Progressive Rentals May-June 2005

He's Golden : An APROfile of Charlie Loudermilk by Kristen Card
APRO @ 25: The 2005 Convention and Buying Show Preview by Julie Sherrier
Rental Memories by Ed Winn III
Paying Damages for Emotional Distress: What's the Risk for Your Business? by Ed Winn III

He's Golden : An APROfile of Charlie Loudermilk

by Kristen Card

Charlie Loudermilk is having a good day. On this particular morning in late April, the chairman and CEO of Aaron Rents has arrived at his Atlanta office to phenomenal news. In the wake of the prior day's announcement of record revenues and earnings for the first quarter of 2005, the company's stock has risen from about $18 a share to more than $20 just this morning. In fact, the call for Aaron Rents stock was so great that the New York Stock Exchange stopped trading on it for about 15 minutes to try to balance out supply and demand. "So you're having a good day," someone surmises.

"We're having a great day," he says. The fact is, Charlie Loudermilk is living a great life. At 77, Loudermilk is celebrating the 50th anniversary of the billiondollar rental-purchase empire he built with his own hands, brains and almost- palpable determination. And his 6,500- plus employees throughout the United States, Canada and Puerto Rico-along with his family, friends and all the lucky Aaron Rents shareholders-are celebrating him because his success has been theirs, too. But make no mistake. Loudermilk's halfcentury hootenanny in no way connotes a conclusion to his career or to his aspirations- and expectations-for Aaron's. This isn't a retirement party.

As a matter of fact, at its recent annual meeting in New Orleans (they don't call him Good-Time Charlie for nothing), the company announced its intentions to double its number of stores within the next five years, from more than 1,000 to over 2,000. And Charlie Loudermilk has no intention of missing that party. WHO IS AARON? R. Charles Loudermilk Sr. launched his company in 1955 with a partner, an answering machine and an inventory of 300 wellused Army-surplus folding chairs available for rent for 10 cents a day. Today, Aaron Rents says it is the nation's leader in the sales-andlease ownership, specialty retailing and rental of residential and office furniture, consumer electronics and home appliances and accessories.

But what got Aaron's from point A to point B really began in a blue-collar Atlanta, GA, neighborhood in 1927. Loudermilk was born the youngest of two sons to Jake and Addie Loudermilk. Jake, a lineman with Georgia Power, had a fourthgrade education and never saw the need for more than a high-school diploma. Addie, a dietician and career woman before her time, wanted her boys to go to college. By working three jobs simultaneously, she made sure it happened as her sons were the only two college graduates to come from their workingclass neighborhood. Loudermilk went to Georgia Tech for two quarters, joined the Navy for a year and finally graduated from the University of North Carolina in 1950 with a bachelor of science degree in commerce. His first job was as a traveling salesman for PET Milk, which lasted less than a year. His stint as a district manager for Pfizer Pharmaceuticals kept him busy for about three-and-a-half years more. Then his mother made her son an offer he couldn't refuse-well, he could, but not to her.

Addie had been running an extremely successful little tearoom and when a restaurant up the street was about to go under, the owner offered it to Addie. She said she would take it, but only if her son, Charlie, would come home and help her run it. Being a dutiful son, Loudermilk returned to Atlanta and opened the restaurant with his mother. But he quickly found himself with a wandering professional eye. "I had seen a small rent-to-rent company in Greensboro, NC," Loudermilk says. "I didn't particularly like the restaurant business, even though I was my mother's partner for 15 years.

So I started a little rental company. I got a partner and borrowed $500 and he had $500. So I put an answering machine in my apartment and the first order came in for 300 folding chairs for an estate auction. "It was the middle of the summer," he says. "We rented a truck and bought 300 very used Army-surplus chairs and delivered them and put them under this tent. With all that work in the hot sunshine and everything, my partner decided he wanted out of the business, so I had to scrape up another $500 to pay him off. He went around town for years saying he used to own half of Aaron Rents," Loudermilk says. With a contrived name guaranteed to give him top listing in the Yellow Pages (no, Virginia, there is no Aaron), Loudermilk's first rental inventories were centered on parties and healthcare. But once he discovered the lucrative opportunities waiting within the office rental market, Loudermilk abandoned the hosts and the healing and honed in on doing business with business. "We grew to about 185 stores in rent-torent, then I saw it going down quickly," says Loudermilk. "I saw rent-to-own flourishing and decided to go into rent-to-own. Y'know, rental is rental."

Rental may be rental, but combined with Loudermilk's insight, rental has turned remarkable. Today, Aaron Rents seems to have a life force all its own. Stores continue to open every week, pushing the company's almost 1,100-store count-which will be markedly higher by publication time-up and up and up.About two-thirds of the stores are company-owned, with one-third ownedby franchisees. "We couldn't open in my lifetime-and maybe not even my son's lifetime-all the stores we could open in the United States," he says. "So, in order to get market share and national recognition, I decided we needed to get help opening these stores."

