IN THE MATTER OF THE ALLEGED FAILURE OF ALTICE USA, INC., ETC. (NEW JERSEY BOARD OF PUBLIC UTILITIES) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1269-19
IN THE MATTER OF THE
ALLEGED FAILURE OF ALTICE
USA, INC., TO COMPLY WITH
CERTAIN PROVISIONS OF THE
NEW JERSEY CABLE
TELEVISION ACT, N.J.S.A.
48:5A-1 ET SEQ., AND THE NEW
JERSEY ADMINISTRATIVE
CODE, N.J.A.C. 14:18-1.1 ET
SEQ.
______________________________
Argued September 20, 2021 – Decided October 15, 2021
Before Judges Sabatino and Mayer.
On appeal from the New Jersey Board of Public
Utilities, Docket No. CS18121288.
Matthew S. Hellman (Jenner & Block, LLP) of the
District of Columbia bar, admitted pro hac vice, argued
the cause for appellant (Schenck, Price, Smith & King,
LLP, attorneys; Jeffrey T. LaRosa, Howard J. Symons,
and Matthew S. Hellman, on the briefs).
Alec Schierenbeck, Deputy State Solicitor, argued the
cause for respondent New Jersey Board of Public
Utilities (Andrew J. Bruck, Acting Attorney General,
attorney; Melissa H. Raksa, Assistant Attorney
General, of counsel; Meliha Arnautovic and Paul
Youchak, Deputy Attorneys General, on the brief).
Maria T. Novas-Ruiz, Assistant Deputy Rate Counsel,
argued the cause for respondent New Jersey Division of
Rate Counsel (Stefanie A. Brand, Director, attorney;
Maria T. Novas-Ruiz, on the brief).
PER CURIAM
Appellant Altice USA, Inc. (Altice) appeals from a November 13, 2019
final agency decision issued by respondent New Jersey Board of Public Utilities
(BPU). Because we find the billing method under N.J.A.C. 14:18-3.8, requiring
prorated billing for cable service, preempted by the Federal Cable
Communications Policy Act of 1984 (Cable Act), 47 U.S.C. §§ 521 to -573, we
reverse.
The following facts are undisputed. In May 2011, Altice's predecessor,
Cablevision, filed a petition with the BPU requesting relief from the "method of
billing" under N.J.A.C. 14:18-3.8. Cablevision contended "[f]orbearance from
the rule would enable Cablevision to meet its customers' billing needs by
allowing it to construct tailored billing arrangements and payment plans," while
remaining competitive with other cable service providers. In September 2011,
the BPU issued a Rule Relief Order (2011 Rule Relief Order) permitting
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Cablevision to prorate its bills provided such billing "would not harm
consumers."
In 2015, Altice sought to merge with Cablevision. The BPU approved the
merger on May 26, 2016. As part of the merger approval, Altice agreed to "abide
by applicable customer service standards, performance standards, and service
metrics as delineated under N.J.A.C. Title 14, including, but not limited to
Chapters 3, 10, and 18, and N.J.S.A. 48:5A, including, but not limited to
requirements related to billing practices and termination." Altice "assert[ed]
that there [we]re currently no concrete plans to change rates, terms, or service
conditions or operations of the systems which [may] develop in response to the
market and regulatory developments, including changes with respect to
finances, operations, accounting, rates, depreciation, operating schedule,
maintenance and management, affecting the public interest."
Following the merger, Altice implemented a "whole-month billing policy"
for its cable service operations across twenty-one states, including New Jersey.
Under the whole-month billing policy, Altice customers paid for cable service,
in advance, on a monthly basis. Altice did not issue a refund if a customer opted
to cancel service prior to the end of the month already billed and paid.
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Altice notified its customers that prorated billing would cease as of
October 31, 2016. The BPU received more than one-hundred complaints from
dissatisfied customers in response to Altice's billing change. In March 2017,
the BPU advised Altice its billing practice was non-compliant with N.J.A.C.
14:18-3.8.
On December 18, 2018, the BPU issued an order to show cause requiring
Altice explain why its failure to prorate customer bills should not immediately
cease. Altice responded the BPU's 2011 Rule Relief Order granted "'flexibility'
to meet . . . competitive challenges[.]" Because Altice's competitors eliminated
prorated billing, Altice argued it required flexibility to do the same.
In November 2019, the BPU issued a cease-and-desist order to Altice. The
order required Altice to resume prorating bills for customers terminating service
prior to the end of a billing month and issue refunds to all affected customers.
The BPU claimed Altice's elimination of prorated billing violated the 2011 Rule
Relief Order and the conditions of the 2016 merger approval.
Two weeks later, Altice requested the BPU stay the cease-and-desist
order, which the BPU denied. Around the same time, Altice filed suit in the
United States District Court for the District of New Jersey, challenging the
BPU's order. Federal District Court Judge Brian R. Martinotti issued a
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preliminary injunction against the BPU's enforcement of its cease-and-desist
order. Altice subsequently moved for judgment on the pleadings, which Judge
Martinotti granted in a March 23, 2021 order and written decision. Judge
Martinotti's disposition of the federal court case in favor of Altice is presently
pending appeal before the United States Court of Appeals for the Third Circuit.
