As Lawsuits Rock the Company’s Bottom Line, Terminix Falls Short of Revenue Predictions

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Another leader is out at Terminix and revenue projections are down as the legal damages against the pest control giant keep coming.

What’s Going On

After only two years on the job, Terminix fired its President continuing a long history of being unable to keep stable leadership at one of the two largest termite companies in America.

On October 22, 2019, ServiceMaster, Terminix International’s parent company, announced in its mandatory quarterly filings that it would miss its revenue projection. Legal claims against Terminix that used to average thousands of dollars are now generating millions of dollars in jury and arbitration awards along the Gulf Coast where subterranean termite pressure is highest. Complaints to state regulators of the pest control trade are up 330% year-over-year in Alabama alone.

Since last fall, Terminix lost a fraud trial in Biloxi, Mississippi for $1,600,000, had a $1,900,000 arbitration award entered by the sitting president of the Alabama Bar Association in Fairhope, Alabama, a $2,800,000 arbitration award entered by a retired judge for a $130,000 beach house on Dauphin Island, had a $1,700,000 arbitration award for fraud in Daphne, Alabama by a retired judge, and a $1,900,000 award entered for a professional building in Fairhope, Alabama by the retired Presiding Judge of the Mobile County Circuit Court. Numerous other confidential settlements have been agreed to and paid by Terminix in just the past year. 

That’s not all. Terminix’s forecast in the quarterly report confesses that the company expects even higher claims expenses in the future. Terminix is aggressively defending the arbitration awards, including accusing one arbitrator of “corruption” and “fraud” because the award included punitive damages and attorney fees for the victims’ lawyers. Terminix claims that paying just one of several adverse pending awards or jury verdicts “. . .will work a financial burden on Terminix. . .” However, the company reports to shareholders annual earnings in excess of $1.5 billion dollars from termite operations before interests, amortization and taxes (EBITA), when the punitive damages portion of the arbitration award the company is complaining about was only $750,000.

In October, a jury in Mobile, Alabama, awarded six times the value of a house as damages to the homeowners after six days of testimony by Alabama’s regulator and current Terminix employees. 

A Recent Example

The awards for clients and damages against Terminix continue to grow, and since Terminix has failed to change their deceptive playbook, claims against the pest control servicer have no end in sight. At the most recent jury trial, Terminix’s new Gulf Coast Operations Manager, Jeff Curtis, testified – despite the recent experience – that Terminix is continuing its practice of not identifying and curing incomplete and worn-off termite treatments.

(Jeff Curtis)

In the 1980’s Terminix’s internal manuals required branches to identify necessary reapplication of termite chemicals at annual inspections. However, as the lead trainer for the Gulf Region at Terminix, Mr. Curtis testified the company has never required the branches to identify bad treatments at annual renewal inspections.

Asked to explain whether there could be a sound scientific basis for discontinuing the requirement to spot incomplete prevention treatments, Terminix could not do so:

Q. Could you list for us every scientifically sound reason that you know of for discontinuing that requirement?

A. Because it is not a regulatory required —

When asked to explain why recent home-office-driven reforms did not include remedying the fact that homes are unprotected from termite infestation, Mr. Curtis testified – as indicated above – that it was only because Alabama regulators have not forced Terminix to fulfill its pledge to provide the necessary re-treatments. Curtis admitted that Terminix has not had a protocol in place to identify deficient termite treatments since at least 2003 despite the president of the company promising to do so in form letters Terminix sends customers to affirm the duty to do just that.

Q. And what you’ve told the jury is that when that inspector goes out to do that annual inspection, there has never been a routine procedure in place for them to check on whether the initial treatment was incomplete or nonexistent, correct?

A. Yes. But it says “deemed necessary.” …

Q. Do you recognize that duty to fix the deficient, initial treatment arises every day that that termite contract is active and paid for?

A. Yes.

(Joe Debrow, Program Director at AL Department of Agriculture & Industries)

However, Alabama’s top regulator, Joe Debrow Jr., testified at the trial that if Terminix pledges to apply the necessary re-treatments during the term of lifetime contracts and lacks a protocol to identify worn-off treatments, Terminix violates an existing regulation (Ala. Admin Code 80-10-9-.23(a) and (b) that prevents “misrepresentation” and “deceit.”    

The financial consequence of this business practice could potentially be an immense one for Terminix and its parent, ServiceMaster. In Alabama, Terminix has 63,000 termite customers according to trial testimony. Applying a full termite treatment to each home would cost approximately $1,000 per home in labor, material and overhead. That is $63,000,000 in re-treatment expenses in Alabama alone. In addition to re-treatment costs, Terminix could face having to refund annual premiums consumers paid when they did not get the promised service. Under Alabama’s Deceptive Trade Practices Act, treble damages and attorney fees are recoverable.

In the same financial report on October 22, Terminix announced that rather than providing the promised services, Terminix is raising premiums for termite customers to cause them to let bonds lapse and plans to lose $10,000,000 per year in revenue from the move. Increases have ranged from increasing premiums from a couple hundred dollars to $1,000 or $1,500 to an annual premium of $70,000 for one commercial structure.

Terminix has enjoyed steady revenue increases for the past twenty years despite a revolving door at the top. In the past 22 years, thirteen different executives have lead Terminix while it has been a unified company or split into residential and commercial operations. Leadership at the parent company has been almost as rocky as the ServiceMaster has used executives from the trade, auto-parts, fast-food and other disparate industries to run the home services conglomerate.

The David to Terminix’s Goliath

Virtually all of the significant litigation against Terminix has been handled by Campbell Law PC. According to its principal attorney, Tom Campbell, “None of the Terminix chief executives chose to reform the company’s practice of leaving incomplete treatments in their deficient condition, and none of them decided to honor the promise in form contracts to replace termite prevention barriers.” Campbell says Terminix changes law firms almost as often as CEO’s: “Terminix has used at least nine different law firms to defend the cases our lawyers have filed against them over the past twenty-two years. To save time, we refer to the firms by number inside our law firm. So far, Terminix has never won an individual homeowners lawsuit against the company.” Campbell concedes that’s a pretty impressive record against the Termite giant but insists that Terminix’s behavior is their pattern of practice, and when a company’s policy has fraud and customer mistreatment built in, “it’s easier to win when every case against Terminix deals with incomplete and worn-off termite treatments. And they treat their customers so badly that many current Terminix employees tell customers to call us,” Campbell says.

Terminix is being increasingly rocked by termite damage claims resulting from their decades-long practice of performing deficient termite treatments. The company is telling investors it is because of climate changes. That’s a dubious explanation. According to Campbell, “It is happening because the company has left hundreds of thousands of properties without termite prevention barriers for decades. All of the executives know it, but they continue to take money without providing the promised prevention service. The problem isn’t confined to the Southeast, either. We have handled cases from California to Michigan to New York City. It is the same everywhere: either they never provide the treatment, or they let it wear-off and concealed this from customers.” He continues, “Decisions and verdicts against Terminix seem like a no-brainer to many, and it might even look like shooting fish in a barrel, but the truth is that over the last two decades, we’ve developed the experience, curated a vast library of information, and sharpened the legal acumen to win these cases regularly and to win big against Terminix.” Simply put, they have done the work. Campbell and the rest of his team continue to win against Terminix because they know what they’re doing, and they know their opponent inside and out.

Campbell Law PC now has an expanding group of eight litigators handling these cases. Three are former criminal prosecutors. Practicing from Alabama, they work almost exclusively on termite related claims nationwide. 

There’s More

For information about more cases against Terminix, please explore the following links: