A judge recently ordered Charter Communications to pay $19.2 million to internet provider Windstream for purposefully lying to Windstream’s customers about its ability to continue providing service after it filed for bankruptcy. The company also faces a $5,279 penalty for shutting off service to Windstream resale customers, Ars Technica reports.
In a memorandum filed on April 8, Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York ordered the fine after ruling Charter intentionally created a “literally false and intentionally misleading advertising campaign” with mailings to convince Windstream customers they were going to lose their internet service because of Windstream’s bankruptcy filing in early 2019.
In the order, Drain said Charter designed those mailings to make it appear they came from Windstream. The envelopes had Windstream’s mark and distinct color pattern, and were labeled “Important Information Enclosed for Windstream Customers.” Inside was the following message, according to Ars:
Windstream Customers,
Don’t Risk Losing Your Internet and TV Services.
Windstream has filed for Chapter 11 bankruptcy, which means uncertainty. Will they be able to provide the Internet and TV services you rely on in the future? To ensure you are not left without vital Internet and TV services, switch to Spectrum. With a network built for the future, Spectrum is here for the long haul.
In May 2019, a bankruptcy court issued a preliminary injunction against Charter, allowing Windstream to mail letters to their customers letting them know the mailings Charter sent out were false. The court also ruled Charter had to pay Windstream for its total cost of mailing all those letters; Windstream has about 1.1 million internet customers. The ISP said about 1,386 customers canceled their internet service as a result of Charter’s fabricated mailings, and it lost about $5.1 million in profits.
As for cutting off last mile service, which provided internet connectivity to hundreds of customers, Charter claimed the termination of service was due to “automatic nonpayment protocols programmed into its computerized billing system,” Drain wrote in the memorandum—or from Windstream’s inability to pay its bills to Charter to provide last mile service.
According to Drain, not only was this a poor defense on Charter’s part, but Charter did not contend it had the inability to override its automatic payment system, thus putting them in violation of a stay order since the ISP was aware of Windstream’s bankruptcy filing. Stay laws temporarily prevent companies, individuals, or other entities from collecting any outstanding debts from a debtor if that company has declared bankruptcy. Charter should have made sure it did not disconnect Windstream customers from the ISP’s services, said Drain.
Charter also did not give Windstream customers a 30-day notice before disconnecting service, which was a violation of VAR Agreement, or a contract between a manufacturer and a reseller. In this case, Charter is the “manufacturer” and Windstream is the “reseller.”
To add more insult to injury, Charter claimed that any punishment for sending out those mailings to Windstream customers was a violation of its First Amendment rights, wrote Drain, noting Charter also said its advertising agency, One Touch Intelligence, should be blamed because it developed the mailing campaign. However, Charter would need to approve of that campaign before anything went out to Windstream customers.
Ironically, Charter had filed a lawsuit against DirecTV in 2009 for giving its customers a false impression they would lose their service because of Charter’s bankruptcy filing.