ARBITRATION IN THE MATTER OF

Anonymous )
)
Claimants, ) FORMALLY IN. THE CIRCUIT
v. ) COURT OF MOBILE COUNTY, AL
)
TERMLNIX INT'L, CO., L.P., et al. )
)
Respondents. )

ARBITRATION AWARD

On June 6, 2022, Anonymous filed a Petition to Appoint Arbitrator to pursue claims

against Terminix International Co, LP, Terminix International, Inc, TMX Holdco, Inc
(Terminix/Respondents), Matthew Cunningham and Clint Downing alleging damages caused
by termite infestation to their home located on Ono Island in Orange Beach, Alabama. On
September 9, 2022, the Circuit Court, by agreement of the parties, appointed the undersigned
as arbitrator, stayed the court proceedings and transferred the case to the Administrative
Docket.

An arbitration hearing was held on March 5-7, 2024 in Mobile, Alabama. Subsequent
to the hearing, the attorneys for the parties filed post-hearing briefs and support documents.
The hearing was declared closed on April 15, 2024.

FACTUAL BACKGROUND

In 2006, Anonymous purchased a lot on Ono Island to relocate their existing home
from its beachfront location. They contracted with MD Construction (Contractor), for the
move and "re-construction" of the home. The home was to be built on pilings. The
Contractor contacted Terminix to pre-treat the ground. It appeared from the testimony that
anonymous either agreed to use Terminix or had no complaint with the Contractor using
Terminix. Terminix came to the property prior to the house move and pre-treated the soil.
Disputed evidence was presented as to whether Terminix treated after the pilings were in
place.

The first indication of termite infestation was in 2014. Terminix was called. Over a
period of months, repairs were made and re-treatment was applied. There was some
disagreement in the evidence as to whether Terminix re-treated on this occasion.

In May 2016, new infestation was found. The home was inspected on several
occasions regarding this infestation. In June 2016, Terminix retreated again on multiple
occasions. On June 26, 2016, Terminix applied 92 gallons of termiticide to the home. On
October 20, 2016, another 91 gallons was applied, based on an inspection revealing live
termites.

In May 2020, another live infestation was found. A "spot re-treatment" was applied
again. In October 2020, another live infestation was discovered. In December 2020, repair
estimates reached over $60,000.00. By April 2021, the estimate had grown to $115,000.00.

In September 2021, Terminix added bait stations. In January 2022, anonymous

found more live termites. Two additional "spot" treatments were applied in February and
March of 2022. Kaleb Owens, a Terminix employee, testified that Terminix's policy, upon
the discovery of live infestation, was to re-treat with a full comprehensive treatment. Jeff
Curtis, a Terminix employee of 20 years and current Director of Non-Litigation Claims,
testified that a full comprehensive treatment should have been performed but was not. No
Terminix work orders indicated a comprehensive treatment was ever performed.

By June 2022, Anonymous had contacted legal counsel, resulting in this claim.
They advised Terminix that they would use their own contractor for all future repairs.
Terminix, at the hearing, waived any defense under the termite contract for anonymous use
of their own contractor.
CLAIMS

Anonymous raised multiple claims for breach of contract, negligence, violation of

statutory requirements, negligent training and supervision, fraud, and equity claims.
Terminix does not dispute the anonymous have a contract repair claim, but maintains that
the original treatment contract and renewal contracts limit damages to breach of contract
only. Further, Terminix argues that the limitation of damages (LOD) clause limits the claim
to direct repair costs only. Terminix relies on paragraph 6 within the contract that excludes
(in all capital letters) "ANY LIABILITY FOR DIRECT, INDIRECT, SPECIAL,
INCIDENTAL, [OR] CONSEQUENTIAL ... AND/OR LOSS OF ENJOYMENT
DAMAGES." See DX 001-41 at ¶6.

ANALYSIS

Terminix has, in effect, admitted that anonymous have a claim, but that the claim is
limited to the direct cost of repairs of the home only. Anonymous claim their additional tort
claims are "outside" the contract and should survive beyond the contract and LOD clause.
The arbitrator agrees with anonymous.

