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[Federal Register Volume 79, Number 130 (Tuesday, July 8, 2014)]
[Notices]
[Pages 38519-38522]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-15905]

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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 14-C0003]

HMI Industries, Inc., Provisional Acceptance of a Settlement 
Agreement and Order

AGENCY: Consumer Product Safety Commission.

ACTION: Notice.

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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 1118.20(e). 
Published below is a provisionally-accepted Settlement Agreement with 
HMI Industries, Inc., containing a civil penalty of $725,000.00, within 
twenty (20) days of service of the Commission's final Order accepting 
the Settlement Agreement.\1\
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    \1\ The Commission voted (2-1) to provisionally accept this 
Settlement Agreement and Order. Acting Chairman Robert S. Adler and 
Commissioner Marietta S. Robinson voted to provisionally accept 
Settlement Agreement and Order. Commissioner Ann Marie Buerkle voted 
to reject the attached Settlement Agreement and Order.

DATES: Any interested person may ask the Commission not to accept this 
agreement or otherwise comment on its contents by filing a written 
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request with the Office of the Secretary by July 23, 2014.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to the Comment 14-C0003 Office of the 
Secretary, Consumer Product Safety Commission, 4330 East West Highway, 
Room 820, Bethesda, Maryland 20814-4408.

FOR FURTHER INFORMATION CONTACT: Mary B. Murphy, Assistant General 
Counsel, Office of the General Counsel, Consumer Product Safety 
Commission, 4330 East West Highway, Bethesda, Maryland 20814-4408; 
telephone (301) 504-7809.

SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears 
below.

    Dated: July 2, 2014.
 Todd A. Stevenson,
Secretary.

UNITED STATES OF AMERICA

CONSUMER PRODUCT SAFETY COMMISSION

    In the Matter of:

HMI Industries Inc.
CPSC Docket No.: 14-C0003

SETTLEMENT AGREEMENT

    1. In accordance with the Consumer Product Safety Act (CPSA), 15 
U.S.C. Sec. Sec.  2051-2089 and 16 C.F.R. Sec.  1118.20, HMI Industries 
Inc. (HMI), and the U.S. Consumer Product Safety Commission 
(Commission), through its staff (staff), hereby enter into this 
Settlement Agreement (Agreement). The Agreement and the incorporated 
attached Order (Order) resolve staff's charges set forth below.

THE PARTIES

    2. The Commission is an independent federal regulatory agency 
established pursuant to, and responsible for, the enforcement of the 
CPSA. By executing this Agreement, staff is acting on behalf of the 
Commission, pursuant to 16 C.F.R. Sec.  1118.20(b). The Commission 
issues the Order under the provisions of the CPSA.
    3. HMI is a corporation, organized and existing under the laws of 
the state of Delaware with its principal corporate office located in 
Strongsville, Ohio. HMI is a manufacturer of floor cleaners and indoor 
air purifiers.

STAFF CHARGES

    4. Between September 2004 and August 2006, HMI manufactured and 
distributed approximately 44,000 Filter Queen Majestic 360 floor 
cleaners (Subject Products, or Floor Cleaners). The Floor Cleaners were 
sold through independent distributors nationwide for approximately 
$1,800.
    5. The Floor cleaners are ``consumer products,'' and at all 
relevant times, HMI was a ``manufacturer'' of these consumer products, 
which were ``distributed in commerce,'' as those terms are defined or 
used in sections 3(a)(5) and (11), of the CPSA, 15 U.S.C. Sec.  
2052(a)(5) and (11).
    6. The Floor Cleaners are defective because their wiring can 
overheat, causing electrical arcing and melting. This poses a burn 
hazard to consumers.
    7. HMI received notice of the defect shortly after distribution 
began in September 2004. Between 2005 and 2008, HMI received hundreds 
of reports of electrical arcing, sparking, and fire, including reports 
of property damage

[[Page 38520]]

