United States District Court, E.D. Pennsylvania
MJC AMERICA, LTD. d/b/a Soleus International, Inc.
[Copyrighted Material Omitted]
Nathaniel Metz, Amy S. Kline, Shanna P. O'Neal, Wayne, PA, Caitlin M. Piccarello, David R. Moffitt, Philadelphia, PA, for QVC, Inc.
Craig W. Hillwig, Kohn Swift & Graf, P.C., Philadelphia, PA, Shang-Tzu Peter Hwu, Peter S. Hwu, P.C., San Francisco, CA, for MJC America, Ltd.
O'NEILL, District Judge.
Plaintiff and counterclaim-defendant QVC, Inc. brings an action for breach of contract seeking declaratory relief, equitable relief and damages against its vendor, defendant and counterclaim-plaintiff MJC America, Ltd., d/b/a Soleus International, Inc. Soleus has asserted a counterclaim for breach of contract against QVC. The parties' claims against each other arise out of QVC's purchase from Soleus of electric space heaters and other items in 2007 and early 2008 and QVC's subsequent recall of certain of those space heaters. QVC contends that it reasonably determined that the recalled heaters were defective, that Soleus breached its purchase order contracts
with QVC and that as a result of Soleus's breach QVC is entitled to damages from Soleus, including the costs attendant to the recall of the heaters. Soleus contends that QVC did not make a reasonable determination that the recalled heaters were defective and that " QVC's conduct during the investigation and recall violated QVC's duties of good faith and fair dealing under the contract." Dkt. No. 93 at 2.
A bench trial was held from January 9 to January 13, 2012. The parties submitted their post-trial briefs including proposed findings of fact and conclusions of law on March 12, 2012. Pursuant to Federal Rule of Civil Procedure 52(a) and after review of the evidence presented and applicable law, I make the following findings of fact and conclusions of law.
FINDINGS OF FACT
I. The Parties
QVC, a retailer, markets and sells merchandise directly to consumers through various media including direct response television programming and the internet. Jt. Stip. ¶ 1. " Soleus is in the business of promoting, marketing, distributing and selling home comfort products, including portable air conditioners, heaters, air purifiers, fans and coolers under the trade names of ‘ Soleus,’ ‘ SoleusAir’ and variations thereof." Id. ¶ 2. QVC sold Soleus products to its retail customers. Id. ¶ 6.
II. The Heaters
Purchase Order 550957, issued by QVC to Soleus on or about August 31, 2007 and subsequently revised on September 13, 2007 and October 9, 2007, required Soleus to provide QVC with 27,000 units of a SoleusAir 360-Degree Micathermic Heater with Three-Heat Settings further identified as QVC SKN V24882 (the " Heater" ). Id. ¶ 3. Purchase Order 567520, issued on or about January 4, 2008 and subsequently revised on January 7 , January 8, and January 10, required Soleus to provide QVC with 1,056 additional Heaters. Id. ¶ 4.
The Heaters were manufactured in China by Ningbo Bole Electric Appliance Co., Ltd. Id. ¶ 7. They were cylindrical, portable electric space heaters designed and intended to stand on the floor. See P-154 at 5. The Heaters were equipped with manual, not digital, control panels and the manual version was sold exclusively in the United States by and through QVC. Jt. Stip. ¶ 8. They had an interior metal wall housing a micathermic heating element. Each Heater's electric wiring, circuit board and thermostat were mounted on a combination of metal and plastic surfaces in a compartment outside of the interior wall. See P-154.
QVC promoted and marketed the Heaters for sale to its customers beginning on December 31, 2007, when they were featured as a Today's Special Value® on QVC's live television programming and on QVC's related website. Jt. Stip. ¶ 18; Tr. Day 1 at 106:4-8 (McGrath). QVC sold more than 19,100 Heaters to its retail customers between December 31, 2007 and March 11, 2008. Jt. Stip. ¶ 19. Most of the Heaters were sold on December 31, 2007 and in January 2008. Tr. Day 2 at 13:18-19 (Fitzgerald).