The result is about 365 operating franchise stores, with another 325 already sold and scheduled to open within the next three years. "We continue to sell them and our backlogs continue to go up," Loudermilk says. Within the next few years, Aaron's will also begin to debut stores in freestanding buildings. "The business warrants it, so we're building a lot of stores right now," Loudermilk says. "We feel our funds can be better spent in inventory than in real estate, though, so we'll build them, sell them and then lease them back." Certainly, Loudermilk's vision has had to continually stretch to accommodate the ballooning size and success of his business. "At one time, when this company first started, I thought that if it did a million dollars' worth of business a year, then I'd be the biggest success in Atlanta," says Loudermilk."Now, last year, we did over a billion dollars.

How do you put that into your brain? I have a hard time trying to understand that." Yet, whatever grand plateau he reaches, Loudermilk always seems to have a clear picture of what the next level looks like. "People ask us, 'How many stores can you have?'" he says, "and we say, 'How many Super Wal-Marts are there?' We ought to be close [in number] to the Super Wal-Marts; that's our customer base. There are about 3,600 of them right now, so we've got a long way to grow." THE AARON'S DISTINCTION So many things about Charlie Loudermilk have contributed to his success and that of his business, it's difficult to pinpoint a single key. A self-confessed project junkie, he has a yellow writing pad wherever he goes, filled with a perpetual list of his next hundred or so todo items waiting to be gratifyingly marked off.

His dogged, down-to-the-penny frugality and tough-as-nails negotiating skills are legendary among his colleagues and employees. And stories abound about his willingness- almost insistence-to do grunt work. From building shelving to sweeping the warehouse to chauffeuring Aaron's personnel from the airport via the family station wagon, Loudermilk may be the company's chief, but that means he's also a member of the tribe. According to Charlie, the key to his success is his competitive nature. "What I like is winning," he says. "I'm competitive, always have been.

I think I inherited my drive from my mother. She was a really dynamic person, the hardest working person I've ever known. I believe entrepreneurs are born. I don't know whether you can make an entrepreneur of someone who doesn't have the genes that drive that. I just love to see something happen." Especially if that something happens his way. From the beginning, Aaron Rents has marched to the beat of Loudermilk's drum, by distinguishing and distancing itself, its products and its services from traditional rent-to-own businesses. "We studied a lot of other businesses and just didn't like the way some of the people were operating," says Loudermilk. "So for years, we've been fine-tuning our business to where it's quite different than the other rent-to-own operators. We just feel we've developed a much better mousetrap. We're not simply in the rent-to-own business.

We're somewhat different." The difference begins, Loudermilk says, with Aaron's customer base. "We're not in the weekly-pay rent-to-own business and we don't want the weekly business," Loudermilk says. "We're in the monthly-pay rent-to-own business. Our customer base is much more stable and has more discipline and a better pay habit than the weekly base. "A lot of our customers aren't credit-constrained," he says. "About 40 percent use credit cards or checks to make their payments. They like getting first-rate merchandise and having to sign only a one-month contract, so they have the option of using the product to see whether they like it. Our keep rate is much higher than the industry average and it's because of the customer base we serve." Secondly, at Aaron's, size matters-in terms of both space and selection. "Our stores are about twice the size of the average rentto- own store.

They're about 8,000 to 10,000 square feet," says Loudermilk. "Customers like a wide variety of choices, especially in furniture and we can show them a lot more furniture. Other companies can't do that; they don't have the space." Furniture, Loudermilk clarifies, is Aaron Rents' main business. The company's own MacTavish Furniture Industries manufactures almost half of the firm's furniture, as well as mattresses and home accessories, at 10 facilities located within four states. Additionally, Aaron's has 13 major distribution centers all over the country, so that merchandise is always available to stores nextday- so Aaron Rents' customers never have to wait longer than a single day for the product they want. A third and critical distinction betweenAaron's and its competitors, says Loudermilk, is how it deals with customers.

The company operates under a strict policy of no credit checks, no security deposits, no delivery charges, no-cost repairs and no balloon payments at the close of a contract. Additionally, it offers several purchasing options designed to let customers own their merchandise within as little as 12 months. "We treat the customer very, very well," Loudermilk says. "People skills is No. 1. It's not how much accounting you know or how much business law you know, it's how you treat people and how they feel about you. That's what I think has carried this company to where we are-people know we will be fair. The success of the business depends upon the quality of the people skills of its leaders." An active APRO member, Loudermilk testifies to the value of belonging to a national association. "I can't imagine not having a national organization to watch over the industry's best interests," he says. "From the legislative standpoint, if nothing else, you just must have a national organization.