On January 7, 2020, Altice appealed the BPU's cease-and-desist order to
this court. On appeal, Altice argues the following: the order violated State law;
the order is arbitrary and capricious based on the BPU's misinterpretation of the
2011 Rule Relief Order; its whole-month billing practice does not violate the
2016 merger approval; the order exceeds the BPU's authority; the Cable Act
preempts rate regulation by the State; and order is rate regulation, not a
consumer protection measure or customer service requirement as claimed by the
BPU.
We first address the preemption issue. Altice argues before this court, as
it did before Judge Martinotti, the BPU's cease-and-desist order is preempted
because the BPU is not permitted to regulate rates under the Cable Act.
According to Altice, the BPU's order regulated the rates charged to Altice's
customers by declining to allow whole-month billing and requiring proration of
rates on a daily basis when a customer terminates cable service prior to the end
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of the month. Altice explains its service is sold to customers at a bulk monthly
rate and the BPU's mandate improperly converts its whole-month billing
structure into a daily rate for the provision of cable services to consumers.
Altice further contends the BPU's edict is neither a "consumer protection
measure" nor a "customer service requirement" and, therefore, is preempted.
The BPU counters "requiring service providers to follow the rules and to
enforce regulations that protect the public interest and ensure customers are not
harmed by anticompetitive [c]ompany practices does not rise to the level of rate
regulation under the law." Because Altice discontinued prorating bills, the BPU
claims cable consumers suffered financial harm. The BPU also asserts it has
authority to enforce consumer protection measures under the Cable Act and,
therefore, federal preemption did not apply.
We review issues of federal preemption de novo. In re Reglan Litig., 226
N.J. 315, 327 (2016). "The doctrine of federal preemption finds its source in
the Supremacy Clause of the United States Constitution." Id. at 328. "The party
claiming preemption bears the burden of supporting that claim by 'clear and
manifest evidence.'" Franklin Tower One, L.L.C. v. N.M., 157 N.J. 602, 615
(1999) (quoting Pa. Med. Soc'y v. Marconis, 942 F.2d 842, 853 (3d Cir. 1991)).
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When considering issues of preemption, the overriding principle "is
whether Congress intended to preempt state law and power." Vill. of Ridgefield
Park v. N.Y., Susquehanna & W. Ry. Corp., 318 N.J. Super. 385, 396 (1999)
(citing Medtronic, Inc. v. Lohr, 518 U.S. 470, 494 (1996)). "Congress' intent is
'primarily discerned from the language of the pre-emption statute and the
statutory framework surrounding it.'" Id. at 396-97 (quoting Medtronic, Inc.,
518 U.S. at 486). Absent specific legislative intent to the contrary, a statute's
plain meaning should be considered, and if clear and unambiguous, the ordinary
meaning must be accepted. Id. at 397.
"Preemption may be either express or implied." In re Reglan Lit., 226
N.J. at 328 (quoting Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 98
(1992)). "Express preemption is determined from an examination of the explicit
language used by Congress." Gonzales v. Ideal Tile Importing Co., 184 N.J.
415, 419 (2005) (citing Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977)).
Preemption may be implied "where the federal legislation is so comprehensive
that it creates the inference that Congress intended to leave no room for state
regulation in the area." Franklin Tower One, L.L.C., 157 N.J. at 615.
We begin by analyzing whether the federal Cable Act preempts New
Jersey's billing regulations under N.J.A.C. 14:18-3.8. The Cable Act seeks to
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"establish guidelines for the exercise of Federal, State and local authority with
respect to the regulation of cable systems . . . ." 47 U.S.C. § 521(3). In balancing
the relationship between federal and state legislation, the Cable Act provides
"[a]ny franchising authority 1 may not regulate the services, facilities, and
equipment provided by a cable operator except to the extent consistent with" the
Act. Id. § 544(a). "If the [Federal Communication] Commission finds that a
cable system is subject to effective competition, the rates for the provision of
cable service by such system shall not be subject to regulation by the
Commission or by a State or franchising authority." Id. at § 543(a)(2). The
Cable Act also provides, "any provision of law of any [s]tate, . . . which is
inconsistent with this chapter shall be deemed to be preempted and superseded."
Id. at § 556(c). However, the Cable Act permits states to enact and enforce
consumer protection laws not specifically preempted. Id. at § 552(d)(1).
In a January 22, 2020 written opinion, Judge Martinotti addressed
preemption under the Cable Act in a matter involving the same parties in this
appeal. He issued a preliminary injunction against the BPU, finding "the Cable
Act prohibits states from regulating 'the rates from the provision of cable
1
The parties agree the New Jersey agency with franchising authority is the BPU.
See 47 U.S.C. § 541(b)(1).
