• by Wendy Davis  @wendyndavis, May 10, 2012

In a new gambit to keep a privacy lawsuit in federal court, two Web users have withdrawn a host of claims against Wide Open West, which partnered with defunct behavioral targeting company NebuAd.

WOW subscribers Dan Valentine and W. Brand Bobosky, who filed new court papers on Wednesday, now allege only that the Internet service provider violated federal wiretap laws by working with NebuAd. They withdrew all of their other claims without prejudice -- meaning that they could potentially refile them in the future. 

The move comes one month after U.S. District Court Judge Edmond Chang in the Northern District of Illinois granted WOW's request to send all claims to arbitration, except for those relating to federal wiretap law. Chang ruled that the ISP was entitled to enforce its terms of service, which require subscribers to take most disputes to arbitration. But the terms of service made an exception for potential violations of the federal wiretap law.

Valentine and Bobosky don't say in their latest proposed class-action complaint why they wish to proceed in federal court rather than arbitration. In general, however, consumers prefer bringing cases in court, largely because juries are seen as more likely than arbitrators to issue large damage awards.

Wide Open Web was one of six Internet service providers to test NebuAd's ad-serving platform in 2007 and 2008. The company, now defunct, worked with ISPs to gather data about Web users' activity in order to serve them targeted ads.

The behavioral targeting platform drew objections from privacy advocates as well as lawmakers. One of the major criticisms was that ISPs were able to provide data about everything consumers did online -- including their searches and activity at noncommercial sites.

NebuAd said its data collection was anonymous, and that consumers could opt out of the program. But in 2008, after news of the tests came to light, consumers sued NebuAd and the six ISPs, arguing that the companies unlawfully installed "spyware."

The complaint against Wide Open West initially alleged violations of the federal computer fraud law and wiretap law, as well as invasion of privacy, unjust enrichment and violations of Illinois state law.

The latest proposed complaint, filed on Wednesday, alleges only that Wide Open West violated the federal wiretap law by "intercepting" Web users' communications and disclosing them to NebuAd. "WOW captured customers' communications in their entirety, including content such as search terms and page requests for health and financial information, family matters, political interests, religious matters, and travel plans, as well as voice-over-Internet-protocol communications such as Skype," the newest complaint alleges. "As WOW continuously funneled customer communications to its collection point ... NebuAd continuously accessed and analyzed the communications."

NebuAd shuttered in late 2008, shortly after news of the tests came to light. Last year, the company agreed to a $2.4 million settlement (to be paid by its insurance carriers). Privacy groups will split two-thirds of the money, while the lawyers who brought the case will receive $800,000.

But the ISPs have been fighting the cases. So far, lawsuits have been dismissed against CenturyTel and Embarq. A case against Knology was sent to arbitration. Litigation is still pending against Bresnan and Cable One.

The consumers who sued Embarq appealed the dismissal to the 10 Circuit Court of Appeals, where it's currently pending.