc., 6 Regent Street, Livingston, NJ 07039
By:--------------------------------------------------------------------
Michael J. Gidding
Counsel for Mega Brands America, Inc.
Brown & Gidding, P.C., 3201 New Mexico Avenue, NW., Washington, DC
20016
U.S. Consumer Product Safety Commission
Cheryl Falvey
General Counsel
Ronald G. Yelenik
Assistant General Counsel
Dated: 3/24/09
By:--------------------------------------------------------------------
Michelle Faust Gillice
Trial Attorney
Division of Compliance, Office of the General Counsel
In the Matter of: Mega Brands America, Inc. f/k/a Rose Art Industries,
Inc.; Order
Upon consideration of the Settlement Agreement entered into between
Mega Brands America, Inc. (``Mega Brands America'') and the U.S.
Consumer Product Safety Commission (``Commission'') staff, and the
Commission having jurisdiction over the subject matter and over Mega
Brands America, and it appearing that the Settlement Agreement and the
Order are in the public interest, it is
Ordered, that the Settlement Agreement be, and hereby is, accepted;
and it is
Further ordered, that Mega Brands America shall pay a civil penalty
in the amount of $1.1 million ($1,100,000.00) in three installments.
The first installment of $400,000 shall be paid within twenty (20)
calendar days of service of the Commission's final Order accepting this
Agreement. The second installment of $350,000 shall be paid within
three (3) months of service of the Commission's final Order accepting
this Agreement. The third and final installment of $350,000 shall be
paid within six (6) months of service of the Commission's final Order
accepting this Agreement. Each payment shall be made by check payable
to the order of the United States Treasury. Upon the failure of Mega
Brands America to make any of the aforementioned payments when due, the
total amount of the civil penalty shall become immediately due and
payable, and interest on the unpaid amount shall accrue and be paid by
Mega Brands America at the federal legal rate of interest set forth at
28 U.S.C. 1961(a) and (b).
Provisionally accepted and provisional Order issued on the -- day
of ----, 2009.
BY ORDER OF THE COMMISSION:
Todd A. Stevenson, Secretary
U.S. Consumer Product Safety Commission
Finally accepted and final Order issued on the -- day of ----,
2009.
BY ORDER OF THE COMMISSION:
Todd A. Stevenson, Secretary
U.S. Consumer Product Safety Commission
[FR Doc. E9-9452 Filed 4-23-09; 8:45 am]
BILLING CODE 6355-01-P