Terminix's argument as to limitation of damages on its face appears to be valid. For

example, Terminix cites Pugh v. Butler Tel. Co., 512 So. 2d 1317, 1320 (Ala. 1987); see also
Barber v. Bus. Prods. Gtr., 677 So. 2d 223, 228 (Ala. 1996) and quoting from Respondents
brief states, "...in Alabama, no tort liability for nonfeasance for failing to do what one has
promised to do [in a contract] in the absence of a duty to act apart from the promise
made." (emphasis added) Additionally, in Ga. Power Co. v. Partin, 727 So. 2d 2, 5 (Ala.
1998), Respondent further cites, "The beneficiary cannot accept the benefits and avoid the
burdens or limitations of a contract." However, the facts bear out that Terminix's actions,
or inactions have provided in essence no benefit to the Claimants under the contract terms
and, therefore, are outside the scope of the contemplated contractual damages and the
LOD clause.

First, the evidence establishes that Terminix's actions to be more of misfeasance or

malfeasance rather than nonfeasance. The facts show that Terminix did not merely fail to
comply with the contract, but that Terminix repeatedly treated the termite infestation the
same way multiple times over several years, never with any success. Over the lengthy time
period and with the number of unsuccessful treatments, this dispute is more than a simple
breach of contract (and thereby being protected by the LOD clause) but more of an ignoring
of its obligations under the contract and thereby losing the protection under the LOD clause.
Terminix (1) represented it would provide a proper pre-treatment of the construction site but
did not; (2) violated its own policies by not providing a comprehensive treatment upon the
existence of infestation; and (3) failed to properly supervise anonymous course of treatment,
including ignoring their own claim department's instructions to conduct a comprehensive
treatment.

Second, to enforce the LOD clause would fly in the face of the legal concept
behind a contract. A contract is a binding agreement that if one party breaches, the other
has remedies to enforce the contract and seek damages. In this case, anonymous, over 8
years, attempted to get Terminix to meet its obligations under the contract. Over that time
and through multiple treatments and repairs, Terminix never came close to meeting its
obligations, substantively, under the contract. Anonymous, as any party that has been
harmed under a contract, should be entitled to some form of remedy if the breaching
party continues to breach and displays an inability or unwillingness to ever live up to its
obligations. To enforce the LOD clause allows Terminix to never have to comply with its
obligations and renders the contract, in effect, completely unenforceable.

Third, evidence supports Claimants theory that Terminix did not pretreat the
foundation properly from the beginning, prior to construction. Although there was
testimony as to the amount of termiticide that was used in the pre-treatment, evidence was
presented that Terminix treated the dirt prior to the installation of the foundation pilings
and failed to adequately treat around the pilings after the ground had been disturbed. This
initial failure set in motion the infestation problems. This failure to properly treat is
important because Terminix has never treated or re-treated all the pilings. Therefore, it is
reasonable to find that areas of infestation are still in existence around the foundational
pilings today. Terminix's failure from the outset creates at least negligent
misrepresentation that it properly pre-treated when it did not. Terminix never complied with
the initial agreement.
 Fourth, in conjunction with the Third Point above, because the existence of areas of
infiltration still exists, it is even more important that Terminix should have fully and
completely re-treated the home. Terminix's employees testified that upon the discovery of
live termites, the policy is to provide comprehensive re-treatment. Further, Terminix
documents indicate a comprehensive re-treatment to the anonymous home was directed but
never done. According to Terminix employee witnesses, no comprehensive re-treatment was
ever conducted. Terminix failed to comply with its own policies and, more importantly,
failed to carry out the specific instructions to provide a comprehensive re-treatment of the
anonymous home. Terminix, at the hearing, attempted to argue that the multiple "spot"
treatments would, under a cumulative effect, act as a comprehensive re-treatment. However,
it's own employee witnesses disagreed. Therefore, that argument is not compelling. The
course of conduct by Terminix is at best negligence and wantonness, and probably
fraudulent.

