By Richard Rothfelder, Rothfelder and Falick

Insider published an article summarizing the 1998 Missouri Court of Appeals decision in Superior Outdoor Advertising vs Snadon, which provides some helpful guidelines for the collection of delinquent accounts. Insider has visited this important, and unfortunately common, problem confronting the outdoor advertiser previously, including in the September 12 and 13, 2018 editions on Collecting on Delinquent Debt, Part 1 and Collecting on Delinquent Debt, Part 2.

The Superior case and  Insider’s recent article pick up with the efforts to enforce remedies and collections clauses in advertising contracts through litigation. The clause in Superior’s contract is typical:

“It is further agreed that if any of said monthly payments are not paid when due and remain delinquent for thirty days, the entire contract price shall become due and payable at once. If payments remain delinquent for sixty (60) days, Superior shall be under no further obligation to maintain signs and Superior may at any time while such delinquency continues remove said signs. Such removal shall in no manner reduce the total amount due under this agreement. “

The key ingredients affording these remedies clauses meaningful advantages in collection litigation include:

1. Requiring a stated term of the contract for a year or more, rather than a mere month to month  obligation.
2. Providing that a breach occurs upon failure to pay after notice and 30 or less days.
3. Upon such breach, the remedy is to declare the full unexpired term of the contract immediately due and payable, not just bringing current the month or two that is outstanding.
4. At the sole discretion of and without any obligation on the sign company, the display  can be relet during the otherwise unexpired term, and any amounts collected after deductions for expenses can be offset against the delinquent account.
5. The sign company can declare the entire amount due through the end of the contract to be in anticipatory breach, sue for such amount, and remove the debtor’s advertisement from the sign.
6. Recovery of all attorneys fees and costs through trial and appeal.

These types of remedies clauses in outdoor advertising contracts for the rendition of services and personal property are very similar to those found in commercial and residential real property leases. In fact, many states including Texas classify billboards as realty. As such, the laws on the enforcement of leases generally apply to litigation over the collection of delinquent advertising accounts.

One of the standard defenses in lease and collection litigation is that the lessor has a duty to reasonably mitigate his damages. As the Court in the Superior case explains, “failure to take reasonable steps to mitigate damages is an affirmative defense which the breaching lessee must prove.” This is a difficult burden for the lessee to meet, and usually requires some demonstration of cavalier behavior by the lessor in refusing any efforts to market and relet the display. The Defendant in Superior failed to satisfy this burden, even though it argued that the sign company was prohibited by a lease dispute with its landlord from offering the display through the full term of the contract. The Superior opinion also condones the provision mentioned above in many remedies clauses that, if the lessor can prove that the lessee has repudiated its obligation to perform through the remaining term of the unexpired contract, the lessor can then declare the entire contract to be anticipatorily breached, thereby eliminating any duty to mitigate through reletting.

Use these helpful hints from the Superior case and Insider’s articles, and you will hopefully collect the accounts you’re rightfully due.

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