04-14681. GROUPE SEB USA f/k/a Krups North America, Inc., 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 Consumer Product Safety Act in the Federal Register in accordance with the terms of 16 CFR 11118.20. Published below is a provisionally-accepted Settlement Agreement with GROUPE SEB USA f/k/a Krups North America, Inc., containing a civil penalty of $500,000.

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 July 15, 2004.

ADDRESSES:

Persons wishing to comment on this Settlement Agreement should send written comments to the Comment 04-C0004, Office of the Secretary, Consumer Product Safety Commission, Washington, DC 20207.

FOR FURTHER INFORMATION CONTACT:

Belinda V. Bell, Trial Attorney, Office of Compliance, Consumer Product Safety Commission, Washington, DC 20207; telephone [phone].

SUPPLEMENTARY INFORMATION:

The text of the Agreement and Order appears below.

Dated: June 23, 2004.

Todd A. Stevenson,

Secretary.

Settlement Agreement and Order

1. This Settlement Agreement, made by and between the staff (“the staff”) of the U.S. Consumer Product Safety Commission (the “Commission”) and Groupe SEB USA, formerly known as Krups North America, Inc., (“Krups” or “Respondent”), a corporation, in accordance with 16 CFR 118.20 of the Commission's procedures for Investigations, Inspections, and Inquiries under the Consumer Product Safety Act (“CPSA”), is a settlement of the staff allegations set forth below.

The Parties

2. The Commission is an independent Federal regulatory agency responsible for the enforcement of the Consumer Product Safety Act, 15 U.S.C. 2051-2084.

3. From 1976 to March 2002, Krups North America, Inc. (“Krups”) was a wholly owned subsidiary of Moulinex SA, a European corporation. Krups was an entity organized and existing under the laws of the State of Delaware, with its principal office located at 7 Reuten Drive, Cloister, New Jersey. In September 2001, Moulinex filed bankruptcy. During the bankruptcy proceedings certain assets, including Krups North America, were purchased by Groupe SEB, another European corporation. Up until December 2003, Krups maintained its operations in New Jersey. On December 15, 2003, it changed its corporate name to Groupe SEB USA and moved to 196 Boston Avenue, Medford, Massachusetts. Groupe SEB USA continues to sell Krups brand products.

Staff Allegations

4. Section 15(b) of the CPSA, 15 U.S.C. 2064(b), requires a manufacturer of a consumer product distributed in commerce, inter alia who 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 1996 and 2000, Krups manufactured and distributed nationwide approximately 218,000 electric drip coffeemakers, sold under the Krups brand name, model numbers 398 and 405 (the “coffeemakers” or the “product(s)”).

6. The coffee makers are “consumer products” and Krups is a “manufacturer” of “consumer products”, which were “distributed in commerce” as those terms are defined in sections 3(a)(1)(4), (11) and (12) of the CPSA, 15 U.S.C. 2052(a)(1), (4), (11), and (12).

7. The coffeemakers are defective because loose electrical components can overheat and ignite the adjacent plastic filer carriage, creating a risk of fire, serious injury and death.

8. Between July 1997 and June 2001, Krups received approximately 48 reports of the coffeemakers' electrical components overheating and igniting, causing incidents of smoking, melting or fires. Some of the fires caused extensive property damage.

9. Not until May 2001, after receiving notice that a consumer's home was destroyed as a result of a defective Krups coffeemaker, did Respondent submit an initial report to the Commission reporting the defective coffeemakers.

10. Although Krups had obtained sufficient information to reasonably support the conclusion that these coffeemakers contained defects which could create a substantial product hazard, or created an unreasonable risk of serious injury or death long before May 2001, it failed to timely report such information to the Commission as required by section 15(b) of the CPSA.

11. 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 Krups is subject to civil penalties under section 20 of the CPSA.

Response of Krups

12. Respondent denies the staff allegations in paragraphs 4 through 11, above. Respondent denies that it violated the CPSA.

13. At the time of the alleged notices of incidents and failure to report, Krups had no engineers on its staff and relied on its parent, Moulinex, for technical analysis and advice concerning the causes and consequences of the coffeemaker incidents. Moulinex advised Krups that the coffeemakers presented no danger of fire outside the coffeemaker.

