Terminix Loses Important Class Action Issue in Arkansas

Released: 01.17.2008

An arbitrator appointed by the American Arbitration Association ruled January 15, 2008 that the scope of mandatory arbitration clauses Terminix International (Terminix) uses in termite prevention contracts is broad enough to allow Arkansas consumers to bring claims as a potential class action on behalf over one hundred thousand current and former Arkansas termite customers who entered into and annually renewed termite prevention contracts. The customers allege that Terminix never applied a complete or effective chemical barrier for termite prevention as the company was obligated to provide as long as the contracts were in force. Fixing the faulty treatments may cost up to thousands of dollars per home according to opinions of industry experts.

Terminix unsuccessfully argued that the language it slipped onto the backs of form contracts should insulate the company from facing class action allegations either in state and federal courts or expensive private arbitration forums. Terminix plans, if they worked, would mean Terminix would never have to face allegations that wrongfully took money from customers by failing to provide the services it is required to provide under the terms of its contracts. Even if Terminix began admitting to current and former customers that it applied incomplete or ineffective termite chemical barriers, consumers would probably not file individual arbitration cases in great numbers. Legal fees and expenses would exceed the cost of retreating houses so few consumers would be willing to make claims and even fewer lawyers would be willing too take cases to recover less than $10,000 dollars.

American Arbitration Association Arbitrator Edith Dinneen (from Florida) ruled on January 15, 2008 that the arbitration clause Terminix drafted and stuck on the back of its form termite prevention contract is broad enough to allow deciding a class action in the private arbitration forum. Additional proceedings will be held to determine if the case will be tried as a class action. Lawyers for the consumers are asking an Arkansas judge to certify that the arbitrator's ruling is valid and should not be disturbed.

The consumers in the Arkansas arbitration case are Dr. and Mrs. Norman Flaxman. The Flaxmans allege that Terminix failed to apply enough termite chemicals under and around the foundation of their home to prevent termites and that the small volume of the Pryfon chemical used was known to Terminix as an ineffective chemical for many, many years. Rather than confessing to the Flaxmans and other Arkansans, or Arkansas regulators, that thousands of homes had been treated with worthless chemical (i.e., Pryfon), Terminix did just the opposite. Terminix mailed notices to the customers that promised to reapply "any additional chemicals" that may be necessary to prevent termites.

Arkansas Judge Elizabeth Danielson on January 2, 2008 ordered Terminix International to present officials of its choosing for sworn testimony on January 9, 2008 to testify in a way that will bind the company. In that testimony, Terminix admitted that it learned after using Pryfon for a few years that it was completely ineffective as a termite prevention chemical. Studies by others in the industry reached the same conclusion and the product was withdrawn from the manufacturer as a termiticide. Despite knowing that Pryfon does not work, and despite applying new chemical barriers with a better product for some Memphis, Tennessee customers, Terminix never reapplied functional chemical barriers for customers across the Tennessee River in the State of Arkansas.

In its Court-ordered testimony on January 9, 2008 Terminix also revealed a possible motive for its decision to continue collecting annual premiums from customers whose homes had incomplete or ineffective chemical barriers. Terminix's designated official, Jim Maloch, testified that the company believed regulators at the Arkansas Plant Board would never audit its termite control practices to determine if it was using effective chemicals in the correct amounts. As a result, the Terminix official admitted the company believed it would never get "caught" in the State of Arkansas. Likewise, the company believe consumers lacked the specialized scientific knowledge to catch on to the truth. The unfortunate result for its Arkansas customers, according the company's testimony, is that the incomplete or ineffective barriers will result in damage to 100% of the affected houses over time. Terminix said it has no plans to fix faulty treatments in Arkansas. Consequently, success in the litigation is critical to over 100,000 families in Arkansas who rely upon Terminix to protect what is usually their largest and certainly their most important asset - the family home.

Campbell Law attorneys (in conjunction with other firms) developed successful arguments over the past 11 years which have lead to conclusions by courts and arbitrators that consumer claims can be brought either in court or arbitration forums against Terminix International. Class actions that are heard in private arbitration under the rules of the American Arbitration Association can cost hundreds of thousands of dollars in payments to the AAA and the private arbitrator. Terminix's litigation strategy is to avoid a trial on the merits of class action claims in court or before a private arbitrator.

If your home has been under a Terminix termite contract in Arkansas or any other state, Campbell Law would be happy to discuss your situation. The firm has handled and assisted other lawyers with claims against Terminix in numerous states. In this case, Campbell Law is working with Bobby Davidson and Associates of Little Rock, Arkansas and the Charleston, South Carolina firm of Richardson, Patrick, Westbrook and Brickman (www.rpwb.com).

Lawyers associated with the Richardson Patrick firm have handled class action and mass action cases over the past several years resulting in recoveries of many billions of dollars for victims of corporate wrongdoing.