Category Archives: Lawsuits

How An Alarm Company Can Handle Bad Debt in Small Claims Court

A small business client went out of business and is now refusing to pay the balance of the contract. What can I do now, and is there any way to avoid this situation in the future?

Assuming you did everything you could to negotiate the balance due, unless the company has filed for bankruptcy protection, small claims court is your best bet. You don’t need an attorney for this; it is very easy. Many jurisdictions have the forms online and instructions for filing. The maximum amount of the claims handled by small claims court differs by jurisdiction, but is typically $5,000.   You will want to reference and attach your contract to your filing. In the section where you describe your lawsuit, say something like this:

[Customer] entered into contracts with [Security Company] for security alarm installation and monitoring at [location(s)].  The contracts are dated________, _______, ________, and __________ .  The term of each contract is for ____ years, with $___ due per month under each contract; giving a $____ total monthly payment due for all contracts.

[Customer] paid under the contracts for _____ months, but stopped paying on ______, ___ months before the contract terms expired.  [Customer] is therefore in default under the terms of the contract with [Security Company].

The terms of the contract provide that [Customer] is obligated for ______ of the remaining term of the contract if it defaults on its payments under the contract.  [put in the contract language]

[Security Company] has sent [Customer] invoices and has tried to work out this issue with [Customer].   [Customer] has refused to pay the balance owed to [Security Company], which totals $ ____ for all contracts.

Unfortunately, bad debt is a part of doing business. One potential protection—if you can get it—is a personal guarantee from the business owner or other willing party (the “guarantor”). To do this, you will need to add a second signature line to your customer’s contract.  Above it, it should say something like:  “The undersigned personally guarantees Customer’s performance under this Agreement.” Have the guarantor sign it.   Then, in your small claims case, you can go after the guarantor personally, not just the business.

 

How an Alarm Company Should Handle Requests to Take A Person Off the Alarm Contract.

Ask the Attorney:  I sometimes have customers ask to remove their spouse or significant other from the account due to divorce or domestic violence allegations. How should I handle these requests?

Tread carefully here because if you make the wrong move, you are opening your company up to potential liability. There are a few things you need to consider. You need to determine whose name is on the contract. If both spouses or significant others are on the contract (which is the best practice), then you can make the change, and get a new contract from person requesting the change. I would notify the other party in writing that s/he is being removed from the account.   If the person requesting the change is not listed on the contract, you need to investigate further. Determine if there is legal authority for the change—is there a divorce decree, or a restraining order? I find it helpful to do a little extra sleuthing sometimes as well. For example, can you find anything from online property records about whether the person making the request owns the property? If you have legal authority that the person seeking the change has ownership or possession of the property, you can get a new contract with the person requesting the change. Be aware, however, that, while unlikely, there is the risk that person dropped from the account could sue for breach of contract. Save all correspondence and documentation regarding the change and your decision-making. If you really want to be extra cautious, you could ask for indemnity from the new account holder for any claims made by the person being dropped from the account.

Can I fire my Security Alarm Customer?

Ask the Attorney:  I have a customer who is just awful.   She is belligerent and hateful to my employees and me. I would like to fire her as a customer. Can I do that?

This is a terrible situation to be in, and one that I hope does not happen often. I know your goal is to gain customers, and that you strive to make even the grumpiest of people happy. The customer is always right, as the saying goes. Despite your best efforts, unfortunately, there are times when a customer crosses the line. When a customer is verbally or physically abusive or is disturbing to your business due to his or her constant complaints—and you just cannot make the customer happy, no matter what—it is time to part ways. This is easy if your contract has a clause concerning situations such as this:

Alarm Company has the right to cancel this Agreement if, at Alarm Company’s sole discretion, it believes Customer is verbally or physically abusive to Alarm Company’s employees, subcontractors, or representatives.

If you don’t have a similar clause in your agreement, it can be trickier. After all, if you have a contract with this customer, you have obligations under the contract too.

As a practical matter, however, it likely won’t be worth your customer’s time, effort or money to sue you on your contract especially if they can find another provider for a similar price. You can help ensure the customer doesn’t sue you by giving the customer ample time to find another provider (60 days should be sufficient), and provide no cost monitoring during that time.   In the right circumstances, you may also be wise to refund the customer for equipment they paid for but can no longer use.   In the end, just remember that should you have to go to court, you want to be able to show that you treated the customer more than fairly—so that you look good, and so that the customer has no claim for damages.   Oh, and along those lines, if you’ve got a written record of your customer’s bad actions (in emails, for example) hang on to it, in case you need to show the court why you backed out of the contract.

Four Steps to Avoid Deceptive Trade Practices Claims

Two high profile legal matters have been in the news involving allegations of alarm companies’ unfair and deceptive practices. What are these cases about? And what can you learn from them to protect your business from such claims? Read on to find out. Continue reading →

Can Current Employees Sign a Non-Competition Agreement?

Wisconsin recently became the thirtieth state to follow the majority rule when it comes to consideration for non-competition agreements. It held that continued employment constitutes lawful consideration for a non-compete agreement signed by an existing at-will employee (i.e., one that does not have a contract).  Continue reading →

Noted alarm industry expert sues ADT and Tyco under the False Claims Act and loses.