You need a voice in Washington." The culture Loudermilk has created at Aaron's is all about fairness, plain and simple. Plain and simple, but not always easy. "Our culture is, we're going to do what's fair." Loudermilk hits the last word hard with his deep Georgia accent. "We want the customer to own the merchandise.We work with our customers a lot of different ways to do that. We just look at what's fair-not what's on the paper-just what's fair and that's served us very, very well." DOING WHAT'S FAIR Not surprisingly, this credo of fairness above all is a direct reflection of Loudermilk himself-who he is and how he's hard-wired. "Charlie is a straight arrow," says Loudermilk's friend of more than 30 years, Andrew Young. Young-who is a minister, former Congressman, former U.S.Ambassador to the United Nations and a liberal black Democrat- had been a business acquaintance of Loudermilk's for almost a decade when Young decided to run for mayor of Atlanta in 1981.

The city had become polarized, both politically and racially, with a black City Hall on one side and a white business community on the other. "The business community had decided not to support another black mayor," Young says. "They were really serious about needing somebody from their number as mayor of the city. I went to Charlie and asked him if he would break ranks with everybody else and work on my campaign.

I said I thought I could win the election without the support of the business community, but if I won, there ought to be somebody from the business community on my team, because you can't build a city with a split like that. He agreed and paid quite a price for that. He went against what seemed to be his short-term financial interests for the long-term good of our city. We became really close during that time and I won the election.

"I think the fact that he grew up in a family that was relatively poor gave Charlie a sense of fairness about him," Young says. "He's conservative, but it was very important to him to be fair.We agreed the city could be a great city, but only if business and politics worked together and only if blacks and whites worked together. No partisan politics, no racial politics. He just wants to do what is right." More than 20 years later, Loudermilk has boiled that sticky situation and his longtime friendship with Young down to a solitary witticism:" He's a black liberal Democrat and I'm a white conservative Republican.

People say, 'Well, how does that work?' and we say, 'Well, that's how we do it in Atlanta.'" "Charlie has a way of reducing everything to its simplest terms," says another old friend of Loudermilk's. John C. Portman Jr. is the chairman of Portman Holdings and a renowned architectural and development pioneer-he's credited with bringing the atrium- centered hotel design into the mainstream and has had a hand in developing most of downtown Atlanta. "Charlie is a straight-up, straight-out sort of fella," Portman says. "I've never seen Charlie without an opinion. He'll tell you what he thinks, and he doesn't worry much whether you're going to like what he has to say. He has no guile about him whatsoever. Charlie's just Charlie."

A CHARITABLE PHILOSOPHY

"The way I see it, life is divided into three segments," Charlie Loudermilk says in his Southern-gentleman drawl, with all the r's pronounced as "ah" and every word sounding like it contains an extra syllable. " The first segment, you're getting yourself prepared in school and your first jobs and so forth and you're acquiring skills. The second is, you have a run-hopefully of being a success and acquiring money. Then, you get to a point where it's time to give back. I'm there right now. Anything that's touched my life, I'm giving back, mostly in bricks and mortar." An exact listing of what Loudermilk has contributed over the years as a benefactor is impossible to compile, but suffice it to say the University of North Carolina has a building named Loudermilk Hall, downtown Atlanta has a conference and events facility named Loudermilk Center, Loudermilk's picture hangs somewhere over at the Georgia Dome and his church hosts a magnificent $2 million organ that would have been a $1 million organ without him.

From kids' baseball fields to schools for handicapped children, Loudermilk is fulfilling the third stage of his life amply. "I've never been able to keep a business going, so I really admire someone who can start a business, keep a payroll going for 50 years and keep families working," says Young. "Charlie's working on something all the time and working on something good all the time. He's also supported his city and his country through his businesses. "Jesus said it's harder for a rich man to get into the kingdom of heaven than it is for a camel to go through the eye of a needle," the minister continues. "Charlie is one who has become wealthy, but who has never forgotten the poor and the dispossessed, regardless of their race or color. If I had to bet on his getting through the eye of that needle, I'd bet on it."

A FAMILY AFFAIR

Yes, life is good for Charlie Loudermilk and he knows it. At the New Orleans gathering, having been lauded in a 45-minute thisis- your-life-type video retrospective and presented with a 1955 Chevrolet classic car by NASCAR driver and company spokesperson Michael Waltrip, Charlie brought the most important people in the room together to join him up on stage: his family. "Family first is something we've always preached at Aaron's," he says. "Mine is my proudest achievement." Charlie's son, Robert C. Loudermilk Jr., nicknamed Robin, works side by side with his namesake as president of the company, overseeing the rent-to-rent and manufacturing divisions and co-leading investor relations with CFO Gilbert Danielson.