III. Customer Complaints and the Parties' Responses to the Complaints
On January 5, 2008, a customer contacted QVC claiming that the Heater he or she had purchased " has a gas odor to it and
[is] very hot to touch."  P-62 at QVC-01-00073. On January 8, a customer claimed that the " Heater went up in sparks out of top." Id. Another customer reported a " burning smell." Id. at QVC-01-00074. On January 9, QVC received a complaint of " smoking smelled bad/tried again and blew fuse in home 2x." Id. at QVC-01-00077. On January 10, a customer reported that their Heater " had a nocious order [sic] and set off their smoke detector." Id. at QVC-01-00073. Subsequent customer calls recorded by QVC included a January 28 report that a Heater was " smoking and flames shot out top of unit," id. at QVC-01-0076, and a January 29 report that a Heater " caught on fire. around knob— wires all melted." Id. at QVC-01-0073. By late January, QVC had received 80-100 similar complaints regarding fire, sparks, odor or smoke from the Heaters. Tr. Day 1 at 19:2-9 (McDermott); see also P-62 (customer contact log). " [O]f particular note were a number of customer complaints in which they indicated that they had seen flames in the unit and that the unit had melted around the control panel, that the plastic facing of the cover of the control panel was warped or melted." Tr. Day 1 at 93:17-24 (McGrath). Due to the number of Health and Safety related complaints pertaining to the Heaters, the complaints became a concern of QVC's Office of the President (" OOP" ). Tr. Day 1 at 24:16-25:12 (McDermott); P-57. The OOP reviews and investigates health and safety concerns raised by QVC customers. Tr. Day 1 at 17:3-18:21 (McDermott).
Soleus's designated contact for the Heaters was Gary Mickles, " an intermediary between [QVC] and Soleus." Tr. Day 1 at 63:24-64:12 (Fitzgerald). Mickles was an independent contractor for Coleman and Hirshman, a sales organization that represented Soleus's products through Epic International, an independent contractor sales representative for Soleus. Mickles Dep. at 8:20-9:15.
On February 1, Tom Kluxen, identified as a QVC " Buyer" for " Home Improvement, Household, Cleaning and Storage" forwarded to Mickles a January 31 email from Shawn Fitzgerald, a Senior Engineer for Quality Assurance at QVC. P-27. Fitzgerald was charged with investigating the Heaters and the customer complaints. Tr. Day 1 at 52:14-20 (Fitzgerald), id. at 93:25-94:3 (McGrath). Fitzgerald's email noted that " QVC's call rate [for the Heaters] is climbing high with several claims of ‘ fire.’ " P-27. Kluxen asked Mickles to " [p]lease alert Soleus about this concern about this and let us know if they have had any calls/concerns." Id. Kluxen noted that QVC's quality assurance " department [wa]s going to evaluate a few of these customer returns." Id.
Fitzgerald asked the OOP if he could get some Heaters back for evaluation. Tr. Day 1 at 55:17-56:1 (Fitzgerald); P-27. On January 31, the manager of the OOP responded to Fitzgerald's request by email, stating that " 1 came back today and Dolores is shipping it over to you." P-25; Tr. Day 1 at 75:23-24 (Fitzgerald). When Fitzgerald visually inspected the first customer-returned Heaters he received from the OOP he observed
signs of soot, which indicates ... something either burned or charred and let smoke out the vents, melting of the control panel, warping of the plastic in the
immediate area around the control panel, and then once [he] began to disassemble— the unit, there were [sic]— one wire in particular, in various stages of failure. And by failure, it appeared to be an over-temperature condition where the wire was burning the wire sleeving, which is the rubber insulation on the outside of the wire, was blistered off or completely charred off, and in one case, the wire was severed, you know, from over-temperature.
Tr. Day 1 at 58:3-13 (Fitzgerald).
