Walton v Ny State Dept of Corr Services Ny Appellant Brief Unlawful Phone Tax 2005.pdf

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STATE OF NEW YORK
APPELLATE DIVISION

SUPREME COURT
THIRD DEPARTMENT

IVEY WALTON, RAMON AUSTIN, JOANN
HARRIS, the OFFICE OF THE APPELLATE
DEFENDER, and the NEW YORK STATE
DEFENDERS ASSOCIATION
Plaintiffs-Appellants.
-againstTHE NEW YORK STATE DEPARTMENT OF
CORRECTIONAL SERVICES, AND MCI
WORLDCOM COMMUNICATIONS, INC.
Defendants-Respondents.
County Index No. 04-1048
BRIEF FOR PLAINTIFFS-APPELLANTS

RACHEL MEEROPOL
BARBARA J. OLSHANSKY
CRAIG S. ACORN
ROBERT BLOOM
CENTER FOR CONSTITUTIONAL RIGHTS
666 Broadway, 7th Floor
New York, NY 10012
(212) 614-6432
Attorneys for Plaintiffs-Appellants
Ivey Walton, Ramona Austin, Joann Harris, the
Office of the Appellate Defender, and the New
York State Defenders Association
To be Argued by: Rachel Meeropol
Time Requested: 30 Minutes

TABLE OF CONTENTS
TABLE OF AUTHORITIES……………………………………………………………..ii
QUESTIONS PRESENTED……………………………………………………………..1
NATURE OF THE CASE………………………………………………………………..2
I.

SUMMARY OF ARGUMENT……....…………………………………………..3

II.

STATEMENT OF FACTS……………………………………………………….6

ARGUMENT……………………………………………………………………………..8
I.

THE COURT BELOW ERRED IN DISMISSING COUNTS II THROUGH
VII OF THE COMPLAINT BECAUSE THOSE CLAIMS ARE NOT TIMEBARRED…………………………………………………………………………8
A.

Plaintiffs’ Claims in Counts II through VII Are Timely Because they
Accrued Well Within the Applicable Statute of Limitations……………..9

Plaintiffs’ Claims in Counts II through VII are Timely Because
Defendants Actions Constitute a Continuing Wrong Causing
Plaintiffs’ Claims to Accrue Each Billing Cycle……...…………………21

II.

THE COURT BELOW ERRED IN DISMISSING COUNT I FOR FAILURE
TO STATE A CLAIM…………………………………………………………...27

III.

THE COURT BELOW ERRED WHEN IT FAILED TO ASSESS
PLAINTIFFS’ PROPERLY PLED AND SUPPORTED CLAIMS.…………….30
A.

Plaintiffs Have Adequately Pled the Existence of the DOCS
Telephone Tax…………………………………………………………...31

Plaintiffs Have Shown that the Telephone Tax is Unauthorized,
Violates Their Rights to Substantive Due Process and is an Unlawful
Taking……………………………………………………………………34

Plaintiffs Have Properly Alleged Violations of Their Free Speech
And Associational Rights………………………………………………..38

Plaintiffs Have Adequately Stated an Equal Protection Claim………….43

Plaintiffs Have Properly Pled a Violation of General Business Law
Section 349……………………………………………………………….44

