Comcast won a significant victory in a potential class-action privacy lawsuit this week, when a federal judge granted the company's request to send the matter to arbitration.
U.S. District Court Judge Robert W. Gettleman in the Northern District of Illinois upheld a clause in Comcast's subscriber agreement, which provide that the company choose to go to arbitration in any disputes with customers. Consumers who sue corporations generally prefer litigating cases in court -- where juries can issue large damage awards -- rather than taking cases to arbitration.
The lawsuit was brought by two consumers -- California resident Aaron Lloyd, who subscribed to Comcast's broadband service from 2008 through 2010, and Illinois resident Steve Bayer, who subscribed to cable service from 2006 through 2007. They allege that Comcast violates federal and state privacy laws by retaining customers' personal information -- including names, social security numbers and financial account information -- after they have canceled service.
They argued that Comcast “no longer has any reason to retain the sensitive personal information” after they stopped subscribing. “On information and belief, Comcast has not taken a single step toward shredding, erasing, encrypting, or otherwise modifying ... [customers'] personal information so as to make it unreadable or undecipherable by others,” they alleged in their complaint, which sought class-action status.
Comcast filed legal papers arguing that the case should be sent to arbitration. The company said that all customers receive a “Welcome Kit,” which contains a subscriber agreement providing that the company can elect to have disputes decided by an arbitrator. The subscriber agreement sent to Lloyd also had a provision allowing him to opt out of arbitration, but only within 30 days of receiving the agreement. The subscriber agreement also bans class-action lawsuits.
Lloyd and Bayer unsuccessfully argued that the arbitration requirement shouldn't be enforced.
Comcast isn't the only company to face a lawsuit for allegedly preserving consumers' personal information. Netflix was sued several years ago for allegedly retaining users' names and their movie-viewing history after they canceled their memberships. The consumers who sued in that case argued that Netflix was violating the federal Video Privacy Protection Act, which says that video rental companies must destroy consumers' personal information within one year of cancellation of membership.
Netflix settled that case by agreeing to decouple former customers' names from their movie-viewing records. Netflix also agreed to pay $6.75 million to various privacy organizations and up to $2.25 million to the lawyers who sued the company.
Netflix since revised its terms of service to provide that disputes with customers will be subject to mandatory arbitration.