If you’re involved in litigation related to the alarm industry, you know–or have heard legend of–Jeffrey Zwirn.  He is a darling of plaintiffs’ attorneys, and seems to be involved in every high profile case involving allegations that a security alarm system failed.   Zwirn has made a living, it seems, by targeting large alarm companies.    But this time did he go too far?

Apparently back in 2010, Zwirn filed a qui tam action against ADT and Tyco.  Qui tam actions are a type of civil lawsuit, allowing a private citizen to bring a claim under the False Claims Act, on the grounds that an individual or a business is defrauding the government.  The private citizen sues to recover funds on the government’s behalf, and a percentage of any recovery goes to the private citizen who brought the claim.

In Zwirn’s lawsuit he claimed that ADT and Tyco made false representations to the government about the alarm systems installed in federal courthouses and judges’ homes concerning their compliance with the law and industry best practices.

The government investigated and declined to intervene in the lawsuit.  The court recently concluded that the allegations are meritless and dismissed the action.   It will be interesting to see if and how this affects Zwirn’s work for the plaintiffs’ bar.

Read the court’s opinion here: US ex rel Zwirn v ADT Sec Services Inc

BRK files patent infringement suit over Nest Protect smoke/carbon monoxide alarm

The new Nest Labs, Inc. product Nest Protect– a combination smoke and carbon monoxide detector–looks like an innovative addition to the market.  The Nest Protect is sleek looking, user friendly, and it is Wi-Fi connected so that all the Nest Protect units communicate with one another, and the Nest thermostat too.  It is designed to make assessing a danger and silencing nuisance alarms easy (a feature I would have welcomed late last night as I was jolted awake by a misbehaving smoke alarm).

It didn’t take long for Nest to find itself in the cross-hairs of industry stalwart BRK Brands, Inc.–the maker of First Alert® smoke and carbon monoxide alarms.  BRK recently filed suit against Nest in federal court in Illinois, claiming that the Nest Protect infringes on six of its patents.  Read the Complaint here:  BRK Complaint.

Georgia Supreme Court denies review of $8.4 million verdict against Monitronics

Yesterday, the Georgia Supreme Court denied Monitronics’ Petition for Writ of Certiorari.  This means it has refused to review the Georgia Court of Appeals’ decision, which upheld an $8.4 million jury verdict against Monitronics and invalidated exculpatory language in Monitronics’ alarm contract.  That Court of Appeals’ decision, which I wrote about last month (http://wp.me/p3fru5-8u), stands and is the law in Georgia.

This is a bad development for alarm companies in Georgia, and it could influence courts in other states when they are determining the validity of exculpatory contract language.

If your business is located in Georgia or does business in Georgia, you need to have an attorney review your contract to ensure the exculpatory language (i.e., limitations of liability and damages) is explicit, prominent, clear and unambiguous.

This is good advice for alarm companies in other states as well.  Make sure your contracts contain plain language, not legal mumbo-jumbo.  And make sure your limitations of liability are clear and prominent.  Don’t hide them on the back page in a small font.

As I said in my previous post on this matter, you stand a better chance of having these limitations enforced in court if they are front and center, stand out from the rest of the contract, and are plainly written.

 

 

North Carolina Attorney General sues alarm company over robocalls

The North Carolina Carolina Attorney General filed suit yesterday against now-defunct alarm company ISI Alarms NC, Inc. and its owner, seeking civil penalties for automated calls (a/k/a “robocalls”) the company made to consumers.

The AG alleges that more than 1,000 North Carolina consumers contacted his office to complain after receiving robocalls that claimed that the authorities, including the FBI, had received reports of recent break-ins in the area.  The automated message prompted consumers to press a certain number to learn more about recent crimes in their area.  Consumers were then transferred to a call center operated by ISI Alarms and heard a pitch for the company’s home alarm system and alarm monitoring services. The automated message gave listeners the option to press a different number to stop the calls, which consumers said did not work.

The Complaint alleges that thousands of such calls were placed to North Carolina home and cell telephone numbers on behalf of ISI Alarm during the past two years, and that the company saw its sales quadruple as a result.

Many consumers who reported getting these unwanted calls had listed their phone numbers on the Do Not Call Registry.   Under both state and federal laws, it’s illegal to make most commercial telemarketing calls to home and mobile telephone numbers listed on the Do Not Call Registry.  North Carolina law also makes sales calls that use recorded messages illegal even if the call recipients haven’t joined the Registry.

The Complaint also alleges that the AG’s office contacted the alarm company about the complaints, but that the calls continued.  And, the alarm company refused to disclose the contact information for its lead generators, who actually placed the calls on the company’s behalf.

The AG has asked the court to award $500 for the first violation, $1,000 for the second, and $5,000 for all successive violations of the North Carolina Telephone Solicitations Act; or $5,000 for each violation of the state’s Deceptive Trade Practices Act.

Read the complaint here:  ISI-Alarms-Filed-Complaint.