Bugs Are Big Business For Alabama Solo

By Amy Johnson Conner

In the "Red Zone" - a portion of the southeastern United States that stretches from North Carolina to Texas - they say there are two kinds of houses: Those that have termites and those that will have termites.

Huntsville solo Tom McGrath has capitalized on the prevalence of house-hungry pests to develop an unusual practice niche - bugs.

While it may not seem, at first glance, that this would be the most scintillating practice area, it has made McGrath famous locally and provided him with a very comfortable living, complete with a vacation home on Lake Michigan, and an apartment overlooking a lake, where he dotes on McTrieve and Boomerang, his two Labrador Retrievers.

"There's nothing sexy about it," he said. "It's only recently that I've had several cases make the paper. But I've made a very good living very quietly for the last four years that's as high or higher than anybody in this part of the state."

McGrath files negligence and fraud claims on behalf of homeowners who have incurred significant termite damage in their homes, despite having paid a pest control company for termite control services. Often, McGrath discovers the defendant companies never actually did anything at the homes to prevent termites - no holes drilled to access the bugs, no chemical spread to kill them.

In the six years he's focused his practice on termite litigation, McGrath has learned "that the unscrupulous pest control companies are cash pigs. They get more money for less work ... than just about any industry with which I've become familiar. They really can take advantage of the consumer without the consumer having the slightest idea until they are long gone."

McGrath has also learned that homeowners have no idea what services pest control companies are supposed to provide, making them a ripe target for fraud.

His expertise at handling termite claims has expanded his practice into homeowner claims for issues such as poor construction and other bug-related claims, including a $5.3 million verdict for a woman in a nursing home who was bitten hundreds of times by swarming fire ants.

But McGrath doesn't usually win million dollar verdicts - termite cases often end in a verdict or settlement that is two to three times actual damages. As a result his settlements range from $4,000 to the full value of a $180,000 home. Those cases may not make headlines, but five or six returns like that, along with a million-dollar verdict each year, allow the 36-year-old lawyer to live a very comfortable life. And since he works from home, he has very little overhead - an expense that consumes 50 percent of the gross revenues of a typical law firm.

McGrath's practice demonstrates that an untraditional niche that focuses on a community's most basic needs can be lucrative - and lead to other interesting and fulfilling cases.

Becoming A Termite Litigator

McGrath started his career working in a personal injury firm because he wanted to be a trial lawyer.

"The termite thing was completely coincidental," he said.

While filling out an application to purchase a cell phone, the sales representative noticed McGrath's profession. He mentioned his mother needed a lawyer because her home was infested with termites, even though she'd been paying for termite control service for many years.

"I was $80,000 in debt from law school, so I gave him my card. His mother calls me and I go out there," McGrath recalled.

The rest, as they say, is history. McGrath settled that case for $70,000 and, in the process, learned much of what he needed to know about termite litigation.

Most termite cases fall into two categories, he explained.

The first includes people who bought a home and within months discover several thousands of dollars in termite damage. In Alabama, each home sale is required to have a termite letter certifying the home is free from the bugs but, in discovery, McGrath often finds the company either cut corners in the termite inspection or didn't conduct one at all.

The other category is made up of homeowners who, like the salesman's mother, paid for termite services year after year and suddenly discovered thousands of dollars in damage that their pest control companies refuse to cover.

According to the minimum standards set forth in Alabama state law, when treating termites, pest control workers are supposed to drill holes through the concrete around the perimeter of a structure and in the cinder blocks in the home's foundation. Then, they are supposed to pour a prescribed amount of chemical, based on the size of the house, through the holes to kill the bugs, McGrath said.

Often, he discovers that holes are never drilled and when he reviews defendant-company files and compares them with those on record with the state Department of Agriculture, which regulates and audits pest control businesses, he finds the companies have on hand far less chemical than they should if they are treating the number of houses their records show they treat.

The Department of Agriculture audits compare the amount of chemical on hand at a pest control company to the amount the company should be using, based on the number of homes treated. Those records are also useful to McGrath.

The agriculture department also offers a free termite inspection that McGrath often uses in the evaluation of his cases, and he also calls the inspectors to testify. "That's a free expert witness there," he said.

