Nautilus, Inc., Provisional Acceptance of a Settlement Agreement and Order, 20107-20110 [05-7682]

Agencies

• Consumer Product Safety Commission

[Federal Register Volume 70, Number 73 (Monday, April 18, 2005)]
[Notices]
[Pages 20107-20110]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-7682]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 05-C0008]


Nautilus, Inc., Provisional Acceptance of a Settlement Agreement 
and Order

AGENCY: Consumer Product Safety Commission.

ACTION: Notice.

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SUMMARY: It is the policy of the Commission to publish settlements 
which it provisionally accepts under the Consumer Product Safety Act in 
the Federal Register in accordance with the terms of 16 CFR 1118.20(e). 
Published below is a provisionally-accepted Settlement Agreement with 
Nautilus, Inc., containing a civil penalty of $950,000.00.

DATES: Any interested person may ask the Commission not to accept this 
agreement or otherwise comment on its contents by filing a written 
request with the Office of the Secretary by May 3, 2005.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to the Comment 05-C0008, Office of the 
Secretary, Consumer Product Safety Commission, Washington, DC 20207.

FOR FURTHER INFORMATION CONTACT: Dennis C. Kacoyanis, Trial Attorney, 
Office of Compliance, Consumer Product Safety Commission, Washington, 
DC 20207; telephone (301) 504-7587.

SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears 
below.

    Dated: April 4, 2005.
Todd A. Stevenson,
Secretary.
    In the Matter of Nautilus, Inc.

Settlement Agreement and Order

    1. This Settlement Agreement is made by and between the staff 
(``the staff'') of

[[Page 20108]]

the U.S. Consumer Product Safety Commission (``the Commission'') and 
Nautilus, Inc. (``Nautilus'' or ``Respondent''), a corporation, in 
accordance with 16 CFR 1118.20 of the Commission's Procedures for 
Investigations, Inspections, and Inquiries under the Consumer Product 
Safety Act (``CPSA''). This Settlement Agreement and the incorporated 
and attached Order settle the staff's allegations set forth below.

I. The Parties

    2. The Commission is an independent federal regulatory agency 
responsible for the enforcement of the Consumer Product Safety Act, 15 
U.S.C. 2051 et seq.
    3. Nautilus is a corporation organized and existing under the laws 
of the State of Washington with its principal corporate offices located 
at 1400 NE 136th Avenue, Vancouver, WA 98661. Nautilus manufactures and 
sells, either through retailers or direct sales methods, such as 
infomercials, health and fitness products under several brand names, 
including Bowflex.

