On February 4, 2010, the U.S. Consumer Product Safety Commission (“CPSC”) announced
that Schylling Associates (“Schylling”) had agreed to pay a $200,000 civil penalty for lead paint violations that occurred between 2001 and 2003. This agreement is the result of CPSC staff allegations that Schylling distributed children’s toys for sale to consumers that contained more than 600 part per million in lead, which was the legal limit at the time of the alleged violations, and failed to report such violations to the CPSC. Schylling had denied that it knowingly or intentionally violated any provision of the Consumer Product Safety Act (“CPSA”) and the settlement agreement
[PDF] between the CPSC and Schylling provides that the agreement does not constitute an admission that it knowingly violated the CPSA.
What is important to know for manufacturers, importers, distributors, and retailers as well as practitioners defending these entities are the facts that gave rise to this settlement agreement. From January 2002 to March 2002, Schylling imported tin pails from one of its manufacturers in Hong Kong. On March 2, 2002, testing results ordered by Schylling revealed that certain wooden handles on these pails were not in compliance with the CPSA. As a result, on March 26, 2002, Schylling performed a unilateral recall.
Additionally, between June 2001 and July 2002, Schylling imported approximately 66,000 spinning tops from another one of its Hong Kong manufacturers. On June 30 and July 1, 2002, Schylling received a report, upon its request, which provided that the wooden handles on certain samples of these tops were not in compliance with the federal lead limit. Schylling thought that it had discovered the issue before any tops had been imported into the U.S. and solved the problem by instructing its manufacturer to only use plastic handles. Schylling was wrong.
Five years later, in August 2007, a news reporter from the Chicago Tribune contacted Schylling reporting that he had purchased a non-compliant top from a U.S. consumer. As a result, Schylling submitted a report to the CPSC regarding both the tops and pails it imported from 2001 to 2003. The CPSC announced a recall of these items on August 22, 2007 and Schylling reported to its customers that they were working to resolve the issue and ensure the safety of all future products.
The CPSC has provided that while Schylling’s March 26, 2002 unilateral recall succeeded in recovering 85 percent of the non-compliant pails, the rest of the pails were not recovered and in the hands of consumers for five years. CPSC Chairman, Inez Tenenbaum stated that “[m]anufacturers, importers, distributors and retailers have a legal obligation to ensure that no banned products are introduced into or distributed in the U.S. marketplace, and to inform CPSC as soon as they become aware of information that must be reported under our laws.” Further, she warned that the CPSC would “continue to penalize companies that do not follow these basic requirements.”
The Schylling recall and resulting settlement agreement has provided all manufacturers, importers, distributors, retailers and their counsel instructions that the CPSC must be notified when there is even a potential risk of violation and that unilateral recall and investigation will not protect against this type of civil penalty.