Security Sales & Integration August 2021 - 58

EXECUTIVE DECISIONS
Legal Briefi ng by Ken Kirschenbaum
Which State Law
Governs Multistate
Subscribers?
You may be
willing to take
the chance
for a handful
of accounts,
but do you
really want to
contract with
hundreds or
thousands of
accounts in a
state where
you're not
licensed?
▶ A QUESTION COMES UP when an alarm
client in one state wants to do installation, service
or monitoring for a subscriber with multiple
locations in other states where the alarm
company is most certainly not licensed. If you
are performing licensed activities in a state then
you need the license required by that state unless
there is reciprocity, which means you are
licensed there.
As a practical matter if you have one customer
with one location in a state where you aren't licensed
it's not likely that it is economical for you
to get licensed, especially if you have to engage
someone to work for you who can qualify the
company for a license. You will have to weigh
the risk-reward taking the chance of performing
unlicensed activity in the state. I wouldn't recommend
installing a fi re alarm system, but if all
you're doing is monitoring the account and subcontracting
that service to a wholesale monitoring
center that is licensed in the state, you might
take the chance. But even then, read on.
For me the critical factor is that the alarm
company and the subscriber are both in the licensed
state and the contract will be signed by
both in the state. Th e law of that state will be the
chosen jurisdiction for selection of law, enforcement
and venue.
Now let's look at that multilocation subscriber.
Th e main offi ce is in the same state as
Ken Kirschenbaum, an
SSI Industry Hall of Famer,
has been a recognized
counsel to the alarm industry
for 45 years and is
principal of Kirschenbaum
& Kirschenbaum, P.C.
(kirschenbaumesq.com).
The opinions expressed in
this column are not necessarily
those of SSI, and not
intended as legal advice.
58
the alarm company, which has a license in that
state. A request is made to install, service and
monitor electronic security or fi re alarm systems
in other states where the alarm company is
not licensed. Th e contract will be signed in the
alarm company's and subscriber's home state,
where the alarm company is licensed. Now it
gets complicated.
Technically, a license is required in some
states to perform any of those intended activities.
In most states, hiring a subcontractor that
is licensed is probably not going to resolve the liSecurity
Sales & Integration AUGUST 2021
ken@kirschenbaumesq.com
cense issue for the alarm company that contracted
with the subscriber. While the contract will
likely provide that the home state is the state for
jurisdictional, enforcement and venue purposes
that will not be controlling on a licensing agency
in a foreign state. So the licensing agency will not
be prevented from issuing a violation to the outof-state
alarm company.
Th e scope of the violation will be important.
Th e likelihood of the licensing agency getting
involved and the severity of the consequences
for the unlicensed work will be diff erent if the
unlicensed out-of-state company installed an
intrusion or camera system for one customer or
25 commercial fi re alarms for one or more customers,
even if those customers have their home
offi ce in a diff erent state. It may also matter if the
unlicensed activity consists of installation, repair
or monitoring, but again I think it will depend
on the scope of the violation.
What can the consequences be? Some that
come to mind include fi nes, requiring you to
quit the state and give up the customer and contract
in the state, prohibiting you from getting a
license temporarily or for a very long time. You
may be willing to take the chance for a handful of
accounts, but do you really want to contract with
hundreds or thousands of accounts in a state
where you're not licensed? You may be required
to cancel every contract.
No buyer with a brain is going to want to buy
those contracts, at least not for a multiple that
you've been dreaming about. Some unlicensed
activity may rise to the level of criminal conduct.
While the fact that you're not licensed may not
mean you were also negligent and therefore liable
for damages suff ered by customers and third
parties, it will constitute a breach of contract
if the contract represents that you are licensed
(customer can terminate for breach and withhold
payment).
Bottom line: Th e state where the parties have
their home offi ce and where the contract is
signed is the state for confl ict of laws issues and
jurisdiction (as between the parties). You should
be licensed if you are performing licensed activity
in a jurisdiction that requires a license; that
means your company needs the license. Not all
violations of the licensing law will be treated the
same, so depending on your tolerance level you
may be able to get away with only one sleeping
pill instead of taking the entire bottle.
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Security Sales & Integration August 2021

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