II. Allegations of the Staff

A. Bowflex Power Pro Fitness Machines-Backboard Bench
    4. Between January 1995 and December 2003, Nautilus manufactured 
and/or sold in commerce nationwide approximately 420,000 Bowflex Power 
Pro Fitness Machines equipped with a Lat Tower and a backboard bench.
    5. The Bowflex Power Pro Fitness Machine is sold to, and/or is used 
by, consumers in or around a permanent or temporary household or 
residence, a school, in recreation, or otherwise and is, therefore, a 
``consumer product'' as defined in section 3(a)(1) of the Consumer 
Product Safety Act (CPSA), 15 U.S.C. 2052(a)(1). Respondent is a 
``manufacturer'' and ``retailer'' of the Bowflex Power Pro exercise 
equipment, which is ``distributed in commerce'' as those terms are 
defined in sections 3(a)(4), (6), (11), and (12) of the CPSA, 15 U.S.C. 
2052(a)(4), (6), (11), and (12).
    6. The Bowflex Power Pro Fitness Machine is an item of exercise 
equipment that uses 10 to 14 resistance rods, a pulley system, and a 
backboard bench. The Bowflex Power Pro's backboard bench can break 
apart and collapse unexpectedly during normal and foreseeable use of 
the exercise equipment. If a backboard bench breaks apart and collapses 
unexpectedly during use, it may cause the consumer to fall and suffer 
serious injuries.
    7. Between December 1998 and July 2002, Nautilus learned of about 
25 reports of consumers sustaining injuries when the Power Pro's 
backboard bench broke apart and collapsed unexpectedly during use of 
the exercise equipment. Nautilus knew of lacerations requiring sutures, 
back, neck, and spinal injuries.
    8. In June 2000, after learning of about eight reported incidents 
of the Bowflex Power Pro Fitness Machine's backboard bench breaking 
apart and collapsing unexpectedly during use, Nautilus reinforced the 
backboard bench by adding a steel plate.
    9. On July 1, 2002, the Commission's National Injury Information 
Clearinghouse forwarded to Nautilus an in-depth investigation report. 
In this report, a consumer alleged the backboard bench broke apart and 
collapsed unexpectedly during use. The consumer suffered injuries to 
his back, tongue, and teeth. In its letter, the Clearinghouse advised 
Nautilus about the CPSA's reporting requirement and the procedures for 
submitting a report to the Commission. At the time it received this 
letter from the Clearinghouse, Nautilus knew of at least 27 incident 
reports of which 25 claimed injuries resulting from the Bowflex Power 
Pro's backboard bench collapsing and breaking apart unexpectedly during 
use, but did not report the defect or risk to the Commission.
    10. As the facts described in paragraphs 4 through 9 above show, 
Nautilus obtained information which reasonably supported the conclusion 
that the Bowflex Power Pro exercise equipment described in paragraph 4 
above contained a defect which could create a substantial product 
hazard or created an unreasonable risk of serious injury or death, but 
failed to report such information to the Commission as required by 
sections 15(b)(2) and (3) of the CPSA, 15 U.S.C. 2064(b)(2) and (3).
    11. By failing to furnish information as required by section 15(b) 
of the CPSA, 15 U.S.C. 2064(b), Nautilus violated section 19(a)(4) of 
the CPSA, 15 U.S.C. 2068(a)(4).
    12. Nautilus committed this failure to timely report to the 
Commission ``knowingly'' as the term ``knowingly'' is defined in 
section 20(d) of the CPSA, 15 U.S.C. 2069(d), subjecting Nautilus to 
civil penalties under section 20 of the CPSA, 15 U.S.C. 2069.
B. Bowflex Power Pro and Bowflex Ultimate Fitness Machines-Seat Pin
    13. Between January 1995 to April 2004, Bowflex manufactured and/or 
sold in commerce nationwide approximately 420,000 Bowflex Power Pro 
Fitness Machines with a Lat Tower and approximately 102,000 Bowflex 
Ultimate Fitness Machines, respectively. Each of these items of 
equipment is equipped with a seat pin that is used to reposition the 
seat for different types of exercises.
    14. The Bowflex Power Pro and Bowflex Ultimate Fitness Machines are 
sold to, and/or are used by, consumers in or around a permanent or 
temporary household or residence, a school, in recreation, or otherwise 
and are, therefore, ``consumer products'' as defined in section 3(a)(1) 
of the Consumer Product Safety Act (CPSA), 15 U.S.C. 2052(a)(1). 
Respondent is a ``manufacturer'' and ``retailer'' of the Bowflex Power 
Pro and Bowflex Ultimate, which are ``distributed in commerce'' as 
those terms are defined in sections 3(a)(4), (6), (11), and (12) of the 
CPSA, 15 U.S.C. 2052(a)(4), (6), (11), and (12).
    15. The Bowflex Power Pro and Ultimate Fitness Machines are items 
of exercise equipment with resistance rods, pull down pulleys, and a 
bench. The seat pins on the Bowflex Power and Ultimate Fitness Machines 
can disengage or break unexpectedly during normal and foreseeable use. 
If a seat pin disengages or breaks unexpectedly during use, it may 
cause the seat to move suddenly and cause the consumer to fall and 
suffer serious injuries.
    16. Between August 5, 2002, and April 16, 2004, the date Nautilus 
submitted a full report to the Commission, Nautilus learned of about 32 
reports of consumers sustaining injuries when the Bowflex Power Pro's 
and Ultimate's seat pins disengaged or broke unexpectedly during use. 
Injuries reported included a blood clot, a laceration requiring 
sutures, pulled ligaments, and back, disc, and neck injuries.
    17. As a result of the Commission's investigation of the Power 
Pro's backboard bench, Nautilus reviewed its products and reported on 
April 16, 2004, the defect associated with the fitness machines 
identified in paragraph 13 above.
    18. As the facts described in paragraphs 13 through 17 above show, 
Nautilus obtained information which reasonably supported the conclusion 
that the Bowflex Power Pro and Ultimate Fitness Machine described in 
paragraph 13 above contained a defect which could create a substantial 
product hazard or created an unreasonable risk of serious injury or 
death, but failed to report such information in a timely manner to the 
Commission as required by sections 15(b)(2) and (3) of the CPSA, 15 
U.S.C. 2064(b)(2) and (3).
    19. By failing to furnish the information to the Commission in a

