What Happened?
The air conditioners, which were manufactured by Royal Sovereign International, Inc., were sold throughout BJ's retail stores. Between 2011 and 2012, BJ's sold 1,778 units of these portable air conditioners, 509 of which were returned to the store. In August 2016, one of its units was involved in a house fire in Smithtown, New York. Although a mother and her two children were rescued from the fire, the mother ultimately succumbed to smoke-related injuries and passed away. BJ's learned of the fire no later than March 2017, after receiving a claim letter from retained counsel for the anticipated wrongful death and personal injury claims, but failed to issue any recall at the time. It was not until March 2021 that BJ's issued a notice to its consumers that the air conditioners did not meet their safety standards and "out of an abundance of caution" advised consumers to stop using the product immediately.
On December 22, 2021, Royal Sovereign and the Consumer Product Safety Commission issued a joint announcement recalling 33,570 air conditioners. As the recall explained, a faulty drain motor in the air conditioners could ignore the plastic enclosure in the unit, posing fire and burn hazards and the risk of serious injury or death. At the time, Royal Sovereign was aware of eleven reports of the air conditioners catching fire or smoking, resulting in over $1 million in property damage as well as the injuries suffered to the Smithtown, New York family. The recall advised consumers to immediately stop using the air conditioners, unplug the unit, and follow instructions for properly severing the electrical cord in order to render the product unusable, warning that failure to unplug the unit could result in shock, electrocution, or death. The recall cited several model numbers that were sold in BJ's and other retailers, such as Amazon.com, Sears, Costco, Home Depot, and Best Buy, nationwide between March 2008 and August 2014. The units cost about $290 and were manufactured in China. Consumers were offered a pro-rated refund depending on the age of the product.
The Settlement
The Consumer Product Safety Commission is authorized by the Consumer Product Safety Act to promulgate rules regarding products and can issue bans and recalls if the products present an unreasonable risk of injury. Per the settlement agreement, the CPSC alleged that BJ’s violated CPSA Section 19(a)(4), by failing to timely furnish information as required under Section 15(b), namely, that the portable air conditioners “contained a defect which could create a substantial product hazard or created an unreasonable risk of serious injury or death.” Because the information in the company’s possession constituted actual and presumed knowledge, the CPCS charged that BJ’s knowingly violated the rules and is subject to civil penalties.
However, as part of the settlement agreement, BJ’s did not admit that it violated the CPSA or any other law. The company maintains that it has a product safety compliance program to ensure the safety of its products and to evaluate any issues on an ongoing basis. BJ’s also asserts that upon learning of the safety issue, it relied upon Royal Sovereign, as the product’s manufacturer, to report the problem to the CPSC.
Under the settlement agreement, BJ’s will pay a civil penalty of $9 million within 30 days of the CPSC’s final order accepting the agreement’s terms. In addition to the penalty, the settlement requires BJ's to maintain internal controls and procedures to ensure compliance with the Consumer Product Safety Act, including enhancements to its current compliance program. BJ's will also have to submit annual reports, for three years, documenting its compliance program, internal controls, and audits regarding the effectiveness of its compliance program, systems, and training.
The Chair of the CPSC issued a statement in support of the settlement, noting it contributed to more than $52 million in final assessments for the 2023 fiscal year. “Our action sends a loud and clear warning to companies who continue to sell dangerous products despite knowing that they can cause serious injury or death,” Alexander Hoehn-Saric, stated. “These penalties, like today’s settlement announcement, demonstrate CPSC’s commitment to hold companies accountable when they put the public at risk and consumers should look forward to a safe marketplace for all.”
