00-1564. Lancaster Colony Corporation, a Corporation; Settlement Agreement and Order

1. This Settlement Agreement and Order, entered into between Lancaster Colony Corporation, a corporation (hereinafter, “Lancaster Colony” or “Respondent”), and the staff of the Consumer Product Safety Commission (hereinafter, “staff”), pursuant to the procedures set forth in 16 C.F.R. § 1118.20, is a compromise resolution of the matter described herein, without a hearing or determination of issues of law and fact.

The Parties

2. The staff is the staff of the Consumer Product Safety Commission (hereinafter, “Commission”), an independent federal regulatory agency of the United States government, established by Congress pursuant to section 4 of the Consumer Product Safety Act (hereinafter, “CPSA”), as amended, 15 U.S.C. § 2053.

3. Respondent Lancaster Colony is a corporation organized and existing under the laws of the State of Ohio with its principal corporate offices located in Columbus, Ohio. Lancaster Colony has an operating division named Candle-lite located in Cincinnati, Ohio, which manufactures and sells candles.

Staff Allegations

4. Section 15(b) of the CPSA, 15 U.S.C. § 2064(b), requires a manufacturer of a consumer product who, inter alia, obtains information that reasonably supports the conclusion that the product contains a defect which could create a substantial product hazard or creates an unreasonable risk of serious injury or death, to immediately inform the Commission of the defect or risk.

5. Between August 1995 and February 1996, Lancaster Colony through its Candle-lite division, manufactured and sold nationwide, approximately three million Clearfire De-lite Candles (hereinafter the “Candles” or the “product”). A candle is a “consumer product and Lancaster Colony is a “manufacturer” of a “consumer product,” which is “distributed in commerce” as those terms are defined in sections 3(a)(1), (4), (11) of the CPSA, 15 U.S.C. §§ 2052(a)(1), (4), (11).

6. The product is a candle made of a clear gel-like substance which is packaged in a textured glass jar.

7. The Candles are defective because they could flare up unexpectedly during use, causing the Candles' glass holders to overheat and break. If this occurs, consumers could be burned or injured by broken glass.

8. On or about November 20, 1995, Lancaster Colony first received a report of an incident involving Candle flare-up.

9. By December 31, 1995, Lancaster Colony was aware of approximately forty four incidents involving Candle flare-up, resulting in reports alleging five personal injuries and twenty one occurrences of property damage.

10. In January 1996, with the incidents continuing to mount, Respondent stopped manufacture of the Candles.

11. In February 1996, Respondent revised the formulation of its original Candle, in part, to address the flare-up problem, and introduced a new candle in its place.

12. On or about May 2, 1996, the date the staff conducted an establishment inspection of the firm, Respondent was aware of at least 142 incidents involving candle flare-ups, including reports of approximately 20 incidents involving personal injury and reports of more than 55 incidents involving property damage.

13. Although Lancaster Colony through its Candle-lite division, had obtained sufficient information to reasonably support the conclusion that these Candles contained a defect which could create a substantial product hazard, or created an unreasonable risk of serious injury or death, it failed to report such information to the Commission prior to the inspection, as required by section 15(b) of the CPSA. This is a violation of section 19(a)(4) of the CPSA, 15 U.S.C. § 2068(a)(4).

14. Respondent's failure to report to the Commission, as required by section 15(b) of the CPSA, was committed “knowingly,” as that term is defined in Section 20(d) of the CPSA, 15 U.S.C. § 2069(d), and Lancaster Colony is subject to civil penalties under Section 20 of the CPSA.

Response of Lancaster Colony

15. Lancaster Colony denies the allegations of the staff that the Clearfire De-lite candles contain a defect which could create a substantial product hazard pursuant to section 15(a) of the CPSA, 15 U.S.C. § 2065(a); denies that it violated the reporting requirements of section 15(b) of the CPSA, 15 U.S.C. § 2064(b), and further denies the other allegations of the CPSC staff as stated herein.

16. Lancaster Colony did not have reason to believe that these candles posed a substantial product hazard. Lancaster Colony believed the information available did not reasonably support the conclusion that the products were defective within the meaning of the CPSA or that they created an unreasonable risk of serious injury or death, and, therefore, no report was required under section 15(b) of the Act.