[[Page 20109]]

timely manner as required by section 15(b) of the CPSA, 15 U.S.C. 
2064(b), Nautilus violated section 19(a)(4) of the CPSA, 15 U.S.C. 
2068(a)(4).
    20. Nautilus committed this failure to timely report to the 
Commission ``knowingly'' as the term ``knowingly'' is defined in 
section 20(d) of the CPSA, 15 U.S.C. 2069(d), thus subjecting Nautilus 
to civil penalties under section 20 of the CPSA, 15 U.S.C. 2069.
C. Bowflex Power Pro Fitness Machine-Incline Support Bracket
    21. Between January 1995 and April 2004, Nautilus manufactured and/
or sold in commerce nationwide approximately 260,000 Bowflex Power Pro 
exercise equipment without a Lat Tower, which were equipped with an 
incline support bracket.
    22. The Bowflex Power Pro Fitness Machine is sold to, and/or is 
used by, consumers in or around a permanent or temporary household or 
residence, a school, in recreation, or otherwise and is, therefore a 
``consumer product'' as defined in section 3(a)(1) of the Consumer 
Product Safety Act (CPSA), 15 U.S.C. 2052(a)(1). Respondent is a 
``manufacturer'' and ``retailer'' of the Bowflex Power Pro Fitness 
Machine, which is ``distributed in commerce'' as those terms are 
defined in sections 3(a)(4), (6), (11), and (12) of the CPSA, 15 U.S.C. 
2052(a)(4), (6), (11), and (12).
    23. The incline support bracket of the Bowflex Power Pro Fitness 
Machine can break or bend unexpectedly during normal and foreseeable 
use of the exercise equipment. If an incline support bracket breaks or 
bends unexpectedly during use, it may cause the consumer to fall and 
suffer serious injuries.
    24. Between May 7, 2001, and April 16, 2004, the date Nautilus 
submitted a full report to the Commission, Nautilus was aware of 
approximately 28 reports of consumers sustaining injuries when the 
include support bracket of the Bowflex Power Pro Fitness Machine broke 
or bent unexpectedly during use of the exercise equipment. Injuries 
reported included lacerations requiring sutures, fractures, back pain, 
and numbness. Nautilus reported after completing the product review 
described in paragraph 17 above.
    25. In August 2002, Nautilus made a running change to the material 
used in the incline support bracket to make it more robust and 
resistant to accidental breakage, but did not report the defect or risk 
to the Commission.
    26. As the facts described in paragraphs 21 through 25 above show, 
Nautilus obtained information which reasonably supported the conclusion 
that the Bowflex Power Pro Fitness Machine described in paragraph 21 
above contained a defect which could create a substantial product 
hazard or created an unreasonable risk of serious injury or death, but 
failed to report such information in a timely manner to the Commission 
as required by sections 15(b)(2) and (3) of the CPSA, 15 U.S.C. 
2064(b)(2) and (3).
    27. By failing to furnish the information to the Commission in a 
timely manner as required by section 15(b) of the CPSA, 15 U.S.C. 
2064(b), Nautilus violated section 19(a)(4) of the CPSA, 15 U.S.C. 
2068(a)(4).
    28. Nautilus committed this failure to timely report to the 
Commission ``knowingly'' as the term ``knowingly'' is defined in 
section 20(d) of the CPSA, 15 U.S.C. 2069(d), thus subjecting Nautilus 
to civil penalties under section 20 of the CPSA, 15 U.S.C. 2069.

III. Nautilus' Response

    29. Nautilus denies the staff's allegations that it violated the 
CPSA as set forth in paragraphs 4 through 27 above.
    30. Nautilus believed that injury reports about the backboard bench 
and incline support breakage were consistent with the type of injuries 
associated when exercising with the type of exercise equipment 
identified in paragraphs 4, 13, and 21. With respect to the seat pin, 
Nautilus believed that the reports of seat pin disengagement did not 
reflect a product defect, but instead reflected consumer error in 
removing and repositioning the seat pin. The product change made in 
August 2002 to the incline support bracket was to address warranty 
claims, not a recognized risk of injury.
    31. Nautilus denies that a defect in any of its products caused 
injury to any person, or that it knowingly violated the reporting 
requirements of the CPSA. Nautilus is entering into this Agreement to 
resolve the staff's claims without the expense and distraction of 
litigation. By agreeing to this settlement, Nautilus does not admit any 
of the allegations set forth above in this Agreement, or any fault, 
liability or statutory or regulatory violation.

