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Newman v. RCN Telecom Services

March 7, 2006

JAMES NEWMAN, PLAINTIFF,
v.
RCN TELECOM SERVICES, INC. AND RCN CORP., DEFENDANTS.



The opinion of the court was delivered by: Andrew J. Peck, United States Magistrate Judge

REPORT AND RECOMMENDATION

To the Honorable Victor Marrero, United States District Judge:

Plaintiff James Newman, seeking to represent a class of individuals who subscribed to certain internet services of defendants RCN Corp. and RCN Telecom Services, Inc. (collectively, "RCN"), alleges that RCN violated New York General Business Law §§ 349 and 350 and consequently was unjustly enriched. (Dkt. No. 1: Notice of Removal Ex. A: Compl. ¶¶ 1-14.) Presently before the Court is Newman's motion for class certification of the § 349 claim pursuant to Rule 23 of the Federal Rules of Civil Procedure. (Dkt. No. 17: Newman Class Cert. Motion & Br.; Dkt. No. 35: Newman Class Cert. Reply Papers.) RCN opposes the motion on the grounds that Newman cannot satisfy Rule 23's numerosity, commonality, typicality and predominance requirements. (Dkt. No. 38: 1/16/06 RCN Opp. Br.)

For the reasons set forth below, plaintiff Newman's motion for class certification should be DENIED, and Newman's individual claims accordingly should be remanded to state court.

FACTS

In April 2005, plaintiff James Newman filed a Class Action Complaint in Supreme Court, New York County. (Dkt. No. 1: Notice of Removal Ex. A: Compl.) On May 18, 2005, RCN filed a "Notice of Removal of Class Action Pursuant to 28 U.S.C. § 1453" in this District. (Dkt. No. 1.) On June 15, 2005, RCN answered the complaint. (Dkt. No. 4: Ans.)

The Allegations in Plaintiff's Class Action Complaint*fn1

Defendant RCN Corp. is a Delaware corporation, and defendant RCN Telecom Services, Inc. is a Pennsylvania corporation that is a wholly owned subsidiary of RCN Corp. (Compl. ¶¶ 2-3.) RCN offers, inter alia, internet services to customers in New York. (Id.)

Since November 2003, Newman, a New York resident, has been an RCN subscriber. (Coml. ¶ 1.) Newman received many advertisements for RCN's internet services via the internet and United States mail. (Id.) "Pursuant to defendants' advertising and promotional campaign, plaintiff subscribed to defendants' basic internet service for $39.95 per month." (Id. ¶ 4.) Thereafter, RCN developed an improved premium internet service titled Mega Modem Mach 7 ("Mach 7"), which RCN advertised throughout New York as being considerably faster than its basic internet service. (Id. ¶¶ 5-6.) "[W]ithout authorization or consent, defendants charged plaintiff for Mach 7 premium service," although he had initially subscribed to RCN's basic internet service. (Id. ¶ 5.) Newman had to pay an additional $25 per month for the Mach 7 service. (Id. ¶ 7.) RCN knew "that the use of Mach 7 was unavailable during normal hours of the day and could only be obtained at unusual times in early morning, when the internet was not being used by other subscribers of RCN." (Id. ¶ 8.) Therefore, Newman and other members of the class were paying extra for a service that was no faster than RCN's basic internet service. (Id.)

RCN thereafter developed an even faster internet service entitled Mega Modem Mach 10 ("Mach 10"). (Compl. ¶ 9.) In March 2005, RCN automatically upgraded Newman and "other members of the Class" to the Mach 10 service, which increased the bill by an additional $25 per month. (Id.) "Plaintiff and the other members of the Class who were subscribers to the Mach 7 did not agree, or consent to the 'bump up' and the additional charges. They were content with the normal download service and did not wish or agree to the Mach 10 premium service." (Id.) Newman and the other class members have wrongfully paid RCN "thousands and thousands" of dollars. (Id. ¶ 10.)

Plaintiff claims that RCN's "conduct violated §§ 349 and 350 of the General Business Law in that it offered a service, contrary to the advertising and promotional campaign, [that] was generally unavailable and, in addition, caused subscribers to pay for additional service without obtaining their consent thereto." (Compl. ¶ 12.) Additionally, Newman claims that "defendants have been unjustly enriched through the receipt of such monies and subscription fees for services which were not obtainable at normal times, nor consented to." (Id. ¶ 14.)