CONCLUSION…………………………………………………………………………..47

TABLE OF AUTHORITIES
Cases
Abiele Contracting v. New York City School Construction Authority,
689 N.E.2d 864 (1997).................................................................................................. 15
Aldens, Inc. v. Tully, 416 N.Y.S.2d 425 (3d Dept. 1979) ................................................ 36
Allegheny Pittsburgh Coal Co. v. County Comm'r, 488 U.S. 336 (1989)........................ 43
Allen v. Coughlin, 64 F.3d 77 (2d Cir. 1995)................................................................... 42
Allen v. Cuomo, 100 F.3d 253 (2d Cir. 1996).................................................................. 42
Alliance of Am. Insurers v. Chu, 571 N.E.2d 672 (1991) ................................................ 37
Amerada Hess Corp. v. Acampora, 486 N.Y.S.2d 38 (2d Dept. 1985) ............................ 26
Baldwin v. Redwood City, 540 F.2d 1360 (9th Cir. 1976)............................................... 40
Barash v. Estate of Sperlin, 706 N.Y.S.2d 439 (2d Dept. 2000) ...................................... 26
Beauchamp v. Murphy, 37 F.3d 700 (1st Cir. 1994) ........................................................ 39
Bikowicz v. Nedco Pharmacy, Inc., 517 N.Y.S.2d 829 (3d Dept. 1987) ......................... 26
Bitondo v. State, 582 N.Y.S.2d 819 (3d Dept. 1992) ....................................................... 16
Board of Ed. v. Village of Alexander, 92 N.Y.S.2d 471 (Sup. Ct. 1949) ........................ 36
Bullard v. State,763 N.Y.S.2d 371 (3d Dept. 2003) ............................................. 12, 22, 25
Bulova Watch Co. v. Celotex Corp., 389 N.E.2d 130 (1979) .......................................... 26
Busbee v. Ken-Rob Co., 720 N.Y.S.2d 785 (1st Dept. 2001) .......................................... 21
Butler v. Gibbons, 569 N.Y.S.2d 722 (1st Dept. 1991).................................................... 26
Cahill v. Public Service Commission 498 N.Y.S.2d 499 (3d Dept. 1986).................. 25-26
Carter v. State, 739 N.E.2d 730 (2000)............................................................................. 13
Cash v. Bates, 93 N.E.2d 835 (1950)................................................................................ 26
Castle Oil Corp. v. City of New York, 675 N.E.2d 840 (1996) ....................................... 34
Chicago Union Traction Co. v. State Bd. of Equalization, 114 F. 557
(C.C.S.D. Ill. 1902)....................................................................................................... 35
ii

CKC, Inc. v. Kleiman, 679 N.Y.S.2d 637 (2d Dept. 1998) .............................................. 19
Commack Self-Service Kosher Meats, Inc. v. State, 704 N.Y.S.2d 737 (3d Dept. 2000) 23
Corvetti v. Town of Lake Pleasant, 642 N.Y.S.2d 420 (3d Dept. 1996) .......................... 43
Cox v. New Hampshire, 312 U.S. 569 (1941) .................................................................. 40
Cranesville Block Co. v. Niagara Mohawk Power Corp., 572 N.Y.S.2d 495
(3d Dept. 1991) ............................................................................................................. 26
Davis v. Rosenblatt, 559 N.Y.S.2d 401 (3d Dept. 1990)............................................ 22, 24
DiMiero v. Livingston-Steuben-Wyoming County Bd. of Cooperative Educ. Srvs.,
606 N.Y.S.2d 92 (3d Dept. 1993) ................................................................................. 16
Drizin v. Sprint Corp., 771 N.Y.S.2d 82 (1st Dept. 2004) ............................................... 45
Eastern Conn. Citizens Action Group v. Powers, 723 F.2d 1050 (2d Cir. 1983)............. 40
Eichacker v. New York Telephone Company, 14 N.Y.S.2d 17 (Mun. Ct. 1939) ....... 20-21
Fernandes v. Limmer, 663 F.2d 619 (5th Cir. 1981) ........................................................ 40
First Nat'l City Bank v. New York Finance Admin., 324 N.E.2d 861 (1975).................. 19
Forsyth County v. Nationalist Movement, 505 U.S. 123 (1992)...................................... 41
Foss v. City of Rochester, 480 N.E.2d 717 (1985) ........................................................... 36
Frostifresh Corp. v. Reynoso, 274 N.Y.S.2d 757 (Sup. Ct. 1966).................................... 14
Golden v. Clark, 564 N.E.2d 611 (1990)..................................................................... 43-44
Greater Poughkeepsie Library Dist. v. Town of Poughkeepsie,
618 N.E.2d 127 (1993).................................................................................................. 34
HBP Assocs. v. Marsh, 893 F. Supp. 271 (S.D.N.Y. 1995) ............................................. 36
Hotel Astor v. United States, 325 U.S. 837 (1945)..................................................... 29, 33
Huff v. C.K. Sanitary Sys. Inc., 688 N.Y.S.2d 801 (3d Dept. 1999)................................ 30
In re AT&T's Private Payphone Comm'n Plan, 3 F.C.C.R. 5834 (1988) ......................... 33

