Company Faces $49.9 Million In Claims After Losing Appeal With AM-Scotus Rdp, Bjt
WASHINGTON (AP) _ Its Supreme Court appeal turned down Tuesday, Figgie International Inc. faces paying up to $49.9 million for ″dishonest and fraudulent″ marketing of its Vanguard heat detectors.
The court, without comment, let stand rulings that could force the Ohio- based corporation to pay refunds to each of the 293,824 consumers who bought the devices over a seven-year period in the 1980s.
The Federal Trade Commission persuaded lower courts that Figgie International misled consumers into believing heat detectors offered effective protection against residential fires long after tests showed otherwise.
Until the 1970s, heat detectors were considered effective. But various tests showed that smoke detectors are more effective because most fire fatalities are caused by asphyxiation or smoke inhalation, not burns.
Also, detectable quantities of smoke precede detectable levels of heat in nearly all residential fires.
Figgie International, which sold heat detectors through distributors, put out promotional materials stating heat detectors gave earlier warning than smoke detectors.
The company’s heat detectors outsold its smoke detectors by four or five times.
The FTC issued a complaint against Figgie International in 1983. Citing test results, the commission concluded that ″Vanguard heat detectors do not provide the necessary warning to allow safe escape from most residential fires.″
The promotional claims were halted. But in 1988 the commission sued in federal court in Los Angeles, seeking to force Figgie International to give rebates to buyers of its heat detectors.
Stating that a reasonable person in Figgie International’s position would have known the claims were fraudulent, the commission sought ″consumer redress″ for heat detectors sold from May 18, 1980, through July 20, 1987.
The 9th U.S. Circuit Court of Appeals last May upheld an order that Figgie International pay, through the commission, all consumers who submit valid claims for rebates.
The total price paid by consumers for Vanguard heat detectors in the relevant time period is $49.9 million.
Figgie International was required to deposit $7.59 million - what it received from distributors for its sales during the relevant period - into an escrow account. But the corporation also is on the hook for consumer claims.