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Gary Marchese, Individually and On Behalf of All Others Similarly Situated v. Cablevision Systems Corporation

July 21, 2011

GARY MARCHESE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
CABLEVISION SYSTEMS CORPORATION, AND CSC HOLDINGS, INC., DEFENDANTS.



The opinion of the court was delivered by: Linares, District Judge.

NOT FOR PUBLICATION

OPINION

This matter arises out of allegations that Cablevision employs an illegal tying arrangement in which it uses its market power to require its subscribers to rent cable boxes as a condition of subscribing to its "Two Way Services," as defined herein, in violation of, inter alia, Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. Currently before the Court is a motion to dismiss the Second Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court has considered the submissions made in support of and in opposition to the instant motion.*fn1 No oral argument was heard. Fed. R. Civ. P. 78. Based on the reasons that follow, Defendant's motion to dismiss is granted in part and denied in part.

BACKGROUND*fn2

Cablevision Systems Corporation and CSC Holdings, Inc. (collectively referred to as Defendant or Cablevision) provides cable programming services to consumers in the New Jersey, New York and Connecticut tri-state area and leases cable set-top boxes to customers in conjunction with its services. (Sec. Am. Compl., ¶¶ 2, 4). Among the services provided by Cablevision are services provided through bi-directional or two way communications between Cablevision and its subscribers. (Sec. Am. Compl., ¶ 2). These services, referred to hereinafter as "Two Way Services," include: (a) certain digital channels and international programming, (b) interactive services (including the interactive program guide), (c) pay-per-view ("Pay TV"), and (d) Video on Demand. (Id.). The Two Way Services are provided through (and are considered a "significant portion of") the iO TV Package. (Id.; ¶ 37).

In order to access Two Way Services, Cablevision requires its subscribers to rent and use a cable set-top box, distributed exclusively by Cablevision. (Sec. Am. Compl., ¶¶ 5, 6, 38, 41, 87). In order to rent a cable set-top box that allows access to Two Way Services, Cablevision subscribers must pay a monthly fee that is in addition to the fee that Cablevision charges for the iO TV Package itself. (Sec. Am. Compl., ¶ 139). Cablevision also distributes a device known as a CableCARD. (Sec. Am. Compl., ¶ 85, Ex. 1). CableCARDs do not, however, perform two way communications; thus, CableCARDs do not allow Cablevision subscribers to access Two Way Services. (Sec. Am. Compl., ¶¶ 40, 84).

Plaintiff, Gary Marchese, brings this action as a representative of a proposed class of Cablevision customers who purchased Two Way Services and were required to lease a cable box from Cablevision in order to access those services. (Sec. Am. Compl., ¶¶1, 14). Plaintiffs allege that "[b]y tying Two Way Services to the rental and use of a cable set-top box distributed exclusively by Cablevision, Defendants have abused their market power in the tying product market and substantially and unreasonably restrained competition in the tied product market" in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. (Sec. Am. Compl., ¶ 7). Plaintiffs also allege that Cablevision's "artificial exclusion of all other set-top boxes capable of providing access to Two Way Services, including boxes of the exact same make and model as those rented from Cablevision (simply because those boxes are not distributed by Cablevision) enabled (and enables) Defendants to create and maintain a monopoly in the market for the distribution of set-top boxes providing access to Two Way Services in the areas in which Cablevision operates," in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. (Sec. Am. Compl., ¶ 9). Plaintiffs also allege that Cablevision has been unjustly enriched, under various states' laws, by virtue of the foregoing conduct.

The Court has now ruled on two of Plaintiffs' prior complaints. Because the Court writes only for the parties, the Court will not repeat each aspect of its prior holdings or the procedural history of this matter; rather, the Court will simply incorporate by reference its prior Opinions dated August 18, 2010 and January 14, 2011. Suffice to say that Plaintiffs' original complaint was filed in April 2010. Plaintiffs' original complaint was dismissed without prejudice by the Court in August 2010. Plaintiffs filed an Amended Complaint in September 2010. Plaintiffs' Amended Complaint was, again, dismissed without prejudice by the Court in January 2011. Plaintiffs filed a Second Amended Complaint in March 2011. The Second Amended Complaint is now the operative complaint in this matter (referred to hereinafter as "Second Amended Complaint" or "Complaint"). Cablevision, once again, seeks dismissal of the claims asserted in Plaintiffs' Second Amended Complaint. Having now granted Plaintiffs leave to amend the deficiencies in their claims on two prior occasions, the Court turns to the arguments raised by Defendants seeking dismissal of Plaintiffs' claims with prejudice.

LEGAL STANDARD

For a complaint to survive dismissal, it "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In evaluating the sufficiency of a complaint, a court must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving party. See Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). Additionally, in evaluating a plaintiff's claims, generally "a court looks only to the facts alleged in the complaint and its attachments without reference to other parts of the record." Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).

DISCUSSION

I. Section 1 Claims

A. Per Se Tying

As a threshold matter, to prove an illegal tie-in, a plaintiff must establish, inter alia, an agreement by a party to sell one product (the tying product) but only on the condition that the consumer also purchase a different product (the tied product). See Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5-6 (1958). "Such an arrangement violates ยง 1 of the Sherman Act if the seller has 'appreciable economic power' in the tying product market and if the arrangement affects a ...


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