Another lucrative RMR business [assuming you believe the alarm business is lucrative] is the amusement coin operated equipment business. These amusement machines are placed in businesses on a lease relationship and the revenue generated by the machines is split between the location owner and the machine owner.
Several amusement coin machine companies sued another competitor [let's call it competitor]. The case, which I will post on our web site under Georgia cases, [https://www.kirschenbaumesq.com/page/alarm-law-issues] [All Star v Georgia Atlanta Amusements] is interesting reading, especially if you are interested in how courts have gotten around the sacrosanct US Constitutional provision that prohibits lawmakers from interfering with private contract rights. The case also has a few other interesting issues that certainly affect the alarm industry.
The plaintiffs had machines placed at various business locations. Competitor induced the owners to replace the machines and plaintiffs claimed tortious interference with contracts. Plaintiffs had three types of contracts in place:
- oral, no written contract
- written contract for 7 years with 7 years automatic renewal unless canceled
- written contract still in original term
The court threw out the claim for the oral contracts. I think I've mentioned the importance of written contracts before in this forum, so hopefully this doesn't surprise you.
The court held that since no one canceled the 7 year contract before renewal that the renewal was enforceable. This is good news for the alarm industry [in Georgia at least], though my Standard Form Agreements continue to have renewal month to month.
The court held that the written contracts in original term and in renewal term could support a claim for tortious interference of contract. In this case the lower court had dismissed the case and the appellate court reversed and sent it back for further proceedings.
It's interesting why the lower court dismissed the case. A law was passed that regulated the monetary deal the amusement coin machine owners could make with the property owners. While some of the existing contracts had a 50/50 split, some were 30/70 and others had different splits. The new law, passed in 2013 [OCGA § 50-27-70 (a). ] fazed in a required split of 50/50 after the state initially took 5%, escalating to 10% over time. Also all revenue from the machines was to be deposited into a state controlled bank account to be distributed by the state, which would ensure compliance with the law. Any other agreement or inducement is not permitted under the law and carries stiff penalties for violation.
For those of you interested in the discussion of the right of states to enact this kind of legislation, read on, and by all means read the entire case - it is interesting. Courts have found that despite the apparently clear language of the US Constitution - and every state constitution - that says no law can impair contract rights, courts permit impairment when the state is exercising its police powers and the industry is regulated or public interest is involved. Of course that's a lot of leeway and we've seen lots of laws affect the alarm industry, from licensing, to consumer regulations and restrictions on enforcement of certain provisions, including term, renewal, limiting liability and indemnity to name a few.
Here are a few quotes from the case that I thought might be of interest:
"We start our analysis with the well-established legal principle that the State may exercise its police powers "to protect the lives, health, morals, comfort, and general welfare of the public." .... And it is "accepted as a commonplace that the Contract Clause does not operate to obliterate the police power of the States." ... Thus the State may, in the exercise of its police powers, enact regulations that place reasonable restraints on individuals' freedom to contract. .. l though the language of the Contract Clause is facially absolute, its prohibition must be accommodated to the inherent police power of the State to safeguard the vital interests of its people" ... the State may exercise its police powers even "though contracts previously entered into between individuals may thereby be affected"
"As the United States Supreme Court has recognized, however, "private contracts are not subject to unlimited modification under the police power." ... Accordingly, any laws that affect contractual rights must be in furtherance of a legitimate public purpose, as this "guarantees that the State is exercising its police power, rather than providing a benefit to special interests." ... Provided that the government has acted in furtherance of a legitimate public interest, parties to private contracts will be required to adjust their
contractual "rights and responsibilities" to accommodate the law, so long as the required adjustment is a reasonable means of furthering the public purpose at issue. ... Moreover, parties who contract with respect to a regulated industry or enterprise enter those contracts subject to further, reasonable regulation; when the subject of the contract is regulated, this fact controls, to some extent, the parties' reasonable expectations under the contract. ... In essence, such parties are presumed to contract with the knowledge that, regardless of the terms they agree to, subsequent reasonable regulation might require them to amend one or more of those terms."