Build-a-Bear Workshop, Inc. Agrees to Pay $600,000 Civil Penalty and to Forego Indemnification

Yesterday the Consumer Product Safety Commission (“CPSC” or Commission”) announced provisional acceptance of a $600,000 civil penalty settlement with Build-a-Bear Workshop, Inc. The agreement resolves CPSC staff allegations that the company failed to report potential safety issues to the Commission in a timely manner pursuant to Section 15(b) of the Consumer Product Safety Act (“CPSA”). In addition to agreeing to pay the civil penalty, in a very unusual provision, Build-a-Bear agreed not to seek or accept indemnification, reimbursement, insurance, or any other form of compensation from any manufacturer, importer, or retail store in connection with the civil penalty payment.

Specifically, the staff alleged that, from March 2001 to October 2008, Build-a-Bear imported and sold approximately 260,000 folding wooden frame toy beach chairs through its website and stores and that those chairs were defective and presented a substantial product hazard or an unreasonable risk of serious injury or death to consumers. The chairs allegedly had sharp edges that could pinch, lacerate, or amputate a child’s fingertip. The company received its first report of injury in July 2007, then in October 2008 stopped sale and issued a notice to its stores to return all stores in inventory. The company allegedly learned of ten other injury reports between July 2007 and January 2009, but did not report to the CPSC until March 20, 2009. The CPSC claims that the company had obtained sufficient information to reasonably support the conclusion that a report under Section 15(b) of the CPSA was required, but failed to report immediately. Consistent with other civil penalty settlements, the staff’s allegations do not identify exactly when the company should have reported.

This settlement serves as a reminder that companies should continuously monitor consumer complaints from all sources and make determinations about their potential safety implications. Although some companies may not think that eleven injury reports indicate a pattern, the Commission in this case thought they did. Publicly-available information does not reveal why the Commission would have demanded that the company forego any indemnification or other payment from third parties, but we will watch future settlements to see if this is new boilerplate language.