Mattress group sleeping on $2M in payments, responsible for warehouse shutdown, says recycler

The head of a mattress-recycling company is holding out hope that he can collect what he says is almost $2.5 million owed by a mattress industry program for old bedding that’s already been processed and restart his operations.

Tchad Robinson, president of Los Angeles-based Blue Marble Materials, said this week that the Mattress Recycling Council has unfairly targeted his company, and abruptly canceled his contract last month, forcing him to close down with almost no notice to his employees.

Blue Marble operated recycling facilities and warehouses in Fresno and San Leandro, in addition to its headquarters in Commerce.

Robinson said the cancellation came even though he was in the process of acquiring equipment that would increase the automation of dismantling mattresses and box springs, plus separating salvageable materials like metal and foam for other purposes.

Blue Marble was the largest processor participating in California’s official mattress recycling program, Bye Bye Mattress, but closed down its Fresno intake center on South Elm Avenue on Sept. 26 — as well as its other locations — amid a contract dispute with the Mattress Recycling Council, which is based in Alexandria, Virginia.

In the meantime, about 250,000 mattresses and box springs — many in compressed bales — are apparently sitting in storage at three different Fresno locations.

“What we were doing is, we were compacting units in our satellite facilities into bales to more efficiently ship them to Los Angeles to be processed,” Robinson said. “Our technology is what allows those cubes to be processed.”

California’s mattress recycling program was launched under state law in late 2015 as a way to try to divert the bulky materials away from landfills and reduce illegal dumping of mattresses on roadsides, empty lots and alleys, with a goal of recycling 75 percent, by weight, of materials recovered from mattresses and box springs by 2020.

The Mattress Recycling Council is a nonprofit established by the International Sleep Products Association, which shares an address with the council in Virginia, to operate California’s state-sanctioned mattress-recycling program as well as recycling efforts in Connecticut and Rhode Island. The council collects a fee of $10.50 for every new mattress sold in California, and in turn pays recyclers such as Blue Marble to transport and dismantle mattresses and box springs. Wood, foam, metal springs and other components are then sold.

Marie Clarke, the MRC’s vice president of industry and external affairs, said last week that Blue Marble Materials was the largest recycler and processor of old mattresses in the state, handling more than 50 percent of the volume of old bedding coming in under the recycling program.

Clarke added that MRC canceled its contract with Blue Marble for “failure to perform,” citing a lack of inventory accounting of mattresses coming in and going out.

A Sept. 21 contract termination letter from MRC to Blue Marble also asserted Robinson failed to secure financing to buy new mattress-shredding technology in time to meet a Sept. 12 deadline, or to purchase the shredder by Sept. 17. MRC said both deadlines were included in a contract that was renegotiated earlier this year.

In response, Robinson sent a letter to MRC documenting that a lender had provided $400,000 in financing in June and extended another $503,000 on Sept. 20. He also provided an invoice from a shredder manufacturer in Italy detailing an order placed with a down payment in June for equipment due to be shipped this month.

“They are completely disingenuous in their justification for terminating our contract,” Robinson said. “They’re sitting on a $40-plus million surplus” in recycling fees from the sale of new mattresses in California “that they’re not spending to grow the program in the state, they’re not investing in research and development, and they’re not investing in market development.”

Instead, Robinson asserted, “they’re using that money for attorneys … to smear us and make us look like a bad actor. But they have all the control.”

The California State Auditor issued a report earlier this year that was sharply critical of the California Department of Resource and Recycling, or CalRecycle, for failing to exercise needed oversight and control of MRC and its Bye Bye Mattress recycling program in California.

“The Mattress Council has amassed excessive reserve funding,” state Auditor Elaine M. Howle wrote in an Aug. 30 report to Gov. Jerry Brown and the state Legislature.

“As of December (2017), the Mattress Council had over $42 million in unrestricted net assets. State law intends that the Mattress Council operate the program over a multiyear period in a prudent and responsible manner. However, we determined that the amount of reserve funding the Mattress Council has accumulated is significantly higher than necessary to meet its stated reasons for needing a reserve.”

Instead, Howle’s office indicated that the MRC should work to increase the convenience for owners of old mattresses to recycle their bedding and invest in research into new recycling technologies. “Without such measures, the Mattress Council cannot show that its spending in those areas has been effective and efficient,” Howle wrote.

In a response to the audit, CalRecycle disagreed with the conclusion the agency has not done enough to oversee the mattress council. “However, CalRecycle agrees that additional authority would enhance the program’s effectiveness in recovering and recycling mattresses and our oversight ability, …” wrote Ken DaRosa, the agency’s chief deputy director.

In a budget submitted to CalRecycle in July and updated last month, MRC that it will receive nearly $44 million in mattress recycling fees paid by consumers when they buy new bedding. That revenue comes against anticipated expenses that include about $35 million in costs for collecting, hauling and recycling old mattresses, and lesser amounts for program communication and outreach, administrative and legal expenses, regulatory oversight, and research and development.

The council also said it expects to pull about $262,000 from the reserves it’s built up since 2015 — the $42 million that was criticized by the state auditor – to make up for a slight shortfall between income from the mattress fees and its expenses for the year.

In a letter to state Assemblywoman Cristina Garcia, a Democrat from Downey whose district includes Blue Marble’s headquarters in Commerce, the MRC defended its cancellation of the contract as “fully justified” because Robinson had not secured “full financing” for the new shredding technology by the deadline.

Robinson said he believe MRC blames him for the critical state audit and is withholding three months worth of payments and canceled the contract in retaliation. “We have not received payment for our services since August, and now there’s no way they will pay anything until this is resolved” through arbitration — a process that could take months during which Blue Marble’s employees are in limbo.

Robinson said Blue Marble had from seven to 12 people working in Fresno — a mix of employees and workers hired under contract through staffing services. Across all of its sites in the state, he estimated that the company had about 60 to 65 of its own employees and 90 to 100 contracted workers.

Now, he said, no employees are working and have not received their Oct. 1 paychecks. “What I’m trying to do is minimize our burn rate, wave the flag and bring some transparency to this situation, get (MRC) to pay our past-due invoices and damages and reconstitute the company.”

But, he added, he hopes the state auditor’s report will prompt the Legislature and CalRecycle to take a hard look at having an industry-controlled group operating the mattress-recycling program for the state “They should be removed from running the program,” Robinson said of the MRC.

Tim Sheehan: 559-441-6319; Twitter: @TimSheehanNews.