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Mock Pallet Wins $584,000
CHEP Loses First Major Jury Trial

By Chaille Brindley
Date Posted: 6/2/2004

After nearly two years of legal wrangling, Mock Pallet Co., Covington, Ga. has emerged from its lawsuit with CHEP USA vindicated and rewarded for its efforts. A Georgia jury awarded Mock Pallet $584,000 for fees and expenses related to recovering, storing and handling CHEP-marked pallets. The award comes out to approximately $19.47 per pallet.

            The decision could impact recyclers across the country if companies use it to push for additional compensation or other courts rely on it for setting costs. CHEP has indicated that it will appeal the decision.

            What may have looked like a slam-dunk for CHEP has turned around to be a major defeat. Instead of walking away with a million dollars and thousands of blue pallets, CHEP has been handed a sizeable bill. CHEP originally filed a lawsuit in 2002 seeking more than one million dollars in damages resulting from Mockís possession of CHEP-marked pallets and refusal to return them. Mock Pallet counter sued CHEP. Mock Pallet has accumulated nearly 30,000 CHEP-marked pallets through its normal course of business. And it offered to return the pallets if CHEP agreed to pay $5 per pallet for storage, handling and transportation fees. CHEP refused to pay any more than what it offered in its current Asset Recovery Program (ARP) and filed suit against Mock Pallet.

            Judge Beverly Martin of the U.S. Federal Court Northern District of Georgia ruled last fall that CHEP owned the pallets. The court also held that Mock has a lien on the pallets and has a right to be compensated for its services as a naked depository of CHEP property. Judge Martin denied CHEPís request for damages and claim of conversion. The court set a trial to discuss fair compensation for Mockís services. Judge Martinís decision is based on the naked depository law, which is unique to the state of Georgia.

            Mock Pallet relied on the naked depository statute, which is a fairly old law and unique to Georgia. This law basically gives an entity the right to be compensated if it helps safeguard and ensure the return of the property belonging to another entity regardless of whether or not there is a contract between the parties. The entity protecting the property has a lien on the property until the owner pays for all fees and expenses associated with safeguarding the property. Last fall, Judge Martin ruled that Mock Pallet is a naked depository of CHEP-marked pallets. Her decision shielded Mock Pallet from CHEPís conversion claim. Judge Martin also recognized CHEPís ownership claim to stray CHEP-marked pallets and tossed out Mock Palletís unjust enrichment claim against CHEP.

            Had unjust enrichment been considered by the Georgia court, the Mock Pallet decision might have had more legal impact because the concept is common throughout U.S. law. Just before the trial, Judge Martin threw out the unjust enrichment issue. She sided with a claim made by CHEP that the naked depository statute already provided a legal remedy under the law. Mockís attorney tried to argue that the two issues were separate and should both be considered.

            The unique nature of the Georgia law may limit the legal significance of the court rulings in the Mock Pallet case. However, the jury award is definitely a great moral victory for independent recyclers everywhere. And it could be a springboard to increased compensation for retrieval depending on how the industry and the courts react.

            Ricky Mock, president of Mock Pallet Company, said, "We stood up for what is right for our industry. We put our trust in God. Bathed it in prayer, and justice prevailed." Mock said that he thinks the jury decision will impact the entire industry. Mock Pallet asked for $1,047,622.45 in total costs related to its services. A majority of the costs came from storage fees. Mock Pallet asked for five cents per day per pallet for storage. CHEP countered that the storage fees were excessive and amounted to more than double what the recycler pays in rent for the entire facility per year. Gene Butt, the attorney for Mock Pallet, countered that CHEP had been notified of the storage charge in October 2001, and CHEP did nothing to move along the negotiations. CHEPís dragging its feet in reacting to the situation likely contributed to the juryís decision.

            Chilton Varner, CHEPís lead attorney in the case, told the jury that Mock Pallet was asking for a "kingís ransom" to "get CHEPís own property back."

            CHEP originally demanded that the pallets be returned for free. Then it began to offer transportation fees as the company launched its new ARP. CHEPís maximum offer was $1.50 per pallet according to court testimony. Mock Pallet claimed that CHEP never offered enough to cover its costs related to returning CHEP-marked pallets. Mock did actually pay to acquire some CHEP-marked pallets and also had typical costs related to retrieving, storing, handling and transporting CHEP-marked pallets.

