Be careful when you make collection threats. That’s the lesson of Lamar Advertising versus Modifications of America. Here are the facts.
- In 2010, Modifications of America (“Modifications”) signed contracts to advertise on Lamar Advertising billboards. The advertising ran from June 21, 2010 to September 30, 2010.
- On August 23, 2010, Lamar sent a collection letter to a Modifications employee who had previously operated an unrelated business which had a $1,200 debt to Lamar. The letter said “[y]our employer, Mortgage Modifications, is in good standing with us…Their account will be in jeopardy of having their advertising suspended if we cannot get this matter resolved.”
- Upon reading the letter the owner of Modifications ceased paying invoices to Lamar, including invoices for advertising which had previously run.
- Lamar filed a suit for payment of amounts owed. Modifications objected, saying that Lamar’s actions – in threatening suspension of Modifications’ advertising for failure of an unrelated party to make payments due on unrelated accounts – constituted a breach of good faith and an anticipatiory breach of contract.
- In June 2013 Rhode Island Superior Court ruled in favor of Lamar. (1) The court stated that Lamar’s actions were not a breach of good faith. “Any implied threat to suspend Modifications’ advertising was never carried out by Lamar, and at best constituted an inartful attempt by Lamar to collect a debt totally unrelated to that owed by Modifications”. (2) The Court also found Lamar had not breached its contract: “…Lamar fully performed its contractual obligation to provide uninterrupted billboard advertising for Modifications, both before and after the transmittal of the August 23, 2010 letter.”
Billboard Insider’s take: Lamar prevailed but could have avoided a lengthy legal fight if it had not threatened a client in good standing about a much smaller bill to an unaffiliated company.
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