Commercial Division Blog
Internet Providers' Claims of Access Speed "Up To" A Certain Number Can Be Subject of Fraud Claim if They Cannot Achieve That Speed
On February 13, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in People v. Charter Communications, Inc., 2018 NY Slip Op. 30253(U), holding that internet providers' claims of speed "up to" a certain number can be the subject of a fraud claim, explaining:
Defendants argue that their representations regarding internet speeds were not misleading. Spectrum-TWC explains it advertised its broadband service plans as providing speeds "up to" a particular speed, such as 20 Mbps downstream, promising nothing more than maximum speeds, so consumers should have expected to receive the advertised speeds or less.
Defendants' theory is contrary to New York law regarding "up to" claims. Spectrum-TWC's argument that consumers should have expected to receive anything less than or equal to the advertised "up to" speeds has been rejected by the Court of Appeals where, as alleged here, the advertised "up to" speeds are functionally unattainable as a result of the defendants' knowing conduct. In Goshen v Mutual Life Ins. Co. (98 NY2d 314 ), the Court of Appeals reinstated the plaintiffs' deceptive practices claims alleging that their Internet connections rarely, if ever, approached the high speed expressly represented by the defendant Internet service provider. The plaintiff consumers alleged that their ISPs advertised speeds up to 126x faster than your 56K modem when the services rarely, if ever, reached the promised "up to" speeds. Although the Appellate Division found that the "up to" language clearly sets forth a maximum possible speed, not the standard speed at which the service would operate, the Court of Appeals reversed this ruling, noting that the plaintiffs' allegation that the service consumers purchased was defective due to malfunctions largely or wholly within defendants' control, clearly stated a claim for deceptive business practices. Likewise, here, plaintiff alleges Spectrum-TWC was unable to fulfill the promises it made to consumers to provide specific Internet speeds due to factors wholly within its control, namely the Modem Failures, Network Failures, and Wireless Failures.
Moreover, the Third Department has held that, for purposes of a consumer fraud action, the phrase "up to" does not reflect a maximum, but rather, expresses a representative amount a consumer would receive. In Applied Card (27 AD3d at 108), the Attorney General alleged that the respondent had falsely advertised that approved credit applicants would receive credit limits of "up to" $2,500, when actual limits were often less than $400. The court concluded that a reasonable consumer would expect that "the 'up to' amount boldly displayed was representative of a likely amount that a consumer would receive. Similarly, here, plaintiff alleges not only that consumers expected to receive the speeds that Spectrum-TWC falsely advertised, but that Spectrum-TWC knew it could not meet its own subscribers' expectations.
(Internal quotations and citations omitted).
Commercial litigation frequently involves fraud-based claims. As this decision illustrates, sometimes something that is literally true still can be fraudulent because it is nonetheless misleading. Contact Schlam Stone & Dolan partner John Lundin at email@example.com if you or a client have a question regarding a fraud-based claim.