Thirty-one-year Aaron's veteran and "surrogate son"Ken Butler runs the firm's sales and lease ownership division. Charlie's youngest, daughter Linda Loudermilk, is a successful haute couture fashion designer whose work has been featured on the runways in Paris and is about to be showcased in her own store on Hollywood's Melrose Place.And his eldest, daughter Lisa DeGolian, is an interior designer by training, currently working as a full-time mom. "I've always said, 'If you out-sire yourself, if your children are better than you are, then you're a success,'" Loudermilk says. "It doesn't matter about the business world or your profession or whatever else about your career. I think I've done that: my kids are bright, they behave themselves well and love to get things done like I do. I'm very, very proud of them." Along with his three children, Charlie enjoys the company of five grandchildren, two stepchildren and his wife, Courtney.

They like to visit Woodhaven, his 5,000-acre south-Georgia quailhunting plantation, which features its own golf course, 22 separate ponds for fishing, a 20,000-square-foot house, a big barn full of horses, mules and wagons, about 20 hunting dogs and a fulltime staff of eight just to maintain it all. They also spend time at their home in Sea Island, GA, out on the coast, and at their summer house located in the mountains northward. With three homes all located within about an hour's flight from Atlanta, it's clear Charlie Loudermilk likes to stay close to home. Sure, he says, he and Courtney travel some, "but about three days away is all I can stand, I've got to get back," he says. "This business gets in your blood. I'm 77 and I'm still working every day. It's a fun business, changing all the time.

If it weren't fun, if we weren't really winning, going full-blast, I wouldn't be here." And that, it turns out, is the real secret of Charlie Loudermilk's success. In the words of his eldest daughter, Lisa, his work is not his work. So if it's not really work, then how can you really retire, anyway? That's Charlie's point, exactly. "I was on a plane not long ago and the guy sitting next to me recognized me. We started talking and he said, 'Why don't you retire?' And he got kind of mad-he said, 'I'm retired and live out on Hilton Head and play golf and I thisthatandtheother. Why don't you retire?' I said, 'Well wait a minute. I'm fortunate I can be anywhere in the world doing anything I want to do and not have to worry about money.

But where I want to be Monday morning is my office and that's where I'm going to be.'Well, he didn't understand that at all. I think the problem is, he never had a job he enjoyed. "I'm livin' a dream, I really am livin' a dream right now." For a lifelong "hard charger," this notion seems to leave him a little awestruck. "Everybody seems to be happy and healthy,my health is reasonably good and the business is going gangbusters. Really, what else could I want?"

APRO @ 25: The 2005 Convention and Buying Show Preview

by Julie Sherrier

Twenty-five years ago in July, two Texas rental dealers scoured the Yellow Pages to send out invitations to various rent-to-own businesses across the country for a meeting in Dallas to discuss issues facing what was then a little-known industry. At this meeting, it was decided that perhaps these business owners needed to band together and form a trade association of their own. In November 1980, representatives from 40 RTO companies met and voted to form what is now the Association of Progressive Rental Organizations, to be based in Austin, Texas.

This year, APRO will take a look back and celebrate its quarter-century mark at the 2005 Convention and Buying Show.We would like you to join us in our celebration. Today, the Association of Progressive Rental Organizations represents more than 2,000 rent-to-own stores throughout the United States and abroad. These companies rent furniture, electronics, appliances and other products with an option for ownership. The APRO Convention and Buying Show is the premier event in the rent-to-own industry. Approximately 1,000 people involved in the RTO industry will attend.

Rental Memories

by Ed Winn III

Twenty-five years ago, I do not think that anybody in RTO could have predicted the business' landscape today. There were maybe 400 stores total in the United States and the biggest company in that era was Remco. Chuck Sims, while he had visions of empire, did not think that you could put a rental store in a town with fewer than 250,000 people. That was the prevailing wisdom back then. Little did he or anyone else imagine that you could put rental stores in towns of 5,000 people, sometimes fewer, and that you could even have your own stores across the street from one another, each with 600 BOR and each one making a buck.

We just rented TVs back then and a few white goods, but mainly TVs-19-inch, click tune portables and a few 25-inch consoles. Remotes were just coming along and rental dealers didn't know how to keep customers from losing them. The insurance guys wanted dealers to offer leased property insurance or maybe damage waivers, but rental dealers feared that if they offered such options, losses would skyrocket and they would go out of business. It took several years before a few intrepid dealers were willing to experiment with the idea of letting customers off the hook if the unit got lost, stolen or destroyed. VCRs came along and rental dealers thought they had died and gone to heaven.

The cost for the first VCRs, which were mechanical and must have weighed 40 pounds, was more than $500. They were new, they were hot and everybody in the world wanted one. They were instantly an almost perfect rental item. They were of a size and complexity that would warrant a delivery and installation, but they could also be stuck in a customer's trunk if you were in a hurry. They went out and came back and went out and came back.What a product! There has been nothing quite that electric in rental stores before or since.

