· A Sept. 4 Business article about liability issues surrounding a bassinet recall misidentified Nancy Baker as the wife of Blackstreet advisory board member James A. Baker IV. They are divorced.
Recall Highlights Liability Questions
Thursday, September 4, 2008
When Blackstreet Capital Management affiliate SFCA purchased the assets of Simplicity for Children, a leading manufacturer of children's furniture, in April, it structured the deal so it would not assume responsibility for products already on the market.
Yet, last week, the issue of liability arose when the Consumer Product Safety Commission directed stores to pull Simplicity bassinets from their shelves after the deaths of two infants.
Blackstreet, a Bethesda private-equity fund, got involved with Simplicity when the Reading, Pa., company was in trouble. Last year, Simplicity had issued its fourth crib recall since 2005, pulling 1 million units -- the largest crib recall in U.S. history. In addition, a 4-month-old Missouri girl had died in one of its bassinets on Sept. 29, and the company was losing money.
In April, SFCA bought Simplicity's assets at auction. At the time, SFCA was aware of Simplicity's recall of 1 million cribs and voluntarily set aside resources to continue carrying it out. A May news release from Blackstreet said: "The Simplicity brand is well known for its exceptional value, innovative design and unparalleled focus on safety."
When the CPSC issued the warning about Simplicity bassinets last week, after the Aug. 21 death of a 6 1/2 -month-old girl from Kansas, the commission turned to retailers to yank bassinets off store shelves. SFCA had refused to issue a recall, saying it gained the right to sell products under the Simplicity brand but that it did not assume the liability of products already on the market, said Rick Locker, an attorney for SFCA.
John F. Banzhaf, a law professor at George Washington University, said by law the company was not required to proceed with a recall. "I'm not going to question that," he said.
Edmund Mierzwinski, consumer program director for U.S. PIRG, a public interest group, was unconvinced.
"No one wants to be liable," Mierzwinski said. "SFCA's response may or may not be correct. We're still researching."
A variety of parties are involved in the liability issue.
"There are lots of interested people who want to get to bottom of this," said Charles Kelly, a lawyer for the Kansas family whose daughter got trapped in the bassinet's metal bars and was strangled Aug. 21. Kelly said the family is planning to sue SFCA and Simplicity; as well as Wal-Mart, the distributor; and Disney, which licensed its Winnie the Pooh character for the bassinet.
Traditionally, only mergers result in one company taking on the liability of another, said Alan O. Sykes, a professor at Stanford Law School. A major benefit of buying assets is that no liabilities are incurred.
"When a company is bankrupt and sells off its old factory and stuff, the people who buy those assets in those sorts of asset sales are not liable," Sykes said.