Major developments have recently occurred in two landmark cases involving recycler rights and just compensation for returning CHEP-marked pallets. In late June, Buckeye Diamond Logistics of South Charleston, Ohio settled its case with CHEP USA after the rental giant agreed to modify its Asset Recovery Program (ARP). About the same time, the Eleventh Circuit Federal Appeals Court overturned the monetary award and ruling in the Mock Pallet Company.
Below are answers to common questions about the latest developments in these landmark cases and how they will impact the industry.
Buckeye settled with CHEP for many reasons. Beyond the obvious physical strain and burden caused by the case, Buckeye received only marginal support from the industry as a whole. Had more people joined the fight, Sam McAdow, president of Buckeye Diamond Logistics, claims that he would have stayed in it. Only a handful of companies stood beside Buckeye. And the support of those started to wane over time for a variety of reasons.
The cost of the trial has been staggering for all sides. And it only looked to get worse as both sides tenaciously fought over what evidence should be made available to the public. After the first day of deliberations, it became clear that CHEP was going to fight every piece of evidence that was being contested. CHEP did not want anything to be made available to the public. All of a sudden, a trial that was thought to go only a week could have lasted weeks.
The judge who presided over the case was known for taking a long time to render his decisions. And even then, CHEP would have contested any ruling favorable to Buckeye. The case could have dragged on for at least a couple more years. CHEP had made it clear that it would not recognize the ruling in other jurisdictions if it was favorable to the industry. Buckeye saw an opportunity to grab a little more money for the industry, so it settled.
The essence of the settlement was that Buckeye accepted the ARP that CHEP has been offering for a few years. CHEP agreed to add a fuel adjustment surcharge to its current ARP for all pallet recyclers participating in the program. The fuel surcharge is based on Department of Energy fuel cost statistics.
The new developments are primarily a tweaking of the program to cover recent fuel increases and a way to end the legal battle that has been going on for about four years. While the Buckeye case would have been a legal precedent only in the southern District of Ohio, the new agreement will impact CHEP’s ARP for the entire U.S. pallet industry.
Ever since the news of the settlement came out, the industry has debated the motives and hero status of Sam McAdow, the outspoken owner of Buckeye Diamond Logistics. Sam and his company received no direct benefit from the settlement other than what has been offered to the rest of the industry.
Some have questioned if Sam’s involvement in PALNET USA, a new pallet management business comprised of several leading recyclers, led to his decision to settle. Sam stated that he received no direct guarantee as part of his settlement that CHEP would do business with or provide cores to PALNET USA. However, CHEP is talking with PALNET USA about the possibility of working together. The idea that Sam engineered the lawsuit to negotiate a deal for PALNET USA seems farfetched because there was no PALNET USA when Sam started his lawsuit. Plus, there are no long term guarantees with CHEP, especially since its relationship with Wal-Mart is changing.
Even CHEP admitted in its news release that Sam’s legal efforts led to the current ARP program, which has benefited the entire recycling industry. He did gain a fuel surcharge. And while this is likely far short of what the courts could find is just and fair compensation, it is a start.
Some of Sam’s supporters have questioned his decision. They have every right to because they were there in the trenches. Everyone else should be thankful for what they got because they didn’t lift a finger to help.
If Sam honestly talked with you, you would probably find that he has second guessed his decision at times. But in the end, what is done is done. Circumstances change. Regardless of whether or not Sam is a hero, he is an honorable man who took on a giant against huge odds. We all (including CHEP) owe him a big "Thank you" for his efforts on behalf of the industry.
Dr. Ed Brindley, publisher of the Pallet Enterprise, wrote, "The entire pallet industry owes Sam a debt of gratitude for the mantle he has been willing to carry throughout the four year fight. All along he made it clear that he was not asking for anything solely for Buckeye but required that any settlement carry over to the industry as a whole. He probably could have settled out of court a long time ago if he was just trying to get something for himself and run with it. That kind of integrity and grit is rare in our society today."