iii

In re Estate of Eckart, 348 N.E.2d 905 (1976).................................................................. 22
In re K.L, 806 N.E.2d 480 (2004)..................................................................................... 43
Jewish Reconstructionist Synagogue, Inc. v. Roslyn Harbor, 352 N.E.2d 115 (1976) .... 32
Jordan v. Gardner, 986 F.2d 1521 (9th Cir. 1993)............................................................ 39
Kahal Bnei Emunim v. Town of Fallsburg, 607 N.Y.S.2d 858 (Sup. Ct. 1993) .............. 20
Koch v. Consolidated Edison Co., 468 N.E.2d 1 (1984) .................................................. 14
Lakeland Water Dist. v. Onondaga County Water Authority, 248 N.E.2d 855 (1969).... 17
Llana v. Pittstown, 651 N.Y.S.2d 675 (3d Dept. 1996).............................................. 10, 16
Manocherian v. Lenox Hill Hosp., 643 N.E.2d 479 (1994).............................................. 44
McCarthy v. Zoning Bd. of Appeals, 724 N.Y.S.2d 798 (3d Dept. 2001) ....................... 16
McKinnon v. Int'l Fidelity Ins. Co., 704 N.Y.S.2d 774 (Sup. Ct. 1999) .......................... 46
Merine v. Prudential-Bache Utility Fund, Inc., 859 F.Supp. 715 (S.D.N.Y. 1994) ......... 25
Metropolitan Life Ins. Co. v. Ward, 470 U.S. 869 (1985)................................................ 44
Moore v. City of East Cleveland, 431 U.S. 494 (1977).................................................... 38
Murdock v. Pennsylvania, 319 U.S. 105 (1943)......................................................... 40, 41
Naevus Int'l, Inc., v. AT&T, 713 N.Y.S.2d 642 (Sup. Ct. 2000)................................. 45-46
National Awareness Found. v. Abrams, 50 F.3d 1159 (2d Cir. 1995) ............................. 41
Nelson v. Lippman, 709 N.Y.S.2d 210 (3d Dept. 2000) .................................................. 25
Neufeld v. Neufeld, 910 F. Supp. 977 (S.D.N.Y. 1996)................................................... 22
New York City Health & Hosps. Corp. v. McBarnette, 639 N.E.2d 740 (1994) ........ 16-18
New York Tel. Co. v. City of Amsterdam, 613 N.Y.S.2d 993 (3d Dept. 1994) .............. 33
Niagara Mohawk Power Corp. v. City School District, 451 N.E.2d 207 (1983) ............. 20
Norwood v. Baker, 172 U.S. 269 (1898) .......................................................................... 36

