Contra Costa files revamped lawsuit against ADT
MARTINEZ, Calif.--The California District Attorney's office that's suing ADT--saying ADT's contracts don't disclose all potential consumer costs--has dismissed, revamped, and then on May 14 re-filed its lawsuit.
"We hope the court will see it our way and require ADT to change all its contracts," said Lon Wixson, Contra Costa County deputy district attorney.
The Contra Costa County DA in February originally filed suit against ADT in a California state court, claiming that ADT was in violation of the federal Truth in Lending Act and a similar California state law called the Unruh Act, which governs retail installment contracts.
Both the original and current suits claim that ADT's customers are required to sign up for two- and three-year contracts, but are not told that the monitoring fees may increase after the first year. Nor are they told, the suits say, that there are fees for terminating the contract before three years. (For more background on the case, search "California county sues ADT" at www.securitysystemsnews.com.)
Because the original suit alleged that ADT had violated both a state and a federal law, ADT was able to "remove the case from state to federal court," explained Eric Pritchard, a partner in the law firm of Kleinbard, Bell & Brecker, where he specializes in security industry matters.
However, Wixson told Security Systems News that he wanted the case tried in state court so "we dismissed the whole lawsuit without prejudice in federal courts and re-filed it in state court. This time the complaint didn't include any claim related to or predicated on a violation of the federal Truth in Lending Law."
"We still have the same concerns as the first law suit," Wixson continued. "We still believe these are retail installment contracts even though there is no interest charged." Citing the Unruh Act "gives us the violations we need," he added.
ADT does not comment on pending litigation, but ADT spokeswoman Ann Lindstrom said that ADT's "customer monitoring services contracts and practices are in compliance with applicable laws." ADT can raise the charges for its monitoring services after the first year of the contract term, but "ADT's customers have the right under the contract to either accept the increase or decline it and cancel the remainder of their contract without a termination fee."
Wixson said that the dismissal and re-filing of his case likely added another three months to the time it will take to resolve the matter. He surmised that it would be a year or two before the case would be tried if it goes to trial. In the meantime, he said that California security dealers who have similar contracts may want to "consult with their attorney and check the Unruh Act."
Pritchard noted that this development with the ADT case means "the federal court won't have an opportunity to determine whether the Truth in Lending Act applies to residential alarm service contracts." He said he believes "consumer advocates would argue that the Truth in Lending Act does apply to such transactions." Accordingly, Pritchard recommended that security dealers seek legal counsel to provide guidance on this issue. Otherwise, Pritchard said, dealers put themselves at risk of a legal action by zealous consumer law advocates including class action lawyers seeking to test the Act.