NY AG Fights Removal of Lawsuit Alleging ISP Throttled Netflix

TV's Internet Fishing Expedition - H 2014
Illustration by: Jason Schneider

TV's Internet Fishing Expedition - H 2014

If a large ISP throttles access to Netflix, who should do something about it? How? Where?

Until the election of Donald Trump, one would presume that the Federal Communications Commission might raise a stink under net neutrality rules enacted two years ago. But the FCC's new leadership has signaled an intention to walk back the agency's classification of broadband as a utility.

In February, New York Attorney General Eric Schneiderman made his own move. He filed suit against Charter, claiming that Spectrum-TWC promised Internet speeds it knew it couldn't deliver and also misled subscribers by promising reliable access to Netflix, online content and online games. According to the complaint, the ISP intentionally failed to deliver reliable service in a bid to extract fees from backbone and content providers. When Netflix wouldn't pay, this "resulted in subscribers getting poorer quality streams during the very hours when they were most likely to access Netflix," and after Netflix agreed to pay demands, service "improved dramatically."

Now, while Charter might have a reasonable argument that failing to maintain interconnection points to handle an ever-increasing traffic load hardly constitutes what Schneiderman sees as effective throttling, that's not where the action is taking place since the lawsuit was filed.

Instead, the stakes are arguably even higher. That's because Charter had the lawsuit removed from state to federal court with the contention that the Communications Act completely preempted claims under state law. Charter even went so far as quoting language from the FCC's 2015 Open Internet Order (aka the net neutrality regulations) to support the proposition that states are precluded from imposing obligations inconsistent with the FCC's regulatory regime.

According to defendants' court papers providing notice of removal, "Given the State’s distortion of the speed tests approved by the FCC and its reliance on other tests that the FCC does not require or endorse, if the 'state court vindicate[s] [the State’s claim], the relief granted would necessarily force [Defendants] to do more than required by the FCC.' The State is, in effect, 'trying to invalidate' disclosures made pursuant to the FCC’s reporting regime; its claim thus is necessarily federal.”

On Monday, the NY AG's office filed a motion to remand the case back to state court. The forthcoming decision could be an important one if other top legal officials in states across the nation attempt to fill the void of whatever the FCC is not doing. (Also, Schneiderman is seeking $5,000 in damages for each violation of general business law plus other penalties including disgorgement that could be way more expensive for Charter than the limited damages available under federal law.) 

Schneiderman's attorneys argue that the lawsuit is "rooted entirely in the kind of consumer deception that is within the traditional purview of state law and is historically subject to enforcement in state court."

The motion to remand (read here) also contends that the Communications Act contains a broad "savings clause" that preserves state claims and has been recognized by all but one of the nation's appellate circuits. It's also said here that the FCC has interpreted the federal statute similarly, including through its net neutrality rules.

"In fact, Paragraph 433 of the Open Internet Order reiterates the FCC’s consistent position that states share the burden of enforcing consumer protection laws against ISPs and the FCC has never contemplated that it has the authority to completely preempt state actions against ISPs," states the NY AG motion. "The short excerpt from Paragraph 433 quoted by Spectrum-TWC...announces the FCC’s intention to 'preclude states from imposing obligations on [ISPs] that are inconsistent' with the FCC’s interests. In other words, the FCC implicitly acknowledges that the FCA underpins a dual federal-state regulatory framework in which states may impose obligations on ISPs provided that they are not inconsistent with the FCC’s interests. To the extent Spectrum-TWC contends that the OAG’s allegations 'are inconsistent' with the FCC’s interests —which they are not — it is free to litigate the issue of conflict preemption as a defense in state court."