CHEP Loses First Major Jury Trial

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.

            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), and the unique nature of the Georgia law may limit the legal significance of the Mock decision.

            Some recyclers are waiting to see what happens in the Buckeye Diamond Logistics case, which should be settled in 2005. 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 CHEP’s 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 CHEP’s 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 CHEP’s 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.