Moldmakers still fighting the same battle: How do we get paid?

According to David Lefere, a partner in the law firm of Bolhouse, Barr & Lefere, the current mold builder lien is a non-possessory lien designed to protect mold companies that must release the mold prior to tryout and validation. Lefere, whose practice specializes in tool-and-die and mold shops, noted that the law is to protect the interest of the moldmaker who ships the tool prior to payment.

“Mold builder lien laws in Michigan, Ohio, and Illinois are non-possessory and are a remedy for a long-standing problem of the mold not getting paid until after shipping the mold,” Lefere told a group of mold builders in a recent webinar sponsored by the American Mold Builders Association. “A number of years ago there wasn’t much a moldmaker could do, but now we have a bit more leverage.”

Those words “a bit more leverage” are telling. While there are things that a mold builder can do to protect his interest, molders and OEMs continually try to thwart those efforts. For example, an essential requirement of the Mold Lien Law in Michigan (but not in Ohio) is that you must have a permanent record of that mold affixed permanently to the mold. That includes putting your full legal company name and address on every mold you build. “If you do this prior to shipping you have a lien,” said Lefere. “And it lasts until you are paid in full.”

Permanent is the operative word in this law, according to another Michigan law firm, Warner Norcross & Judd. In a news item dated 1/26/11 on the firm’s website, “Moldbuilders/Tool Builders Beware: Permanent Means Permanent,” the attorneys note, “To have an enforceable lien under Michigan’s Moldmakers Lien Act, a moldbuilder must ‘permanently record’ its name and address on its mold, die or form and file a UCC financing statement. The Michigan Court of Appeals recently interpreted, for the first time, the ‘permanently recorded’ requirement. The Court’s decision puts moldbuilders—and special tool builders—on notice that their liens will not be enforceable if their identifying information can be removed.”

Lefere stressed that you must have your full legal name on the mold. If your company’s full legal name is Acme Mold Company Incorporated then you must include all of that. You can’t just put Acme Mold. Some companies manufacture nameplates and secure them to the mold. However, these plates can be removed and it’s been known to happen that the OEM removes the nameplate to get rid of proof of the supplier that built the mold in order to evade payment.
Engraving the company’s full legal name and address into the mold plate has also been proven not to be immune from unscrupulous OEMs that want to avoid paying for molds. They merely grind off the identifying information.

To keep one step ahead of these antics, mold builders are trying other means. Eclipse Tool & Die (www.eclipsetd.com) in Wayland, MI, began milling the company’s full legal name and address in a stop block hidden inside the mold. They did this to stop customers from grinding off the engraved name and address. Putting it under a stop block makes it inaccessible.

Another method is to take photos of the mold’s identifying plate or engraving on the mold along with the full description of the mold and the parts that it makes so that these can be presented as evidence if the identifying plates or engravings have been removed.

The key to making the law effective is to file the lien when you get the order. “If you don’t file a lien you don’t have a fighting chance,” stressed Lefere. “It’s absolutely essential that you file a UCC lien prior to shipping the mold. If you don’t it will be a problem. However, if you forget to do it, file anyway even if you’ve already shipped the mold.”

Who should you file against? “Every entity that has an ownership interest in the tooling,” stated Lefere, “including your customer, the OEM and all entities that may have a possessory interest in the mold. Include everyone so that you eliminate the defense that you didn’t file a UCC.”

The owners of the molds are typically the OEMs who ultimately purchase the tooling, so Lefere cautioned that moldmakers should always file against the end user.

Where do you file the UCC?
You file in the state where the tooling is being produced and where your company is registered. “For General Motors and Ford, you want to file in Michigan and Delaware,” said Lefere. “You have to do a thorough search process to find where a company is formally registered and file in the correction location and against the correct entity.”

Another important item is to make sure you fill out the UCC form correctly. “Fully the describe the tooling,” Lefere emphasized. “Describe the collateral. Don’t just say it’s a mold for such-and-such company, but provide a full description of the mold and what it produces.”

What about POs (purchase orders) from Mexico or a European country? “Always try to get a PO from the U.S. or Canada,” Lefere advised. “There are no UCC equivalents in Mexico or Germany. That makes shipping a mold out of the country more of a risk. However, molds in Mexico can be litigated, but it’s more challenging from an enforcement standpoint. File anyway!”

Levere noted that he once went after molds that were being run at a company in Mexico that was owned by Ford. “I told them either bring back the molds or I’d find assets in Michigan to give to the moldmaker,” he said.

While the battle continues, it’s imperative that mold manufacturers do all that they possibly can to protect their interest in the molds they build. Find out what the requirements are in your state and follow those carefully. If the laws in your state don’t have enough teeth, find out what you need to do to get non-possessory laws enacted in your state.

While taking these steps to protect your interest may seem time consuming, not getting paid for the molds you build can be costly—and even result in the loss of your business.