PEOPLE BY SCHNEIDERMAN v. NCTA (2018)

Order, Supreme Court, New York County (O. Peter Sherwood, J.), entered February 16, 2018, which denied defendants' motion to dismiss the complaint, unanimously affirmed, without costs.

This civil enforcement action alleges that in the marketing of broadband Internet service defendants have engaged and continue to engage in fraudulent practices in connection with advertised promises to subscribers about Internet speeds and reliable access to online content.  The complaint asserts claims pursuant to Executive Law § 63(12) and General Business Law §§ 349 and 350.

The court correctly rejected defendants' argument that the claims based on allegations of false promises about broadband speeds involve an irreconcilable conflict between federal and state law that requires a finding of preemption.  The Federal Communications Commission's “Transparency Rule” requires providers of broadband service to “publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services” (47 CFR 8.3).  Defendants make official disclosures about broadband speeds (actual speeds measured according to a testing protocol on the modems of consumers deemed representative) in accordance with the federal rule.  The complaint alleges that defendants' use of their official disclosures in consumer advertisements is misleading, because other statements in the advertisements give consumers the false impression that the disclosed speeds represent speeds that consumers can expect to experience on their devices, including wireless devices, consistently (cf. Matter of People v. Applied Card, Sys., Inc., 11 N.Y.3d 105, 863 N.Y.S.2d 615, 894 N.E.2d 1 [2008] [rejecting argument that false advertising claim was preempted by federal credit card disclosure requirements], cert denied 555 U.S. 1136, 129 S.Ct. 999, 173 L.Ed.2d 292 [2009] ).  The Transparency Rule does not preempt state laws “that prevent fraud, deception and false advertising” (id. at 114, 863 N.Y.S.2d 615, 894 N.E.2d 1).

The court correctly determined that the complaint's allegations about the advertisements' representations of speeds “up to” a certain level state a cause of action (see Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 746 N.Y.S.2d 858, 774 N.E.2d 1190 [2002] ).  Issues of fact exist as to whether defendants delivered the advertised speed levels consistently.

The court correctly declined to dismiss claims based on allegations about network quality and reliability on the ground that some of the language in the advertisements is mere puffery, because other statements in the advertisements are not mere puffery and are actionable (see Bader v. Siegel, 238 A.D.2d 272, 657 N.Y.S.2d 28 [1st Dept. 1997] ).  Since the record does not include the full content of the advertisements cited in the complaint, it would be premature to try to determine which, if any, of the cited advertisements do not support a false advertising claim because they are mere puffery.