There was a throbbing rent-to-rent furniture industry operating alongside RTO in those early days, which was far larger at the time than RTO. RTO guys thought that the RTR industry was a little soft. RTR rented apartments full of furniture to executives. No one caught on immediately to the potential of RTO furniture. It was a revelation slow to emerge, but when it did come to life, RTO furniture quickly dwarfed the RTR business, which barely exists today. RTO came into furniture with a vengeance and rented furniture to its standard base of RTO customers and grabbed the executive business, too.

The RTR furniture business may be a tenth the size of RTO today. Prying open a closed-door industry We had fights with various elements of the rental industry in those early days. The rental yard owners thought that we were stinking up the good name of rental with our RTO programs and they barged into our meetings and told us to quit using the word "rental" in our business. The RTR industry took shots at us and wished us all the bad luck in the world, but were finally helpless in the face of the RTO onslaught. Bankers who were newly in the leasing business, mainly vehicles, urged us to stick with the "rental" moniker to keep distance between their business and ours, but they were polite about it.

Rental dealer pioneers of 25 years ago were somewhat different from rental dealers of today. The early guys were plowing new ground and few of them were certain that what they were doing was even legal, much less that the business would be around forever. The business was new and unproven legally. It was a high-risk, high-reward environment that attracted fast money and faster entrepreneurs. Rental companies were subject to harsh attack and quite a few of the early dealers were in the business to make a quick killing and then get out. They figured they would run a few stores for as long as the law let them and then move on to the next thing. That kind of thinking was not universal, but it was prevalent.

When you think that short-term, you are less concerned with fostering good customer relations than if you are building a business you intend to pass down to your kids. Most of the apocryphal stories of collection debacles came from this era. The rental business was rougher then than it is today. There were no laws and dealers ran their businesses accordingly. No competition = no accountability There wasn't much competition in those early days, either. Dealers had whole cities to themselves. The prevailing view was that there was an endless supply of rental customers in the marketplace. For every disgruntled customer who didn't like how the store did business, there were several more potential customers who wanted that TV.

So, you didn't have to work with customers back then like you do today. Competition has taught us all that there is no endless supply of customers. Today, we value every one we can get and work harder than ever to keep customers on the books. Twenty-five years ago, we didn't. Rental dealers were particularly fond of the lack of competition and wanted very much to keep it that way. It was a logical instinct, but a doomed strategy for a business no more complicated than RTO. Early fights among rental dealers concerned this issue: whether the fledgling trade association was going to be able to do trade association kinds of things such as promote the industry and solicit new members-or whether it was just going to work on the legal issues and make the business safe for the rental dealers already in it. I had a personal point of view in this controversy. It was that you couldn't ultimately hide a good idea and that is the view that has prevailed. But it was touch and go 25 years ago.

It was a fierce battle between the "under-the-rock" rental dealers and the "we've-got-nothing-to-hide, let-thesunshine- in" rental dealers and the camps were pretty evenly split in those early days. This split colored everything the Association did or tried to do. The first group, while desiring a safer business legally, did not want a trade association that was going to help outsiders get into the business. Membership was closely monitored.

There were fights about whether APRO could attend CES, High Point and other vendor shows out of a fear that retailers would stumble onto the Association's booth and decide to start up an RTO store or counter. Tom Devlin, founder of Rent-A-Center, supported APRO's legislative efforts, but didn't want APRO holding seminars. He told me once in Las Vegas that Wendy's and McDonald's don't sit around talking about how to make hamburgers and he'd be damned if he was going to tell anybody how to rent TVs. Bud Holladay and Chuck Sims, APRO rental dealer founders, disagreed and argued that if rental dealers were going to rent TVs anyway, they needed to know how to do it properly and there was plenty of evidence that some of them didn't.

Plus, the industry was young and fragile and the bad acts in one company could have serious repercussions for everyone. These guys both put on lots of early training seminars that taught some of today's rental dealers how to run the business. The industry today is more ethical and bigger because of that early training. There were, of course, rental dealers then, as now, who wanted no laws, no seminars, no magazines and no groups of any kind. They were hardscrabble entrepreneurs- some good, some bad-who saw no need or use for any kind of organization beyond their own companies. They were not members of the Association then and are not members today.

The rise of customer service

There was another dividing line between types of rental dealers then that still exists today. It has to do with how the dealer feels about rental customers. There are dealers who have genuine appreciation for their customers, affection even. They tend to be more humble, generally, and recognize that but for the grace of God Almighty, they might be rental customers themselves instead of rental dealers. At the other end, there were and are rental dealers who in the dead of the night cannot escape the conviction that they are really ripping off their customers.