By February 8, Fitzgerald had inspected and photographed three customer return Heaters. P-30. That day, Fitzgerald emailed Mickles " word documents with photos included for the three customer return units," noting that " [t]he failure mode seems to be common among the three units. The same wire is at various stages of failure in the [sic] each of the three units." P-30. The attached photographs included photographs of the serial numbers for each of the referenced Heaters. Id. Fitzgerald asked Mickles to " [p]lease advise what the next steps should be" and noted that " there have been 100 calls reporting some nature of " Health and Safety incidence." Id.
Later that day, Kluxen emailed Mickles, stating that
Shawn from [Quality Assurance] will likely be contacting you shortly if he hasn't already to discuss the findings of the heater returns. I did see a few today that did have small electrical fires in them. Pls [sic] have the production units put on hold for the black until you get confirmation from qvc. To ship. I hope this isn't a recall issue.
P-32. Mickles responded to Kluxen by email, noting that he had " informed Soleus of a potential problem, and of course stopped production for the units you wanted." P-33. Mickles added, " I think everyone out there is heading into Chinese New Year, and they will be on top of this when they get back." Id.
On February 11, Mickles visited Fitzgerald at QVC to discuss and inspect certain of the damaged Heaters. Tr. Day 1 at 72:6-11 (Fitzgerald). At the end of their meeting, Fitzgerald gave Mickles two of the customer-returned Heaters and asked him to send them to Soleus for examination. Id. at 73:20-22; Mickles Dep. at 53:23-54:3. Mickles " sent them right to Soleus." Mickles Dep. at 54:17-18. Also on February 11, Gino Aiello  sent an email to Charley Loh, Soleus's Chief Executive Officer, C. Loh. Dep. at 6:18-23, explaining that " Gary met with QVC quality control today on a serious issue with [the Heaters]. It appears that they have received several back that have either caught fire or got hot enough to melt the wires inside." P-36. Aiello went on to say that " [w]e need to inspect these and come up with a reason for this issue, or we could face the real possibility of QVC issuing a recall on these." Id. Charley Loh responded that day explaining, " [t]his is the first time I hear [sic] it catch on fire on this item.... I have read all the reviews 10 days ago for QVC and there is to [sic] one case mentioned catching on fire." Id.
On February 12, QVC offered to send Mickles or Soleus another customer-returned Heater " with the same wire burnt behind the control panel." P-37. Responding by email on February 13, Mickles told
Fitzgerald that the other Heaters had arrived at Soleus and asked QVC to keep the additional unit QVC had until Mickles knew more. P-40.
On February 14, Mickles sent Fitzgerald a document regarding the " Burnt wires factory evaluation." P-42. It included an initial evaluation of the Heaters based on photo images of two Heaters with melted wires from the Ningbo Bole factory in China. Citing " oxidation (rusting) on a surrounding metal trim" on one unit " which can only be caused from contact with water or sodium" and, on the other unit, " grease or oil content found near the burnt wires which would suggest foreign debris entering the circuitry," the document concluded that " the factory suspects that these units were either used under non-residential environment [sic] or advertently tempered [sic] by foreign substance." P-41.
Fitzgerald responded to the factory's conclusions in a February 14 email to Mickles noting that he had " a hard time believing the conclusions for the burnt wires giving [sic] they are not isolated incidents. It seems more epidemic than random foreign material getting into the control panel since there are a large quantity of failures." P-43. Mickles forwarded Fitzgerald's response to Soleus and asked whether Soleus " would like me to have QVC send the additional burned units to you." P-44. There is no immediate response from Soleus to Mickles' inquiry in the record.
On February 22, Mickles emailed Tyler Scott  with a copy to Aiello noting that " if we don't do something soon, the QVC Legal Department will be breathing down yours and Charl[ey Loh's] throat." P-45. He added, " [p]lease let me know if you have heard anything back from China since you sent the two fire damaged Heaters back. They need answers now." Id.
