02-4677. Regent International Corporation, Inc., a Corporation Provisional Acceptance of a Settlement Agreement and Order

AGENCY:

Consumer Product Safety Commission.

ACTION:

Notice.

SUMMARY:

It is the policy of the Commission to publish settlements which it provisionally accepts under the Flammable Fabrics Act in the Federal Register in accordance with the terms of 16 CFR 1610.05(d). Published below is a provisionally-accepted Settlement Agreement with Regent International Corporation, Inc., a corporation containing a civil penalty of $75,000.

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 March 14, 2002.

ADDRESSES:

Persons wishing to comment on this Settlement Agreement should send written comments to the Comment 02-C0003, Office of the Secretary, Consumer Product Safety Commission, Washington, DC 20207.

FOR FURTHER INFORMATION CONTACT:

Dennis C. Kacoyanis, Trial Attorney, Office of the General Counsel, Consumer Product Safety Commission, Washington, DC 20207; telephone [phone], 1346.

SUPPLEMENTARY INFORMATION:

The text of the Agreement and Order appears below.

Dated: February 21, 2002.

Todd A. Stevenson,

Secretary.

Settlement Agreement and Order

1. This Settlement Agreement and Order, entered into between Regent International Corporation, Inc. (hereinafter, “Regent” or “Respondent”), and the staff of the consumer Product Safety Commission (hereinafter, “staff”), pursuant to the procedures set forth in 16 CFR 1605.13, is a compromise resolution of the matter described herein, without a hearing or determination of issues of law and fact.

I. The Parties

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

3. Respondent Regent International Corporation, Inc. is a Subchapter “S” corporation organized and existing under the laws of the State of New York. Regent is located at 1411 Broadway, New York, NY 10018. Regent is a manufacturer and importer of clothing.

II. Allegations of the Staff

4. On March 9, 1996, Regent filed a continuing guaranty with the Commission. The guaranty covered all men's, women's, and children's apparel, excluding sleepwear, for a period of three years. In the guaranty filed by Regent on March 9, 1996, Regent represented that it had performed reasonable and representative testing of its product lines and that its products conformed to the applicable flammability regulations.

5. Throughout October 1996, Regent imported approximately 165,000 of the “Jason Maxwell” sherpa fleece garments, Style Numbers 12142, 12143, 12144, 12145, 12146, 12147,22049, 22050, 22051, 22052, 22053, 22054, 32035, 32036, 32037, 32038, 32039, 32040, 52010, 52011, 52012, and 52013, made from 80% cotton, 20% polyester (hereinafter, “sherpa garments”), for sale to retail customers in the United States.

6. These sherpa garments were subject to the Standard for the Flammability of Clothing Textiles (hereinafter, “Clothing Standard”), 16 CFR part 1610, issued under section 4 of the FFA, 15 U.S.C. 1193.

7. Because Regent had filed a continuing guaranty with the Commission on March 9, 1996, Regent was required to conduct reasonable and representative testing on the sherpa garments and to maintain the requisite records for three years to support the guaranty under section 8(a) of the FFA, 15 U.S.C. 1197(a) and 16 CFR 1610.37 and .38.

8. Before selling its sherpa garments to its customers, Regent failed to conduct reasonable and representative testing or to verify whether the foreign manufacturer, The Motiff Factory, had conducted reasonable and representative testing on the sherpa garments to support the guaranty under section 8(a) of the FFA, 15 U.S.C. 1197(a) and 16 CFR 1610.37.

9. Regent did not maintain the requisite records to support the guaranty under section 8(a) of the FFA, 15 U.S.C. 1197(a) and 16 CFR 1610.38.

10. On December 30, 1996, J.C. Penney, Regent's largest customer, notified Regent that one of its customers had reported an incident when one of these sherpa garments ignited when exposed to a flame from a candle. The consumer was not injured.

11. During the first week of January 1997, Regent conducted flammability testing on the sherpa garments. The test results showed that the green and peach checked garments and the green striped and solid pattern garments were dangerously flammable and unsuitable for clothing because of their rapid and intense burning and, therefore, violated the Clothing Standard.

12. On January 3, 1997, Regent agreed to allow J.C. Penney to authorize returns and to remove certain lot numbers of the sherpa garments from the selling floor.

13. At the time Regent notified the Commission of flammability problems regarding the sherpa garments on January 9, 1997, it possessed approximately 8,936 sherpa garments.

