ADT takes Pinnacle to court over sales tactics

BOCA RATON, Fla.—Residential security giant ADT is suing Pinnacle Security in federal court, alleging the Utah-based summer model company and its employees used unlawful and deceptive sales strategies to steal ADT's customers and damage its reputation.

ADT also accuses Pinnacle of theft of confidential information about ADT customers and breach of contract.

However, Pinnacle, formerly an ADT dealer that went independent in 2006, “vigorously denies” the allegations.

Pinnacle contends that ADT, which is based here, is going after Pinnacle because of its growing success.

“Based on our review of the lawsuit, we believe it is clear that the largest company in the residential security market (and perhaps others) has targeted Pinnacle because of our growth and market share gains we have made in the residential security industry,” Pinnacle said in a statement responding to Security Systems News' questions about the legal claims.

Pinnacle characterized ADT's claims as outdated and “without merit,” and said Pinnacle leads the industry in “compliance procedures to help minimize any instances of improper sales tactics.” Pinnacle said it instituted a code of conduct in 2008, which all of its representatives are required to sign, and said any employees who violate the code face penalties that can include getting fired.

ADT filed the lawsuit on Nov. 19 in U.S. District Court for the Northern District of Illinois. Pinnacle has 30 days from that date to reply, and said it plans to file a formal response. Pinnacle said it “looks forward to having its day in court.”

This is not the first time ADT has gone to court over summer sales. In 2009, ADT and Monitronics filed lawsuits against individual door-to-door salespeople alleging deceptive sales practices. Two of three lawsuits filed by ADT were against Pinnacle employees.

In the most recent case, however, Pinnacle itself is listed as the sole defendant.

The lawsuit names three Pinnacle employees who ADT claims went door-to-door in Illinois, Minnesota and Kentucky in 2009 and 2010 using deceptive sales tactics on ADT customers to get them to switch to Pinnacle. ADT contends the instances cited in the lawsuit are “a few examples” and show that “Pinnacle and its agents/employees have engaged in a nationwide campaign of deceiving consumers through [a] myriad of unlawful acts.”

ADT claims Pinnacle received complaints about at least one salesman, but rehired him “to maraud around the country and unleash his arsenal of unlawful and false statements upon a new group of unsuspecting consumers.”

Filed with the lawsuit are affidavits from five former ADT customers who claim they were “scammed” by Pinnacle sales representatives in April or May of 2009 into signing contracts with Pinnacle because they were led to believe Pinnacle had taken over ADT's business.

A sixth ADT customer said in an affidavit that a Pinnacle salesman came to her Kentucky home in June of this year and tried to get her to sign up with Pinnacle by saying her “current ADT alarm system was not safe.” The woman said she refused and called ADT, who tested her system and said it was working fine.

Pinnacle denies the allegations and says it takes steps to ensure such situations do not occur.

For example, Pinnacle said in its response to SSN, customers get “a recorded pre-installation call on which a Pinnacle agent verifies the customer understands Pinnacle is not affiliated with the customer's previous alarm company, Pinnacle also requires an additional form containing 11 clarification points including common points of customer confusion. The customer must initial each point and sign the bottom of the form.”

ADT also claims in the lawsuit that Pinnacle stole trade secrets. It asserts Pinnacle employees obtained access to an APX Alarm security systems database of home security monitoring contracts that ADT purchased from APX in 2007 and used the information to target ADT customers in 2008 and 2009. The headquarters of APX are in Utah, not far from Pinnacle's headquarters.

Pinnacle denies the claim.

ADT also cites in the lawsuit two state actions against Pinnacle. Pinnacle in March of this year agreed to settle a 2009 lawsuit filed by the state of Illinois charging Pinnacle salespeople with using deceptive sales practices to target customers of competitors, including ADT. Pinnacle agreed to pay restitution to consumers but emphasized the company was taking steps to “investigate, identify and eliminate instances where individuals acted outside our established code of conduct.”

In July of this year, Pinnacle also reached an agreement with New York State, which accused Pinnacle sales representatives in 2008 and 2009 of targeting the customers of competitors using misleading and deceptive sales tactics.

Pinnacle did not admit or deny the claims but agreed to desist from prohibited practices and paid restitution, penalties, costs and fees.

When ADT sued individual sales personnel last year, David Bleisch, chief legal officer for ADT, told SSN: “This is not an ADT versus Pinnacle problem, this is a security industry problem involving any door-to-door sales person who acts unlawfully.”

However, in a written statement ADT made to SSN on Dec. 1, the company said it decided to take Pinnacle to court because “recent additional customer complaints, together with the settlements Pinnacle entered into this year with the attorney generals of New York and Illinois over deceptive sales practice allegations indicate that Pinnacle has not complied with the industry Code of Ethics and Standards of Conduct which it publicly signed earlier this year … ADT cannot condone this behavior and is therefore seeking injunctive relief and damages against Pinnacle.”

ADT does not specify in the lawsuit how much it seeks in damages but states in it that “the amount in controversy exceeds $75,000 exclusive of interest and costs.”

Pinnacle, along with other businesses, signed the industry code of ethics in March at ISC West.

Pinnacle said it not only adheres to that code but also has “implemented an internal code of conduct that is in many instances more rigorous and comprehensive than the industry code of ethics.”