When McGrath finds - and he often does - that defendants are not meeting the state's minimum treatment standards, not only does he claim basic negligence for not treating the termites, but he also alleges fraud and deceptive trade practices based on the misrepresentations in defendants' contracts, which say their treatment will meet or exceed state standards.

An Untraditional Niche

As McGrath said, termite litigation is far from sexy.

"I go to my client's house wearing jeans and a t-shirt, I read their paperwork and put on a headlamp and crawl under the house," he said. "I ruin four pairs of jeans every spring when the termites are swarming."

But it pays the bills and then some. McGrath settles about 90 percent of his cases, ending up in trial about twice a year, and has lost only one case in six years.

"You've got an $80,000 house with $20,000 in damages. I'm getting the entire value of the house on settlement. You're not going to read about it in the newspaper, but with five or six of those a year, you're not only going to be able to survive, but you're going to be able to afford a second dog pretty soon," McGrath said.

McGrath's biggest win, the case that "really put me on the map" as a termite litigator, was a $2.7 million arbitration verdict he won in December 1999 against Orkin, a case that began with the help of a disgruntled former employee.

When McGrath and the man met at the local Dairy Queen to discuss dishonest termite treatment methods Orkin allegedly used, the man named several local apartment buildings that had never been treated for termites despite their owners' paying the company to do so, including some 25 buildings on a lake that were worth about $15 million total.

With only one case pending against Orkin, McGrath was looking for a pattern of fraudulent behavior, so he asked the owner of the 25 buildings for permission to walk through the property with a Department of Agriculture worker during an inspection.

The owner agreed. When McGrath called to tell him the results - that the state inspector determined his property had never been treated for termites and that the buildings were now infested - the owner was stunned.

He then gave McGrath permission to use information about his property as "pattern and practice evidence" in McGrath's pending case against Orkin. He also hired McGrath to file suit against Orkin on his own behalf.

The $2.7 million arbitration verdict McGrath and a colleague won for the owner ended up equaling about 8 percent of the value of his apartment buildings.

"Orkin never had a clue what would happen to them," McGrath said.

Limiting Cases And Maximizing Damages

McGrath handles only 40 cases at once. His theory is that if he can extract the greatest amount of damages possible from each client's claim, it allows him to develop them more thoroughly and make just as much money as he would taking on a greater number of cases.

To make the model work, though, McGrath can take only the very best cases that come his way.

"I have to separate the wheat from the chaff," he said. Rather than get sucked in to laundry lists of homeowners' little tribulations, he focuses on the cases with severe damages, such as those with sinking, sagging, swaying or collapsing homes.

But that's not to say McGrath takes only the most lucrative cases. He also takes a number of cases on principle. Recently he accepted a termite case on behalf on an elderly widow whose home was infested, despite the fact she'd been paying since 1987 for termite services.

"Those are the ones you take on principle. [The elderly are] probably the most vulnerable portion of our society," McGrath said. "I really like helping people ... All of a sudden I'm going to do something for this lady she can't necessarily do for herself."

While some people might see a $10,000 repair bill and think that's the ceiling on the damages potential, McGrath uses many strategies to maximize those damages. Whenever he can prove a termite company has not met the state's minimum treatment standards, he uses the state's consumer protection statute to allege deceptive trade practices and thereby collect treble damages and attorney fees.

In cases involving poorly built homes, McGrath files claims for the homes' diminished value. He uses appraisers and the Multiple Listing Services information to gauge the value of the damaged home and the comparable value of a non-damaged home.

McGrath also emphasizes how easily the damages could have been prevented. He points out during trial that contractors or the people who treated a home for pests are required to be licensed by the state and were trained in proper practices before obtaining their licenses.

"They had the knowledge and just didn't use it," McGrath tells jurors.

Becoming An Expert

McGrath makes it sound like becoming an expert in bugs and their behavior is pretty simple. He has learned about wood-destroying organisms in much the same way a lawyer who takes on certain med-mal cases develops an expertise in that particular area of medicine.

"If you're doing cases about diabetes, you know enough about diabetes to talk with a doctor. Bug biology is no more difficult than anything you studied in college, and that's enough to do this work," McGrath said.

McGrath takes photographs under his clients' homes and with the help of text books, entomologists and information he has picked up through the years, he can determine how much damage a pest control company employee should have seen if a proper inspection had been conducted.