and injuries to consumers. During that same time, HMI implemented four 
separate design changes to alleviate the hazard posed by the product. 
HMI distributed product information notices to consumers in March 2006 
and May 2006, alerting users to the defect which the design change 
attempted to correct. Throughout this period, HMI also paid out claims 
filed by consumers who reported that the product failed and caused 
fires and/or property damage.
    8. By March 2006, HMI had sufficient information that reasonably 
supported the conclusion that the Floor Cleaners contained a defect 
that could create a substantial product hazard or created an 
unreasonable risk of serious injury or death. HMI was required to 
inform the Commission immediately of such defect or risk, as required 
by sections 15(b)(3) and (4) of the CPSA, 15 U.S.C. Sec. Sec.  
2064(b)(3) and (4). By that date, the Firm had received approximately 
500 reports of arcing, had instituted its third design change, and had 
sent product information notices to consumers alerting them to the 
defect.
    9. Despite having information regarding the Floor Cleaner's defect 
or risk, HMI failed to inform the Commission immediately, as required 
by sections 15(b)(3) and (4) of the CPSA, 15 U.S.C. Sec. Sec.  
2064(b)(3) and (4).
    10. In failing to inform the Commission about the Subject Products 
immediately, HMI knowingly violated section 19(a)(4) of the CPSA, 15 
U.S.C. Sec.  2068(a)(4), as the term ``knowingly'' is defined in 
section 20(d) of the CPSA, 15 U.S.C. Sec.  2069(d).
    11. HMI did not file its Full Report with the Commission until 
February 2009. By that date, HMI was aware of approximately 2,000 
incidents of arcing involving the Floor Cleaners, approximately 120 
consumer reports of overheating and property damage, and injuries to 
two consumers. However, HMI advised staff that it knew of only 40 
consumer complaints of overheating and damage to carpets, with no 
reports of injury. Staff relied upon that information and included that 
information in the joint press release issued on April 29, 2009.
    12. In underreporting to Commission staff the number of incidents 
and injuries associated with the Floor Cleaners, HMI knowingly 
committed a material misrepresentation to an officer or employee in the 
course of an investigation under the CPSA in violation of section 
19(a)(13) of the CPSA, 15 U.S.C. Sec.  2068(a)(13).
    13. Pursuant to section 20 of the CPSA, 15 U.S.C. Sec.  2069, HMI 
is subject to civil penalties for its knowing failure to report, as 
required by section 15(b) of the CPSA, 15 U.S.C. Sec.  2064(b), and for 
HMI's material misrepresentation in violation of CPSA Section 
19(a)(13).

HMI's RESPONSE

    14. This Agreement does not constitute an admission by HMI to the 
charges set forth in paragraphs 4 through 13, including, but not 
limited to, the charge that the Floor Cleaners contained a defect which 
could create a substantial product hazard or created an unreasonable 
risk of serious injury or death, and the contention that HMI failed to 
notify the Commission in a timely manner, in accordance with section 
15(b) of the CPSA, 15 U.S.C. Sec.  2064(b), and the charge that HMI 
knowingly committed a material misrepresentation to an officer or 
employee in the course of an investigation in violation of Section 
19(a)(13) of the CPSA.

AGREEMENT OF THE PARTIES

    15. Under the CPSA, the Commission has jurisdiction over the matter 
involving the Floor Cleaners described herein and over HMI.
    16. In settlement of staff's charges, and to avoid the cost, 
distraction, delay, uncertainty, and inconvenience of protracted 
litigation or other proceedings, HMI shall pay a civil penalty in the 
amount of seven hundred twenty-five thousand dollars ($725,000), with 
three hundred twenty-five thousand ($325,000) of that sum suspended. 
The remaining four hundred thousand dollars ($400,000) is to be paid in 
forty equal payments of $10,000, with the first payment due and payable 
within twenty (20) calendar days after receiving service of the 
Commission's final Order accepting the Agreement, and each subsequent 
payment due and payable no later than the 15th day of each succeeding 
month until all amounts due and payable under this Agreement are paid 
in full. Interest at the federal legal rate of interest set forth at 28 
U.S.C. Sec.  1961(a) and (b) shall accrue only on amounts not timely 
paid as provided in this Agreement and shall be payable by HMI. All 
payments shall be applied first to accrued but unpaid interest, if any, 
and then to principal. All payments to be made under this Agreement 
shall constitute debts owing to the United States and shall be made by 
electronic wire transfer to the United States via: http://www.pay.gov 
for allocation to and credit against the payment obligations of HMI 
hereunder.
    17. The parties agree that this settlement figure has been agreed 
to by staff, and is predicated, among other things, upon the accuracy 
of oral and written representations of, and statements by, HMI and 
HMI's representatives (including representations and warranties set 
forth in this Agreement) regarding (a) facts that establish HMI's 
status as a small business and (b) the financial condition of HMI, 
including statements concerning HMI's inability to pay a greater 
penalty due to restrictions imposed by a tangible net worth covenant in 
an existing loan agreement.
    18. HMI warrants and represents that the financial statements and 
financial information provided to staff are true, accurate, and 
complete and have been prepared in accordance with GAAP applied on a 
consistent basis throughout the periods indicated and with each other; 
and that the financial statements and financial information fairly 
present the financial condition and results of operations and cash flow 
of HMI as of the dates, and for the periods, indicated therein, all in 
conformity with GAAP consistently applied during the periods involved 
except as otherwise noted. HMI additionally warrants and represents 
that all information provided to staff in connection with this civil 
penalty matter is true, accurate, and complete. To the extent that 
financial information provided by the Firm during the course of this 
civil penalty matter included projections and/or forward looking 
statements, such projections or statements represented HMI's good faith 
assessment of the HMI's future performance, and had a reasonable basis.
    19. HMI has provided staff with its consolidated financial 
statements as of and for the years ending September 30, 2012 and 
September 30, 2013 and, along with related notes to the financial 
statements, as reviewed and audited by independent auditors.
    20. The parties agree that an amount equal to $725,000 
(representing the entire civil penalty including the suspended portion) 
plus any accrued and unpaid interest minus any penalty amounts paid by 
HMI shall become immediately due and payable upon the occurrence of an 
``Event of Default.'' An Event of Default means: (1) HMI's breach or 
failure to perform in any respect any of its agreements, covenants, 
representations or warranties contained in this Agreement (including 
the failure of HMI to timely pay any payment obligation under this 
Agreement as set forth in this Agreement); or (2) a violation by HMI of 
any CPSC statute or regulation.
    21. The suspended portion of the civil penalty ($325,000), and any 
obligations of HMI related to such payment, will terminate upon the 
payment in full by HMI as provided in this Agreement of

