Windstream Sues Charter for Chapter 11 'Scare-Tactic' Campaign

Windstream, which filed for Chapter 11 bankruptcy protection in February, has filed suit against Charter Communications, alleging it engaged in a “scare-tactic” campaign to deceive customers into believing it would no longer provide services and was going to liquidate.

The suit was filed in the U.S. Bankruptcy Court for the Southern District of New York. It seeks a temporary restraining order, preliminary injunction and other relief.

Windstream filed for bankruptcy protection after losing its court battle with Aurelius Capital Management, a Windstream bondholder, and its stock was delisted from Nasdaq.

Windstream declined further comment beyond its complaint. Charter also declined to comment.

According to Windstream’s complaint, Charter, through its Spectrum brand, started the campaign to “mislead, deceive, and confuse consumers regarding the reason, status, and consequences” of its Chapter 11 filing. Charter disseminated false advertisements targeting Windstream’s strongest customer bases in Alabama, Georgia, Kentucky, Nebraska, North Carolina and Ohio, it said. This included both business customers and consumers.

“With a clear intent to deceive, Charter’s advertisements were sent to Windstream’s customers in a manner designed to make customers believe that the communication was from Windstream,” it said. “On the envelopes, Charter used Windstream’s trademark and copied the same distinct color pattern from Windstream’s current advertising campaign. Charter deceitfully used this bait-and-switch tactic to lure Windstream customers into opening the advertisement. Instead of a Windstream communication as consumers would have expected, the envelopes contained false and misleading statements about Windstream’s Chapter 11 cases. The advertisements falsely implied that due to its bankruptcy, Windstream would not be able to continue services and was going to liquidate. The advertisements urged customers to switch to Charter because Windstream was in imminent danger of going out of business.”

Windstream points out that Charter sued and obtained a temporary restraining order against DirecTV for engaging in “virtually the same bad acts” during Charter’s Chapter 11 case 10 years ago.

The Chapter 11 filing is not expected to disrupt the debtors’ operations or Windstream’s ability to continue serving its customers, Windstream said in its complaint.

“Contrary to the misleading advertisements published and mailed by Charter to Windstream’s customers, the debtors did not file for Chapter 11 to liquidate or downsize operations, and there has been no interruption to Windstream’s operations or services,” it said. “Rather, Windstream filed for Chapter 11 simply to restructure the company’s balance sheet. This is not a matter of opinion, but of fact.”

Windstream said it has been “forced to expend substantial time, money and resources” to combat these false claims. When distressed customers have called in, Windstream said it has offered upgrades, which many customers have taken.

“Windstream has also incurred costs and resources to educate its customer care associates on how to provide a comprehensive response to Charter’s false claims, which includes an explanation of the true effects of the Chapter 11 proceedings,” Windstream said. “In addition, as a direct result of Charter’s advertising campaign, Windstream has undertaken an extensive mailing and advertising campaign, at significant cost and expense, to counter Charter’s false and misleading advertising campaign. Windstream’s legal department has also expended extensive time and effort in researching and responding to this matter.”

Windstream also alleges Charter disconnected service to …

… about 350 Windstream customers without notice to “fabricate uncertain service.” When Windstream customers contacted Charter to have their services reinstated, they were told that service was not being reinstated because of Windstream’s failure to pay certain amounts due to Charter, according to the complaint.

“Windstream, however, is not currently authorized to make any payments to Charter on account of prepetition debt as a result of the Chapter 11 filing,” Windstream said. “Charter’s attempt to thus collect prepetition is a willful violation of the Bankruptcy Code’s automatic stay and was a deliberate attempt to manufacture a problem with Windstream’s services contract.”

Windstream is seeking triple the amount of the actual/compensatory damages, as well as punitive damages.