"You do this long enough you pick up on what's there, how long it's been there and why it's there," McGrath said. "All those things are interrelated."

With his expertise in bugs and the pesticides used to kill them, McGrath occasionally receives calls from people concerned about pesticide spills. But most often he hears from homeowners who have problems with contractors.

The influx of companies relocating to or expanding in Alabama, coupled with what McGrath describes as "lax building inspection," has created a cottage industry of poorly built homes that have severe structural problems.

One case McGrath is handling involves a couple whose new home developed a god-awful smell. Inspection after inspection revealed nothing, but finally someone tore into a wall near the master bedroom and found the body of a dead skunk.

With no access from the outside of the home, McGrath said there is no way the skunk could have crawled in there. His theory is a disgruntled construction worker planted it there.

The warranty of habitability claim against the builder also includes an argument for damages to compensate the owners for the carpeting and clothing that must be replaced because no amount of cleaning has removed the stench, as anyone who owns a dog sprayed by a skunk can imagine, he said.

"It's not that different from termites. Houses with code problems have structural problems and diminished value and things like that," McGrath said. In the past few years claims like these have become nearly 45 percent of his practice.

Well-Received

McGrath's niche has been well received in the Huntsville community, the residents of which are both his clients and his jury pool.

In Alabama, homeowners are required to get a termite bond and McGrath estimates that about 95 percent of jurors are homeowners. That gives McGrath's clients a leg up with juries because all homeowners can put themselves in his clients' shoes.

His clients have another advantage: Huntsville's educated jury pool.

"That's typically bad for a plaintiff. It can be very rough on economic damages. But by God every one of them lives in a house and is trying to make that investment grow. They're at Home Depot or Lowe's every weekend," he said. "I started to realize this and tap into it. I had a substantial advantage the rest of the plaintiffs' bar didn't have with these homeowners."

McGrath describes his clients as "the nicest people in the world."

"When you hand them a check for a 120-grand, that's very rewarding. Those people are the ones who send Christmas cards every year saying the wife quit teaching or they set up a scholarship for Timmy or took a big vacation" with the money they won from their lawsuits, he said. "I didn't get any of that kind of feedback when dealing with the personal injury half of it."

Furthermore, because of the high-end military and civilian operations based in the Huntsville area, McGrath's clients are computer literate and well educated. All have e-mail, which makes communicating about their cases much easier.

"My clients are rocket scientists, Army majors, West Point graduates," some even have "top secret" security clearances, he said. He has also represented Linwood Smith, a federal judge in Alabama, who hired McGrath to represent him and his wife in a dispute with the builder of their new home.

Most clients come to him on referral from other satisfied clients or from those in the termite industry, including two pest control workers for whom McGrath bought lunch after winning his first termite case to thank them for their help. Not only did picking their brains glean useful information for future cases, but he developed two sources of countless client referrals over the years.

Stick To The Red Zone

A practice niche specifically dealing with termites can only be successful in the "Red Zone" for termites, which stretches from Florida north to the Carolinas and east to Texas, McGrath thinks. However, termite cases can also be a worthwhile subspecialty in states outside the Red Zone, he said.

But to lawyers who might try to develop this or a similar niche in their own communities, McGrath says they should choose their cases carefully.

"You have to know what you're looking for and really separate what's a good case of liability and what isn't," he said.

For example, in cases of lax termite inspection, McGrath cautions lawyers that if there was no damage for the inspector to see at the time of the inspection, they will have a hard time meeting their initial burden on liability.

Similarly, if there has been a long stretch of time between treatment and the onset of termite damage, and the homeowners have only a repair bond, "you'll have a tough time showing negligence on the part of the termite operator unless (1) you find holes weren't drilled, (2) the chemical was not put where it was supposed to be or (3) you find an affirmative screw-up on paper showing they didn't use enough chemical."

If all works as McGrath plans, his territory may be up for grabs soon enough. Within five years he hopes to retire from the practice of law, put his savings into a retirement account and launch a new profession as a high school teacher and hockey coach - or if he makes enough, retire completely to spend six months in Colorado and the rest of the year at his home on Lake Michigan.

"I'd like to think 15 years litigating like this is enough," McGrath said. "After winning the appeals of two multi-million dollar verdicts and securing a multi-million dollar settlement, "what other goals can you set for yourself?"