They don't really believe that RTO is anything more than a means to make a lot of money for themselves and have rationalized taking advantage of customers, employees, vendors, anyone, really, in order to achieve selfish financial goals. They have no respect for their customers; instead they have only disdain. They think of their customers as "those people" and their only interest in them is how deeply they can pillage their pockets. It may not be immediately apparent from the storefront into which camp a dealer falls, but it doesn't take long if you talk to the guy or watch the operation. It would be convenient to argue that the good rental dealers are all APRO members and the bad ones are not. But APRO has some selfish dealers as members and always has had them and there are some rental saints who have never been members of the Association.

I used to think that the nature of the business tended to attract a certain kind of less-than-ethical entrepreneur.Rental customers,many of them, are downtrodden to begin with and it is not so hard to intimidate them and otherwise to take advantage of their necessitous circumstances. I thought that I saw rapacious entrepreneurs swooping into an industry that did business with low-income consumers because it was easy turf on which to ply their less-than-noble business skills and make a quick buck. I've learned over the years that all businesses have their fair share of disreputable merchants. RTO, finally, today at least, has its fair share, but only its fair share.

You can find these guys selling jet airplanes to rich people or CAT scans to charitable hospitals or anywhere else you look, really. Disclosure battles Twenty-five years ago, there were other internal fights very different from the fights than the ones that exist among rental dealers today. One example concerns disclosing the total RTO price to customers. As quaint as it may sound, 25 years ago, almost no rental dealers did this. They disclosed the weekly rate and the number of weeks for ownership, but they did not "do the math" for the customer.

Consumer advocates and the Federal Reserve Board thought the total price was an appropriate and necessary disclosure that rental dealers ought to make and so we debated the issue at rental meetings. The non-disclosure crowd argued that if customers saw up front how much they would end up paying to own a TV, nobody would ever rent another one. A more refined argument from this side was that customers didn't really "need" this information, because what finally influenced their decision to do the deal or not was not the total price but rather how much it cost per week.

These were fervent debates that lasted for years. Remembering them today makes the early '80s seem long ago, indeed. We also fought over the "new" versus "used" disclosure. Once again, one side argued that customers didn't really care about this information-what they wanted was a TV that worked and, moreover, dealers delivering from a remote warehouse might not always know what was being delivered (this was before computers). Wisdom and enlightenment and openness prevailed in these and other debates during these early years as the industry struggled to find its way.

Lease vs. sale victories

What 21st-century rental dealers might not fully appreciate is how legally at risk the industry was in those early days. In 1980, when I first encountered RTO as an outsider, I looked at the transaction from a lawyer's point of view and concluded that RTO was really a lease. But laws get made by politicians. There is no constitutional right to rent TVs anywhere. Politicians could easily have voted that RTO is a sale and that is what it would have been.We had nasty legal and political fights in Connecticut, Maine and North Carolina in those early days over this issue. I can remember a Maine politician scoffing at us during a committee hearing, "The next thing you know, they'll be renting 'those people' Lincoln Continentals."

We won the fights in those three states-in the Maine Supreme Court, in the North Carolina Legislature and in the courts and legislature in Connecticut-barely. If we had lost those legal/political battles, which we certainly could have, I honestly believe that there would be no RTO industry today and certainly not a $6.23 billion industry, at any rate. Putting differences aside On a personal note, I've never made a distinction between APRO and the RTO industry, although there is one, I guess. I've always wanted all rental dealers to belong to APRO from a selfish point of view, perhaps, because I wanted and still want maximum credibility when I am out telling the RTO story to whatever audience I happen to have, hostile or friendly, and I still talk to both. Over the years, I have learned that trade associations are curious entities.

They are confederations of competitors who, as often as not, have little use for one another. Members, however, manage to look for common ground in order to come together and sometimes they have to look really hard for that common ground. Rental dealers who are in the Association look at those who are not in different ways. Some look out and see free-loaders-dealers willing to profit from the Association's efforts without making a contribution. They view them as cheap, irresponsible and selfish. Others look out and say, "good riddance." Sometimes they are right. It is certainly true that over the years the noblest, most giving and most generous rental dealers in the industry have been members of APRO.

Generosity and unselfishness may not rank high on the rental business scale where you only count profits and earnings per share, but those qualities rank high on the human being scale. I have cherished knowing most of the rental dealers who gave their time, talent and treasure to the group. I have made some lifelong friends along the way in this trade association over the past 25 years, some old, some new.

I've married one and now I have begun to bury a few. The art of growing an industry We cannot really hang a "mission accomplished" banner over the APRO headquarters here at the end of the first 25 years. It is true that the industry thrives in a safe legal environment and has for a long time now. That is no small feat for an association with a modest budget despite the nagging absence of a federal law. Trade associations, generally, do not like too many "missions accomplished." That kind of self-congratulation can erode membership. If the job is done, why bother paying dues?

