Class Action Lawsuit Against Centurylink – Update

A class-action lawsuit against CenturyLink is being pursued by the former consumers of its services, now called the New York Telephone Company. The latter’s advertising campaign included putting out a slogan:” NY Telephone Company – Never Calls.” The slogan was used to attract customers from rival companies that had begun using the innovative POTS technology already in place in some parts of the country. At the time, however, this was not an effective strategy: the market was saturated with other such advertisements.

CenturyLink then began what has become a litany of lawsuits that have continued over the years: it attempted to corner the market in the state of New York by filing numerous class action complaints with the Federal Trade Commission and the National Advertising Division, among other authorities. At various points, CenturyLink was cited in hundreds of court cases brought into this litigation by its customers. Although the company has settled some of these cases out of court, most have been resolved without the help of a court of law. Some of these settlements were for sums much larger than the amount the company desired to settle, however, which explains why the company often seeks such large awards.

On March 7th, the New York State Department of Financial Services sent a letter to CenturyLink announcing that the company would be barred from offering any residential service in New York until further notice. The notice cited the pending lawsuit involving the NYSE’s AMEX division. According to the letter, the department believed that CenturyLink had engaged in activities that violated New York State securities laws, specifically the New York Times Square lease provisions, and was “determined to pursue enforcement actions” against the company if it was found guilty.

The Department of Financial Service sent the letter after receiving a complaint from a New York State Comptroller Thomas DiNapoli, who oversees the reactors register. DiNapoli told the NY Times that he would file a lead plaintiff application with the state attorney general “if we think it will help our investigators”. DiNapoli said that CenturyLink “certainly” violated the lease provisions of the original agreement. CenturyLink responded with a letter to the NYSE stating that it “does not believe the lease provisions are in any way violative of existing securities laws and that it has not and will not make any representations concerning future action whether or not there may be enforcement”.

On June 6th, CenturyLink announced that it had settled the AMEX lawsuit. In a statement, the company said that it “does not believe its conduct violated the securities laws in any way”. The company did not indicate if it had signed any agreements with the SEC or had issued any orders concerning the case. The company did indicate that it did not expect to be sued by the SEC. The case has been filed with the US Attorney’s Office in New York.

On June 7th, investor Doug Richman who had purchased a majority share of CenturyLink from Robert Wagner announced that he had sold his shares and would be purchasing a new class of shares. He stated that he is “pleased that both parties have come to a resolution that the transaction will go through without further issues or litigation”. The company later clarified Mr. Richman’s remarks, saying that he “was incorrect in assuming that there would be a lawsuit from the New York State Department of Securities and Insurance”. The company did not specify how Mr. Richman’s sale of stock would affect the terms under which he would purchase that new class of shares. It is not clear whether or not he will be paying the full price for his shares or whether he will receive a rebate.

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