Quality Control One Safeguard Against Growing Litigation

As recently as 10 years ago, the Pallet and Container
Research Laboratory at Virginia Tech would receive about one request every other year from
a lawyer seeking expert testimony in a lawsuit involving a failed pallet. Now, the
laboratory receives about six or seven such requests annually, according to Dr. Marshall
("Mark") White, director of the laboratory. Lawsuits involving pallet failure
have dramatically increased over the last decade, he told members of the National Wooden
Pallet and Container Association at the group’s recent annual meeting in La Jolla,
Calif.

Mark is frequently summoned as an expert witness in lawsuits involving
pallet failure. In his remarks to NWPCA members on liability issues, however, he
emphasized that he was not speaking as a lawyer. "There is a method to protect
yourself," he told a gathering at the NWPCA meeting. "The tools are available,
most through the National Wooden Pallet and Container Association." Pallet companies
can limit their risk to this emerging legal threat by following some basic steps, he said.
These procedures consist of:

One cause of growing litigation, he suggested, was increasing product
damage. The Grocery Manufacturers of America recently reported that the value of
unsaleable grocery product has increased from $2.6 billion in 1995 to $3.97 billion in
1997. Crushed, dented, or collapsed product accounted for somewhere between 28% to 44% of
this total.

Ironically, the increase in the number of pallet failures may be linked
to tools like the Pallet Design System, a computer program developed by the Virginia Tech
pallet lab and the NWPCA which eliminates over-design of pallets. "The evolution of
tools like PDS has helped you and your customer to do one very important thing: eliminate
over-design, and if used right, eliminate under-design," Mark said.

However, elimination of over-design has removed a "cushion"
that in the past compensated for errors in the design, manufacture and use of pallets,
according to Mark. If pallet manufacturers do not exercise care in using newer design
technologies, such as the PDS, a pallet that sold for $8 and fails to perform can lead to
millions of dollars in legal damages.

"In order to protect yourself, don’t stop using tools like
the Pallet Design System to promote pallet design efficiency, because you are doing your
customer a service," said Mark. "But when you start using these tools to improve
the material handling efficiency of your customer, you have to take greater and greater
care in controlling your manufacturing quality. Failure to do so can lead to risk
exposure."

Mark, who has been an expert witness for both plaintiffs and
defendants, pointed out that the risk in supplying a pallet to a customer is linked to its
use as a load-bearing structure. As a load-bearing structure, it contains components that
act as beams. "If one of these components, or the pallet, which is a beam in a
load-bearing structure, fails, then fingers are pointed and questions are asked."

"A pallet that fails to perform will interfere with the material
handling efficiency of your customer and possibly cause product damage, and finally,
personal injury, and-or death," Mark reminded the audience.

There are two general causes of pallet failure, he noted: selection of
the wrong pallet, and improper use of correctly designed pallets. As for improperly
designed pallets, he gave examples of cases in which he has been called to testify; pallet
under-design had resulted in problems for automated systems and product damage. Poorly
designed bottom pallet decks can result in crush damage to packaging below that impairs
the stability of stacked product. Bottom pallets in stacks several unit-loads high must be
specified to withstand the load of the entire stack. Other typical pallet-related
accidents he cited included pallets that fail in storage racks, pallets that fail when
elevated by forks, individuals stepping on pallets, and product falling from pallets
during movement.

In other cases, however, pallet misuse is at the root of injury or
product damage claims. One case involved the improper alignment of stacked unit-loads,
resulting in packaging failure and eventually falling product. In another example, a
worker was on a roof, off-loading tile that had been elevated on a pallet. The worker
stepped onto the pallet while he was removing the material, the pallet tipped, and he fell
off the roof.

There are 100 fatalities per year associated with forklift operation in
the U.S. "One of the most common causes of injury is a person being struck by falling
material," Mark said. "That can be attributed to pallet failures. I know from
experience this is a common cause."

In order to reduce exposure to litigation, Mark recommended a series of
steps. First, pallet suppliers need to understand how the pallet will be used. A detailed
pallet audit of the customer should be performed. (The pallet audit is taught at the PDS
short course given by Virginia Tech and must be performed in order to use PDS; many courts
have ruled that such an audit is the responsibility of the pallet vendor.) Following the
development of prototype pallets using PDS, field tests should follow. Finally, a detailed
pallet specification should be written.

"Using PDS you have to almost take more care to control quality
variation," Mark said. Since elimination of over-designed pallets also removed a
"cushion" that compensated for certain errors, he strongly suggested that pallet
companies implement statistical quality control methods. "I can’t emphasize how
important this is as you begin to go through the process of improving the efficiencies of
your customers design using tools like PDS." Mark recommended the quality assurance
manual that is available for wood pallet manufacturers through the NWPCA.

He also suggested the NWPCA’s SPEQ certification program as a
quality control measure that could reduce risk. "SPEQ is small but it’s going to
grow," he said. Major companies such as Armstrong and Chevron are SPEQ users.
"If a SPEQ label pallet fails, the fact is you’ve done everything you could to
reduce your risk. You did an audit, you used the design procedure, you have a statistical
process control system to control your manufacturing variation, and you are SPEQ
certified. There is no (legal) case" against a pallet manufacturer who has taken
those steps.

Recyclers are vulnerable to lawsuits, too. Because PDS is not available
as a tool for recyclers, he recommended that they obtain copies of the database available
on the strength of recycled pallets. Tests also can be performed with simple equipment,
such as two I-beams and a skid of nails.

The last important step in limiting liability is to instruct customers
on safe handling practices. "It is incumbent to inform customers of the proper way
that pallets should be used and not used," Mark said. "Teach your customers to
inspect pallets during use. They need to understand when a pallet is no longer functional
and should be pulled from the system. You know. Teach them." One useful aid he
suggested for educating customers is the NWPCA’s training video. "The audits,
the design procedures, the quality assurance manual and all of these training documents
are available through the NWPCA," Mark reiterated. "When these tools are
employed…the $8 pallet will probably cost a lot less than $8 to use, and not millions of
dollars to use."