In re Adelphia Communications Corp.

• Decision Date: 03 May 2005
• Docket Number: Bankruptcy No. 02-41729 (REG).,Adversary No. 02-8074 (REG).
• Citation: 325 B.R. 89
• Parties: In re ADELPHIA COMMUNICATIONS CORP., et al., Debtors. Gerald Dibbern, individually and on behalf of all others similarly situated, Plaintiff, v. Adelphia Communications Corp., John Does 1-20 and XYZ Company Nos. 1-50, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

Page 89

325 B.R. 89

In re ADELPHIA COMMUNICATIONS CORP., et al., Debtors Gerald Dibbern, individually and on behalf of all others similarly situated, Plaintiff, v. Adelphia Communications Corp., John Does 1-20 and XYZ Company Nos. 1-50, Defendants.

Bankruptcy No. 02-41729 (REG).

Adversary No. 02-8074 (REG).

United States Bankruptcy Court, S.D. New York.

May 3, 2005.

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Law Offices of Stephen V. Saia, by Stephen V. Saia, Esq. (argued), Pembroke, MA, Johnson & Perkinson, by Jacob B. Perkinson, Esq., South Burlington, VT, for plaintiff Gerald Dibbern.

Willkie, Farr & Gallagher, by Brian E. O'Connor, Esq. (argued), Joanna Rotgers, Esq., for defendant Adelphia Communications Corp.

ROBERT E. GERBER, Bankruptcy Judge.

In this adversary proceeding under the umbrella of the jointly administered chapter 11 cases of Adelphia Communications Corporation ("Adelphia") and its subsidiaries, plaintiff Gerald Dibbern — a basic service tier only ("BST-only") subscriber to Adelphia cable television service in Massachusetts — asserts a variety of causes of action for alleged overcharges by the unnamed Adelphia subsidiary with whom he did business (the "Massachusetts Subsidiary").¹ Dibbern bases his claims on the Massachusetts Subsidiary's alleged failures to tell him, after his local system was upgraded, that he no longer needed a cable converter box. He alleges that, as a result, he was charged for a cable converter box that he did not need.

Dibbern makes like claims on behalf of a nationwide class of "Adelphia" consumers, who allegedly similarly did not need cable converter boxes but were not told that. He seeks class action certification for that nationwide class.²

Dibbern asserts causes of action for violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law³ ("UTPCPL"), common law fraud, breach of contract, unjust enrichment, for an accounting, and for the imposition of a constructive trust.

Adelphia moves to dismiss under Fed.R.Civ.P. 12(b)(6). Adelphia's motion is granted.

Procedural History

Dibbern first brought an action against Adelphia on June 18, 2002, in Pennsylvania state court. Dibbern alleged in the state court action, as he alleges here, that Adelphia had charged, and continues to charge, BST-only cable subscribers for unnecessary cable converter boxes. The complaint in the state court action asserted a claim under the Pennsylvania UTPCPL, as well as claims for breach of contract and fraud. Shortly thereafter, on June 25, 2002, Adelphia and many of its subsidiaries filed (for unrelated reasons) the chapter 11 cases that are now pending in this Court, and Dibbern's state court action was stayed.

On July 8, 2002, Dibbern filed a "class" proof of claim — on his own behalf and on behalf of a nationwide class of subscribers assertedly similarly situated — alleging that "Adelphia" improperly billed him for the rental of two cable converter boxes.⁴ His bills, some of which were attached to his proof of claim, included monthly charges of $3.20 for "Converter Rental," except that his August 2001 and September 2001 bills reflected a monthly charge of $6.50 for "Converter Rental." Dibbern listed the amount of his claim as ranging from $815 million to $1.191 billion.

Dibbern then filed this adversary proceeding, again as a nationwide class action, raising issues that largely overlap with those that he had raised in his proof of claim. Insofar as relevant to Adelphia, the complaint in this adversary proceeding made the same allegations and asserted the same claims as in the complaint in the earlier state court action, except that claims for unjust enrichment, an accounting, a constructive trust, non-dischargeability, and subordination were added. Dibbern later amended his complaint, dropping the claims for nondischargeability and subordination. The Court's further references to his allegations are to his complaint as amended (the "Amended Complaint").

Facts

Parsed of duplicative allegations, and characterizing the allegations in Dibbern's favor, his Amended Complaint alleges the following.