Orville v. Newski, 547 N.Y.S.2d 913 (3d Dept. 1989)..................................................... 26
Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank,
647 N.E.2d 741 (1995)............................................................................................. 45-46
\People ex rel. Public Service Commission v. New York Telephone Co.,
29 N.Y.S.2d 513 (3d Dept. 1941) ...................................................................... 28-29, 33
People v. Rodriguez, 608 N.Y.S.2d 594 (Sup. Ct. 1993) ................................................. 44
People v. Two-Wheel Corp., 525 N.E.2d 692 (1988)....................................................... 14
Phillips v. Washington Legal Found., 524 U.S. 156 (1998)............................................. 37
Pitts v. Thornburgh, 866 F.2d 1450 (D.C. Cir. 1989).................................................. 39-40
Pond v. New Rochelle Water Co., 76 N.E. 211 (1906) .................................................... 14
Radio Common Carriers v. State, 601 N.Y.S.2d 513 (Sup. Ct. 1993).............................. 36
Rego Properties Corp. v. Finance Adm'r of New York, 424 N.Y.S.2d 621
(Sup. Ct. 1980).............................................................................................................. 35
Riverdale County Sch. v. City of New York, 213 N.Y.S.2d 543 (1st Dept. 1961) .......... 19
Roth v. Cuevas, 624 N.E.2d 689 (1993) ........................................................................... 44
Scarborough School Corporation v. Assessor of Ossining, 467 N.Y.S.2d 674
(2d Dept. 1983) ............................................................................................................. 19
Selkirk v. New York, 671 N.Y.S.2d 824 (3d Dept. 1998)................................................ 23
Sentinel Communications Co. v. Watts, 936 F.2d 1189 (11th Cir. 1991) ........................ 40
Solnick v. Whalen, 401 N.E.2d 190 (1980)........................................................... 10, 17-18
State University of New York v. Patterson, 346 N.Y.S.2d 888 (3d Dept. 1973) ............. 33
Subin v. City of New York, 229 N.Y.S. 628 (Mun. Ct. 1928) ......................................... 26
Stanley v. Illinois, 405 U.S. 645 (1972) ........................................................................... 38
Sunday Lake Iron Co. v. Township of Wakefield, 247 U.S. 350 (1918) ......................... 35
Tennessee v. Whitworth, 117 U.S. 129 (1886)................................................................. 36

Thornburgh v. Abbott, 490 U.S. 401 (1989)................................................................ 38-39
Torsoe Bros. Constr. Corp. v. Bd. of Trustees, 375 N.Y.S.2d 612 (2d Dept. 1975) ........ 33
Town of Lumberland v. New York State Div. of Human Rights, 644 N.Y.S.2d 864
(3d Dept. 1996) ............................................................................................................. 26
Town of Saranac v. Town of Plattsburgh, 630 N.Y.S.2d 394 (3d Dept. 1995)................ 26
Trizec Western, Inc. v. City of New York, 489 N.E.2d 235 (1985)................................. 20
Turner v. Safley, 482 U.S. 78 (1987)..................................................................... 39, 41-42
United States v. AT&T, 57 F. Supp. 451 (S.D.N.Y. 1944) ........................................ 29, 33
Washington v. Reno, 35 F.3d 1093 (6th Cir. 1994).......................................................... 38
Webb's Fabulous Pharmacies v. Beckwith, 449 U.S. 155 (1980) .................................... 37
Weissinger v. Boswell, 330 F. Supp. 615 (M.D. Ala. 1971) ............................................ 35
Yonkers Racing Corp. v. State, 516 N.Y.S.2d 283 (2d Dept. 1987)…………………34-35
Statutes
N.Y. Gen. Bus. Law § 349 (Consol. 2004).................................................................. 44-45
N.Y. Pub. Serv. §91(1)...................................................................................................... 28
N.Y. Pub. Serv. § 92(2)(d)................................................................................................ 29
N.Y.C.P.L.R § 213 (McKinney 2005) ................................................................................ 5
N.Y.C.P.L.R. § 103(c) (McKinney 2005)......................................................................... 19
N.Y.C.P.L.R. § 217 (1) (McKinney 2005) ....................................................................... 13
N.Y.C.P.L.R. § 7803 (McKinney 2005) ........................................................................... 15

QUESTIONS PRESENTED
1.

Whether, when a state agency and a private corporation act together to unlawfully

impose a telephone surcharge tax on private telephone customers to fund the agency’s
general operations, and that tax is unauthorized by the state legislature and violates the
New York State Constitution and the General Business Law, and the telephone customers
seek: (a) a declaration that the tax is unlawful; (b) an order enjoining the continued
collection of the tax; and (c) an order to return money unlawfully collected, the
customers’ claims properly accrue on the effective date of the contract between the state
agency and the private corporation, or on the date the challenged rates were approved and
put into effect? The court below erroneously decided that Plaintiffs’ claims accrue on the
effective date of the contract.
2.