Referring to Respondents brief, "Punitive damages for tort claims must be "proven
by clear and convincing evidence that the defendant consciously or deliberately engaged in
oppression, fraud, wantonness, or malice with regard to the plaintiff" Ala. Code § 6-11-20.
Terminix represented that an initial comprehensive treatment had been performed prior to
construction, knew that a comprehensive re-treatment was the appropriate action upon
discovery of live infestation and made an internal decision that the anonymous home should
receive a full comprehensive re-treatment. Terminix did none of the above, yet continued to
represent to anonymous it was fully treating their home. It is clear and convincing that
Terminix consciously engaged in wanton conduct with regard to the anonymous home.

Finally, Terminix did not contest the anonymous contractual claims but only the
amount of and type of damages. Interestingly, the LOD clause attempts to exclude "any
liability for DIRECT, INDIRECT,..." damages. It is difficult to rationalize what damages
are available for anonymous if both direct and indirect damages are excluded. The literal
application of this LOD clause could leave the Claimants with no avenue of recovery under
the contract. (Since, Terminix has waived the portion of the contract that requires Terminix
contractors to do the repairs or the contract is voided, there is no reason to address that
issue.)

As to the Claimants' contractual claims, because the property can be repaired for an
amount less than the diminution in value, the cost of repair standard for determination of
damages applies. Claimants' expert, Mr. Fitzgerald, estimates the cost of repairs at
$1,033,000.00. Respondents' expert, Mr. Wilboum, estimates the cost at $281,000.00. The
major difference in the estimates are: replacement of the roof, "gutting" of the house
exposing all the walls, removal of the attic foam and removal of the outside cladding to
expose all the pilings. The arbitrator finds the additional costs for removal of the spray foam,
removal of the cladding to expose of all the pilings for inspection and treatment, and
replacement of the roof are reasonable. Given the long history of repeated infestation and
Respondent's inability to stop the infestation and damage, the additional work is
not speculative but reasonably foreseeable.

As to the tort claims, the LOD clause does not apply. Terminix actions were
negligent and reckless and outside the terms of the contract. Anonymous suffered damage to
their property as a result of the negligent/wanton conduct of Terminix. Anonymous also
suffered substantial mental anguish over 8 years of multiple infestations and damage,
repeated construction repairs, loss of enjoyment of the home, loss of the home for the
anonymous mother, and multiple promises by Terminix with no relief. Additionally, the
actions or inactions by Terminix support a claim for fraudulent misrepresentation.

As to punitive damages, Terminix also claims punitive damages should not be

awarded because it has already been punished by the consent judgment entered into with
the State of Alabama. That argument is not persuasive. Terminix agreed to pay the monies
set out in the judgment by consenting to the judgment. The award of punitive damages is
not taken lightly. Consideration is given to the limited scope and consistent failure to
properly treat the home, and the representations made by Terminix. It is also noted that the
consent judgment was entered in 2020 and yet the practice by Terminix continued for
almost 2 more years as to the anonymous home. That said, the consent judgment is taken
into account in determining the amount of punitive award in this case. Punitive is less than
1:1 to compensatory.

AWARD

The arbitrator finds for the Claimants/Anonymous and against

Respondents/Terminix on the breach of contract, negligence, wantonness and fraud claims
and sets the award as follows:
$ 523,000.00 compensatory damages for the actual property repair damage
$ 24,648.42 compensatory damages for storage, travel and renewal expenses
$ 500,000.00 compensatory damages for mental anguish for Anonymous
$ 500,000.00 compensatory damages for mental anguish for Anonymous
$ 1,000,000.00 punitive damages

Total award: $ 2,547,648.40

Additionally, Claimants request for $ 60,785.71 in litigation costs is Granted.

Claimants request for attorney fees is Denied. All claims not specifically granted above
are Denied. All claims against the individual Respondents are Denied.
(V.P
Entered this "/ --- day of May 2024.

J. Langfor Floyd, Arbitrator