The complaint defines the class as Newman "and all other New York residents who subscribed to defendants' Mach 7 service, paying therefor and not receiving said service and were bumped up to Mach 10 service and being charged therefor without their expressed consent thereto." (Compl. ¶ 15.) "The Class seeks damages for violations of §§ 349 and 350 of the General Business Law, and for violations of the duty of good faith and fair dealing and for unjust enrichment." (Id. ¶ 16.) Newman subsequently, however, dropped his class claim under General Business Law § 350, retaining only the § 349 claim on a class basis. (Dkt. No. 35: Newman Class Cert. Reply Br. at 2.)

RCN's Affidavits

RCN's General Pricing and Billing Policies

"RCN provides telephone, cable television and high speed internet connectivity (through a cable modem network) to customers in the New York City market. . . ." (Dkt. No. 39: Tyson Aff. ¶ 2.) RCN offers promotional pricing packages called "bundles," which enable RCN customers who order multiple services (internet, cable television, telephone) to save money by purchasing these services together instead of paying for each service separately. (Id. ¶¶ 6-7.) RCN's policy "is that if a customer who subscribes to a bundle later cancels one of the bundled services, the customer is still responsible to pay RCN for the remaining services at the regular, non-discounted rates." (Id. ¶ 9.) RCN's promotional mailers advertising the "Resilink Gold" bundle (described below), for example, specified that "[i]f a portion of the package is canceled (by customer voluntarily or due to non-payment) remaining service charges will revert to a la carte rates." (Id. ¶ 9 & Ex. D at RCN5073, RCN5075, RCN5077.)

RCN bills its customers for all services in advance, which "means that a customer's billing statement is sent and received prior to RCN providing the particular services identified therein, and prior to the time for which the customer is obligated to make payment." (Tyson Aff. ¶ 11.) This procedure gives customers an opportunity to review their bills in advance and to dispute any questionable charges or change any service prior to making payment. (Id. ¶ 14.)

RCN's Internet Service Network

RCN's internet service network is designed to act as a large "pipeline" for the information sent and received by RCN's customers. (Dkt. No. 41: Laird Aff. ¶ 34.) "That pipeline is designed to transfer up to 40 megabits per second (mbps) of aggregated data being sent to or from RCN subscribers in a geographical location." (Id. ¶ 35.) "However, in order to maintain availability of the pipeline to its subscribers, RCN electronically limits the amount of information that any individual subscriber's cable modem can place on the RCN network at any precise point in time." (Id. ¶ 36.) "At the present time RCN's limit is 7 megabits per second (mbps) downstream (from the internet user to the RCN user) for subscribers to RCN's Megamodem Mach 7 service. Subscribers to RCN's Megamodem Mach 10 service are limited to 10 mbps downstream." (Id. ¶ 37.)

In addition to the limitations that RCN places on its customers, there are myriad other factors that can affect internet speed. (Laird Aff. ¶ 12, 59-81.) Those factors include: "(a) hardware and software configuration for each particular subscriber; (b) the CPU speed of the subscriber's computer; (c) the overall condition of the internet on any given day and at any given time; (d) the capacity of the website that a subscriber seeks to visit; and (e) how many other people are attempting to access a particular website at the same time as an RCN subscriber." (Id. ¶ 81.) In order to determine why an RCN subscriber experienced slower internet service, each of these factors would have to be examined. (Id. ¶ 83.) According to RCN's Mr. Laird: "RCN's monitoring of its pipeline demonstrates that there was always sufficient capacity for its subscribers to send and receive data through it and across the internet. The RCN network has more than adequate capacity it needs to provide users of Megamodem Mach 7 and Mach 10 service with the maximum available speed to which they subscribe." (Id. ¶¶ 91-92.)

James Newman's RCN Subscription History

Plaintiff James Newman initially subscribed to RCN's services by subscribing to the "Resilink Gold" bundle on October 31, 2003. (Dkt. No. 39: Tyson Aff. ¶ 18 & Ex. A at RCN0001-0002.) The Resilink Gold bundle included cable television, telephone, and high speed cable modem internet service. (Tyson Aff. ¶ 19.) The Resilink Gold bundle automatically provided subscribers with RCN's best possible internet speed, "so that whatever was RCN's fastest cable modem service available to subscribers at any particular time, a Resilink Gold subscriber received that premium service over RCN's basic internet service, and received that premium service for no additional charge over the cost of the basic service." (Id. ¶ 20.)