Instead, stopping every now and then at notable anniversaries, for example, is a useful exercise to observe a milestone in a long and fruitful, even if occasionally turbulent, existence. I think that the RTO industry is bigger,more ethical, and better than it would have been had APRO not helped lead the way toward making RTO a truly respectable business, which is was not in those early days. A lot of the Association's effort came from rental dealers themselves who wanted a business and an industry of which they could be proud. Looking back, things could easily have gone another way.

The "dark side" could have prevailed and most of you reading this article would be doing something different today. If you didn't live it, it may be that you cannot fully appreciate the high place that the RTO industry has forged for itself in the American economy. There were numerous turning points along the way. The industry could have faltered at any one of them and RTO would still be the suspicious, disreputable, unseemly business that most people once thought it was. At 25 years, we celebrate both the past and the future, as it is APRO's intention to be "Always There" for its members. Thanks for the memories.

Paying Damages for Emotional Distress: What's the Risk for Your Business?

by Ed Winn III

It was a case of the needle, not in the haystack, but in the sofa. And nobody was looking for it. She rented the sofa. The price and the color were right and it didn't look very used. To hear the customer tell the tale, as soon as she sat on her new-to-her sofa, the very day it got delivered, she felt something sharp stick her in the buttocks. When she pried the cushions apart, she found a used hypodermic needle. Her first reaction was one of terror. She feared it was a "shared" needle and had been left in the sofa by drug addicts and the rental store failed to find it before rerenting the sofa to her. The facts aren't in yet. Nobody knows, yet, where the needle came from or what it was used for.

But the facts so far offer a useful platform for a brief overview of the law of damages as it relates to the torts of Intentional Infliction of Mental Distress (IIMD) and Negligent Infliction of Mental Distress (NIMD). As torts go, these are fairly new. Before the science of medicine fully understood the power of the mind, the law insisted that a plaintiff suffer a physical injury before awarding damages for the plaintiff 's pain. The law was unwilling to compensate victims for purely psychic suffering. Early on and still today, the difficulties with damages for emotional harm are how can it be proven and how much is it worth?

The law is much more comfortable with broken arms and legs because then the law can compensate the victim for the medical expenses and time lost from work. Juries can generally value the pain and suffering surrounding such an injury because they have been there or know someone who has suffered similarly. That is less the case with severe mental suffering all by itself. The culture still tends to look at people who seek psychiatric help as somehow "weaker" or less stable than the norm. How then to compensate someone who claims that the defendant was responsible for his or her mental breakdown?

PROVING SEVERE MENTAL STRESS

A couple of real cases will show the wide gulf that exists in such cases and the uncertain state of the law regarding the assessment of damages for severe mental distress. A recent case from California involved Macy's department store and a needle in the pocket of a woman's jacket that had been returned and was on the rack. The plaintiff put her hand in the pocket and pricked her finger. Here is what she said: "I can't sleep at night. I have panic attacks. I cry all of the time. I am very sharp with my family. I worry constantly about putting my family through a terrible ordeal and what they may experience by being related to a victim of HIV. I experience night sweats and nightmares concerning my future and the future of my family.

If I dwell on the situation, I throw up. I get very angry about being victimized. I focus on this situation so often that I am unable to give adequate attention to my children. I feel helpless. I went through a period of deep mourning." In the Macy's case, a California Court of Appeals held that the woman could not sue the department store because she could not prove that the needle stick caused "detrimental physical changes to her body," the threshold level of harm required in an NIMD case. Nor was the plaintiff able to prove that she was more likely than not to contract the diseases she feared. The woman has never tested positive for HIV or hepatitis A, B or C. Macy's offered expert testimony that even if the needle were contaminated, the odds of contracting HIV from it were 1 in 200,000. And so, at one end of the spectrum, a plaintiff who clearly had severe mental suffering took nothing because there was no physical injury to accompany the mental pain.

WHEN STRESS MANIFESTS AS PHYSICAL INJURIES

At the other end of the spectrum comes a case from Texas in which the jury gave the plaintiff $5 million for her severe mental distress due to a company's abusive collection practices (Greenpoint Credit Corp. v. Perez, 75 SW3d 40 (TX. Ct. of App. 2002)). A finance company employee called Perez several times and threatened that if she didn't make the payments due on her mobile home, she would be put in jail. The problem was that Perez didn't own a mobile home. Nor did she speak much English. Perez, 72, had a medical history of anxiety disorders. When the mystifying calls persisted, Perez had her daughter drive her to the sheriff 's office so that she could turn herself in. The sheriff called the finance company himself to explain that they were dunning the wrong person, but the calls continued. Two weeks later, a finance company employee went to Perez' house and got a signed affidavit stating that Perez did not own and had never owned a mobile home, nor had she ever consented to anyone using her name or credit to buy a mobile home.

