Products Liability Law Daily Starbuck’s Teavana agrees to $3.75M penalty for alleged reporting failures
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Thursday, June 2, 2016

Starbuck’s Teavana agrees to $3.75M penalty for alleged reporting failures

By Colleen Kave, J.D.

Teavana Corporation, a specialty tea and tea accessory retailer owned by Starbucks, will pay a civil penalty of $3,750,000 to settle allegations that the company knowingly failed to report to the Consumer Products Safety Commission, as required by federal law, that its tea tumblers created an unreasonable risk of serious injury. The agreement, which was provisionally accepted by the Commission by a 3 to 2 vote, did not constitute an admission by Teavana to the CPSC staff’s charges (In the Matter of Teavana Corp., May 27, 2016; CPSC Press Release, No. 16-181, June 1, 2016).

According to the CPSC, Teavana received numerous complaints about its tea tumblers unexpectedly shattering, exploding, or breaking during normal use. These incidents included six reports of injuries to consumers who suffered cuts to their fingers or legs as a result of broken glass or burns from hot liquid. Nonetheless, Teavana failed to immediately report the issue to the CPSC.

Eventually, Teavana recalled the tumblers in May 2013 (Recall No. 13-205), after the company had imported around 445,000 tumblers. The tumblers were sold at Teavana stores and online at Teavana.com from August 2007 through May 2013 for about $15 to $33 for the individual tumblers; about $40 for the Flourish Iced Tea Glasses Sets; and about $80 to $100 for the Imperial Blooming Collection Tea Sets.

In addition to the $3.75 million penalty, Teavana has agreed to comply with and maintain the compliance program of its parent company that is designed to ensure compliance with the Consumer Product Safety Act (CPSA) and regulations enforced by the Commission. Moreover, Teavana will comply with and maintain a system of internal controls and procedures to ensure that the company discloses information to the Commission in accordance with applicable law.

Two CPSC commissioners were critical of the settlement, expressing concern over the ways in which the agency calculates, imposes, and settles civil penalty demands for alleged violations of CPSC statutes. Commissioner Joseph P. Mohorovic issued a statement in which he disclosed that he was “unpersuaded by any of the facts – public or not – that our settlement amount is appropriate or that a penalty is justified at all.” Further, he opined that the agency does not fulfill its duty to explain to the public why it imposes penalties such as the one in this case.

Commissioner Ann Marie Buerkle echoed Commissioner Mohorovic’s sentiments, noting that all of the CPSC’s civil penalty settlements “arise from the staff’s enforcement of a remarkably vague statutory requirement” and lamenting the difficulty of evaluating the appropriate penalty amount for reporting failures. According to Commissioner Buerkle, “There will be cases where penalties are entirely appropriate, but they should be more of a last resort. Consumers will be safer if we help companies prevent violations rather than celebrating marquee penalties.”

The case is CPSC Docket No. 16-C0003.

Attorneys: Georgia C. Ravitz (Arent Fox LLP).

Companies: Teavana Corp.

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