ADT’s dealer contract the focus of lawsuit

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Thursday, April 1, 2004

DENVER - Another lawsuit has been filed against ADT Security Systems charging that the company breached its contract with authorized dealers. The nationwide class-action lawsuit was filed on behalf of Advantek Pro, a former ADT authorized dealer.

The complaint, submitted in Colorado district court on Feb. 10, alleges dealers were owed significant compensation from ADT when the security giant instituted changes to its dealer program. According to the complaint, alterations were made to the dealer agreement after Tyco International purchased the business in July 1997.

At the center of the lawsuit are accusations surrounding ADT’s implementation of a connection fee charged to dealers to cover administrative costs absorbed by the company.

“We think that those alleged administrative expenses and associated costs were fictional,” said John Fognani, an attorney at Fognani Guibord & Homsy who represents Advantek. “That this was just an opportunity for ADT to gain greater profit.”

Also playing a major part in the lawsuit are revisions ADT made to its dealer contract in 1998 that eliminated growth bonuses.

“There are lots of complications and problems with the way ADT has handled these contracts with the dealers,” Fognani said.

ADT’s alleged profit off dealer contracts could very well turn into a loss if the company is found at fault. Although an exact number was not available at press time, lawyers plan on seeking damages estimated at more than $100 million.

Officials at ADT declined to comment on the lawsuit, citing its policy not to remark on pending litigation.

Although the petition has not been officially certified as a class-action lawsuit, Fognani is confident that it will be designated as such.

The number of dealers who may be members in the class-action lawsuit has not been determined, but Fognani expects the count to rise into the hundreds. He encouraged interested dealers to contact the firm for more information.

“We’re happy talk to people now,” he said. “ Trying, obviously, to identify people who may be similarly situated.”