Despite evidence that they had the wrong person, the finance company sued Perez anyway. During discovery, everybody learned that the daughter had forged Perez' signature on the loan documents for the mobile home. The company dropped its collection suit against Perez, but she continued with her counterclaims against the company for violations of the state debt collections statute and "intentionally and knowingly causing mental deficiency, impairment or injury to an elderly person." The jury awarded Perez $3 million for damages in the past and $2 million for damages in the future.

The jury also awarded her $10 million in punitive damages. The court of appeals upheld the actual damages award of $5 million, but threw out the punitive damages award. In tort law, a fundamental principle is that the defendant takes the plaintiff as it finds him, the "egg-shell skull" doctrine. A plaintiff who suffers more than an ordinary person because of some deficiency or malady is entitled to compensation for the amount of actual injury, not for some stylized injury suffered by some "average" person. In this case, Perez was "handicapped by advancing age, a demonstrable history of anxiety and nervousness, an inability to understand the language and cultural insulation," and she therefore did not have "protective mechanisms available to counter the unexpected threats."

The jury saw and heard evidence of physical injuries: "eruptions of her skin, disfiguring, angry running sores were evidence of the turmoil within." The legal distinction between these two cases is primarily one of physical injury. The sleeplessness, night sweats, nightmares, etc., suffered by the Macy's shopper are all psychic injuries. Perez got shingles and had other skin ailments. Those physical injuries got her case in front of a jury. In the Macy's case, the judge was aware of what juries can do with exciting facts and applied the law of physical injury quite strictly. As a result, the judge dismissed the case and it never went to trial. No jury ever heard the facts..

EVIDENCE VS. NEGLIGENCE

If a jury gets facts relating to a plaintiff 's severe mental distress, there is little legal guidance as to how much to award for such suffering. Here is a typical jury instruction: If you find that a plaintiff is entitled to a verdict against the defendant, you must then award the plaintiff damages in an amount that will reasonably compensate the plaintiff for all loss or harm, provided that you find that loss and harm was suffered by the plaintiff and was caused by the defendant's conduct. The amount of such award shall include: Reasonable compensation for any fears, anxiety and other emotional distress suffered by the plaintiff and for similar suffering reasonably certain to be experienced in the future from the same cause.

This is non-economic damage. There is no definite standard or method of calculation as prescribed by law by which to fix reasonable compensation for emotional distress.Nor is the opinion of any witness required as to the amount of such reasonable compensation. In making an award for emotional distress, you shall exercise your authority with calm and reasonable judgment and the damages you fix shall be just and reasonable in light of the evidence. In the sofa-prick case, all of the evidence is not yet in. The customer may yet contract HIV or hepatitis, in which case she will be able to get to the jury with her request for damages. There is no evidence in, yet, as to any other damages, like those that showed up in the Perez case.

There may never be any more damages than a prick in the buttocks and a moment of terror. At worst, the rental store is guilty of negligence by not refurbishing the sofa before re-renting it. In Perez, the finance company willfully threatened an old woman with jail and continued with an aggressive pattern of collection efforts against her even after the evidence pointed somewhere else. It should not matter that it was Macy's on the one hand and a consumer finance company on the other, but it might have. If the nature of the business was at play in these cases, then rental dealers should know that their business may be viewed negatively by a jury. The nature of the threats mattered in Perez.

The court of appeals noted that "the threat of being put in jail is calculated to put fear and anxiety into every citizen's heart. It is the very tool used by our justice system to control bad behavior in our society. Even a hardened criminal may think twice before doing something that will cause him to be locked away from society. If a criminal may be frightened by jail, how much more mental and physical anguish would be suffered by a woman in the position of Mrs. Perez?"

CUSTOMERS SUFFER MENTAL STRESS DIFFERENTLY

Lessons for rental dealers from these cases are first of all that dealers must take customers and possible plaintiffs in a lawsuit against them as they find them. Some customers handle life's blows with aplomb. Others react more strongly to setbacks. Rental dealers, because of the ongoing and intimate nature of their relationship with their customers, must acknowledge those customers who handle the pressures of daily existence poorly and react accordingly. Dealings with such customers need to be above reproach lest a rental company inadvertently abuse a weak sister like Perez.

The good news is that the law has not evolved to where plaintiffs can sue for hurt feelings. That is why the requirement for physical injury persists. In the coarsened culture of today, the law acknowledges that people must be hardened to a certain amount of rough language and to occasional acts that are definitely inconsiderate and unkind. However, the context will matter and the nature of the business of collecting on expired accounts and repossessing TVs will, from time to time, necessarily test where that line is drawn.

There are few companies today that could survive a $5 million judgment against them. There may always be a needle hidden away somewhere that nobody can find. Rental dealers probably won't have to pay for those kinds of negligent mistakes unless the customer really gets hurt and more than in the head. But collection abuse that rises to the level of being extreme or outrageous coupled with a delicate customer who "just can't take it" could cost a dealer everything he has worked to gain.