N.J. Supreme Court Questions Altice Objections to Prorating Rule

TRENTON -- New Jersey justices challenged Altice on its claim that a state requirement to prorate cable bills is impermissible rate regulation preempted by the Cable Act. The state Supreme Court heard oral argument Tuesday on the New Jersey Board of Public Utilities and Division of Rate Counsel's appeal of a lower court’s ruling for Altice. Justices noted the 1st U.S. Circuit Court of Appeals upheld Maine’s similar rule applying to customers who end service before the month is up.

New Jersey is appealing a 2021 state Appellate Division decision that the federal Cable Act preempts the state prorating rule (see 2110180018). In February, the 3rd Circuit ruled in a related case that state courts should decide the matter (see 2202250059). Earlier this month in a separate case, the U.S. Supreme Court denied a cert petition filed by Charter on a 1st Circuit decision that the Cable Act doesn't preempt Maine's cable TV charges prorating law (see 2301090027). The 1st Circuit reversed a ruling that courts in New Jersey cited in earlier decisions supporting Altice.

"The challenged rule does not regulate rates at all,” argued New Jersey Deputy Solicitor General Michael Zuckerman: It’s instead a “classic form of state power -- consumer protection.” The 1st Circuit ruling toppled the “house of cards” that had previously supported Altice’s legal arguments, testified Rate Counsel Director Brian Lipman. New Jersey’s law isn’t rate regulation,” he stressed. “This is a customer service protection.” Prorating isn’t "a daily rate,” he said. “This is a percentage."

“This is rate regulation in the most fundamental sense of that term,” countered Altice attorney Matthew Hellman: By not allowing the company to charge for the full month, the rule dictates a daily rate cable must charge in the last month of service, he said: It doesn’t matter that the state calls it a consumer protection. The deal is that a customer agrees to buy one month of service and Altice provides a full month, but the New Jersey rule changes the contract so a customer may buy a certain number of days for a certain price, he said.

But Justice Fabiana Pierre-Louis asked the Altice attorney to respond to a rate counsel argument that the canceling customer may not be able to use the full month if the reason were that the person died or moved from Altice’s service territory. “Isn’t that what the customer protection piece is addressing?” she asked. “These customers are affirmatively stating that they do not want this service” for reasons that may include that they can’t use it. Altice makes “accommodations” in certain scenarios, responded Hellman, but someone who left an NFL game at halftime wouldn’t get half the ticket price back.

“How is this regulating a specific price and not the term and condition?” challenged Justice Rachel Wainer Apter, noting the Cable Act differentiates between rates and not-preempted terms and conditions. Some other states require prorating, noted Justice Anne Patterson. “Where are the cases saying that that constitutes rate regulation?" The 1st Circuit ruled the Maine law doesn’t regulate rates, she noted. “If in fact this is rate regulation in disguise, some court somewhere had to have the issue and hold in your direction, and it doesn’t appear to have happened.”

“It’s a reasonable exercise of the state’s police power to protect against deceptive practices,” Justice Douglas Fasciale said. The NJBPU didn’t say rates were too high but rather that a company “can’t charge for a service customers never got,” he said. Noting the 1st Circuit decision, Fasciale asked if the Maine law was identical to New Jersey’s. Zuckerman said the state laws are functionally the same and the 1st Circuit ruling, while not binding, should be “highly persuasive.” But Hellman said the 1st Circuit was wrong and the cases have different context.

The state Supreme Court need not remand to the Appellate Division on other claims it didn’t resolve in its decision, said Zuckerman: The case is fully briefed and the Supreme Court can resolve the 6-year-old case in its entirety. But Hellman said the court should remand on the leftover issues if it finds no federal preemption.

On the remaining issues, justices asked repeatedly about a 2011 NJBPU order granting regulatory waivers to Cablevision, which Altice acquired about five years later. Cablevision prorated bills before and after the 2011 order, but Altice argued the decision gave the company flexibility not to prorate in the future. Justices noted the order addressed a section of billing rules that includes the prorating policy, but the specific relief was unclear. Chief Justice Stuart Rabner asked if Cablevision expressly sought relief from the prorating requirement. Hellman said it didn’t “use those words” but had sought flexibility for the entire section.

Apter said the NJBPU order indicates the company provided sample, prorated bills to show how it would continue the policy, said Apter. Hellman disagreed, saying the company was showing historical practices, but the order gave it flexibility to change the policy. Apter asked why the company didn’t object to the board’s conclusion if that were the case. Hellman said it would have been strange to object to an order granting waiver. Patterson asked why the company wasn’t more concerned about the board’s apparent expectation in the order that prorating would continue.

“The justice asked the right questions,” particularly on the importance of the 1st Circuit case, Lipman told us afterward. The state Supreme Court sometimes reaches decisions in 30 days, though it could take longer, he said. Five of seven justices heard argument Tuesday and those five will decide the case, he said. That’s due to recusals by Justice Lee Solomon, who was NJBPU president at the time of the 2011 waiver decision and is husband of current Commissioner Dianne Solomon, and by Judge Jack Sabatino, who is currently assigned to the Supreme Court from the appellate court that previously heard the Altice case, said Lipman.

If the court decides the state law isn’t preempted, Altice could file cert at the U.S. Supreme Court, which could take this case despite declining to hear the Maine case, said Lipman. Also, the state Supreme Court could remand it to the Appellate Division to decide if the BPU properly enforced its regulations, he said.