by H. Alan Rothenbuecher
Benesch, Friedlander, Coplan & Aronoff LLP
It is a familiar story: Your company has accumulated many inactive molds over time. You have tried to contact the owner of the molds to pick them up or give you permission to scrap them. In some cases, you cannot find the owner. In others, the owner refuses to provide any instructions on what you can do with those molds. What can you do that will allow you to dispose of the molds AND minimize the risk of any blowback from the owner of the molds?
A simple solution is to advise the owner of the molds that you will begin charging a storage fee for the inactive molds. Doing so is easy if your terms and conditions already provide you the ability to do so. You simply exercise a contractual right that allows you to start charging interest for inactive molds. If your terms and conditions do not provide for such ability to charge interest, you should to revise them to include that right.
If your terms and conditions are silent on the issue, then write the owner of the mold and inform the owner that you will now start charging interest. The presumption for your agreement to hold the mold for the customer is that it will remain active. So long as your supply agreement does not obligate you to hold such molds indefinitely, there is nothing that prevents you from charging a storage fee. Whether you decide to collect on that storage fee is up to you. Further, accrued storage fees can be used as a cost to often justify maintaining a molders lien on the molds, thereby preventing other molds from being removed from your facility without prior full payment of all amounts due you.
In the instance in which the owner of the mold either cannot be found or does not provide you with any insight (such as never responding to your request for guidance), you should look to your state’s particular laws on this topic. In general, if you own the mold, you can scrap it, sell it or dispose of it at your leisure, assuming your contract or purchase order with the customer does not restrict such action. If the customer owns the mold, but you are still owed money by the customer, most states allow you to sell the mold and apply the sale proceeds to the debt the customer owes you after you provide notice to the customer. Alternatively, certain states allow you to sell the mold as scrap and apply any money you receive to the debt. In such cases, send a letter to the last known address you have for the customer, telling the customer you are going to scrap or sell the mold and apply the money you receive to the debt the customer owes. Keep a copy of the letter in your file even if it is returned because the customer is now out of business.
If the customer owns the mold but does not owe you any money, then just write a letter again to the last known address – stating something along the following: “We have in our possession several molds owned by you. These molds [identify the molds by part number or name] have been inactive for some time. If we do not hear from you within thirty (30) days, we will make arrangements to dispose of the molds and invoice you for the cost associated with such disposal.” By sending such a letter, you provide ample notice to the customer to act before you either scrap or sell the molds. If you do not hear from the customer, then go ahead and get rid of the molds as you deem most economical to you. If you sell them, deduct from the sale proceeds a reasonable fee for past storage and send the excess, if any, to the customer. But, if the customer no longer exists, keep the sale proceeds.
Although many states have particular nuances that must be observed, such as how many days of advanced notice must be provided or where the notice must be published (such as in a paper of general circulation in the city of the customer), the preceding procedure is generally allowed and avoids risk of blowback. And, don’t forget: if you don’t address this issue proactively, your customer never will.
Alan Rothenbuecher regularly assists plastics industry companies with their daily challenges. His specialty is helping companies build and protect their assets and business. Rothenbuecher is actively involved in trade associations and has developed significant industry experience in the plastics industry, in general, and additive manufacturing (3D printing), in particular. He is a member of the Manufacturers Association for Plastics Processors and the American Mold Builders Association, where he is a member of the board of directors and serves as general counsel of these national associations.
More information: [email protected] or www.beneschlaw.com.