Phone+ asks—do agents have a chance fighting mass terminations from carriers?

Originally published on March 23, 2010
Greg Taylor

“Unfortunately, there’s no universal answer to this question from a legal standpoint. As with any contract dispute, you have to look at the specific provisions of the contract. For example, if a contract permits the carrier to terminate ‘for convenience,’ then there’s probably nothing an agent can do to stop the termination. In that situation, the question is really whether commissions will continue to be paid after termination, and the answer depends on whether the contract has a well-crafted evergreen clause. Likewise, if the carrier purports to terminate the contract ‘for cause,’ the grounds for termination must be examined in light of the specific provisions of the contract governing terminations for cause. The good news is that mass terminations which purport to be ‘for cause’ but cannot be supported by either the facts or the language of the contract can be fought successfully in court or arbitration. However, there may be other reasons at the heart of a mass termination which agents cannot successfully fight, such as financial distress (i.e. you may end up winning the battle but losing the war).”

— Ben Bronston, Partner, Nowalsky, Bronston & Gothard, telecom law firm

“It all depends on the agent’s specific agreement with the carrier. In the case of a well prepared agent agreement, the carrier may not be able to terminate the agreement at will or without some continuing benefit to the agent. For example, the carrier may only be able to terminate if certain conditions are met. Or, the carrier may only be able to terminate if a continuing commission is paid to the agent (an ‘evergreen clause’). In short, agents which have invested the time and effort into a sound agreement will have options.”

— Thomas K. Crowe, Partner, Law Offices of Thomas K. Crowe, P.C., communications law firm

“Agents’ best chance to fight mass terminations is to be aware where they stand with required carrier commitments. If you are lacking in any area, you are at risk. However, if I was involved in a mass termination, I would first contact a telecommunications attorney to find out my legal position. If the termination was without cause, then I would contact telecommunications agent organizations to find agencies in the same situation with the goal of creating a class action lawsuit. Unless you are wealthy, going ‘head to head’ with a carrier is suicide, in my opinion.”

— Robert Cullen, President, NBS Group Ltd., independent agent

“The first step to avoid contractual conflicts with carriers is investigating the financials and philosophy of the carrier prior to becoming a distributor. The contract negotiation process will provide signs into how the carrier will act during the life cycle of your proposed relationship. If any uncertainty occurs, find another carrier option. Most importantly, in today’s market, channel partners need a ‘war chest’ for unlawful terminations. Viable channel partners must have the time and finances to prove your contractual position in the court of law which can take years.”

— Timothy J Joos, Director, Business Development, Warner Telecomm, master agent

“No. Agents do not have a chance fighting mass terminations from carriers. Unless an agent has a special contractual provision with the carrier, resistance by the agent is futile. It is more of an issue of how to handle the effects of the termination, not battling it. Agents can protect themselves against the effects of mass terminations in their contract drafting and business models; but, nothing beats a good relationship with the carrier’s channel and decision makers to prepare for and protect against the effects.”

— Philip Josephson, Principal, Law Office of Philip Josephson, tele-information law firm

“The national carriers like AT&T and Verizon seem to be making it difficult for agents with regional focus to maintain direct agent relationships. The push toward national master agent models and the mandate by these carriers for regional agents to abandon their direct relationships and become subagents has created tangible discomfort. Finding the right master agent is not a simple matter and often creates an unnatural alliance between firms that have a long history of competing with each other.

These edicts force a firm to become a subagent or abandon the carrier altogether. These recent revamps have come with very little warning and almost no assistance from the carrier on how to migrate from a direct contractual agent relationship to an indirect relationship through a master agent.

The longevity, loyalty, historical results and quality of the agent seem to be meaningless in this environment. The agent has no say in the matter — ‘adjust or be terminated’ — ‘take it or leave it.’ I think this trend toward master agents with national carriers bodes very well for the regional carriers with which we can align and actually feel like a true valued partner with clout and impact.”

— Tim Mackin, Partner, Utility Telecom, master agent

“The hard truth is a carrier can do whatever it wants as they control the money (at least in the short term). The agent’s only defense lies in the legal language that exists in their carrier agreement and the resources they have to legally defend their position. Outside of having to play the legal card, a professional agent should always add value and maintain a strong relationship with their customers. This way, they have the opportunity to move their accounts to alternative solutions.”

— Brad Miehl, President/CEO, MicroCorp Inc., master agent

“Two threshold issues must be answered affirmatively. First, the carrier’s conduct must give rise to the agent’s claim (e.g., breach of contract or tort-based claims). Second, the agent must possess adequate resolve (and resources) to go the distance. Most agents can’t do this alone, but there is strength in numbers. Similarly situated agents have a much better chance to succeed when aligned with others and where the group is represented by competent telecom counsel.”

— Greg L. Taylor, Attorney, Technology Law Group, telecom and technology law firm