Wis. ADT dealers challenge terminations

MILWAUKEE - Citing a nearly 30-year-old Wisconsin law that requires dealers to receive 90 days notification of termination of their contracts as well as an opportunity to rectify performance deficiencies, five former dealers for ADT Security Services filed a lawsuit in April in Milwaukee County Circuit Court against the company’s registered agent in Madison, Wis. The lawsuit marks another challenge following ADT’s announcement in August 2002 that it was cutting back on its nationwide dealer program, limiting the number of accounts it would purchase or terminating some contracts altogether because they didn’t meet specific criteria. In late December 2002, a New Jersey dealer, Spectracom Inc., filed a class action lawsuit there citing breach of contract for lost income because ADT had limited the number of qualified accounts it would purchase. The Wisconsin dealers, listed in the complaint as Home Protective Services Inc., Milwaukee; A-1 Security of S.E. Wisconsin LLC, Racine, Wis.; Howard Reddan, Verona, Wis.; David Hinks, Kenosha, Wis.; and Vicetec Security Group Inc., Milwaukee, had been affiliated with ADT for one to eight years, said Attorney Paul Jacquart with Jacquart & Lowe, Milwaukee. The first four had all been terminated following the receipt of a letter in August 2002 giving them from 30 to 33 days’ notice. Vicetec had initially received notice in August 2002 that ADT was limiting the number of accounts it would purchase from the dealership, but six months later the company’s contract with ADT was terminated outright. Jacquart said Wisconsin’s Fair Dealership Law, enacted in 1974, clearly predates the dealers’ contracts with ADT. In addition, he said, “you can’t contract outside the law,” meaning even contracts that specify shorter notification periods, such as the ADT contracts’ 30-days’ notice, are subject to the overriding state law. Jacquart noted dealerships have successfully challenged terminations shorter than 90 days under the state’s Fair Dealership Law provisions. “Generally what we find is that these are national companies making national decisions,” Jacquart said, and they may not be aware of the local laws. “These decisions are made by businesspeople, not lawyers.” However, Les Gold, attorney with Mitchell, Silberberg and Knupp, Los Angeles, which represents parties in the security industry, said of the differences between ADT’s contract termination criteria and the Fair Dealership Laws’ 90-day notice, “I would assume the ADT attorneys know what they’re doing in that regard. They’ve got a competent legal staff.” Having spoken with an ADT dealer’s representative about the case, consultant Craig Leiser, president of The Kismet Group Ltd., Stillwater, Minn., said he was told ADT’s contract stipulates it is subject to the laws of the state in which the dealer program is based, which is Colorado. And Colorado doesn’t have the equivalent of Wisconsin’s Fair Dealership Law. Although he wouldn’t speculate on how that would affect the outcome of the Wisconsin dealers’ lawsuit, Leiser said “in all probability, this will go to court” rather than being settled. He also noted because ADT is trying to cut both its dealer program and its overall costs, “they have no incentive to acquiesce.” He said while ADT is trying to make decisions to enhance the livelihood of its business, the Wisconsin dealers and others affected by terminations nationwide are also concerned for their well-being. The loss of access to the ADT name and the company’s support can be a big blow to a dealer, Leiser said. “In security, there’s no bigger name than ADT. To use that name provides a big advantage.” Attorney Jacquart said while it was too early to talk about specific damages, he said the damages were likely to be “substantial because (the actions) led to the destruction of their (the dealers’) business, livelihood and those of the people who worked for them.” He noted some of the companies - though he didn’t specify which ones - had been able to take on new security contracts since their termination from ADT’s program. In those cases, he said, damage amounts would be related to whether they were able to cover the losses of the ADT portion of their business. Neither Jacquart, Gold nor Leiser were aware of any other lawsuits brought against ADT under a state’s fair dealership law. Jacquart said that could be because most dealers aren’t aware that such laws exist to protect them. In the case of the Wisconsin dealers, he said his firm was initially approached about general legal advice, at which point he was able to make the parties aware of the Wisconsin statute. Jacquart said ADT had 45 days to respond after being served with the complaint, which was in mid-April. He expected a trial date to be scheduled soon after the response. He added there was the potential for two additional plaintiffs to join the lawsuit against ADT.