Many have looked to the Buckeye case as a bellwether for how federal courts across the country will deal with legal questions about CHEP’s asset recovery policies and recycler rights. CHEP made a last minute appeal to seal many of the pertinent documents and to keep them from public record. In the interest of promoting the welfare of the industry and to make sure that the industry knows the truth about the value of recycling services to CHEP, Industrial Reporting Inc. (IRI), the publisher of the Pallet Profile and Pallet Enterprise, joined the case, filing to keep the court open. The judge ruled that the courtroom had to be open; IRI’s brief likely contributed to that decision. Of course, it did not really matter in the end since both Buckeye and CHEP settled the case. But IRI’s willingness to enter the case shows its dedication to uncovering the truth when it comes to the issue of recycler rights.
IRI believes that some of the records that CHEP wants to keep out of the public arena have ramifications far beyond just Buckeye. Specifically, CHEP has done studies to determine the benefit of recyclers to its asset recovery program. And while the exact findings are hidden under a protective order, the degree that CHEP has fought to conceal this information indicates that it could be very juicy.
What if the information showed that the financial benefit of recycler services to CHEP is much greater than what the leasing giant has claimed in the past? What if CHEP’s own documents show that the company has knowingly low-balled the market, forcing its competition to work for it at artificially low prices? These are the issues that IRI wants to see resolved, and public exposure of related documents is the only way to effectively do that.
CHEP has publicly stated that its Asset Recovery Program (ARP) is fair compensation for recycler services involved in storing and returning CHEP-marked pallets. CHEP refuses to negotiate on a case by case basis. It claims that making an agreement with each individual recycler would be a logistical and paperwork nightmare. CHEP has been concerned about creating a black market for its pallets, and it doesn’t want the free enterprise system to dictate the price for recycler services.
But is what CHEP has said about the fairness of its ARP really true? Is CHEP’s ARP even legal? That is what IRI hoped to discover by bringing CHEP’s own internal analysis and other documents into the open. If CHEP has been a good corporate citizen, then it has nothing to hide. But if CHEP has said one thing and secretly known another to be true, then its reputation could be on the line. This would tarnish the image of the kinder, gentler CHEP and cast it again as a big bully that uses legal threats and intimidation to prey upon smaller competitors. Which one is the real CHEP?
IRI’s involvement in the Buckeye case marks the first time it has ever sought to intervene in any trial. The decision is important enough that IRI has taken this step to preserve the freedom of the press.
CHEP fought hard to keep many of the records away from the public, claiming that disclosure would unfairly expose trade secrets. And while the exact findings are hidden under a protective order, the degree that CHEP has fought to conceal this information indicates that it contains a great deal of interesting information.
After arguing over these documents for over a day, the court was still having difficulty resolving whether or not most of them should be protected. Dr. Ed Brindley, publisher of the Pallet Profile and Pallet Enterprise, had flown to Dayton and was prepared to go on the stand to explain what we intended to do with this sensitive information and why it is so important to the pallet industry. It turned out that he did not take the stand because Buckeye and CHEP settled their long standing disagreement out of court.
The biggest development for the industry to come from the Mock ruling is that the appellate court affirmed that Mock Pallet is entitled to compensation under the unjust enrichment provision in the law. And according to the ruling, the measure of damages is based on the benefit conferred upon CHEP, not the cost to render the services or the cost of goods. Damages based on the benefit to CHEP would likely be substantially more than just the cost of the service. CHEP’s Asset Recovery Program (ARP) has supposedly been based on the costs associated with sorting, storing and transporting CHEP-marked pallets, not the benefit of the service to CHEP. This means that CHEP’s ARP might not be considered fair compensation depending on what the district court finds if this case is retried. The ARP is the national program that CHEP has setup to compensate recyclers for expenses involved in returning its pallets.
Another major provision in this ruling is that the appellate court stated that mere possession of CHEP-marked pallets and refusal to return them without just compensation does not constitute conversion. In the past, CHEP has tried to use the conversion statute to claim that refusal to return CHEP-marked pallets is an unlawful activity which could carry with it severe civil penalties. This ruling seems to support the opposite conclusion, especially since the recycler is providing a service to CHEP by locating stray property.
