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Kawasaki Settles with CPSC for $5.2 Million for Alleged Failure to Report Defects: U.S. Consumer Product Safety Commission

Kawasaki Heavy Industries, Ltd., of Japan; Kawasaki Motors Corp., U.S.A., of Foothill Ranch, California; and Kawasaki Motors Manufacturing Corp., U.S.A., of Lincoln, Nebraska, agreed to pay a $5.2 million civil penalty over allegations that Kawasaki failed to report floorboards cracking during normal operation of various Teryx4 recreational off-highway vehicles (ROVs) during two separate periods, which U.S. Consumer Product Safety Commission (CPSC) alleged amounted to defects that could create substantial product hazards.

  • April 2012–July 2014: Kawasaki allegedly received over 400 reports of certain models’ floorboards cracking or breaking during normal operation due to debris impacts/penetration. Three incidents resulted in injuries to consumers, including one serious injury.

  • July 2013–August 2015: Kawasaki allegedly received over 150 reports of certain models’ floorboards cracking or breaking during normal operation, with three of these incidents resulting in consumer injuries, including two serious injuries.

Federal law requires that manufacturers, distributors, and retailers must report potential product safety hazards to the CPSC within 24 hours of discovering evidence of a problem. Despite having received numerous reports of incidents caused by problems with the floorboards of thousands recreational off-highway vehicles (ROVs), Kawasaki allegedly detailed only one incident and an unspecified number of injuries, which the Commission believed amounted to a material misrepresentation of the extent of the problem. The CPSC asserted that the company impeded the CPSC’s investigation, and hampered the agency’s ability to accurately communicate the prevalence of the hazard to the public, creating an unreasonable safety risk.

The civil penalty relates to a recall initially announced in 2014 and subsequently expanded in 2015.

In addition to paying a civil penalty, the company also agreed to maintain a program to ensure compliance with CPSC-administered laws, and also to maintain a related system of internal controls and procedures to assure that it adheres to reporting obligations.

Making determinations about substantial product hazards for purposes of reporting to CPSC necessarily involves subjective judgments.  It can be difficult to sort through complex facts and information.  The CPSC, however, continues to urge companies to report promptly and fully, and this civil penalty settlement follows several multimillion dollar agreements in recent years.

The settlement was provisionally approved by the CPSC by a 4-to-1 vote, with the three Democrats and one Republican voting to approve the settlement, and Acting Chairman Ann Marie Buerkle voting to reject the provisional settlement. While it is possible that ultimately a change in the makeup of the Commission will result in the agency taking a new look at its approach to civil penalties, it remains essential for manufacturers to maintain accurate records of product defects, analyze them carefully, and to do their best to assure that agency communications are accurate.

© 2017 Keller and Heckman LLP

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Sheila Millar, Keller Heckman, advertising lawyer, privacy attorney
Partner

Sheila A. Millar counsels corporate and association clients on advertising, privacy, product safety, and other public policy and regulatory compliance issues.

Ms. Millar advises clients on an array of advertising and marketing issues.  She represents clients in legislative, rulemaking and self-regulatory actions, advises on claims, and assists in developing and evaluating substantiation for claims. She also has extensive experience in privacy, data security and cybersecurity matters.  She helps clients develop website and app privacy policies,...

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Tracy Marshall, Keller Heckman, regulatory attorney, for-profit company lawyer
Partner

Tracy Marshall joined Keller and Heckman in 2002. She assists clients with a range of business and regulatory matters.

In the business and transactional area, Ms. Marshall advises for-profit and non-profit clients on corporate organization, operations, and governance matters, and assists clients with structuring and negotiating a variety of transactions, including purchase and sale, marketing, outsourcing, and e-commerce agreements.

In the privacy, data security, and advertising areas, she helps clients comply with privacy, data security, and consumer protection laws, including laws governing telemarketing and commercial e-mail messages, contests and sweepstakes, endorsements and testimonials, marketing to children, and data breach notification. Ms. Marshall also helps clients establish best practices for collecting, storing, sharing, and disposing of data, and manage outsourcing arrangements and transborder data flows. In addition, she assists with drafting and implementing internal privacy, data security, and breach notification policies, as well as public privacy policies and website terms and conditions. 

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Nathan Cardon, Keller Heckman, product safety attorney, labor lawyer, consumer protection law, cybersecurity matters
Associate

Nathan Cardon joined Keller and Heckman in 2013.  Mr. Cardon practices in the areas of product safety, privacy, and advertising.

In his product safety practice, Mr. Cardon counsels clients on risk management and product safety strategies, as well as on compliance with Consumer Product Safety Commission (CPSC) requirements, including new requirements under the Consumer Product Safety Improvement Act of 2008 (CPSIA). 

In the privacy and advertising practice, Mr. Cardon is involved in a wide variety of privacy, data...

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