14. Krups reasonably relied on the advice from Moulinex in concluding that a section 15(b) report was not required until agents of Krups investigated a fire involving one of the coffeemakers. Based on the advice of these agents, Krups decided that the problems with the coffemakers should be reported.

15. Although the current parent, Groupe SEB, was not involved in any of the decisions that led to the alleged reporting violation, it has agreed to enter into this Settlement Agreement to resolve these issues.

Agreement of the Parties

16. The Consumer Product Safety Commission has jurisdiction over Respondent and the subject matter of this Settlement Agreement and Order under the CPSA, 15 U.S.C. 2051 et seq.

17. Respondent agrees to pay a civil penalty in the amount of five hundred thousand and no/dollars ($500,000.00), payable to the “U.S. Treasury” within twenty (20) calendar days of receiving service of the final Settlement Agreement and Order.

18. Respondent knowingly, voluntarily and completely waives any rights it may have in the above-captioned case (i) to the issuance of a Complaint in this matter; (ii) to a judicial hearing with respect to the staff allegations cited herein; (iii) to judicial review or other challenge or contest of the validity of the Settlement Agreement or the Commission's Order; (iv) to a determination as to whether a violation of section 15(b) of the CPSA, 15 U.S.C. 2064(b), has occurred, and (v) to a statement of findings of fact and conclusions of law with regard to the staff allegations; and (vi) to any claims under the Equal Access to Justice Act.

19. Upon provisional acceptance of this Settlement Agreement and Order by the Commission, this Settlement Agreement and Order shall be placed in the public record and shall be published in the Federal Register in accordance with 16 CFR 1118.20. If the Commission does not receive any written requests not to accept the Settlement Agreement and Order within 15 days, the Settlement 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 CFR 1118.20(f).

20. The Settlement Agreement and Order shall become effective upon its final acceptance by the Commission and service of the final Order upon Respondent.

21. Upon provisional acceptance by the Commission, the Commission may publicize the terms of the Settlement Agreement and Order.

22. Respondent agrees to the entry of the attached Order, which is incorporated herein by reference, and agrees to be bound by its terms.

23. If, after the effective date hereof, any provision of this Settlement Agreement and Order is held to be illegal, invalid, or unenforceable under present or future laws effective during the terms of the Settlement Agreement and Order, such provisions shall be fully severable. The rest of the Settlement Agreement and Order shall remain in full effect, unless the Commission and Respondent determine that severing the provision materially affects the purpose of the Settlement Agreement and Order.

24. This Settlement Agreement and Order shall not be waived, changed, amended, modified, or otherwise altered, except in writing executed by the party against whom such amendment, modification, alteration, or waiver is sought to be enforced and approved by the Commission.

25. This Settlement Agreement and Order is binding upon Respondent, its parent and each of its assigns or successors.

26. The Commission's Order in this matter is issued under the provisions of the CPSA, 15 U.S.C. 2051 et seq., and a violation of this Order may subject Respondent to appropriate legal action.

27. 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 contradict its terms.

Dated: May 19, 2004.

GROUP SEB USA

By: Paul Pofcher,

Executive Vice President.

Michael A. Brown, Esquire,

Respondent's Attorney.

The U.S. Consumer Product Safety Commission

Alan H. Schoem,

Director, Office of Compliance.

Eric L. Stone,

Director, Legal Division, Office of Compliance.

By Belinda V. Bell,

Trial Attorney, Legal Division, Office of Compliance.

Order

Upon consideration of the Settlement Agreement between Groupe SEB USA, a corporation, and the staff of the Consumer Product Safety Commission, and the Commission having jurisdiction over the subject matter and over Groupe SEB, and it appearing that 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 Groupe SEB USA shall pay the United States Treasury a civil penalty in the amount of five hundred thousand and 00/100 dollars, ($500,000.00), payable within twenty (20) days of the service of the Final Order upon Groupe SEB USA. Upon the failure by Groupe SEB to deliver any payment in full to the Commission in accordance with the terms of the subject Settlement Agreement and Order, interest on the outstanding balance shall accure and be paid by Groupe SEB 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 18th day of June, 2004.

By Order of the Commission.

Todd A. Stevenson,

Secretary, Consumer Product Safety Commission.