Mock did sell 1,200 CHEP-marked pallets to whomever wanted them. Mock did not necessarily sell CHEP-marked pallets to entities that were going to be putting them back into CHEP’s network. Thus, you can’t really use what Mock did as a test case for providing CHEP-marked pallets to CHEP customers. There still seems to be some gray area on this issue. Any recycler considering any action other than participating in CHEP’s ARP or simply safeguarding the pallets while you negotiate with CHEP should consult an attorney for legal advice.
What did the appellate court rule in the Mock case?
The Eleventh Circuit Court of Appeals has overturned the jury award in the CHEP USA v. Mock Pallet Company case.
The issues to be deliberated include whether or not Mock Pallet is a naked depository, the amount of compensation due to the recycler, and the damages associated with 1,200 CHEP-marked pallets that Mock sold.
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.
Before the initial trial, Judge Beverly Martin ruled that Mock Pallet is a naked depository of CHEP-marked pallets. This decision has been overturned by the appellate court and is to be retried if mediation does not work. Since whether or not Mock qualifies as a naked depository is now up for debate, the Mock defense team may try to push for unjust enrichment, which would have greater impact for the whole industry and would conceivably result in greater compensation. It is highly unlikely that Mock will see any compensation as high as the $19.47 awarded by the first jury. But the court could grant Mock compensation well above what is offered by CHEP’s new ARP.
What’s next for the Mock case?
The federal appeals court has sent the case back to district level for mediation. And if that doesn’t work, a new trial could take place.
Ricky vows to continue the fight. He said, "Your biggest competitor shouldn’t have the right to force you to work for it at the price it sets…I am in this fight for the long haul unless CHEP wants to give me a decent offer to settle." CHEP refused to comment on the Mock case until it is settled.
(Editor’s 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.)
Even though Mock Pallet lost on appeal why was the appellate court ruling so favorable for the industry?
Why did the publisher of the Pallet Enterprise enter the Buckeye trial?
Is Sam McAdow a hero or did he sell out the cause?
What does the Buckeye settlement mean for recyclers?
Why did Buckeye settle?
Major developments have recently occurred in two landmark cases involving recycler rights and just compensation for returning CHEP-marked pallets. In late June, Buckeye Diamond Logistics of South Charleston, Ohio settled its case with CHEP USA after the rental giant agreed to modify its Asset Recovery Program (ARP). About the same time, the Eleventh Circuit Federal Appeals Court overturned the monetary award and ruling in the Mock Pallet Company.
Below are answers to common questions about the latest developments in these landmark cases and how they will impact the industry.
Buckeye settled with CHEP for many reasons. Beyond the obvious physical strain and burden caused by the case, Buckeye received only marginal support from the industry as a whole. Had more people joined the fight, Sam McAdow, president of Buckeye Diamond Logistics, claims that he would have stayed in it. Only a handful of companies stood beside Buckeye. And the support of those started to wane over time for a variety of reasons.
The cost of the trial has been staggering for all sides. And it only looked to get worse as both sides tenaciously fought over what evidence should be made available to the public. After the first day of deliberations, it became clear that CHEP was going to fight every piece of evidence that was being contested. CHEP did not want anything to be made available to the public. All of a sudden, a trial that was thought to go only a week could have lasted weeks.
The judge who presided over the case was known for taking a long time to render his decisions. And even then, CHEP would have contested any ruling favorable to Buckeye. The case could have dragged on for at least a couple more years. CHEP had made it clear that it would not recognize the ruling in other jurisdictions if it was favorable to the industry. Buckeye saw an opportunity to grab a little more money for the industry, so it settled.
The essence of the settlement was that Buckeye accepted the ARP that CHEP has been offering for a few years. CHEP agreed to add a fuel adjustment surcharge to its current ARP for all pallet recyclers participating in the program. The fuel surcharge is based on Department of Energy fuel cost statistics.
The new developments are primarily a tweaking of the program to cover recent fuel increases and a way to end the legal battle that has been going on for about four years. While the Buckeye case would have been a legal precedent only in the southern District of Ohio, the new agreement will impact CHEP’s ARP for the entire U.S. pallet industry.