On February 25, Scott sent Mickles an email with a copy to Aiello with Soleus's " initial findings regarding QVC's melting issue of the HM5" after its initial inspection of the returned units received from QVC. P-46 at 5. Soleus's conclusion was that " the melting problem appears to be in this rare incident and only on product that was used improperly. Most importantly, it does not appear to be a fire hazard." P-47 at 2. Scott explained that " [t]he melting is still considered very serious by us, thus we have shipped [the samples that were returned to QVC and then to Soleus] to China for a thorough evaluation." Id. Mickles responded to Scott's email that day, explaining that " QVC has many more units with the same problem, and they want me to pick them up this week." P-48. Further, QVC " seem[s] to feel that this was not an isolated incident, rather an Epidemic in regard to the units overheating and melting wires inside. The return rate for this product is approaching 20%." Id.
Also on February 25, in response to Scott's email, Mickles sent an email to Aiello asking whether anyone had seen " what Shawn [Fitzgerald] wrote back to us when we gave him that bullshit about water and grease getting into the units I sent back?" P-47. Mickles noted his concern that Soleus would be " forced into a 100% recall of this item." Id. He also asked whether " Soleus ha[d] Lot numbers for product manufactured," noting that " [i]f they do, we can talk about a small amount produced in a lot, and therefor convince them that it can be isolated." Id.
Although Mickles' emailed question about lot numbers raised the issue with Soleus of whether a potential recall could be limited in scope, neither Mickles nor anyone else connected to Soleus ever " raise[d] the question or the issue of whether the defect or potential defect could be segregated to a particular manufacturing lot" with QVC during QVC's investigation of the Heaters and the cause of the customer complaints. Tr. Day 1 at 104:25-105:9 (McGrath); see also id. at 149:22-150:1 (Fitzgerald) (" Q. Did Soleus ever ask you in the period of time, February 2008, whether there were lot numbers for the product manufactured? A. They never, regardless of the month or year, asked us for lot series or a serial number. Q. Did Soleus ever suggest to you in the period of time, February 2008, that there was a potential to talk about a small amount produced in a particular lot of these heaters? A. No." ); Tr. Day 3 at 43:18-23 (Scott) (" Q. Did you ever tell QVC— suggest to QVC, QVC, that there were lots which could be identified for a particular wiring problem so that the problem could be isolated or limited? ... A. I did not pass that information, no." ).
On February 27, at a meeting with QVC, Mickles gave QVC Soleus's initial findings. P-53; Tr. Day 1 at 85:14-22, 87:16-19 (Fitzgerald). Fitzgerald was dissatisfied with the initial findings, noting at trial that " given the volume of complaints that we had and the failures that we were seeing, to state that the product had been used in the rain, or someone repeatedly poured water onto it, causing it to catch on fire, was beyond comprehension for me." Tr. Day 1 at 89:4-9 (Fitzgerald). At their meeting, QVC told Mickles that QVC had received " more complaints and under [United States Consumer Product Safety Commission] guidelines they [were] required to report a certain amount of complaints." Mickles Dep. at 80:15-24.
On February 28, Aiello emailed Scott, explaining that during Mickles's meeting with QVC, QVC was looking for a reason from Soleus " for the wires melting." P-52; D-10. Aiello explained that the CPSC would require a retailer " receiv[ing] significant complaints on an item that could be a hazard to a consumer" to report the complaints to the CPSC. Id. Aiello also noted that " QVC wants to avoid this and they have empathy for our position, which is why they want us to come up with an explanation, so they can avoid having to report[ ] this to CPSC." Id. Scott forwarded Aiello's email to Charley Loh, explaining that
QVC is getting scared that they are going to have to call CPSC and file a recall on [the Heaters]. They need an official response from us on why the wire are [sic] melting. They have more complaints than just the 2 so we have to come up with a better explanation.
Need ASAP so they don't file a recall on our product with CPSC.
