US Bankruptcy Court penalises company for violating automatic bankruptcy stay

US Bankruptcy Court penalises company for violating automatic bankruptcy stay

Charter Communications asked to cough up over $19 million for violating automatic bankruptcy stay and misleading customers of rival firm Windstream

A US Bankruptcy Court has come down heavily on a telecom service provider for breaching the automatic stay under Bankruptcy Code. The court held Charter Communications contempt of law and ordered the firm to pay the crisis-ridden rival telecom company Windstream over $19 million in damages.

The Court is currently overseeing Windstream's bankruptcy case. Under US laws, an automatic stay is triggered immediately after a bankruptcy petition is filed. It prohibits other parties from taking actions against a company or individual who has filed a bankruptcy petition and gives the debtor breathing space to restructure its business or to liquidate its assets.

The Bankruptcy Court found that Charter Communications had breached the automatic stay by terminating "last mile" services to some of the Windstream customers and running an advertising campaign containing false and misleading information aimed at inducing customers to terminate their contracts with Windstream.

The Court was not convinced with Charter Communications' argument that the termination of the connectivity service was not intentional but occurred because of nonpayment protocols programmed into its computerized billing system.

The Court rejected that argument terming it not a legitimate defense for a large and sophisticated company to argue that its computer systems do not contain an effective fail-safe to prevent it from violating the automatic stay.

Charter Communications is accused of trying to capitalize on Windstream's bankruptcy and poach its customers through an advertising campaign that was intended to create the impression, through mailings designed to seem that they were coming from Windstream, that Windstream was going out of business.

The Bankruptcy Court found that the campaign was intended to interfere with Windstream's contract rights with its customers as well as to impair its goodwill and it held Charter Communications in contempt of the automatic stay and ordered it to pay Windstream's damages and attorneys' fees.