On April 2, 2018, the Consumer Product Safety Commission (CPSC) announced a $27.25 million civil monetary penalty (CMP) settlement agreement with Polaris for failure to report to CPSC immediately when it became aware of defects in certain models of RZR and Ranger Recreational Off-highway Vehicles (ROVs).
At the same time, CPSC and Polaris jointly announced the recall of more than 100,000 Polaris Model Year 2014 to 2018 RZR XP 1000 ROVs. According to CPSC’s press release, “if the exhaust silencer fatigues and cracks, the heat shield may fail to manage heat, which may lead to melting of nearby components or fire.” This is yet another recall to repair additional models of ROVs for potential fires.
Everyone always says that product safety should be nonpartisan. But as evidenced by CSPC actions, there are often votes on key policy and enforcement actions that fall right down party lines. Recently, some have even suggested that the current Democratic voting majority is heavily influencing enforcement and compliance efforts. Acting Chairwoman Buerkle has, in fact, been the lone holdout in a recent provocative vote. In February, CPSC commissioners voted 3-1 to sue Britax to recall its jogging strollers. Acting Chairwoman Buerkle voted against suing for the recall. Before the Britax case, the last time the CPSC sued for a mandatory recall was in 2012, and thus the Britax case was a surprise to many stakeholders. Moreover, Acting Chairwoman Buerkle is on record as opposing record-high CMP settlements. (See Statement of Commissioner Ann Marie Buerkle on the Commission’s Growing Civil Penalty Settlements.)
So the question is, why did Chairwoman Buerkle vote for the Polaris settlement?
The Polaris CMP settlement is unique for several reasons. First, it is the highest in CPSC’s history. Just as remarkable, the vote by the CPSC Commission was unanimous. The size of the settlement and the Commission’s 4-0 vote in its favor call into question the conventional wisdom about the partisanship of CPSC’s commissioners.
Second, buried within the Polaris Settlement Agreement in paragraph 32, there is language that basically makes this agreement into a global settlement of all potential reporting violations against Polaris up to June 29, 2017. The full sentence reads:
After receipt of the payment set forth in paragraph 27 above, the Commission releases and agrees that it will not seek civil penalties from Polaris, including its current and former directors, officers, employees, successors and assigns, for any violation of section 19(a)(4) of the CPSA, 15 U.S.C. § 2068(a)(4), regarding a hazard or defect reported in connection with a model year vehicle for which Polaris, as of June 29, 2017, had submitted an Initial or Full Report under CPSA section 15(b), 15 U.S.C. §2064(b), and 16 C.F.R. § 1115.13(c) and (d).
What this means is that this $27.25 million covers any (and all) potential late reporting claims for all of Polaris’s Section 15 (b) reports filed before June 29, 2017 – not only those described in detail in the agreement. Without full access to the non-public compliance and enforcement record in this case, we have no insight into the extent of the potential violations. One can only assume that this element of the settlement is a good deal for Polaris.
Third, the simultaneous settlement and recall in the Polaris case is unusual because typically, CMP settlements are announced years after the recall, and it is hoped that the company has resolved all Section 15(b) reporting and product defect issues, and has enhanced its compliance program so that additional recalls are limited and much less frequent. In this case, Acting Chairwoman Buerkle noted in her official statement, Polaris and the CPSC worked together “for years” to get to this point.
As already indicated, in the Polaris CMP settlement Acting Chairwoman Buerkle voted with the Democrats. In her official statement, she affirmed her support for the resolution of the case and urged customers to get their ROVs repaired. She took the additional step of virtually congratulating CPSC staff and Polaris for this outcome. In her short official statement released at the same time as the CPSC press release, she said:
I urge consumers to contact Polaris or visit www.polaris.com immediately to see if your ROV is included in this recall. If it is, stop riding the affected vehicles and take advantage of the free repair quickly. In addition, today, CPSC is announcing a $27.25 million civil penalty agreement with Polaris for failure to report to CPSC immediately when it became aware of defects with RZR and Ranger ROV models. . . . the recall and penalty agreement is the culmination of many years of hard work between Polaris and CPSC staff. The company has agreed to maintain an enhanced compliance program going forward, which we will monitor closely. Consumers should know that our collaboration with Polaris to jointly address safety issues is ongoing.
Acting Chairwoman Buerkle has publicly stated repeatedly that she believes that the way to ensure the safest consumer products is to engage with all of CPSC’s stakeholders. Under her leadership, the CPSC will hold its annual Agenda and Priorities Hearing next week on April 11, where it will request input from stakeholders, much earlier than it has been held in recent years. On May16, the CPSC will hold another public hearing during which it will request comments from stakeholders on the Internet of Things and Consumer Product Hazards. Clearly, she wants the CPSC to actively engage with its stakeholders – and they would be wise to take her up on her offer.
If we take Acting Chairwoman Buerkle at her word, the fact that Polaris consistently engaged with the CPSC over the past few years as it navigated multiple issues with the CPSC related to their reporting obligations and the necessity for recalls is likely, at the very least, one of the reasons she voted to approve the settlement. That, combined with the creative aspect of the settlement – a global resolution of all claims that existed before a certain date – helps explain her recent vote. The totality of the settlement agreement, including the highest CMP yet, in combination with the additional simultaneous large recall, was also enough for the three Democrats. At best, the Polaris settlement is an example of a successful bipartisan effort that all stakeholders can learn from.
There are still many open questions to be answered about the CPSC:
- Will Acting Chairwoman Buerkle be confirmed by the Senate as Chairwoman, and when?
- Will Dana Baiocco be confirmed by the Senate to replace Commissioner Robinson, and when?
- Will a replacement be nominated and confirmed for the current open Republican seat on the Commission, and when?
- If the situation remains as is, how will enforcement actions be affected? Should we expect more lawsuits for recalls because of the Democratic majority?
- If/when the Commission changes and the new Republican commissioners are confirmed, what will CPSC enforcement look like?
- Will the current and/or future Commission continue to engage with all stakeholders by holding additional public hearings and workshops on issues like emerging technology, data, eCommerce, and leveraging technology for recall effectiveness?
- Does engagement with CPSC throughout the reporting, recall, and settlement phase of a case work to the benefit of stakeholders? CPSC? Overall product safety?
It will be interesting to find out the answers to these questions and to see what does—and does not—change at the CPSC in the future. One thing certainly will not change: in our consumer economy, we will continue to purchase products. Inevitably some percentage of those products will be defective or dangerous and will require a recall. When that happens, the CPSC must always be at the ready to fulfill its mission to “keep consumers safe.”
Polaris may provide some faith in how the CPSC fulfills that important mission to members of industry, consumer advocates, and those worried about partisan deadlock. The Acting Chairwoman’s political party did not prevent her from reaching a unanimous decision with the Democratic majority that resulted in the biggest settlement of its kind to date, with the inclusion of a nontraditional release of claims. Maybe, just maybe, CPSC and consumer product safety can avoid the perilous pitfalls of partisanship – especially when companies engage with the CPSC in a proactive, creative, and productive way. Stakeholders will have their next opportunity to do so at the upcoming CPSC hearings on April 11 and May 16. Stay tuned!