NEW YORK—Charter Communications has been handed a $19.2 million penalty for its false advertisements to Windstream customers attempting to lure them away from the internet and cable provider while it dealt with bankruptcy proceedings.
The judgement was given by the U.S. Bankruptcy Court in the Southern District of New York and is the largest compensatory sanction award issued by a bankruptcy court for violation of the Bankruptcy Code’s automatic stay.
Windstream, which is based in Little Rock, Ark., filed for Chapter 11 bankruptcy in 2019. Charter subsequently sent letters to Windstream customers saying “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?”
Charter reportedly sent the letters in envelopes featuring the Windstream logo and colors.
In April 2019, Windstream filed a seven-count complaint against Charter, saying that it violated the Lanham Act and the Bankruptcy Code’s automatic stay.
Ultimately, Windstream did not go out of business. Following restructuring, Windstream emerged from bankruptcy protections and ended 2020 with a reported $2 billion for network upgrades.
The judge in the case found that Charter’s mailings were “literally false and intentionally misleading,” attempting to influence customers into thinking that Windstream was going out of business and that they needed to switch to Charter.
The judge ruled that Charter was liable for four separate categories of damages: 1) lost profits from customers who switched to Charter as a result of the campaign; 2) the cost of corrective advertising to maintain customers; 3) the cost of a promotional campaign to recover market share; and 4) the fees and expenses of outside counsel and expert witnesses.
Testimony estimated that Windstream lost 1,400 customers and as much as $5.1 million in profits. The company spent $900,000 in corrective advertising and more than $4 million in promotional costs. In addition to attorney fees, the total came out to $19,184,658.30.
“We are gratified that Judge Drain’s ruling means Charter will have to pay a significant price for its egregious false advertising,” said Kristi Moody, executive VP and general counsel for Windstream, in a statement. “Charter knew full well what it was doing when it embarked on a dishonest scare-tactic campaign to lure away our customers. At Windstream, we will always aggressively defend ourselves and our customers against predatory schemes and meritless allegations.”