On February 29, Scott emailed Fitzgerald a one page " Factory Evaluation of HM5s with melting damage." P-55. The document purported to be Soleus's " final report" conducted after the Ningbo Bole factory reviewed and tested the two damaged customer-returned Heaters that Fitzgerald had given to Mickles. The document concluded that:
There was oxidation (rusting) on a surrounding metal trim on one damaged unit. It could be caused by water directly drop [sic] on the wire connectors, causing short in circuit. The wiring was melt [sic] as a result.
The other damaged HM5's wire remains intact. The insulation melted off. Upon closer inspection, there was grease or oil content found near the burnt wires. It
could be caused by the ignition of grease or oil which resulted [sic] melting down the insulation of wire. The factory conducted extensive testing trying to simulate possible causes of melting. Under the following circumstances the heater case could be damaged with melting:
1. The top of heater is covered by a wet towel or other material.
2. Foreign substances such as water or oil enter into the control box.
3. The wire connectors got damaged (could be caused by high vibration or units being dropped)[.]
The test affirmed that even for the unit exhibits melting [sic], it will not catch fire as 1) Anti-Flaming material is used and 2) Auto shut off devise [sic] will activate to cut off the power supply when excessive heat is detected.
Id. In forwarding the Factory Evaluation to QVC, Scott explained that " [t]he good news is that the factory confirmed what our initial findings were, that this is not a fire hazard." Id. (emphasis in original). He also noted that it was " reasonable to assume that this small percentage of customers may have used this heater improperly." Id.
Fitzgerald forwarded Soleus's report to Tom Long, id., who was QVC's Director of Quality Assurance. Tr. Day 1 at 64:20-21 (Fitzgerald). Fitzgerald reacted to the conclusions in the Final Factory Evaluation by explaining that he was " skeptical that two different cases of customer misuse result in the exact same wire catching fire." P-55. McGrath, who was QVC's Vice President of Quality Assurance and Quality Control at the time, Tr. Day 1 at 90:20-25 (McGrath), explained that the report " led me to think that Soleus was not viewing this with the same gravity as we were in terms of the potential impact that this could have to a customer in a household use." Id. at 100:20-23.
IV. QVC Sends Heaters to Intertek for Evaluation
Sometime in or around the second week of March, QVC had an internal meeting to discuss the Heaters. Tr. Day 1 at 26:19-27:8 (McDermott). QVC decided it would make the Heaters unavailable for purchase so that it " could take a further investigation." Id. at 26:24-27:15. Because QVC " didn't have confidence in Soleus's testing and the thoroughness of the review that would be done on the evaluation of the Heaters," Tr. Day 1 at 101:5-13 (McGrath), it felt that it " needed to take a more robust physical analysis of the units" and decided to engage Intertek, an independent testing company to look at the Heaters. Id. at 128:20-21. On March 14, Intertek sent a proposal to QVC for a " constructional review of 2 damaged [Heaters] and a review of a new unit." P-65. Intertek proposed to " perform basic tests to characterize the unit and try some actual failure modes test to determine if the product fails or results in a hazardous condition." Id.
Scott testified that as a result of conversations directly with QVC and dialogue about the Heaters, he knew that QVC planned to send two units to Intertek for testing. Tr. Day 4 at 10:15-25 (Scott). From the record at trial, it appears that although the sales middlemen for the Heaters may have known about QVC's plans to have Intertek examine certain Heaters, Soleus was not made aware of QVC's arrangements with Intertek.
QVC ultimately supplied Intertek with four customer-returned damaged Heaters and four new Heaters. P-168, ¶ 26. On March 18, Fitzgerald emailed Steven Hartquist, Intertek's general manager for retail/home appliances and electronics, with details about the history of the four used Heaters. P-94. The following day Fitzgerald
emailed Hartquist again and asked whether there was " any chance that [QVC] can get a verbal update on Thursday?" Id. He posed a number of questions to Hartquist and explained that his " management [was] pressing [him] for some clarity since [QVC] was deciding a recall based on [Intertek's] findings." Id.
