Windstream to Charter Communications: Time to pay up for poaching subscribers

Windstream files a memorandum that seeks payment from Charter for poaching some of its subscribers after it filed for Chapter 11 bankruptcy. (Pixabay)

Windstream has filed a memorandum that seeks payment from Charter for poaching some of its subscribers after it filed for Chapter 11 bankruptcy.

After losing close to $20 million and about 1,750 subscribers, Windstream said its time for Charter to "face the consequences" for its deceptive advertising around Windstream's Chapter 11 bankruptcy.

In a 52-page post-trial memorandum filed last week with the U.S. Bankruptcy Court for the Southern District of New York, Windstream asked Judge Robert Drain, who is also overseeing its bankruptcy proceeding, to issue a verdict that seeks to have Charter pay $19.9 million for its losses, which includes legal fees, litigation costs and internal legal costs.

"Charter should have recognized its unlawful actions and settled this adversary proceeding rather than 'dig a deeper hole' for itself," Windstream said in its June 9 filing. "Charter, however, has stubbornly refused to recognize its unlawful conduct (despite bringing suit against DirecTV over the same type of false advertising when it filed itself for bankruptcy) and make Windstream whole for the harm Charter inflicted upon it."

Charter Communications declined to comment on Windstream's recent filing. Windstream expects a court decision on its latest filing next month, according to Windstream's David Avery, vice president for corporate affairs.

In February of last year, Windstream lost a legal battle with New York hedge fund Aurelius Capital Management over whether Windstream had defaulted on bonds by spinning off Uniti Group four years ago. The same month, Windstream filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York.

RELATED: Windstream accuses Charter of scare tactics to take its subscribers

In April of last year, Windstream filed a federal lawsuit against Charter that said Charter was engaging in a "scare-tactic campaign" to entice Windstream subscribers to switch over to Charter. Among other issues, Windstream said in its filing that Charter used envelopes that had Windstream's trademark and company colors to imply that it would not be able to provide services to its subscribers and that it was going to liquidate its assets.

Windstream said Charter executives knew that it would be "business as usual" for Windstream despite the Chapter 11 filing, and that it had enough funds on hand to continue its operations.

The court entered a temporary restraining order against Charter on April 16 of last year. Evidentiary hearings were held by the court on April 15 and May 14 in 2019, with Judge Drain ruling that there was "good and sufficient" cause to issue a preliminary injunction.

Charter was also barred from using "Goodbye, Windstream, Hello Spectrum," or "Windstream Customer, Don't Risk Losing your TV and Internet Service" in any of its ads or door-to-door campaigns.

In December, Judge Drain issued a partial summary judgment that found Charter liable for violations of the federal Lanham Act and state laws by trying to convince Windstream customers that its bankruptcy filing meant it would no longer be able to provide its services.

Citing a lack of evidence to support Windstream's claims, Charter appealed the ruling in January.

In its latest filing, Windstream said close to 1,400 of its subscribers switched their services to Charter and at least 4,500 Windstream customers ported their telephone service to Charter, all of which cost Windstream up to $5.1 million in revenue.

"Moreover, Windstream was forced to incur significant expenses to mitigate the damage caused by Charter’s false advertising, according to Windstream's filing. "Windstream tasked employees with rectifying Charter’s disconnects and issued customer credits to mollify its disconnected customers In April 2019, Windstream was forced to launch a corrective advertising campaign to explain to its customers that it was not going out of business."

In September 2019, Windstream launched a promotional campaign to attract new customers to make up for the customers who were deterred from subscribing to Windstream in the first place due to Charter’s false advertising. Windstream said that campaign cost it more than $4 million.

"The time has now come for Charter to face the consequences of its unlawful actions and its frivolous and dilatory conduct of this litigation," Windstream said its filing.

Windstream is targeting late August to emerge from its own Chapter 11 bankruptcy, which was filed early last year, once it gains regulatory approvals. The court the will hold a confirmation hearing on Windstream's reorganization plan on June 24.