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service,'" and "[a] requirement that service providers prorate bills is a type of
rate regulation." Altice USA, Inc. v. N.J. Bd. of Pub. Utils., No. 19-cv-21371,
2020 WL 359398, at *8 (D.N.J. Jan. 22, 2020). In concluding "[a] requirement
that service providers prorate bills is a type of rate regulation," Judge Martinotti
relied on a federal court decision, Windstream Neb., Inc. v. Neb. Pub. Serv.
Comm'n, No. CI-10-2399, 2011 WL 13359491, at *6 (D. Neb. June 9, 2011)
(holding a Nebraska law requiring a telecommunication common carrier to
prorate customer charges upon initiation or termination of service constituted
rate regulation prohibited by the Cable Act).
After concluding the BPU's cease-and-desist order constituted rate
regulation, Judge Martinotti then examined whether Altice was "subject to
effective competition." He explained "[i]n a series of orders between 2002 and
2010, the FCC found that Cablevision was subject to effective competition[,]"
and "[i]n 2015, the FCC 'adopt[ed] a rebuttable presumption that [all] cable
operators are subject to Competing Provider Effective Competition." Ibid. (first
citing ECF No. 17-1, at 2 n.2) (second citing In re Amend. to Comm'n's Rules
Concerning Effective Competition, 30 FCC Rcd. 6574, 6577 (June 3, 2015)).
Consequently, Judge Martinotti concluded Altice, as Cablevision's successor,
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was engaged in effective competition and could not be subject to rate regulation
under the Cable Act. Ibid.The BPU argues Judge Martinotti's reasoning was flawed because there is
a presumption against preemption when considering a state's enforcement
action. It also claims its cease-and-desist order, enforcing N.J.A.C. 14:18-3.8,
qualified as a consumer protection measure or customer service requirement
pursuant to 47 U.S.C. § 552(d) and, therefore, was not preempted.
We reject these arguments for the reasons expressed by Judge Martinotti
in an opinion in a related case, Altice USA, Inc. v. Fiordaliso, No. 19-cv-21371,
2021 WL 1138152 (D.N.J. March 23, 2021). First, Judge Martinotti found the
"language of the Cable Act [wa]s clear enough to overcome t[he] presumption"
favoring preemption. Fiordaliso, 2021 WL 1138152, at *4. Relying on
Spectrum Northeast LLC v. Frey, 496 F.Supp.3d 507, 510 (D. Me. 2020), Judge
Martinotti explained "[t]hough BPU's order and N.J.A.C. 14:18-3.8(c) only
restrict Altice's billing for 'the month in which a subscriber cancels her cable
service, its prohibition on charges for service that was not provided have the
effect of prescribing a daily rate for the service that was provided before the
cancellation.'" Id. at *4. Thus, Judge Martinotti determined the BPU's alteration
of Altice's whole-month billing practice to a per diem billing methodology
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constituted rate regulation and was preempted by the clear and unambiguous
language of the Cable Act.
Judge Martinotti also held the BPU's cease-and-desist order was not a
"state customer service requirement." Id. at *5. He found "customer service"
included "requirements governing (1) cable system office hours and telephone
availability; (2) installations, outages, and service calls; and (3) communications
between the cable operator and the subscriber" and did not include governance
of "the availability or structure of refunds." Id. at *6 (quoting Spectrum
Northeast LLC, 496 F.Supp.3d at 515-16). Because "[t]he overarching purposes
of the Cable Act [are] to 'establish a national policy concerning cable
communications' and to 'establish guidelines for the exercise of Federal, State,
and local authority with respect to the regulation of cable systems[,]'" Judge
Martinotti determined the BPU's order could not be considered a "customer
service requirement." Ibid. (quoting Spectrum Northeast LLC, 496 F.Supp.3d
at 516). According to Judge Martinotti, to conclude otherwise would allow
states to circumvent the Cable Act by claiming "consumer protection,"
potentially lead to incongruous state regulations, and undermine the purpose of
the Cable Act. Ibid. (quoting Spectrum Northeast LLC, 496 F.Supp.3d at 516).
The Cable Act only authorizes states to enact "any consumer protection law, to
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the extent not specifically preempted by this subchapter." 47 U.S.C. § 552(d)(1).
It is clear from the language in the Cable Act, Congress specifically preempted
rate regulation for cable service providers. Id. at §543(a)(1).
While federal district court decisions are not "binding" on this court, such
decisions may be considered persuasive. See Dewey v. R.J. Reynolds Tobacco
Co., 121 N.J. 69, 79-80 (1990). Having reviewed Judge Martinotti's decisions
in the matters pending before him, we are persuaded his thorough and detailed
legal analysis applies to the matter pending before this court. Judge Martinotti
reviewed the same facts and issues and determined preemption applied. After
considering the judge's cogent reasoning and the lack of New Jersey case law
compelling an opposite outcome, we adopt the reasoning articulated by Judge
Martinotti, finding the Cable Act expressly preempted N.J.A.C. 14:18-3.8(c).
Because we agree the Cable Act preempts N.J.A.C. 14:18-3.8, we need not
address Altice's other arguments. Therefore, the BPU's 2019 cease-and-desist
order is invalidated.
Reversed. We do not retain jurisdiction.
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