14. When requested by the staff in 1997 Regent failed to provide test reports to show that it or someone acting on its behalf had conducted reasonable and representative testing on the sherpa garments before sale to support the guaranty.

15. Respondent knowingly sold, or offered for sale, in commerce, or caused to be transported, in commerce, or sold or delivered for after a sale or shipment in commerce, sherpa garments that it knew or should have known violated the Clothing Standard, as the term “knowingly” is defined in section 5(e)(4) of the FFA, 15 U.S.C. 1194(e)(4), in violation of section 3 of the FFA, 15 U.S.C. 1192. A knowing violation of this provision subjects Respondent to civil penalties under section 5(e)(1) of the FFA, 15 U.S.C. 1194(e)(1).

16. By failing to conduct reasonable and representative testing or to verify that the foreign manufacturer, The Motiff Factory, had conducted reasonable and representative testing on the sherpa garments and by failing to maintain the requisite records, Respondent knowingly furnished a false guaranty, in violation of section 8(b) of the FFA, 15 U.S.C. 1197(b). A knowing violation of this provision subjects Respondent to civil penalties under section 5(m)(1)(A) of the Federal Trade Commission Act (FTCA), 15 U.S.C. 45(m)(1)(A).

III. Response of Respondent

17. Regent is a small, family-owned garment manufacturer in New York City with approximately thirty employees that has been in business for over thirty years. During these 30 years of business, prior to this one incident in 1996, Regent had never had any of its garments recalled and had never been accused by the Commission of violating any statute or regulation. Nor has Regent been subjected to any other recalls, or has it been accused of violating any statute or regulation since the 1996 incident.

18. Respondent denies the allegations of the staff set forth in paragraphs 4-16 above.

19. Respondent adamantly denies that it knowingly violated the FFA's Clothing Standard and the Guaranty Provisions, and it is settling the matter to avoid the costs of litigation.

20. Regent adamantly denies that the green and peach checked garments and the green striped and solid pattern garments were dangerously flammable and unsuitable for clothing because of their rapid and intense burning and, therefore, violated the Clothing Standard.

21. In November 1995, Regent instructed its manufacturer, The Motif Factory (“Motif” ), to begin testing fabrics for washing instructions, flammability, and color fading. In its instructions to Motif, Regent emphasized the importance of the testing being done. Accordingly, Regent further instructed Motif to secure a good testing facility, to ensure that all fabrics have been tested, to begin testing fabrics immediately, and to test fabrics each year. Motif confirmed that it would begin the testing as per Regent's instructions. At some time, Regent was informed that the fabric had passed the testing.

22. On December 30, 1996, J.C. Penney notified Regent of a complaint by one customer about the flammability of one of its sherpa garments. No injury was reported, nor had one occurred. On January 3, 1997, Regent authorized J.C. Penney to stop selling the garments and to accept any returns. On Tuesday, January 7, 1997, Regent informed the Commission of the single report by a consumer and on, January 10, 1997, Regent voluntarily recalled not only the garments that had failed the flammability tests, but also those that had passed the tests. Regent did the recall in this manner in order to minimize customer confusion and to make sure that all the garments were returned.

23. In January 1997, Regent learned for the first time that sherpa is an unusual fabric in that its color impacts flammability. Consequently, reasonable and representative testing, as defined by the Commission, would not indicate that some sherpa garments did not comply with the flammability requirements set forth in the Clothing Standard.

24. Because Regent had responded so effectively and expeditiously to the single report and expeditiously recalled the garments, Regent believed that it would not be subject to civil penalties.

25. Regent adamantly denies that it knowingly furnished a false guaranty with respect to the sherpa garments. Regent specifically denies the allegations set forth in paragraphs 8, 9, 15, and 16, in which the staff claims that Regent failed to conduct reasonable and representative testing on the sherpa garments and to maintain the requisite records to support the continuing guaranty it had filed with the Commission under section 8(a) of the FAA, 15 U.S.C. 1197(a) and 16 CFR 1610.37. As stated above, Regent instructed its manufacturer, The Motif Factory (“Motif”), to begin testing fabrics for washing instructions, flammability, and color fading. In its instructions to Motif, Regent emphasize the importance of the testing being done. Accordingly, Regent further instructed Motif to secure a good testing facility, to ensure that all fabrics have been tested, to begin testing fabrics immediately, and to test fabrics each year. Motif confirmed that it would begin the testing as per Regent's instructions. At some time, Regent was informed that the fabric had passed the testing.

