CPSC Settles Civil Penalty Matter with Kawasaki for $5.2 Million

On June 2, 2016, the US Consumer Product Safety Commission announced that Kawasaki Heavy Industries, Ltd., of Japan, Kawasaki Motors Corp., USA., of Foothill Ranch, California, and Kawasaki Motors Manufacturing Corp., USA., of Lincoln, Nebraska agreed to pay a $5.2 million civil penalty to settle charges that Kawasaki violated the Consumer Product Safety Act because it did not immediately report a substantial product hazard or an unreasonable risk of serious injury or death associated with certain recreational off-highway vehicles distributed under the Teryx brand. The CPSC also alleged that Kawasaki knowingly made a material misrepresentation to CPSC staff by underreporting the number of incidents associated with one of the ROV models and failing to report any incidents regarding two others. 
 
The charges arose out of Kawasaki’s receipt, beginning in 2012, of hundreds of reports of the floorboards of these ROVs cracking or breaking during normal operation due to impact with, or penetration by, debris from outside the vehicle. Some of these incidents resulted in injuries (including several serious injuries) to consumers. However, when Kawasaki ultimately filed its full report with CPSC (several years after it began receiving reports of the problem), it reported only a single incident and an unspecified number of injuries. The CPSC asserted not only that Kawasaki violated the CPSA by failing to make a required report (in violation of section 19(a)(4) of the CPSC), but also that the company knowingly omitted information about the scope and incidence of the hazard. According to the CPSC, this omission constituted a “material misrepresentation” (a violation of section 19(a)(13) of the CPSA) that interfered with the Commission’s investigation into the matter and hampered its ability to accurately communicate the prevalence of the hazard to the public. This appears to be only the second time that the CPSC has alleged a violation of section 19(a)(13) in a civil penalty proceeding (the other being the Commission’s 2016 settlement with Gree Electronic Appliances, Inc. related to the distribution of dehumidifers that posted a posed a serious fire and burn hazard.) 
 
In addition to paying the $5.2 million civil penalty, Kawasaki also committed to maintaining a compliance program to ensure compliance with the CPSA, along with a related system of internal controls and procedures.
 
The penalty agreement has been accepted provisionally by the Commission by a 4 to 1 vote.
 
Although it is too early to identify trends with any certainty, we note that while the penalty under the settlement is substantial, it is significantly lower than the $15.45 million settlement with Gree last year. Time will tell if it reflects a retreat under the Trump administration from the Commission’s previously stated objective of imposing larger civil penalties for statutory violations.