3rd Circuit Weighs Letting NJ Courts Take Lead on Cable Prorating
Judges wrestled with whether to let state courts handle Altice’s challenge of New Jersey Board of Public Utilities cable prorating rules, at virtual oral argument Thursday in the 3rd U.S. Circuit Court of Appeals. On Cable Act preemption, judges were skeptical about Altice’s argument that the state can’t force it to prorate bills when customers end service early.
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There's a “house of mirrors effect” among the many courts involved in cable prorating litigation, noted Alec Schierenbeck, deputy state solicitor for the New Jersey attorney general’s office. He was answering a question by Judge Brooks Smith. A New Jersey state court decision favoring Altice referred to and agreed with a federal district court decision favoring the cable company. That court in turn had referred to and supported another federal district court’s decision supporting Charter Communications’ challenge to Maine’s prorating law. The 1st Circuit reversing the lower court’s Maine decision earlier this month now could affect the 3rd Circuit’s review of the district court case that Altice won (see 2201190022).
Third Circuit judges spent much time dissecting New Jersey’s request that the federal court dismiss under the Younger abstention doctrine to clear the path for a New Jersey Supreme Court ruling on the parallel state court case. Younger tells federal courts to abstain from hearing cases involving federal issues that are before state courts. The New Jersey Supreme Court hasn’t decided whether to hear the state’s appeal.
Whether the Cable Act preempts the state’s prorating rules is a federal question that should be decided in the 3rd Circuit “under normal principles of jurisdiction,” argued Altice counsel Matthew Hellman: “This is rate regulation for the provision of cable service under the plain text of the [Cable] Act.”
New Jersey initially sought a determination on the merits when it appealed the lower court’s preliminary injunction, but “now they have made a judgment … that it would not be appropriate for this court” to do that, Hellman said. “This court ought not to encourage the … opportunistic playing of Younger doctrine.” He later added, “If this kind of enforcement proceeding, with no criminal analog, is sufficient to block federal court access, the court really here will have ‘Youngerized’ vast swaths of normal run-of-the-mill federal preemption cases.”
Judges asked why Altice wouldn’t want the case to be decided in state court. “You’re doing quite well in the New Jersey state courts,” said Judge Thomas Hardiman. “If the New Jersey Supreme Court chooses not to hear the case, you win and the case is over, right?” Hellman said yes, though it would be subject to U.S. Supreme Court review. Hardiman continued, “So, wouldn’t prudence dictate that we sort of sit on this and see what happens in the New Jersey Supreme Court?" If the state high court agrees to hear the case, replied Hellman, “that should not be an impediment to this court deciding the federal question.”
Judge Patty Shwartz said she’s “surprised you’re not saying, ‘You know, why don’t you guys just stay out of this?’” Altice won the district court case, but there’s also the “troubling 1st Circuit case,” she said. Altice thinks “we have the better argument” that requiring prorating is preempted rate regulation, replied Hellman.
New Jersey “asking the court to abstain in the face of a state court judgment that is adverse to us … is hardly an instance of gamesmanship,” said Schierenbeck. “It underscores the state’s crosscutting interest in having comity and federalism interests respected.”
Hardiman cited a condition of BPU OK of Altice acquiring Cablevision in 2016, which said Altice would comply with applicable service quality standards and metrics, including billing practices and termination. Even if Cablevision had the option not to prorate, he said, “it looks like perhaps Altice didn’t because you agreed to abide by the state’s billing practices and termination rules, which seemed to require per diem rebates if somebody cancels in the middle of the month.”
Shwartz asked if there was ever a legal challenge to New Jersey’s rule requiring customer credits for outages, “which sounds like this scenario … a circumstance when there’s no service provided.” Schierenbeck said he didn’t know of one, “but we are quite concerned that if Altice’s position were adopted, then that really classic consumer protection situation of a service outage would also be preempted.” He said Altice says it wouldn’t but hasn’t described “a construction of the language of the [Cable] Act that allows you to distinguish between outage credits … and the proration requirement.”
Requiring outage credits isn’t preempted, said Hellman, because when a customer buys a month of service, Altice agrees to provide a month of service. If Altice can’t provide service due to an outage, it's obligated to provide a credit, he said. But the prorating rule is preempted because it says, even though the customer and Altice agreed to a month of service, “the customer can actually get daily service at a rate specified by the state,” said Hellman: That's rate regulation.
Shwartz asked about Altice’s competition argument that requiring the cable company to prorate would put it at a disadvantage. Schierenbeck said he gets the company’s point about people cutting cords and moving to streaming services, but if that’s a problem, Altice should ask Congress to update the law.