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From Products Liability Law Daily, April 22, 2015

CPSC seeks civil penalties against Michaels Stores for failing to report defect in shattering vases

By Pamela C. Maloney, J.D.

Michaels Stores, Inc. and its subsidiary Michaels Stores Procurement Co. Inc., have been charged with failing to report, on a timely basis as required by the Consumer Product Safety Act (CPSA), that the glass walls of 20-inch vases, which the company imported and sold, were too thin to withstand normal handling, according to a complaint filed by the U.S Department of Justice in the U.S. District Court for the Northern District of Texas. According to the CPSC, the vases could shatter and break in customers’ hands causing lacerations and more serious injuries, including severed tendons and nerve damage. As a result, the vases contained a defect that could create a substantial product hazard and could pose an unreasonable risk of serious injury to consumers (United States of America v. Michaels Stores, Inc., April 21, 2015).

Background. Between June 2006 and February 2010, The Gerson Company, a Kansas corporation unaffiliated with Michaels, procured on behalf of Michaels, the manufacture of approximately 203,000 glass vases, which were imported into the United States by Michaels. The vases, which were made in China, were shipped directly from the Chinese factories to Michael’s freight forwarder, also located in China. The freight forwarder shipped the vases to Michaels’ distribution centers in the United States. Michaels was listed as the “importer of record” of the vases on the U.S. customs forms. CPSC charged that at all relevant times, Michaels was an importer of the vases and, therefore, it was a manufacturer under the CPSA. CPSC stated that Michaels was also a retailer as defined in the Act.

Allegations of wrongdoing. The complaint provides details of injuries associated with handling of the vases, many of which occurred in Michaels’ stores. These reports indicated that as early as September 2008, Michaels had knowledge of or information about the defect in or risk of the vases shattering in consumers’ hands and causing serious injuries. However, Michaels failed to provide any notice or information to the agency and when the company finally did report the problem, its report was incomplete and misleading in that it conveyed the false impression that Gerson had imported the vases and that Michaels had acted only as the retailer. This misrepresentation allowed Michaels to avoid responsibility for a recall of the vases. Instead, the agency worked with Gerson to carry out a recall of the vases, which was announced in September 2010 (Recall Alert number 10-349).

The complaint also charges Michaels with failing to implement or maintain a reasonable and effective program or system for complying with the reporting requirements of the CPSA and related regulations and with failing to adopt appropriate internal controls to ensure and monitor compliance with federal laws and regulations.

Relief sought. CPSC is seeking civil penalties against Michaels for making a material misrepresentation to an officer or employee in the course of an investigation under the CPSA. In light of its belief that Michaels will continue to violate the CPSC reporting requirements, the agency also requested injunctive relief against the company.

The case is Civil No. 3:15-cv-1203.

Attorneys: Kerala Cowart, U.S. Department of Justice, for United States of America.

Companies: Michaels Stores, Inc.; Michaels Stores Procurement Co. Inc.

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