On March 31, Intertek provided to QVC a draft report on the Heaters. Id. The draft report concluded that with respect to any burning or melting of plastic it " seemed to occur from an overheating condition on conductors or terminal connectors," and " a possible cause would be increased amperage and resulting temperatures from a poor quality crimp connection." Id. at QVC-03-00212. Also on March 31, Hartquist sent an email to Fitzgerald responding to Fitzgerald's questions. P-96. Hartquist explained that " [t]here is clearly a breakdown of insulation on electrical components which make the units non-compliant with safety standards, and from inspection of the damaged units; there is clearly shorting of live parts to ground, ignition of plastic which may or may not have left the enclosure." Id.
On April 1, Intertek sent QVC a finalized version of the report regarding the Heaters. Jt. Stip. ¶ 32; P-98. In the report, Intertek explained that it " was not able to reproduce similar failures on any of the new samples provided." D-22 at 15. However, its examination of the four customer-returned units demonstrated:
a breakdown of insulation on electrical components. From inspection of the damaged units, there is clearly shorting of live parts to ground and ignition of plastic which may or may not have caused flames to leave the enclosure.... There is evidence of combustion from the burned plastic, although it did not completely consume the plastic control enclosure panel.... From an electric shock point of view, there was breakdown of electrical insulation in high voltage circuits which could lead to a risk of electric shock.
Id. Intertek noted that the overheating apparently originated near metal connectors that were " crimped" to the end of affected wires and observed that poor quality crimp connections could be a cause of overheating. Id. at 14. The report concluded that " it is possible that the cause of the failures is quality of construction related and thus an intermittent problem." Id. at 15.
Although Jimmy Loh, Soleus's chief financial officer, Tr. Day 4 at 60:23-24 (J. Loh), testified that he did not see the Intertek report until after this action had been filed, id. at 89:8-10, Scott testified that he remembered viewing the results of the Intertek testing. Tr. Day 4 at 12:7-13:12 (Scott).
V. Events Leading to the Heater Recall
At QVC's meeting in early March, before QVC retained Intertek, in addition to discussing the need for further investigation of the Heaters, QVC also discussed the possibility that the Heaters might be subject to a recall. Tr. Day 1 at 27:16-18 (McDermott). On March 10, QVC put all Soleus items " on hold" pending resolution of QVC's concerns about the Heaters. P-58.
Also on March 10, having learned of the hold, Mickles informed Aiello that QVC would not accept any additional products from Soleus. P-59. Aiello asked Mickles, " [w]hat is it that they want for a resolution? We have not found any significant manufacturing defect." Id. Mickles emailed Long at QVC and asked him to let Soleus know what QVC needed in order to resolve the issue with the Heaters. Id.
Long replied by asking for the results of factory run testing performed on the Heaters at Ningbo Bole. Id. Soleus did not provide QVC with factory run test results. P-169, J. Loh Dep. at 107:23-107:25; Tr. Day 1 at 156:19-21 (Fitzgerald); Tr. Day 2 at 5:19-21 (Fitzgerald).
On March 12, Dan Feiner, in-house counsel for QVC forwarded a copy of QVC's customer contact log for the Heaters to Soleus and asked Soleus to " contact [him] as soon as [Soleus] ha[d] had a chance to review it." P-61. Feiner sent a second report of " customer contacts regarding fire, smoke, burning, melting, etc." to Soleus on March 13. P-63. Also on March 13, Feiner wrote a letter to Charley Loh to " provide [Soleus] with formal written notice in connection with any liability QVC may have in connection with the sale and use" of any Heaters for which it had received a customer report " involving fire, smoke, burning and/or melting plastic controls." P-64. QVC asked Soleus to provide adequate assurances and " confirm in writing that [it would] honor its indemnification obligation set forth in the Purchase Order(s)." Id.
On March 14, Soleus acknowledged receipt of the customer-complaint logs through an attorney, Ryutaro Hirota, and requested " a copy of the proposed initial report QVC would like to make to the [CPSC]." P-66. On March 15, Charley Loh wrote to Feiner to " confirm that Soleus International Inc[. would] indemnify QVC for any claims associated with the products that Soleus International Inc[.] sold to QVC, as detailed in QVC purchased [sic] order(s)." P-68. Loh's letter did not make any reference to a potential recall or the CPSC. Id.
Before receiving the results of Intertek's testing, QVC continued to prepare for a possible recall of the Heaters. On March 17, Feiner sent Hirota " a draft of an Initial Report that we intend to file [with the CPSC] by the close of business today." P-69. In the draft letter, QVC included a statement that it " intend[ed] to work expeditiously with the vendor to determine whether corrective action is necessary." Id. Feiner also provided Hirota with contact information for Michael Gidding, QVC's outside counsel who was assisting QVC in its interactions with the CPSC. Id. Soleus did not respond immediately to Feiner's letter. Notwithstanding the absence of a response from Soleus, Gidding, on behalf of QVC, submitted a letter regarding the Heaters to the CPSC on March 17. P-70.
The letter Gidding submitted to the CPSC was edited to remove a reference to QVC's intent to work with its vendor to determine the necessity of corrective action— a reference that had been included in the draft sent to Hirota. Id. Instead, the letter stated that " QVC is expeditiously investigating this matter to determine whether a recall is appropriate." Id. QVC noted a " possible problem" with the Heaters. Id. QVC explained that it had " received multiple customer reports of the [Heater] smoking, sparking and overheating, and ha[d] also received reports of fire or flames coming from units" and that " QVC has received over 70 reports of heaters smoking, overheating, sparking, melting, and/or emitting odors of burning. Nine additional customers have reported observing flames or fire coming out of or inside the heaters." Id. QVC reported that the " [n]ature and extent of possible risk" associated with the Heaters was " burns or house fires." Id. The letter informed the CPSC that, if QVC determined that a recall were appropriate, " QVC intend[ed] to participate in the Commission's Fast Track recall program." Id.
On March 19, Hirota wrote a letter to Feiner " [t]o follow up on their earlier teleconference"
of that same day. P-71. He explained that
based on the reports from the technical and engineering staff of the manufacturer, MJC America does not believe at this time that any alleged defects in the Soleus Air 360 Degree Micathermic Heater rise to a level which would require a recall of the product. MJC America is in the process of conducting further investigation into the product including additional testing and the hiring of experts to analyze the product. We will keep you appraised [sic] of the results of MJC's investigation.
On March 20, Scott sent an email to Charley Loh about a conversation that Scott had with Dennis D'Angelo, a merchandiser from QVC. D-18; Tr. Day 4 at 5:4-19 (Scott). D'Angelo had " mentioned [that QVC] may want to do a recall of their own." D-18. Scott wrote that " I told him whatever they do, we want to do with them" and that D'Angelo " was very positive and wants to work together." Id. Scott noted, however, that D'Angelo knew less about " what was going on" with the Heaters than Scott did and that D'Angelo " did not know something was sent to CPSC." Id.
By March 20, QVC had decided " to notify the customers that we had received complaints and to provide them with information on the nature of those complaints and to advise them to stop using the product temporarily. But [QVC] did not— [it] had not decided to recall the product at that time." Tr. Day 1 at 103:12-16 (McGrath). McGrath testified that
while the Intertek testing was underway, we were continuing to receive samples— not samples, but complaints, and probably samples as well, from customers. And we felt at that point that it was appropriate to send a notification to customers to temporarily discontinue using the product, that we had received some complaints and that we were investigating them, but in the meantime that we wanted to inform those customers to discontinue using the product and that we would provide them with subsequent information at a later date.
Tr. Day 1 at 102:5-14 (McGrath).
Accordingly, on March 20, with the approval of the CPSC, QVC sent a letter to customers who had purchased a Heater stating that QVC
has received some customer reports of smoke or flames appearing within the area of the front control panel while the heater is in use. This could present a risk of fire or injury. However, no injuries have been reported. Please stop using this product ...