Senator Richard Blumenthal has introduced legislation, S.2615, known as the “Hide No Harm Bill,” that adds criminal liability to existing penalties for a company’s failure to immediately report to the applicable federal agency a known danger caused by a product.  While the language of S.2615 does not single out any particular product, if passed, its greatest impact will likely be on the automotive and consumer products industries.

S.2615 applies to any product “manufactured, assembled, designed, researched, imported, or distributed” in interstate commerce.  The bill mandates reporting to the federal agency with jurisdiction over a product within 24 hours of a company or responsible corporate officer acquiring “actual knowledge” that a covered product or part poses “serious danger” to the user.

The bill defines “serious danger” as “a danger, not readily apparent to a reasonable person, that the normal or reasonably foreseeable use of, or the exposure of an individual to, a covered product … has an imminent risk of causing death or serious bodily injury to an individual.”  S.2615 does not define “actual knowledge.”  The bill also requires warnings to employees and notification to individuals “as soon as practicable” after the initial report.

S.2615 provides for criminal fines and imprisonment for knowing violations.  To the extent a fine is assessed against a responsible corporate officer, the bill prohibits the underlying business from paying the fine directly or indirectly.

While S.2615 is aimed at deterring delayed reporting of known product dangers, it appears to be a half-baked reactionary measure resulting from recent high profile recall issues in the automotive industry.  The two agencies most directly impacted by S.2615, the National Highway Transportation and Safety Administration (NHTSA) and the Consumer Product Safety Commission (CPSC) already have robust reporting requirements.  NHTSA regulations require a report for safety-related defects and non-compliance with a safety standard within five days of a company concluding that the defect or non-compliance exists.  CPSC regulations require a report within 24 hours of obtaining information that reasonably supports the conclusion that a product contains a safety-related defect or does not comply with a safety standard, but the regulations provide a company with time to undertake a “reasonably expeditious” investigation (CPSC consider 10 days to be reasonable).

Rather than just adding criminal liability to a willful failure to report under the existing NHTSA and CPSC schemes, S.2615 creates a separate reporting obligation that is not consistent with either NHTSA or CPSC reporting requirements.  S.2615 accelerates the timeline for NHTSA reporting from 5 days to 24 hours.  It also likely accelerates the timeline for customer notification, as NHTSA requires notification within 60 days, but does not have the “as soon as practicable” requirement that is in S.2615.  Further, it is unclear whether a company’s conclusion that an automotive product contains a safety-related defect is necessarily equivalent to the “serious danger” that would trigger a report under S.2615.

S.2615 adopts the same 24 hour reporting timeline for consumer products as the CPSC regulations, but it differs in two important respects.  First, S.2615 and the CPSC regulations appear to have different triggers.  S.2615 requires actual knowledge, while CPSC requires reporting upon obtaining information “that reasonably supports” the conclusion that there is a safety-related defect or non-compliance with a safety standard.  In this respect, S.2615 involves a stricter knowledge standard than the CPSC requirement.  Second, the CPSC requirement permits a reasonable investigation lasting, in general, up to 10 days.  S.2615 does not clearly define whether the “actual knowledge” standard is only met once an investigation concludes, or whether other information obtained during an investigation, but before it is complete, could necessitate earlier reporting under S.2615.

It is easy to imagine scenarios in which these inconsistencies lead to confusion and concern over liability under S.2615, especially since enforcement actions for failure to report, or report timely, necessarily involve retrospective examinations of the facts.

Perhaps more importantly, S.2615 appears to upset many years of regulations and guidance that the agencies have developed with input from the various stakeholders and as a result of practical experience. A cursory look at the NHTSA and CPSC websites reveals the complex systems these agencies have created for reporting, and that does not capture the other soft guidance these agencies develop in discussions with companies and their counsel in connection with reporting.  .

S.2615 is currently assigned to the Senate Judiciary Committee.  Based on the inconsistencies, and the problems likely to result, we expect that the various stakeholders impacted by the bill, including the agencies, industry, and consumer advocacy groups, will seek substantive revisions to S.2615 if it is to get out of committee.