IV. Agreement of the Parties

26. The Commission has jurisdiction over Respondent and the subject matter of this Settlement Agreement and Order under the Consumer Product Safety Act (CPSA), 15 U.S.C. 2051 et seq.; the Flammable Fabrics Act (FFA), 15 U.S.C. 1191 et seq.; and the Federal Trade Commission Act (FFA), 15 U.S.C. 41 et seq.

27. This Agreement is entered into for settlement purposes only and does not constitute an admission by Respondent or a determination by the Commission that Respondent knowingly violated the FFA's Clothing Standard and/or Guaranty Requirements.

28. Upon provisional acceptance of this Settlement Agreement and Order by the Commission, this Settlement 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 1610.05(d). If the Commission does not receive any written request not to accept the Settlement Agreement and Order within 15 days, the Settlement Agreement and Order will be deemed finally accepted on the 20th day after the date it is published in the Federal Register.

29. Upon final acceptance of this Settlement Agreement by the Commission and issuance of the Final Order, Respondent knowingly, voluntarily, and completely waives any rights it may have in this matter (1) to an administrative or judicial hearing, (2) to judicial review or other challenge or contest of the validity of the Commission's actions, (3) to a determination by the Commission as to whether Respondent failed to comply with the FFA, as alleged, (4) to a statement of findings of fact and conclusions of law, and (5) to any claims under the Equal Access to Justice Act.

30. In settlement of the staff's allegations, Respondent agrees to pay a $75,000.00 civil penalty as set forth in the attached Order incorporated herein by reference.

31. The Commission may publicize the terms of this Settlement Agreement and Order.

32. Upon final acceptance by the Commission of this Settlement Agreement and Order, the Commission shall issue the attached Order.

33. A violation of the attached Order shall subject Respondent to appropriate legal action.

34. The provisions of this Settlement Agreement and Order shall apply to, and be binding upon, Respondent and each of its shareholders, officers, directors, employees, agents, successors, assigns, and representatives, directly or through any corporation, subsidiary, division, or other business entity, or through any agency, device, or instrumentality.

Respondent Regent International Corporation, Inc.

Dated: February 7, 2002.

Michael Shweky,

Vice President, Regent International Corporation, Inc., 1411 Broadway, New York, NY 10018.

Commission Staff.

Alan H. Schoem,

Assistant Executive Director, Consumer Product Safety Commission, Office of Compliance, Washington, DC 20207-0001.

Eric L. Stone,

Director, Legal Division, Office of Compliance.

Dated: February 6, 2002.

Dennis C. Kacoyanis,

Trial Attorney, Legal Division, Office of Compliance.

In the Matter of Regent International Corporation, Inc., a corporation.

Order

Upon consideration of the Settlement Agreement entered into between Respondent Regent International Corporation, Inc. (hereinafter, “Respondent”), a corporation, and the staff of the Consumer Product Safety Commission (“Commission”); and the Commission having jurisdiction over the subject matter and Respondent; and it appearing that the Settlement Agreement and Order is in the public interest, it is

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

Further Ordered, that upon final acceptance of the Settlement Agreement and Order, Respondent Regent International Corporation, Inc. shall pay to the United States Treasury a civil penalty in the amount of Seventy-five thousand and 00/100 Dollars ($75,000.00) in three (3) installments each. The first payment of Twenty-five thousand and 00/100 dollars ($25,000.00) shall be paid within twenty (20) days after service of the Final Order of the Commission (hereinafter, “anniversary date”). The second payment of twenty-five thousand and 00/100 dollars ($25,000.00) shall be paid within one (1) year of the anniversary date. The third payment of twenty-five thousand and 00/100 dollars shall be paid within two (2) years of the anniversary date. Upon the failure of Respondent Regent International Corporation, Inc. to make a payment or upon the making of a late payment by Respondent Regent International Corporation, Inc. (a) the entire amount of the civil penalty shall be due and payable, and (b) interest on the outstanding balance shall accrue and be paid at the federal legal rate of interest under the provisions of 28 U.S.C. 1961(a) and (b).

Provisionally accepted and provisional Order issued on the 21st day of February, 2002.

By Order of the Commission.

Todd A. Stevenson,

Consumer Product Safety Commission.