Charter Must Face Lawsuit Alleging Netflix Throttling in N.Y. State Court

A judge has rejected the telecom giant's federal preemption arguments.
Illustration by: Jason Schneider

If the FCC decides to get out of the business of strongly regulating net neutrality, and individual states across the nation decide to fill the void through their own enforcement, a new ruling from a federal judge may bolster their confidence.

On Thursday, U.S. District Court judge Colleen McMahon ordered Charter Communications back to a New York state court to answer allegations that its Spectrum-TWC service promised internet speeds it knew it couldn't deliver and that Spectrum-TWC also misled subscribers by promising reliable access to Netflix, online content and online games.

New York Attorney General Eric Schneiderman filed the lawsuit in February after a 16-month investigation. Afterwards, Charter had the case removed to federal court by arguing that the Federal Communications Act (FCA) preempted the false advertising and deceptive business practices claims. The telecom pointed to how the FCC had issued regulations in the name of transparency whereby ISPs had to disclose "actual network performance," and as such, Charter posited that the claims being made were covered by a federal rule-making regime.

"The FCC has not always categorized broadband Internet providers like [Charter] to be 'common carriers' subject to Title II regulation," notes McMahon in her order (read here). "In fact, it did not regulate them as such until very recently, and it is quite possible that they will cease being regulated as such in short order."

Regardless of what the FCC does, McMahon concludes that the FCA does not provide the exclusive remedy for the asserted claims against Charter.

She points to the FCA's savings clause — "Nothing in this chapter contained shall in any way abridge or alter the remedies now existing at common law or by statute" — as well as the forbearance authority given to the FCC, which allows the agency to waive a federal remedy altogether.

"Third, nothing the FCC has said suggests that the FCA completely preempts state-law causes of action against telecommunication services for consumer protection and false advertising claims," she continues. "In fact, in numerous regulations the FCC has said the opposite."

McMahon acknowledges some merit to Charter's other arguments, including the one that broadband be treated differently "because the FCC has declared that 'broadband Internet access service is jurisdictionally interstate for regulatory purposes.'

"But the FCC's acknowledgement of its own jurisdiction to regulate broadband providers does not necessarily mean that the only remedy for injuries caused by broadband providers' fraudulent disclosures is 'exclusively federal,'" she responds. "Had the FCC intended its regulations to have that effect, it could have used more explicit language to say so, rather than state that it would approach preemption questions on a case-by-case basis in light of the fact specific nature of particular preemption inquiries."

McMahon adds, "Furthermore, the FCA provides that, in order to utilize its power to declare state laws preempted, the FCC must do so 'after notice and an opportunity for public comment.' Such decisions are usually quite explicit about which state laws or requirements are being preempted in a particular case. While the 2015 Open Internet Order was issued pursuant to ordinary notice-and-comment procedures, there is no indication that this complete preemption question was ever presented for public comment or that the FCC intended the order to preempt state-law claims like those asserted by Plaintiff."

Unless Charter chooses to appeal the decision to the 2nd Circuit, the case now is remanded back to state court where the telecom is still free to argue that New York's laws conflict with federal law. But only as a defense. Not as a cause to take it out of a state judge's hands altogether.