Ever since the news of the settlement came out, the industry has debated the motives and hero status of Sam McAdow, the outspoken owner of Buckeye Diamond Logistics. Sam and his company received no direct benefit from the settlement other than what has been offered to the rest of the industry.
Some have questioned if Sam’s involvement in PALNET USA, a new pallet management business comprised of several leading recyclers, led to his decision to settle. Sam stated that he received no direct guarantee as part of his settlement that CHEP would do business with or provide cores to PALNET USA. However, CHEP is talking with PALNET USA about the possibility of working together. The idea that Sam engineered the lawsuit to negotiate a deal for PALNET USA seems farfetched because there was no PALNET USA when Sam started his lawsuit. Plus, there are no long term guarantees with CHEP, especially since its relationship with Wal-Mart is changing.
Even CHEP admitted in its news release that Sam’s legal efforts led to the current ARP program, which has benefited the entire recycling industry. He did gain a fuel surcharge. And while this is likely far short of what the courts could find is just and fair compensation, it is a start.
Some of Sam’s supporters have questioned his decision. They have every right to because they were there in the trenches. Everyone else should be thankful for what they got because they didn’t lift a finger to help.
If Sam honestly talked with you, you would probably find that he has second guessed his decision at times. But in the end, what is done is done. Circumstances change. Regardless of whether or not Sam is a hero, he is an honorable man who took on a giant against huge odds. We all (including CHEP) owe him a big "Thank you" for his efforts on behalf of the industry.
Dr. Ed Brindley, publisher of the Pallet Enterprise, wrote, "The entire pallet industry owes Sam a debt of gratitude for the mantle he has been willing to carry throughout the four year fight. All along he made it clear that he was not asking for anything solely for Buckeye but required that any settlement carry over to the industry as a whole. He probably could have settled out of court a long time ago if he was just trying to get something for himself and run with it. That kind of integrity and grit is rare in our society today."
Many have looked to the Buckeye case as a bellwether for how federal courts across the country will deal with legal questions about CHEP’s asset recovery policies and recycler rights. CHEP made a last minute appeal to seal many of the pertinent documents and to keep them from public record. In the interest of promoting the welfare of the industry and to make sure that the industry knows the truth about the value of recycling services to CHEP, Industrial Reporting Inc. (IRI), the publisher of the Pallet Profile and Pallet Enterprise, joined the case, filing to keep the court open. The judge ruled that the courtroom had to be open; IRI’s brief likely contributed to that decision. Of course, it did not really matter in the end since both Buckeye and CHEP settled the case. But IRI’s willingness to enter the case shows its dedication to uncovering the truth when it comes to the issue of recycler rights.
IRI believes that some of the records that CHEP wants to keep out of the public arena have ramifications far beyond just Buckeye. Specifically, CHEP has done studies to determine the benefit of recyclers to its asset recovery program. And while the exact findings are hidden under a protective order, the degree that CHEP has fought to conceal this information indicates that it could be very juicy.
What if the information showed that the financial benefit of recycler services to CHEP is much greater than what the leasing giant has claimed in the past? What if CHEP’s own documents show that the company has knowingly low-balled the market, forcing its competition to work for it at artificially low prices? These are the issues that IRI wants to see resolved, and public exposure of related documents is the only way to effectively do that.
CHEP has publicly stated that its Asset Recovery Program (ARP) is fair compensation for recycler services involved in storing and returning CHEP-marked pallets. CHEP refuses to negotiate on a case by case basis. It claims that making an agreement with each individual recycler would be a logistical and paperwork nightmare. CHEP has been concerned about creating a black market for its pallets, and it doesn’t want the free enterprise system to dictate the price for recycler services.
But is what CHEP has said about the fairness of its ARP really true? Is CHEP’s ARP even legal? That is what IRI hoped to discover by bringing CHEP’s own internal analysis and other documents into the open. If CHEP has been a good corporate citizen, then it has nothing to hide. But if CHEP has said one thing and secretly known another to be true, then its reputation could be on the line. This would tarnish the image of the kinder, gentler CHEP and cast it again as a big bully that uses legal threats and intimidation to prey upon smaller competitors. Which one is the real CHEP?
