Class Sues Time Warner Over Modem Fee

MANHATTAN (CN) - Time Warner Cable is defrauding millions of customers by making them pay to lease used modems along with their monthly fees, a class action claims in state court.

Lead plaintiff Kathleen McNally sued Time Warner Cable in New York County Supreme Court, on behalf of a proposed class of millions.

"Prior to October 15th, the company provided customers with Internet modems included as part of their monthly service plans," the complaint states. "Now, however, TWC is charging millions of customers an extra $3.95 per month for the privilege of 'leasing' old modems - used pieces of equipment that the company supplied and typically wrote off as worthless years ago."

Time Warner has more than 50,000 employees and more than 15 million customers, making it the second-largest cable company in the United States.

Given the company's size, the $3.95 lease charge adds up to "a virtually guaranteed $40+ million cash flow per month," the complaint states.

"With revenues already topping $19.7 billion in 2011, the new modem fee could quickly pump another $500+ million per year into the corporate coffers and push the company over the $20 billion mark.

"To prevent defendant TWC's massive consumer fraud and breach of contract, the New York plaintiffs seek a declaratory judgment and injunction to stop the media giant from following through on its scheme to charge this surprise fee both in New York as well as the 27 other states where Time Warner Cable has cable Internet customers."

The class claims that Time Warner's code of professional business conduct instructs its employees to ask themselves three questions when making a business decision: "Does it feel right? How would the person I respect the most view this decision? How would this look in a newspaper?"

The plaintiffs answer in the complaint: "No, the surprise new Lease Fee doesn't feel right; the people you respect would call it a scam; and it will look terrible once the media gets hold of the story. Yes, it's the same old story once again, a corporate behemoth putting profits over people by way of some sneaky fee."

Time Warner spokesman Eric Mangan declined to comment on pending litigation.

The class seeks an injunction and damages for breach of contract, consumer fraud, unjust enrichment and other charges.

It is represented by Steven Wittels, of Armonk, and Richard Roth in New York City.

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