Upon subscribing to RCN's Resilink Gold bundle on October 31, 2003, Newman signed and received a copy of a work order, the back of which contained a list of "Terms and Conditions" regarding RCN's services. (Tyson Aff. ¶¶ 18, 21-28 & Ex. A at RCN0002.) The Terms and Conditions on the work order included a paragraph regarding customer payment:

3. Payment of Charges: Customer will be billed monthly in advance for services to be received, plus pro-rata charges, if any, for periods not previously billed. . . . Customer must pay all undisputed monthly charges as itemized on the RCN monthly invoice and/or notify RCN of disputed items within thirty (30) days of receipt or such other amount of time as is prescribed by law. . . . Subject to applicable law, RCN shall issue a credit or refund for any billing error that is brought to its attention by Customer within sixty (60) days of bill. (Tyson Aff. ¶ 26 & Ex. A at RCN0002 ¶ 3.) The Terms and Conditions also specified that "[r]ates for . . . programming or other services are subject to change in accordance with applicable law."

(Tyson Aff. ¶ 27 & Ex. A at RCN 0002 ¶ 18.) The Terms and Conditions also incorporated certain other RCN agreements that were located on RCN's website: the RCN Internet Access Agreement, the Internet Customer Guide, the RCN Acceptable Use Policy, and the RCN High Speed Cable Modem Service Addendum, all of which contained additional terms and conditions relating to RCN's services, including RCN's right to change its fees upon notice to the customer. (Tyson Aff. ¶¶ 28-32 & Exs. A, B, C.)

As of October 31, 2003, when Newman initially subscribed to Resilink Gold, RCN's "premium" internet service was Mach 3, which "afforded users up to 3 megabits per second of data transfer over RCN's internet network." (Tyson Aff. ¶ 36.) Newman received Mach 3 services as part of the Resilink Gold bundle for no additional charge over RCN's lower speed internet service. (Id. ¶ 37.) "The price initially paid by Plaintiff for Mach 3 service, ($25.48) was the price charged by RCN for its lower speed internet service to customers not within an eligible bundle." (Id. ¶ 37 & Ex. E at RCN2091.)

On January 1, 2004, RCN upgraded its premium service to "Mach 5," with an upgraded speed of 5 megabits per second. (Tyson Aff. ¶ 38.) RCN designated Mach 3 service as its basic service at a charge of $25.48 per month. (Id. ¶ 39.) Resilink Gold subscribers, including Newman, automatically received Mach 5 service at no extra charge over the previous charge of $25.48 per month. (Id. ¶ 40 & Ex. F at RCN2083.) Newman continued to pay his monthly RCN bill without inquiry for the next four months. (Tyson Aff. ¶ 41.)

On May 1, 2004, RCN increased its rate for Mach 3 service to $35.29 per month. (Tyson Aff. ¶ 42.) As a result, RCN billed Newman $35.29 per month for Mach 3 service, and because he was a Resilink Gold bundle subscriber, he received Mach 5 service at no extra charge. (Id. ¶ 43 & Ex. G at RCN2067.) Newman continued to pay his monthly RCN bill without complaint to RCN. (Tyson Aff. ¶ 44.)

On September 1, 2004, RCN upgraded its premium service to "Mach 7," with an upgraded speed of 7 megabits per second. (Tyson Aff. ¶ 45.) RCN designated Mach 5 service as its basic service at a charge of $35.29 per month. (Id. ¶ 46.) Resilink Gold subscribers, including Newman, automatically received Mach 7 service at no extra charge over the previous charge of $35.29 per month. (Id. ¶¶ 47-48 & Ex. H at RCN2050.) Newman paid his September, October and November 2004 RCN bills without dispute. (Tyson Aff. ¶¶ 49-57.) The October and November 2004 bills contained prominent notations on the first page that read: "With your ResiLink Gold bundle, you saved $32.00 this month compared to buying these services separately!" (Tyson Aff. Ex. I at RCN2001; Tyson Aff. Ex. J at RCN2006; Tyson Aff. ¶ 50, 55.)

On November 4, 2004, "Plaintiff voluntarily discontinued his Resilink Gold bundle, by canceling RCN's telephone service and switching to another telephone provider." (Tyson Aff. ¶ 58.) After this, RCN billed Newman for his remaining cable television and high speed internet services based on a la carte pricing. (Id. ¶¶ 59-60.)

In November 2004, RCN sent Newman his December 2004 statement for high speed internet and cable television services. (Tyson Aff. ¶ 61 & Ex. M.) This statement charged Newman based on a la carte pricing, including $39.95 for Mach 5 high speed internet service as well as $25.00 for an upgrade to Mach 7 internet service. (Tyson Aff. ¶¶ 64-66 & Ex. M at RCN2014.) This statement also omitted the notation regarding Resilink Gold bundle savings that had appeared on Newman's previous bills. (Tyson Aff. ¶ 62 & Ex. M at RCN2012.) Newman did not dispute the charges in the December 2004 statement and paid it in full. (Tyson Aff. ¶¶ ...


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