Three equipment resellers have sued Adelphia Communications Corp., claiming the MSO dumped inoperable set-top equipment on the small businesses.
The three companies — Medley & Co. of Ohio and Digimax Inc. and Cable Equipment Locators Inc., both of Pennsylvania — filed suit in federal court in Pennsylvania, claiming the Denver-based MSO violated racketeering laws.
The suing companies — seeking unspecified damages — said the dispute rises to the level of racketeering, because Adelphia never intended to live up to terms of the equipment sale.
Adelphia spokesman Paul Jacobson said the company could not comment on pending litigation, but said the operator has asked the court to dismiss the complaint.
What began as a deal to buy $300,000 of aging set-tops from Adelphia became a financial mess that could force one of the resellers out of business, according to the lawsuit, filed June 16 in U.S. District Court for the Western District of Pennsylvania.
The suit indicates Digimax financed its part of the deal with money from a third party that's threatening to sue, “seeking remedies that, if granted, would cause closure of Digimax's business.”
The complaint says in 2003, Medley & Co successfully bid to buy 46,000 used digital cable terminals from Adelphia. Medley bought the boxes “as is,” but with the caveat that any boxes “deemed to be beyond economical repair” would be replaced in the sale with boxes pulled from the field.
Medley then assigned rights to Cable Equipment Locators, which also assigned rights, to Digimax. Digimax wired $300,000 to Adelphia.
When Digimax received its shipment, 9,000 boxes arrived with markings from Adelphia noting the boxes were inoperable, all according to the complaint.
When the boxes were tested, 22,000 of 46,000 units were deemed too expensive to repair, according to Medley and Digimax.
After the two companies sought redress, Adelphia refused to send more boxes.
Medley also claims Adelphia retaliated for the lawsuit by dropping Medley from a list of approved bidders for used equipment. The violations occurred during the course of regular post-bankruptcy business and aren't governed by the protection afforded by Adelphia's 2002 Chapter 11 filing, the plaintiffs said.
The companies said they were concerned that Adelphia might be sold, and the disputed assets moved beyond their reach.
“We think they got a better offer” for the equipment, said Harvey Harris, president of Cable Equipment Locators.
He said he lost a $2 million deal to provide equipment to a client because of the bad boxes, which kept coming “at an astronomical cost” of shipping from as far away as California.