Whether, when a state agency and a private corporation act together to unlawfully

impose a telephone surcharge tax on private telephone customers to fund the agency’s
general operations, and that tax is unauthorized by the state legislature and violates the
New York State Constitution and the General Business Law, and the telephone customers
seek: (a) a declaration that the tax is unlawful; (b) an order enjoining the continued
collection of the tax; and (c) an order to return money unlawfully collected, each form of
relief is available through an CPLR Article 78 proceeding? The court below erroneously
answered this question in the affirmative.
3.

Whether, when a state agency and a private corporation act together to unlawfully

impose a telephone surcharge tax on private telephone customers to fund the agency’s
general operations, and that tax is unauthorized by the state legislature and violates the

New York State Constitution and the General Business Law, and the telephone customers
seek: (a) a declaration that the tax is unlawful; (b) an order enjoining the continued
collection of the tax; and (c) an order to return money unlawfully collected, each
unlawful billing that includes the tax and is mailed by the private corporation, at the
continued direction of the state agency, is a continuing violation of the telephone
customers’ constitutional, statutory and common law rights, such that a new cause of
action accrues with each billing? The court below erroneously answered this question in
the negative.
4.

Whether, when the Public Service Commission disavows jurisdiction over the

portion of the telephone rate filed by a private company and attributable to a state
agency’s demand for a tax to fund its general operations and that portion of the rate is
charged to private telephone customers, telephone customers can seek relief from the
continued collection and retention of the tax by the state agency and the private company
or whether only the explicit directives of the PSC Order are subject to judicial review and
enforcement? The court below erroneously determined that Plaintiffs are entitled to no
relief based on the PSC order.
NATURE OF THE CASE
Plaintiffs-Appellants Ivey Walton, Ramona Austin, Joann Harris, Office of the
Appellate Defender, and the New York State Defenders Association (“Plaintiffs”) are the
family members and advocates of prisoners incarcerated in various New York State
correctional institutions. They bring this appeal from the lower courts’ dismissal of their
combined Article 78/declaratory judgment proceeding seeking relief from the imposition
of an unlawful tax. Plaintiffs challenge this tax (the “DOCS tax,” “commission” or

“surcharge”) collected by Defendant-Respondent MCI WorldCom Communications
(“MCI”) and paid to Defendant-Respondent New York State Department of Correctional
Services (the “State,” “Department” or “DOCS”) as a surcharge imposed upon them
when they receive collect telephone calls from prisoners.1 The DOCS tax is a charge
imposed over and above the telephone rate filed by MCI which was deemed “just and
reasonable” by the New York State Public Service Commission (“PSC”). [R. 36].
Plaintiffs seek relief from the unlawful DOCS tax by means of: (1) an order that MCI
and DOCS cease assessing and collecting the unlawful tax; (2) a refund of the taxes
unlawfully collected from them; and (3) a declaration that the DOCS tax is: (a) an illegal
and unlegislated tax in violation of Articles I, III, and XVI of the New York State
Constitution; (b) a taking of Plaintiffs’ property without due process of law in violation of
Article I §§ 6 and 8 of the State Constitution; (c) a violation of Plaintiffs’ rights to equal
protection guaranteed by Article I § 11 of the State Constitution; (d) a violation of
Plaintiffs’ speech and association rights guaranteed by Article I § 8 of the State
Constitution; and (e) a deceptive act or practice in violation of General Business Law §
349. [R. 55-65].
I.

SUMMARY OF ARGUMENT
On October 22, 2004, the Honorable Judge George B. Ceresia, Jr., granted

Defendants’ Motions to Dismiss and dismissed as untimely Counts II through VII of the
Complaint. The court also dismissed Count I, seeking to enforce the Public Service
Commission Order (“PSC Order”), on the merits.

