"'Cause when life looks like Easy Street,
There is danger at your door."
- Garcia, J, Hunter, R., Grateful Dead, Uncle John's Band, (Warner Bros. Records., 1970).
One of the last times I wrote about Terminix was in 2020. At that time, TMX’s stock was on a downward spiral, driven in part by several large, litigated claims against it. Rather than addressing the problem directly, TMX decided to try to run off its problem accounts by requiring cancellation as part of the claims process and by subjecting older customers in Mobile and Baldwin Counties to drastic price increases with no corresponding increase in services or benefits. TMX referred to this as its "clean sheet initiative."
This practice resulted in many consumer complaints being filed with the Alabama Department of Agriculture and Industries (ADAI). The ADAI began a joint investigation with the Attorney General’s office into Terminix’s business practices. Ultimately, Terminix entered a settlement with the AG, paying millions to the Attorney General’s office and the ADAI. Terminix also agreed to set up a damage claim process and promised to reinstate contracts that were canceled because of the price increase.
In practice, the damage claims process benefited Terminix by reducing the number of litigated claims. In addition, in practice, Terminix did not legitimately reinstate canceled contracts but instead signed canceled customers to new contracts with less favorable terms to the customer.
The consent decree notably provided millions of dollars directly to the ADAI and the AG, to be used at their sole discretion. Following the consent decree, the ADAI’s practices appeared to shift. Whereas before Terminix paid millions to the ADAI, the ADAI would seize company records during surprise inspection and provide them to consumers pursuant to open records requests; after Terminix paid millions directly to the ADAI to be used at its discretion, the ADAI apparently began calling Terminix and giving it a heads-up before any surprise inspection. In addition, the ADAI apparently stopped requesting the entire customer file in response to consumer complaints, and despite the Governor calling for more transparency in public business, the AG entered an advisory opinion, effectively telling the ADAI that it had little obligation to provide documentation to consumers pursuant to valid open records requests.
Terminix later merged with Rentokil Initial, a pest control company operated out of the United Kingdom. Terminix officially became known as Rentokil-Terminix, and Terminix International LP merged with Rentokil North America. On September 11, 2024, Rentokil Initial warned investors of lower annual profits after weaker than expected sales in its largest market, North America, sending shares of the British pest control company down as much as 20%. The company's shares have lost about a third of their value since the first North America warning in October last year. Stocks were down approximately 20%, making it the biggest loser on the FTSE 100 index.
Rentokil, which made about 60% of its revenue in North America last year, said it would cut an undisclosed number of jobs in its U.S. workforce to address cost overruns.
Rentokil lost about 5.4 billion pounds ($7 billion US) in market capitalization since it issued its first profit warning in October 2023.
Rentokil and rival Rollins (Orkin) account for roughly half of the U.S. pest control market, with Rentokil the larger player following the Terminix deal.
What is in store for Terminix in Q4? A lot. On Monday, October 14, Terminix has an arbitration involving allegations of fraud by a prominent Alabama church, where the damages are in the millions of dollars. Cochran Bowers PC is trying the case with attorney Bill Reece from Satterwhite Reece, a Mobile law firm. Mr. Reece also has a great deal of experience handling termite fraud cases.
The following week, Cochran Bowers PC and Campbel Law PC (TermiteTom.com), out of Birmingham, will be trying two separate arbitrations against Terminix in Mobile and Baldwin Counties. The amount in controversy for the two cases is also in the millions of dollars.
Cochran Bowers PC will then be representing a Mobile charitable organization with Bill Reece against Terminix in arbitration, wherein the out-of-pocket damages are bumping up against $10,000,000. The following week, Cochran Bowers has another arbitration scheduled against Terminix for an individual homeowner, where the out-of-pocket damages are approximately $1,000,000.
In each of these cases, there are also claims for mental anguish and/or punitive damages.
Cochran Bowers PC has reviewed the transcript from Rentokil’s Q2 2024 earnings call and did not see any warning specific to this block of large and complex litigated claims. The transcript for the Q3 call has not yet been released to the public; perhaps, they are mentioned there.
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