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Cable in the Courtroom

Supremes Hear One Class-Action Suit, Dismiss Second 11/11/2012 7:00 PM Eastern

WASHINGTON — The U.S. Supreme Court heard arguments in one class-action lawsuit against Comcast, but denied an appeal of a lower court’s dismissal of a second such lawsuit against that MSO and others over the practice of bundling channels.

On Nov. 5, the High Court heard oral arguments in Comcast’s appeal of a 2011 decision by the 3rd U.S. Circuit Court of Appeals in Behrend vs. Comcast Corp. That suit, which seeks damages of more than $875 million, was filed on behalf of six non-basic Comcast subscribers who claim that, starting in 1998, Comcast through system swaps with other operators had “abused its dominance to stifle competition from those cable providers.” It cited swaps Comcast had made through the years in the Philadelphia, Chicago and Boston markets.

NO A LA CARTE BLANCHE

The Supreme Court is ruling on the appeal of a 2011 decision by the 3rd Circuit, which had ruled 2-1 that sufficient grounds had been established to create a “class” in the class-action suit. Comcast had tentatively settled the suit, but will wait until the court renders a decision before deciding how to proceed.

The issue is whether a lower court can certify a class without weighing evidence of whether that class qualifies for damages. The U.S. District Court instead left that weighing of evidence for the actual trial.

The Supreme Court decided only to hear the question of whether a district court can certify a class, or give it standing to sue collectively, without determining whether it qualifies for damages on a class-wide basis.

If the Supreme Court agrees with the lower courts and allows the class-action suit to proceed, Comcast would likely move ahead with a proposed tentative settlement, which reports put at several hundred million dollars. Comcast had no comment on the oral argument.

That argument at times seemed to turn on whether Comcast had properly challenged the admissibility of the model for assessing damages offered up by the plaintiffs when it had the chance. Comcast said it had made it clear it had issues with that model, though not with the witness that offered it up, while the opposing counsel said the MSO had not expressly challenged its admissibility.

Based on oral argument, antitrust attorney Matthew Cantor, partner at Constantine Cannon, said he thinks the case will be remanded to the lower court to decide whether or not Comcast waived its challenge. That, he said, would be a defeat for Comcast, since the lower court is the one that certified the class based on the damages model. He thinks that in that case, Comcast would likely settle.

In August 2011, the 3rd Circuit affirmed a district court ruling that the plaintiffs in the suit had established “by a preponderance of evidence” that they could prove through antitrust impacts — specifically, higher basic-cable prices — that they would quantify for damages as a class if they established that Comcast, through system swaps with other operators had “abused its dominance to stifle competition from those cable providers.”

Comcast had countered that the district court had gotten ahead of itself by failing to first resolve arguments of merit that directly bore on whether or not the class could be certified. Comcast had argued that any deterrent effects on overbuilders of the system swaps would not be felt on a class-wide basis in the Philadelphia market at issue, and that the market was not a relevant geographic market for testing theories of antitrust impact.

While the Court’s ultimate decision could open the door to other class action suits over clustering, the High Court closed the door on a class action suit trying to force cable operators and programmers to offer their programming a la carte.

The Supreme Court, in a one-line rejection, declined to hear the appeal of a class action suit filed by cable and satellite subscribers, who had argued that the bundling of channels violated antitrust laws, and had asked the courts to compel programmers and distributors to offer single channels for purchase. Back in March, the 9th U.S. Circuit Court of Appeals dismissed the suit, Brantley, Rob, et. al. v. NBCUniversal, et. al., saying the plaintiffs had not stated a plausible claim.

TAKEAWAY

The U.S. Supreme Court heard arguments about how system swaps could be anti-competitive but dismissed a challenge to channel bundling.

September