MCI and DOCS will be referred to collectively as “Defendants.”
3

In granting Defendants’ Motions to Dismiss the Complaint, the court below erred
in four fundamental ways. First, the court erred in holding that Plaintiffs’ claims accrued
at the date of the implementation of the last contract between MCI and DOCS and thus
wrongly determined that six of Plaintiffs’ seven claims were time-barred. Second, the
court failed to properly apprehend the nature of the claims Plaintiffs raise, as it was
required to do in this combined Article 78/declaratory relief action. Because it failed to
do so, the court below applied the wrong statute of limitations to six of the seven counts
of the Complaint, wrongly determining that those claims were time-barred. Third, the
court failed to apply the doctrine of continuing harms, causing it to wrongly determine
that Plaintiffs’ claims were time-barred. Finally, the court below failed to recognize the
implications of the PSC Order, resulting in its erroneous determination that there was
nothing to enforce with respect to the findings in the Order. In this appeal, Plaintiffs
show why this Court should reverse the decision of the court below and order a trial on
the merits.
Plaintiffs will show that the court below erred in dismissing Counts II through VII
of the Complaint because they were timely filed. First, each claim accrued, at the very
earliest, on the effective date of the PSC Order, because that is the date on which the rates
challenged by Plaintiffs were filed and “approved” such that they would be charged to
Plaintiffs, and because that is the date the PSC determined that it lacked jurisdiction over
the DOCS “commission” portion of the rate, such that Plaintiffs were informed that the
rate they would be charged was unauthorized by any official body. Because all of
Plaintiffs’ claims accrued less than four months before the Complaint was filed, they are
timely no matter what statute of limitations this Court applies.

Second, Plaintiffs’ claims against DOCS delineated in Counts II through VII are
claims for declaratory judgment and for moneys had and received – all of which are
governed by the six-year statute of limitations set out in N.Y.C.P.L.R § 213 (McKinney
2005). The relief sought pursuant to these constitutional and statutory claims is not
available through an Article 78 proceeding. Because a six-year limitations period
applies to these counts, the court below erred in dismissing Counts II through VII as
untimely and Plaintiffs are entitled to damages for all unlawful billings within the six
years prior to initiation of this action.
Furthermore, even if these claims were found to have accrued at the time of the
2001 contract, and to fall within the Article 78 four-month limitations period, they
nevertheless would be timely pursuant to the doctrine of continuing harm, in as much as a
new claim accrues each time Defendants unlawfully bill and collect the DOCS surcharge.
Finally, Plaintiffs will show that the court below erred in dismissing Count I on its
merits. Plaintiffs here seek enforcement of the PSC Order not in terms of what it
affirmatively orders, but in terms of what it prohibits Defendants from doing. The PSC
held that it does not have jurisdiction to review the reasonableness and justness of the tax
monies collected by MCI from telephone customers and retained by DOCS as a
“commission.” Because DOCS tax was not reviewed and approved by the PSC, its
continued collection and retention by Defendants as a telephone surcharge is unlawful.
Because both DOCS and MCI continue to act in violation of these prohibitions, the court
below erred in failing to stop Defendants from filing and collecting the tax as a telephone
surcharge and in failing to order the return of the monies unlawfully collected.

II.

STATEMENT OF FACTS
The court below erred because it dismissed these claims without properly

declaring the rights and obligations of the parties. Any New York State prisoner who
wishes to speak to a loved one, friend, or lawyer must do so by placing a collect call from
a telephone in his or her facility. [R. 47]. Pursuant to the MCI and DOCS contract, MCI
is the exclusive provider of telephone services to the New York State Department of
Correctional Services. [R. 33]. Under the Contract, MCI remits to DOCS a
“commission” of 57.5 percent of the gross annual revenue garnered from its operation of
the telephone system. [R. 33]. To finance the State’s 57.5 percent tax, MCI charges
recipients of prisoners’ collect calls exorbitant rates. The current rate structure, which
includes a $3.00 flat surcharge and a set rate of $0.16/minute on all local and long
distance calls, was not established by the 2001 contract, but was instead created by an
amendment to the contract effective July 1, 2003. [R. 220-224]. As explained below, this
new rate was not approved by the PSC until its order effective October 30, 2003. [R. 6792].
The Contract between MCI and DOCS is extremely lucrative for the State. For
instance, between April 1, 1996 and March 31, 2001, prisoners’ telephone calls paid for
by Plaintiffs and putative class members provided the State with revenues totaling
approximately $109 million. [R. 46]. The 57.5 percent DOCS tax is paid by Plaintiffs
and tendered by MCI to the State, which deposits it into the general fund. [R. 46]. The
proceeds are then appropriated and earmarked for deposit into DOCS’ “Family Benefit
Fund.” [R. 35]. The monies deposited in the Fund are used to cover the costs of
Departmental operations wholly unrelated to the maintenance of the prison telephone

