Home Depot Agrees to $5.7 Million Civil Penalty to Settle Allegations it Sold Recalled Products

The U.S. Consumer Product Safety Commission (“CPSC”) announced on August 29 it has provisionally agreed with Home Depot U.S.A., Inc. to a $5.7 million settlement of allegations that the retailer unlawfully sold recalled products over a four year period.  The settlement will almost certainly become final once The Commission considers public comments as required by its rules.

The CPSC staff alleges in the settlement agreement  that Home Depot “knowingly” sold or distributed approximately 2,816 units of 33 different recalled products from 2012 to 2016, in violation of Section 19(a)(2)(B) of the Consumer Product Safety Act (“CPSA”). Under this provision of the CPSA, “knowingly” means the retailer knew or “should have known” of the sale of a recalled product. Indeed, CPSC staff do not allege Home Depot intended to sell any recalled products, but rather that it failed to accurately identify, quarantine and prevent the sale of the recalled items—essentially, an allegation of negligence.

Notably, CPSC and Home Depot had issued a joint press release in November 2015 notifying customers of the post-recall sales, but CPSC staff asserts that Home Depot sold additional units of some of the same recalled products (as well as other recalled products) after the press release. While it is not clear from the settlement agreement, it seems reasonable to assume that the large size of the agreed penalty may have been at least in part due to the post-press release sales.

As is typical in recent civil penalty settlements, the settlement agreement also requires Home Depot to maintain a compliance program to prevent future sale or distribution of recalled products.

The Commission voted 4 to 1 in favor of the proposed settlement. All Commissioners believed a penalty to be justified, with Acting Chairman Ann Marie Buerkle voting to accept a $1 million penalty rather than the $5.7 million penalty that her fellow Commissioners—including Republican Joseph Mohorovic—voted to approve.

This penalty is not the first penalty for the sale of recalled products. In 2014, Meijer paid a settlement of $2 million for selling approximately 1,700 units subject to 12 recalls. In addition, one of the claims by the government in the pending U.S. v. Spectrum Brands, Inc. case is for the sale of recalled products. Retailers obviously need to take their obligation not to sell recalled products seriously, as should manufacturers. The law may also create challenges for manufacturers as retailers impose requirements on manufacturers (like changes in product SKUs for products that are recalled) designed to ensure retailers do not inadvertently sell a recalled product.

This blog was written by Timothy Mullin and Dwight Stone at Miles & Stockbridge.

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