A New Jersey federal district court denied a motion to dismiss filed by prison telecom giant Global Tel*Link (GTL) and its subsidiary DSI-ITI in a class-action lawsuit alleging predatory practices in providing phone service to New Jersey state prisoners.

On September 8, 2014, Judge William J. Martini held that although the plaintiffs in the suit also had a pending complaint before the Federal Communications Commission (FCC) that raised many of the same claims, a stay rather than dismissal was more appropriate. The case is yet another attempt to rein in exorbitant phone rates targeting prisoners and their families.

The seven plaintiffs, including a New Jersey state prisoner and her parents, claimed that GTL and DSI-ITI had engaged in “violations of federal and New Jersey state law arising from ... Defendants’ abuse of their monopoly power over phone calls made from New Jersey by prisoners by charging rates more than 100 times higher than market rates.” The complaint called the companies’ conduct “abusive, discriminatory and unreasonable,” and added the “state of New Jersey benefits financially from the Defendants’ monopoly.” At the time the suit was filed, the New Jersey DOC received a 41% commission kickback from the revenue generated from prison phone calls under its contract with GTL, amounting to over $3 million per year.

The plaintiffs allege that GTL and its subsidiary “purchase their minutes for calls terminating within the United States for less than 3/10 of a penny per-minute, and ... often resell the minutes they buy at more than 100 times their cost to Plaintiffs and other class members.” The lawsuit, filed in 2013, also claims that GTL offered “no information on rates,” did “not issue account statements in writing or electronically to customers,” failed “to inform their customers that they will be charged a service or set-up fee” and charged “an unconscionable service fee of approximately 20% of the deposit” into prison phone accounts.

After the class-action suit was filed, the FCC issued new regulations that capped interstate (long distance) prison phone rates in August 2013, then capped intrastate (in-state) rates in an October 2015 order that has since been stayed by a federal circuit court. [See: PLN, May 2016, p.36; Dec. 2015, p.40; Dec. 2013, p.1].

GTL’s motion to dismiss the New Jersey suit was based on the theory that the FCC had primary jurisdiction to determine whether the phone rates were “just and reasonable” under 47 U.S.C. § 201, which the plaintiffs had cited in their complaint. Although Judge Martini agreed that the FCC had primary jurisdiction, he noted that a stay rather than outright dismissal was a more appropriate disposition, stating, “we consider it more prudent to follow the other courts in our district and stay the entire case until the FCC rules on the reasonableness of the Defendants’ charges and practices....”

In a separate ruling the district court allowed discovery to proceed, but only on “specific, limited” grounds where the plaintiffs could show that a court order was necessary, that discovery requests were not duplicative of discovery sought in the administrative action before the FCC, or that the discovery might be unavailable in the future.

“The delay wasn’t our preference, but it’s not significant in the overall scheme of things,” said plaintiffs’ attorney James A. Plaisted with the law firm of Pashman Stein Walder Hayden. The plaintiffs are also represented by attorneys James E. Cecchi, Lin Claire Solomon and Lindsey H. Taylor.

A motion to compel arbitration was filed by GTL and DSI-ITI in August 2015; arbitration typically favors businesses rather than consumers. On February 11, 2016, the district court granted the motion to compel arbitration as to one of the plaintiffs, but denied it as to the other six plaintiffs. GTL has since appealed the court’s order and the case remains pending. See: James v. Global Tel*Link, U.S.D.C. (D. NJ), Case No. 2:13-cv-04989-WJM-MF.

Currently, the phone rates for calls made from New Jersey prisons are some of the lowest in the nation, at $.0438/min. for all types of calls, or $.66 for a 15-minute call. The state ended prison phone kickbacks in 2015, two years after the class-action lawsuit against GTL was filed, resulting in the lower rates. [See: PLN, May 2015, p.40].

Additional source: www.njlawjournal.com

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