Basic Factual Allegations

As alleged in the Amended Complaint, and taken as true for the purposes of this motion, Dibbern is a resident of Massachusetts, and has been a BST-only customer of "Adelphia" or its predecessors for six years.⁵ Dibbern had been a subscriber of Harron Communications, Corp. ("Harron"), which was acquired by Adelphia in April 1999. Dibbern rented two converter boxes and was charged between $1.60 and $3.25 per box per month, which amounts he paid by making payments to a post office box in Pennsylvania.⁶ Prior to Adelphia's acquisition of Harron, Harron's BST-only subscribers, including Dibbern, needed to rent cable converter box equipment to view basic programming.⁷

At the time of the acquisition of Harron in April 1999, Adelphia announced that it expected to consolidate the majority of Harron's cable systems with existing Adelphia cable systems, and estimated that at the time of closing on its acquisition of Harron, approximately 67% of Harron's cable plant would be upgraded.⁸ The acquisition of Harron and the upgrade of the former Harron system rendered unnecessary the converter boxes that Dibbern rented from Adelphia.⁹

In other allegations, apparently not relating to his own cable service,¹⁰ Dibbern alleges that between May 1997 and November 2000, Adelphia made a series of acquisitions of cable systems, and integrated those systems into its existing systems. Adelphia also upgraded those cable systems, and integrated them into its existing systems. Thus, for those other systems too, it became unnecessary for BST-only subscribers with cable-ready televisions to continue to rent converter box equipment from Adelphia.

Then, in further allegations (once more relating to his own cable service), Dibbern alleges that in May 2001, Adelphia disclosed¹¹ (the "May 2001 Notice") to its subscribers on their billing statements that they no longer needed to rent cable converter box equipment for BST-only service if they had cable-ready televisions.¹² Allegedly, the May 2001 Notice came too late, and was inadequate to apprise subscribers that they no longer needed to rent cable converter box equipment for BST-only service if they had cable-ready televisions.¹³

In a second notice in September 2001 (the "September 2001 Notice"), Adelphia again disclosed to its subscribers on their billing statements that they no longer needed to rent cable converter boxes for BST-only service if they had cable-ready televisions.¹⁴ Allegedly, this disclosure also came too late and was insufficient.

Legal Contentions and Mixed Questions of Fact and Law

In the context of the foregoing, Dibbern makes a number of further contentions, which are contentions of law or mixed questions of fact and law. He alleges that:

(a) "Federal rules require defendants to provide at least 30 days notice to subscribers before implementing any change in services;"¹⁵ (b) "Federal law requires that defendants `provide notice of service and rate changes to subscribers using any reasonable written means at its sole discretion;'"¹⁶ and

(c) "Accordingly, defendants had a duty to disclose to plaintiff and members of the class, pursuant to 47 C.F.R. § 76.964(h) and 47 U.S.C. § 552(c), the upgrade and change of service which rendered unnecessary the converter boxes."¹⁷

Dibbern then goes on to say that the defendants knowingly and/or recklessly:¹⁸

. "failed to notify plaintiff and members of the class of this change in cable service;"

. "failed to cease billing plaintiff and members of the class for unnecessary rental fees;" and

. "engaged in unfair and deceptive business practices designed to induce plaintiff and members of the class to pay for unnecessary cable converter box equipment."

Dibbern also alleges that the defendants knowingly or recklessly:

. "failed to provide adequate notice to plaintiff and the class members that they no longer needed to rent cable converter box equipment ... in order to receive basic cable services;"¹⁹

. "failed to provide adequate notice to plaintiff and the class members that they were entitled to purchase a compatible cable converter box from a retail vendor other than defendant as required by ... [s]ection 544a;"²⁰

. "failed to advise plaintiff and the class members that they had paid or would pay cable converter box rental fees in excess of the actual cost of the equipment;"²¹

. "disregarded from their records which subscribers had BST-only service and which subscribers did not need to rent the converter box equipment,"²² when continuing to include rental charges for such in customer bills,²³ even though they "had an obligation to cease billing plaintiff and members of the class, independent of the notice requirements...."²⁴

As a consequence, Dibbern alleges that from at least April 12, 1999 (the date on which Adelphia acquired Harron), and continuing until the date of the filing of the Amended Complaint (in November 2002) "Adelphia" (individually and/or jointly with the XYZ Companies) knowingly or recklessly "engaged in unlawful schemes and course of conduct that induced plaintiff and class members to pay for cable converter box equipment rental through one or more of the following [six] unfair and/or deceptive acts and/or practices:"²⁵

(a) improperly charging its BST-only customers for cable converter box equipment that was not required;

(b) "misrepresenting through its billing statements and/or suppressing material facts designed to confuse or mislead plaintiff and members of the class into believing that such rental charges were in fact proper;"

(c) "overcharging its BST-only customers the fair rental value of the equipment;"

(d) "fail[ing] to adequately advise plaintiff and the class members that there were alternatives to renting converter box equipment from Adelphia, including purchasing compatible cable converter box...