17. During the time period in which the CPSC alleges Lancaster Colony wrongfully failed to file a report, it conducted its own internal testing as well as independent testing at four different laboratories of 4,500 candles. Neither the in-house nor outside laboratories were able to recreate the scenario about which some consumers complained. These test results suggested to Lancaster Colony that no defect was present. Likewise, the extremely low complaint rate (0.00020) suggested to Lancaster Colony that any flare ups were due to consumer misuse and/or environmental contamination rather than an inherent product defect. Finally, based upon the nature of the complaints received by Lancaster Colony, the firm did not believe that the candles could create a substantial product hazard or create an unreasonable risk of serious injury or death. For these reasons, Lancaster Colony concluded, and outside counsel concurred, that it was not required to submit a report to the CPSC.

18. Nevertheless, Lancaster Colony cooperated fully with the Commission staff in designing and implementing a voluntary recall of the candles described in paragraphs 5 and 6 above.

19. By entering into this Settlement Agreement and Order, Lancaster Colony does not admit any liability or wrongdoing. This Settlement Agreement and Order is agreed to by Lancaster Colony solely for the purposes of avoiding the cost of litigation and does not constitute, and is not evidence of, an admission of liability or wrongdoing by Lancaster Colony.

Agreement of the Parties

20. The Commission has jurisdiction in this matter under the CPSA, U.S.C. §§ 2051-2084.

21. Lancaster Colony knowingly, voluntarily and completely waives any rights it may have (i) to an administrative or judicial hearing with respect to the Commission staff's allegations discussed in paragraphs 4 through 14 herein, and to the issuance of a complaint, (ii) to judicial review or other challenge or contest of the validity of the Commission's Order, (iii) to a determination by the Commission as to whether a violation of Section 15(b) of the CPSA, has occurred, (iv) to a statement of findings of fact and conclusions of law with, and (v) to any claims under the Equal Access to Justice Act.

22. Upon provisional acceptance of this Settlement Agreement and Order by the Commission, the Commission shall place this Agreement and Order on the public record and shall publish it in the Federal Register in accordance with the procedure set forth in 16 C.F.R. § 1118.20(e). If the Commission does not receive any written request not to accept the Settlement Agreement and Order within 15 days, the Agreement and Order shall be deemed finally accepted on the 16th day after the date it is published in the Federal Register, in accordance with 16 C.F.R. § 1118.20(f).

23. This Settlement Agreement and Order becomes effective only upon its final acceptance by the Commission and service upon Respondent. Compliance by Lancaster Colony with this Final Settlement Agreement and Order releases it from liability arising from any allegations of violation of section 15(b) of the CPSA regarding the specific candles described in paragraphs 5 and 6 above.

24. Upon final acceptance of this Settlement Agreement, the Commission may publicize the terms of the Settlement Agreement and Order.

25. Lancaster Colony agrees to pay to the Commission a civil penalty in the amount of one hundred fifty thousand dollars ($150,000), in settlement of this matter, payable within twenty (20) days after service of the Final Order of the Commission accepting this Settlement Agreement.

26. This Settlement Agreement and Order are entered into for settlement purposes only and shall not constitute an admission or determination arising from the allegations that the candles contain a defect which could create a substantial product hazard or create an unreasonable risk of serious injury or death.

27. The provisions of this Settlement Agreement and Order shall apply to Lancaster Colony and its successors and assigns, agents, representatives and employees, directly or through any corporation, subsidiary, division, or other business entity, or through any agency, device or instrumentality.

28. This Settlement Agreement may be used in interpreting the Order. Agreements, understandings, representations, or interpretations made outside of this Settlement Agreement and Order may not be used to vary or to contradict its terms.

Dated: December 10, 1999.

John L. Boylan,

Treasurer, Lancaster Colony Corporation.

The Consumer Product Safety Commission.

Alan H. Schoem,

Associate Executive Director, Office of Compliance.

Eric L. Stone,

Director, Legal Division, Office of Compliance.

Dated: December 17, 1999.

Ronald G. Yelenik,

Trial Attorney, Legal Division, Office of Compliance.

Order

Upon consideration of the Settlement Agreement between Respondent Lancaster Colony Corporation, a corporation, and the staff of the Consumer Product Safety Commission, and the Commission having jurisdiction over the subject matter and over Lancaster Colony Corporation, and it appearing the Settlement Agreement is in the public interest, it is

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

Further Ordered, that within 20 days of service of the Final Order upon Respondent, Lancaster Colony Corporation shall pay to the order of the U.S. Treasury a civil penalty in the amount of one hundred fifty thousand dollars ($150,000).

Provisionally accepted and Provisional Order issued on the 18th day of January, 2000.

By order of the Commission.

Sadye E. Dunn,

Secretary, Consumer Product Safety Commission.