            Chilton pointed out that Mock Pallet had the burden of proof to establish costs. She said in her closing arguments that Mock Pallet had failed to justify its claims and as such the jury should not award the recycler anything. But if the jury did award Mock Pallet compensation it should be no more than the $1.50, which CHEP previously offered Mock Pallet and has been "endorsed by the rest of the industry." This strategy may have backfired on CHEP because Gene said, "In CHEPís world, it is their way or the high way...Their philosophy is that Mr. Mock should be doing this for free." By asking the jury to give Mock Pallet little to no compensation, CHEPís legal strategy may not have played well with the jury.

            While the jury didnít give either side exactly what they wanted, the decision showed that CHEP is not unbeatable in court. Chilton cautioned the jury that its decision could impact more than just the parties involved. She warned that giving a major monetary award to the Mocks could set a bounty on CHEP-marked pallets and establish a major black market.

            Mockís attorney said, "CHEP wanted to send a message to the industy that they could smush these two people...Send a messsage to recyclers that the bully can no longer run over recyclers."

            In the end, the jury awarded $734,000 in compensation but subtracted $150,000 for Mock not doing enough to mitigate damages or reduce its exposure to CHEP-marked pallets. Mock Pallet actively solicited CHEP-pallets on its handout to pallet scavengers. Had it not done this and contacted CHEP earlier about acculumating CHEP-marked pallets, the jury may have awared the full amount. How the jury came up with its decision is not part of the court record. But it appears that the jury awarded about half of what Mock Pallet requested.

            The fight is not over. CHEP has indicated that it will appeal the jury verdict. Deb Spicer, CHEPís spokesperson, said, "This is an isolated ruling under Georgia law individual to Mock Pallet regarding a naked depository statute. The statute is unique to Georgia law and has been applied and interpreted only rarely. We believe the application of this statute is questionable in this case and will be reversed on appeal."

            Deb said that CHEP fully intends to go ahead with its current ARP.

            If the appellate court decides to grant CHEPís appeal, the ownership and unjust enrichment issues could be put back on the table. No new evidence or testimony can be submitted for the appellate court to consider. However, the appellate court can reconsider any or all of the issues discussed in the case. And the higher that CHEP appeals the decision the broader the application could be for whatever decision is reached. The current ruling could prove legally persuasive in other parts of Georgia and possibly other states depending on what local jurisdictions decide.

            Happy with the outcome in the trial, Ricky said, "We are prepared to go another round if that is what CHEP wants."

            (Editorís Note: Nothing in this article should be misconstrued to be legal advice or followed without consulting an attorney. Laws vary from state to state, and the only way to be sure of the legality of any action is to seek effective legal counsel.)

 

Lessons for Recyclers from the Mock Pallet Case

            Recyclers across the country are wondering what the Georgia ruling means for them. While it could give them additional leverage to negotiate with CHEP, the rental giant has shown no signs that it intends on negotiating one-on-one with recyclers. CHEP pretty much has a take it or leave it attitude toward its Asset Recovery Program (ARP). Some recyclers are waiting to see what happens in the Buckeye Diamond Logistics case, which should have likely been decided by the time you read this article. These recyclers are holding onto CHEP-marked pallets and may use the decision from the Buckeye case as legal leverage to negotiate for more compensation. Others are participating in CHEPís ARP. And still others provide CHEP-marked pallets to CHEP customers that are deficient on return counts. These recyclers charge the CHEP customers a logistics and transportation fee for providing this service. Many refuse to comment on what they do with CHEP-marked pallets. But it is widely speculated that some recyclers grind or destroy CHEP-marked pallets even though CHEP contends this practice is illegal and unethical.

 

            Pallet recyclers companies can learn several important lessons from the Mock Pallet case.

1.) CHEP made a pretty big deal out of its current ARP and tried to portray it as the industry standard. Mock Pallet never participated in CHEPís ARP, yet CHEP used it any way as a major part of its case. If you participate, regardless of whether or not you have signed anything, your participation could be used against you in the future if you go to court and ask for compensation over and above CHEPís ARP pricing.

2.) Keeping accurate records of CHEP-marked pallet flows, your costs for handling and storing them, and any problems encountered along the way could help you if you end up in court.

3.) Consider talking with an attorney before taking any significant action with proprietary pallets. Consulting legal counsel and having a well-thought out plan is the smart way to go.

 

Unējust Enērichēment:n.

Pronunciation: "&n-íj&st -in-írich-m&nt

1. Unjust enrichment definition ó Unjust enrichment is where a party keeps money or benefits that, in fairness, belong to someone else. A person who has been unjustly enriched at the expense of another must legally return the unfairly kept money or benefits. (Source: www.legal-definitions.com)

 








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