IV. Agreement of The Parties

    32. The Consumer Product Safety Commission has jurisdiction over 
this matter and over Nautilus under the Consumer Product Safety Act, 15 
U.S.C. 2051 et seq.
    33. This Agreement is entered into for settlement purposes only and 
does not constitute an admission by Nautilus or a determination by the 
Commission that the products referenced in paragraphs 4 through 26 
contain or contained a defect or defects which could create a 
substantial product hazard or create an unreasonable risk of serious 
injury or death, or that nautilus knowingly violated the CPSA's 
reporting requirements.
    34. In settlement of the staff's allegations, Nautilus agrees to 
pay a civil penalty in the amount of $950,000.00 as set forth in the 
incorporated Order.
    35. This Settlement Agreement and Order resolves the failures to 
report set forth in paragraphs 4 through 29, above.
    36. Upon final acceptance of this Agreement by the Commission and 
issuance of the Final order, Respondent knowingly, voluntarily, and 
completely waives any rights it may have in this matter (1) to an 
administrative or judicial hearing, (2) to judicial review or other 
challenge or contest of the validity of the Commission's actions, (3) 
to a determination by the Commission as to whether Respondent failed to 
comply with the CPSA and the underlying regulations, (4) to a statement 
of findings of fact and conclusions of law, and (5) to any claims under 
the Equal Access to Justice Act.
    37. Upon provisional acceptance of this Agreement by the 
Commission, this Agreement shall be placed on the public record and 
shall be published in the Federal Register in accordance with the 
procedures set forth in 16 CFR 1118.20(e). If the Commission does not 
receive any written objections within 15 days, the Agreement will be 
deemed finally accepted on the 16th day after the date it is published 
in the Federal Register.
    38. The Commission may publicize the terms of the Settlement 
Agreement and Order.
    39. The Commission's Order in this matter is issued under the 
provisions of the CPSA, 15 U.S.C. 2051 et seq., and that a violation of 
this Order may subject Nautilus to appropriate legal action.
    40. This Settlement Agreement may be used in interpreting the 
Order. Agreements, understandings, representations, or interpretations 
apart from those contained in this Settlement Agreement and Order may 
not be used to vary of contradict its terms.
    41. The provisions of this Settlement Agreement and Order shall 
apply to Nautilus and each of its successors and assigns.
    42. This Settlement Agreement and Order shall expire and have no 
force or effect if it is not provisionally accepted by the Commission 
on or before April 2nd, 2005.

[[Page 20110]]

Respondent, Nautilus, Inc.

    Dated: March 28, 2005.

Wayne Bolio,
Senior Vice President-Law and General Counsel, Nautilus, Inc., 1400 
NE, 136th Avenue, Vancouver, WA 98661.

    March 28, 2005.

Erika Z. Jones,

Esquire, Attorney for Nautilus, Inc., Mayer, Brown, Rowe & Maw LLP, 
1909 K Street, NW., Washington, DC.

Commission Staff.

John Gibson Mullan,

Assistant Executive Director, Office of Compliance, Consumer Product 
Safety Commission, Washington, DC 20207-0001.

Eric L. Stone,

Director, Legal Division, Office of Compliance.

    March 28, 2005.

Dennis C. Kacoyanis,

Trial Attorney, Legal Division, Office of Compliance.

Order

    Upon consideration of the Settlement Agreement entered into between 
Respondent Nautilus, Inc. and the staff of the Consumer Product Safety 
Commission; and the Commission having jurisdiction over the subject 
matter and Nautilus, Inc.; and it appearing that the Settlement 
Agreement and Order is in the public interest, it is
    Ordered that the Settlement Agreement be, and hereby is, accepted; 
and it is
    Further Ordered that upon final acceptance of the Settlement 
Agreement and Order, Nautilus, Inc. shall pay to the Commission a civil 
penalty in the amount of $950,000 within twenty (20) days after service 
upon Respondent of this Final Order of the Commission.

    Provisionally accepted and Provisional Order issued on the 4th 
date of April, 2005.

By Order of the Commission.


Todd A. Stevenson,
Secretary, Consumer Product Safety Commisison.
[FR Doc. 05-7682 Filed 4-15-05; 8:45 am]
BILLING CODE 6355-01-M