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November 13, 2012 (New York, New York) – Surfing the internet at Time Warner Cable Inc. (TWC) just cost customers a cool $40 million more per month in illegal modem “lease” charges, allege two class action lawsuits filed simultaneously today in New York and New Jersey. The suits seek injunctions to stop the country’s second largest cable provider from billing customers for the privilege of leasing old modems that the company typically wrote off as worthless years ago – and until recently were included in the cost of monthly service.
Riding the wave of corporations trying to squeeze the last drop out of consumers’ already shrunken wallets, Time Warner Cable’s new $3.95 tack-on fee not only violates its customer agreements, but misleads customers about virtually every aspect of the modem scheme, the lawsuits allege.
“It’s a massive hi-tech consumer fraud accomplished by low-tech methods,” says Steven L. Wittels, the lead lawyer for the class, who obtained a $250 million punitive damages jury verdict in a 2010 class action against big pharma. “Send customers confusing notice of the fee in a junk mail postcard they’ll throw in the garbage, sock them with a $500 million dollar a year rate hike, then announce on your website that customer satisfaction is your #1 priority. That’s some way to deliver satisfaction,” adds Mr. Wittels.
With more than 15 million customers in 29 states (nearly all of whom use internet modems), the suits maintain that the cable colossus misleadingly dubs the new charge a “lease fee.” In reality, Time Warner is using the new cash source to fund overhead like infrastructure operating costs and product development. With $19.7 billion in revenues in 2011, industry commentators have suggested the new fees could boost the company above the $20 billion mark.
Manhattan resident Kathleen McNally and Fort Lee, N.J. resident Natalie Lenett are spearheading the dual suits against NYC-based Time Warner Cable, on behalf of themselves and all customers in states where the company operates: Alabama, Arizona, California, Colorado, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Missouri, Nebraska, New Hampshire, New Mexico, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin.
Although the new lease policy claims to let customers avoid the fee by buying their own modems, what the company fails to disclose is that TWC’s own customer agreements forbid the cable giant from imposing a modem fee in the first place, specifying that all “replacement” modems will be “at no charge.” The company also fails to tell customers that if they buy their own modems, they’ll lose certain services they’re paying for like phone.
Echoing widespread dissatisfaction reported after consumers got wind of the new lease fee policy, the lawsuits describe a litany of ways in which TWC violates consumer fraud laws in New York and New Jersey, and breaches customer contracts, including taking advantage of the disabled, the elderly, and the homebound, who have no realistic option but to pay the add-on fee; and also imposing the fee before waiting 30 days after notice of a price change as required by the contracts.
“TWC’s Code of Business Conduct asks employees to consider whether business decisions they make ‘feel right,’ how the person they ‘respect most would view the decision,’ and how it would ‘look’ in the press,” says co-counsel Richard Roth. “Frankly, the whole modem lease scheme feels very wrong, people you respect will call it a scam, and it looks terrible in the media,” he added.
To add insult to the modem fee policy, TWC’s conduct is especially galling to consumers because of the class-action waiver and arbitration clauses TWC stuck in its customer contracts as a way to try and insulate suspect business practices from attack. While still allowing lawsuits for injunctions and declaratory relief like the ones filed today, the clauses raise another obstacle for customers trying to fight corporate America’s unscrupulous tactics.
“Our lawsuits seek to invalidate these unconscionable clauses,” adds Mr. Wittels. “Unfortunately, the anti-consumer faction of our Supreme Court has aligned itself with big business in enforcing these shameful clauses. But it’s our hope that once enough people realize that their highest court has stripped them of their basic consumer rights, Congress will finally listen and outlaw these types of roadblocks.”
Ms. McNally and Ms. Lenett and the class are represented in the matter by Steven L. Wittels, Esq. and The Roth Law Firm, PLLC, two New York based firms. For more information, or to join this case, contact us.