system. [R. 35]. For example, the vast majority of these monies are spent on services,
like medical care, that the State is required by law to provide for prisoners. [R. 46]. The
high cost of collect calls from New York State prisoners is a direct result of the DOCS
tax. [R. 33]. The DOCS tax places a substantial financial burden on Plaintiffs and
putative class members and limits the duration and numbers of calls that they can accept
from prisoners. [R. 48 – 53].
The DOCS tax has not been authorized by the New York State legislature, nor has
it been approved as a legitimate component of MCI’s filed telephone rate by the PSC.
[R. 36]. On August 15, 2003, MCI filed revised tariffs setting out the new rate to be
charged to the recipients of prisoners’ collect calls beginning on September 14, 2003. [R.
44]. Family member, friends, lawyers, and other recipients of prisoner collect calls
(including Plaintiffs Austin and Office of the Appellate Defender and counsel for
Plaintiffs) filed comments on the proposed tariff amendments in a timely manner. [R. 45,
124-153]. In their comments, Plaintiffs and putative class members requested a hearing
on the entire MCI rate, and directed the PSC’s attention to the constitutional and legal
infirmities of certain aspects of the prison telephone system. [R. 124-153].
By order effective October 30, 2003, the PSC held that it did not have jurisdiction
over the DOCS tax. [R. 88]. The PSC reasoned that because DOCS is not a telephone
corporation subject to the Public Service Laws, it does not have jurisdiction over either
the Department or the tax charged by it. [R. 88]. The PSC called the non-jurisdictional
portion of the total charge the “DOCS commission,” and referred to the other portion of
the rate, the 42.5 percent retained by MCI, as the “jurisdictional rate.” [R. 88]. The PSC
reviewed the jurisdictional portion of the MCI rate by comparing it to rates MCI charges

for analogous services. [R. 88]. Based upon this comparison and other factors, the PSC
approved the jurisdictional rate as “just and reasonable” under the Public Utilities Law.
[R. 89]. The PSC did not undertake any review of the reasonableness of the DOCS tax or
of the entire combined rate. [R. 89]. The PSC directed MCI to file a new tariff reflecting
the two separate charges: the DOCS tax and MCI’s filed rate. [R. 89, 432-434]. Since
the October 30, 2003 PSC Order, MCI has continued to bill Plaintiffs and putative class
members for both charges, the 42.5 percent of the total that the PSC approved as a just
and reasonable telephone rate, and the unapproved 57.5 percent DOCS tax.
ARGUMENT
I.

THE COURT BELOW ERRED IN DISMISSING COUNTS II THROUGH
VII OF THE COMPLAINT BECAUSE THOSE CLAIMS ARE NOT TIMEBARRED
The Court below erred in dismissing as time-barred Plaintiffs’ claims in Counts II

through VII of the Complaint. In its Decision, the court found that those claims accrued
on April 1, 2001, the effective date of the current contract between DOCS and MCI, and
that they are subject to Article 78’s four-month statute of limitations. Because more than
four months elapsed from that triggering date and the filing of this action the court
dismissed each claim as untimely. [R. 24]. In so holding, the court below erred in
several significant ways.
All of these claims are timely. In their Verified Petition and Complaint, Plaintiffs
brought their claims as a combined Article 78 / declaratory judgment action, challenging
the continuing wrongs perpetrated by Defendants each time Plaintiffs receive a monthly
telephone bill. