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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