[[Page 38521]]

an amount equal to $400,000 plus accrued and unpaid interest, if any, 
provided that no Event of Default has occurred.
    22. The parties enter into this Agreement for settlement purposes 
only. The Agreement does not constitute an admission by HMI that HMI 
violated the CPSA.
    23. Following staff's receipt of this Agreement executed on behalf 
of HMI, staff shall promptly submit the Agreement to the Commission for 
provisional acceptance. Promptly following provisional acceptance of 
the Agreement by the Commission, the Agreement shall be placed on the 
public record and published in the Federal Register, in accordance with 
the procedures set forth in 16 C.F.R. Sec.  1118.20(e). If within 
fifteen (15) calendar days the Commission does not receive any written 
request not to accept the Agreement, the Agreement shall be deemed 
finally accepted on the sixteenth (16th) calendar day after the date 
the Agreement is published in the Federal Register, in accordance with 
16 C.F.R. Sec.  1118.20(f).
    24. This Agreement is conditioned upon, and subject to, the 
Commission's final acceptance, as set forth above, and is subject to 
the provisions of 16 C.F.R. Sec.  1118.20(h). Upon the later of: (i) 
the Commission's final acceptance of this Agreement and service of the 
accepted Agreement upon HMI, and (ii) the date of issuance of the final 
Order, this Agreement shall be in full force and effect and shall be 
binding upon the parties.
    25. Effective upon the later of: (i) the Commission's final 
acceptance of the Agreement and service of the accepted Agreement upon 
HMI, and (ii) the date of issuance of the final Order, for good and 
valuable consideration, HMI hereby expressly and irrevocably waives and 
agrees not to assert any past, present, or future rights to the 
following, in connection with the matter described in the Agreement: 
(a) an administrative or judicial hearing; (b) judicial review or other 
challenge or contest of the validity of the Order or of the 
Commission's actions; (c) a determination by the Commission of whether 
HMI failed to comply with the CPSA and the underlying regulations; (d) 
a statement of findings of fact and conclusions of law; and (e) any 
claims under the Equal Access to Justice Act.
    26. HMI shall implement and maintain a compliance program designed 
to ensure compliance with the statutes and regulations enforced by the 
Commission that, at a minimum, contains the following elements: (i) 
written standards and policies; (ii) procedures for implementing 
corrective and preventive actions when compliance deficiencies or 
violations are identified; (iii) a mechanism for confidential employee 
reporting of compliance-related questions or concerns to either a 
compliance officer or to another senior manager with authority to act 
as necessary; (iv) effective communication of company compliance-
related policies and procedures to all employees through training 
programs or otherwise; (v) senior manager responsibility for compliance 
and accountability for violations of the statutes and regulations 
enforced by the Commission; (vi) board oversight of compliance (if 
applicable); and (vii) retention of all compliance-related records for 
at least five (5) years and availability of such records to staff upon 
request.
    27. HMI shall maintain and enforce a system of internal controls 
and procedures designed to ensure that: (i) information required to be 
disclosed by HMI to the Commission is recorded, processed and reported 
in accordance with applicable law; (ii) all reporting made to the 
Commission is timely, truthful, complete and accurate; and (iii) prompt 
disclosure is made to HMI management of any significant deficiencies or 
material weaknesses in the design or operation of such internal 
controls that are reasonably likely to adversely affect in any material 
respect HMI's ability to record, process, and report to the Commission 
in accordance with applicable law.
    28. Upon request of staff, HMI shall provide written documentation 
of its compliance program, and internal controls and procedures 
including, but not limited to, the effective dates thereof. HMI shall 
cooperate fully and truthfully with staff and shall make available all 
information, materials, and personnel deemed necessary by staff to 
evaluate HMI's compliance with the terms of the Agreement.
    29. The parties acknowledge and agree that the Commission may make 
public disclosure of the terms of the Agreement and the Order.
    30. HMI represents that the Agreement: (i) is entered into freely 
and voluntarily, without any degree of duress or compulsion whatsoever; 
(ii) has been duly authorized; and (iii) constitutes the valid and 
binding obligation of HMI, and each of its successors and/or assigns, 
enforceable against HMI in accordance with the Agreement's terms. The 
individuals signing the Agreement on behalf of HMI represent and 
warrant that they are duly authorized by HMI to execute the Agreement.
    31. The Commission signatories represent that they are signing the 
Agreement in their official capacities and that they are authorized to 
execute this Agreement.
    32. The Agreement is governed by the laws of the United States.
    33. The Agreement and the Order shall apply to, and be binding 
upon, HMI and each of its subsidiaries, successors, transferees, and 
assigns, and a violation of the Agreement or Order may subject HMI and 
each of its successors, transferees, and assigns to appropriate legal 
action.
    34. The Agreement and the Order constitute the complete agreement 
between the parties on the subject matter contained herein and therein.
    35. The Agreement may be used in interpreting the Order. 
Understandings, agreements, representations, or interpretations apart 
from those contained in the Agreement and the Order may not be used to 
vary or contradict their terms. For purposes of construction, the 
Agreement shall be deemed to have been drafted by both of the parties, 
and therefore, shall not be construed against any party for that reason 
in any subsequent dispute.
    36. The Agreement shall not be waived, amended, modified, or 
otherwise altered, except as in accordance with the provisions of 16 
C.F.R. Sec.  1118.20(h). The Agreement may be executed in counterparts.
    37. If any provision of the Agreement or the Order is held to be 
illegal, invalid, or unenforceable under present or future laws 
effective during the terms of the Agreement and the Order, such 
provision shall be fully severable. The balance of the Agreement and 
the Order shall remain in full force and effect, unless the Commission 
and HMI agree that severing the provision materially affects the 
purpose of the Agreement and Order.

