Terminix Gets Whacked for $3 Million for Thumbing Nose at Federal Judge

As an unfeeling lawyer once said, "A starving plaintiff is easier to manipulate than a well-fed one." Terminix 's litigation strategy seems to be based both on this idea and the knowledge that it makes economic sense for it to frivolously delay paying arbitration awards. With an internal internal rate of return on its equity of more than 40% per year, it makes sense to pay lawyers to delay having to pay $3,000,000 awards as long as possible.

Knowing that one of the women who lost her house due to termite damage was living in her camper because her home is unsafe to occupy due to termite damage, Terminix refused to pay the 2.8 million dollar award entered by an arbitrator. It has use of the money it owes for almost one year. So by keeping the money it owes these women, Terminix has already "made" over $1,100,000 on that money.

After winning the arbitration trial and getting an award of $2,800,000, the lawyers at Campbell Law PC asked a federal judge to turn the award into a judgment so they could seize Terminix assets to pay the award if necessary.

To what extent with a company and its lawyer go to hold on to money that it owes to the people it injured? Let us explain that. The answer is truly shocking.

The Federal Arbitration Act (FAA) allows the winner of an arbitration case to ask a federal court to make the award the court's judgment. The Act gives the winner up to one year to do apply for a judgment. If the loser (i.e., Terminix) wants to claim the award should be vacated (i.e., reversed), they must do so within 90 days of the award. The FAA also says the court that decides both issues is the US District Court for the federal district (area) where the award was entered.

Congress also passed an Act that allows all court proceedings to be governed by uniform rules of civil procedure so the way cases are handled in all 677 federal trial-level courts is the same.

Because two Acts govern how motion to confirm or vacate an arbitration award apply, a lawyer who is involved in that proceeding has to keep both Acts in mind - and behave accordingly. The statute that enables creation of the Rules of Civil Procedure is found here:

In this case, the winner's lawyers (Campbell Law PC lawyers Tom Campbell and Brandon Falls and Adam Milam of Milam and Milam) asked the Court to "confirm" the arbitration award or, in layman's terms, turn the arbitration award into the Court's judgment so the winner can seize and sell Terminix's assets to collect the money if need be.

So Terminix knew in this case that the ONLY issue before Judge Jeffrey U. Beaverstock was ONE legal question: "Should the award be entered as the judgment of the Court?" One of the Court rules allowed by Congress is Rule 16 which deals with scheduling and setting deadlines. Rule 16 allows the trial judge to set a schedule or deadlines by which acts need to be done. Judge Beaverstock, because he was authorized by law to do so, set a deadline of 15 days for Terminix to explain any reason he should not enter judgment.

Terminix and its lawyers decided not to comply with the mandate Judge Beaverstock entered.

Rule 16 is available here:

Instead of complying with the 15 day deadline allowed by Act of Congress and the Rules approved by the United States Supreme Court, Terminix told Judge Beaverstock that the FAA allowed the company to file reasons to vacate the order for up to 90 days after the award. They declared they would wait the full 90 days.

By implication, Terminix was saying to Judge Beaverstock that Terminix could disregard the Act of Congress and Supreme Court Rules that allow the judge instead of the parties to set the schedule in a Court case. Logic dictates that the premise underlying reasoning is that parties rather than judge get to set deadlines in cases.

It does not take a rocket scientist - or even a bad lawyer - to understand how that analysis of the law must lead to really stupid outcomes and impossible outcomes. If the parties accused of crimes or who owned money got to set the deadlines for resolving their cases, no case would ever end in a money judgment or jail sentence. Cases would go on forever. Criminals would stay free on bail indefinitely and cheaters would keep their victims' money forever.

In other words, the position Terminix took before the trial judge was way outside the bounds of reasonable conduct or advocacy. Let us provide another example of how crazy it is to suggest that the FAA trumps the Rules of Civil Procedure in court case.

In this or any other case involving a motion to confirm an arbitration award, the court could have entered the judgment 20 days after the case was filed. Normally, a loser must appeal within 30 days of the adverse final judgment - say 51 days after filing. So under the Rules of Civil Procedure, the judgment could be final and not appealable in 51 days. Then the U.S. Marshall could take 2.8 million dollars out of Terminix's bank accounts and give it to its victims.

Under Terminix's logic, what would happen on the 90th day if the arbitration award had been turned into a judgment? After the 51st day, there is no arbitration "award" to set-aside because the "award" has become a "judgment' - two legally different things. It is like how a cucumber becomes a pickle. Pickles cannot turn back into cucumbers any more than judgments can turn back into arbitration awards. So the law could not work the way Terminix claims because there may be no arbitration award at the 90 deadline.

Alternatively, if you ignore the fact that the "award" is now a "judgment", Terminix argues that the Court should ignore res judicata and collateral estoppel that say issues merged into a final judgment are final and cannot be relitigated. What the trial court would have to do is set-aside a judgment over which the Court has lost jurisdiction, and then tell the victim to return the money they have already collected and that they have probably already spent.

Everything that would or could happen under Terminix's arguments is absurd and ignores basic logic, the efficient resolution of disputes in Court, and allows the inmates (litigants) to run the asylum (courts).

It is hard to believe that a sane or rational lawyer could believe the FAA on the one hand, and the enabling statute for the Rules of Civil Procedure on the other, work in this fashion. Nonetheless, this bizarre reasoning is being used by Terminix and its lawyers as the reason for stiffing its victims. This flimsy and absurd reasoning is why a 74 year-old retired high school principal is still without a real home.

There is a rationale reason for the bizarre behavior, however. The time value of money for a business is equivalent to its internal return on equity ("ROE"). Equity is the amount of money stockholders have invested in a business. As of March 2018, the return on equity for Terminix's parent company, ServiceMaster, was 41.32%.

Consequently, Terminix "makes" $1,156,960 for each year that it keeps its victims' $2,800,000. All it takes to make this conduct rational is for the Company to be willing to abuse the legal process and have an appalling lack of morals.

Judge Beaverstock's order entering judgment and interest is below.

UPDATE: Terminix's lawyers supplied a copy of this story to Judge Beaverstock on August 13, 2020. Terminix claimed that this story is "used by Campbell Law P.C. to advertise its services." In truth the story seeks to advise the public of Terminix's fraudulent service and the need for consumers to use caution when dealing with Terminix. The law firm also alleges that they have "... strong opinions about the propriety of both the content..." of the story. We assume the opinion is that reporting on favorable outcomes for your law firm's clients is appropriate and useful because the firm routinely uses LinkedIn and Terminix's law firm's website to announce what it considers favorable outcomes for clients. This outcome is not reported by Terminix's law firm.

For example, Terminix's law firm announces on its web page that it secured an 89 million dollar settlement for the City of Jackson, Mississippi.

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