Chemtura Corporation (CHMT) has filed a lawsuit to overturn the amended regulatory rules that govern upholstered furniture flammability. The newly adopted rules replace the prior fire safety standard in California, which served as the benchmark for furniture makers and retailers nationwide for almost four decades.
According to the revised rule, the furniture makers are required to pass a cigarette ‘smolder test’. The rule eliminates important criteria that all filling material used in upholstered furniture should pass an ‘open-flame’ test to replicate a candle, match or lighter flame. As per Chemtura, the revised fire safety standard is weak and if not challenged would lead to more fires and injuries, deaths and property damage nationwide.
Chemtura further stated that the revised rules, effective Jan 1, 2014, ignored a key requirement in the fire safety standard that led the company to file a lawsuit for obtaining judicial review of the revised rules from the authority of the California Bureau of Electronic and Appliance Repair, Home Furnishings and Thermal Insulation (the Bureau).
According to Chemtura, the Bureau ignored a very important fire safety standard that led the company to file for a lawsuit so that the Bureau adheres to its statutory obligations in the rulemaking process. The company is seeking judgment that will rule out the revised standard that does not provide protection from open-flame ignition sources, as mandated by law.
Though national statistics indicate that both smoldering cigarettes and open flames are significant sources of ignition, the significant drop in smoking and Fire-Safe Cigarette laws has led to lesser fire threat from smoldering cigarettes. This brings in the importance of maintaining open-flame protection in a new or revised standard.
Even the fire safety-minded National Fire Protection Association (NFPA) has raised concerns over the new standard and opposes the elimination of open-flame protection from the standard rules.
Chemtura, which currently carries a Zacks Rank #2 (Buy), will release its fourth-quarter and full-year 2013 results on Feb 24.
Other stocks in the specialty chemicals industry worth considering are Globe Specialty Metals, Inc. (GSM), Sensient Technologies Corporation (SXT) and HB Fuller Co. (FUL). All these stocks retain a Zacks Rank #2 (Buy).
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