HMI, INDUSTRIES INC.

Dated: June 10, 2014

By:--------------------------------------------------------------------

Kirk W. Foley, Chairman and CEO, HMI Industries Inc., 13325 Darice 
Parkway, Unit A, Strongsville, Ohio 44149

Dated: June 11, 2014

By:--------------------------------------------------------------------

Elizabeth Abbene Coleman, Jenner & Block, LLP, 353 North Clark Street, 
Chicago, Illinois 60654, Counsel for HMI Industries Inc.

Dated: June 10, 2014

By:--------------------------------------------------------------------

Mary B. Murphy, Assistant General Counsel

U.S. CONSUMER PRODUCT SAFETY COMMISSION STAFF

[[Page 38522]]

Stephanie Tsacoumis, General Counsel

UNITED STATES OF AMERICA

CONSUMER PRODUCT SAFETY COMMISSION

    In the Matter of: HMI, Industries Inc.
CPSC Docket No.: 14-C0003

ORDER

    Upon consideration of the Settlement Agreement entered into between 
HMI, Industries Inc. (HMI), and the U.S. Consumer Product Safety 
Commission (Commission), and the Commission having jurisdiction over 
the subject matter and over HMI, and it appearing that the Settlement 
Agreement and the Order are in the public interest, it is
    ORDERED that the Settlement Agreement be, and is, hereby, accepted; 
and it is
    FURTHER ORDERED, that HMI shall comply with the terms of the 
Settlement Agreement and shall pay a civil penalty of $725,000 
($725,000, with $325,000 of the total suspended) subject to the terms 
and conditions of the Settlement Agreement. HMI shall pay the non-
suspended portion of the penalty, $400,000, in accordance with the 
schedule and terms set forth in the Settlement Agreement. Upon the 
occurrence of an Event of Default as set forth in the Settlement 
Agreement, an amount equal to $725,000 (representing the entire civil 
penalty including the suspended portion) plus any accrued and unpaid 
interest minus any penalty amounts paid by HMI immediately shall become 
due and payable.

Provisionally accepted and provisional Order issued on the 2nd day of 
July, 2014.
By Order of the Commission:

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Todd A. Stevenson, Secretary,
U.S. Consumer Product Safety Commission.
[FR Doc. 2014-15905 Filed 7-7-14; 8:45 am]
BILLING CODE 6355-01-P
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