IRI’s involvement in the Buckeye case marks the first time it has ever sought to intervene in any trial. The decision is important enough that IRI has taken this step to preserve the freedom of the press.
CHEP fought hard to keep many of the records away from the public, claiming that disclosure would unfairly expose trade secrets. And while the exact findings are hidden under a protective order, the degree that CHEP has fought to conceal this information indicates that it contains a great deal of interesting information.
After arguing over these documents for over a day, the court was still having difficulty resolving whether or not most of them should be protected. Dr. Ed Brindley, publisher of the Pallet Profile and Pallet Enterprise, had flown to Dayton and was prepared to go on the stand to explain what we intended to do with this sensitive information and why it is so important to the pallet industry. It turned out that he did not take the stand because Buckeye and CHEP settled their long standing disagreement out of court.
The biggest development for the industry to come from the Mock ruling is that the appellate court affirmed that Mock Pallet is entitled to compensation under the unjust enrichment provision in the law. And according to the ruling, the measure of damages is based on the benefit conferred upon CHEP, not the cost to render the services or the cost of goods. Damages based on the benefit to CHEP would likely be substantially more than just the cost of the service. CHEP’s Asset Recovery Program (ARP) has supposedly been based on the costs associated with sorting, storing and transporting CHEP-marked pallets, not the benefit of the service to CHEP. This means that CHEP’s ARP might not be considered fair compensation depending on what the district court finds if this case is retried. The ARP is the national program that CHEP has setup to compensate recyclers for expenses involved in returning its pallets.
Another major provision in this ruling is that the appellate court stated that mere possession of CHEP-marked pallets and refusal to return them without just compensation does not constitute conversion. In the past, CHEP has tried to use the conversion statute to claim that refusal to return CHEP-marked pallets is an unlawful activity which could carry with it severe civil penalties. This ruling seems to support the opposite conclusion, especially since the recycler is providing a service to CHEP by locating stray property.
Mock did sell 1,200 CHEP-marked pallets to whomever wanted them. Mock did not necessarily sell CHEP-marked pallets to entities that were going to be putting them back into CHEP’s network. Thus, you can’t really use what Mock did as a test case for providing CHEP-marked pallets to CHEP customers. There still seems to be some gray area on this issue. Any recycler considering any action other than participating in CHEP’s ARP or simply safeguarding the pallets while you negotiate with CHEP should consult an attorney for legal advice.
What did the appellate court rule in the Mock case?
The Eleventh Circuit Court of Appeals has overturned the jury award in the CHEP USA v. Mock Pallet Company case.
The issues to be deliberated include whether or not Mock Pallet is a naked depository, the amount of compensation due to the recycler, and the damages associated with 1,200 CHEP-marked pallets that Mock sold.
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.
Before the initial trial, Judge Beverly Martin ruled that Mock Pallet is a naked depository of CHEP-marked pallets. This decision has been overturned by the appellate court and is to be retried if mediation does not work. Since whether or not Mock qualifies as a naked depository is now up for debate, the Mock defense team may try to push for unjust enrichment, which would have greater impact for the whole industry and would conceivably result in greater compensation. It is highly unlikely that Mock will see any compensation as high as the $19.47 awarded by the first jury. But the court could grant Mock compensation well above what is offered by CHEP’s new ARP.
What’s next for the Mock case?
The federal appeals court has sent the case back to district level for mediation. And if that doesn’t work, a new trial could take place.
Ricky vows to continue the fight. He said, "Your biggest competitor shouldn’t have the right to force you to work for it at the price it sets…I am in this fight for the long haul unless CHEP wants to give me a decent offer to settle." CHEP refused to comment on the Mock case until it is settled.
(Editor’s 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.)
Even though Mock Pallet lost on appeal why was the appellate court ruling so favorable for the industry?
Why did the publisher of the Pallet Enterprise enter the Buckeye trial?
Is Sam McAdow a hero or did he sell out the cause?
What does the Buckeye settlement mean for recyclers?
Why did Buckeye settle?
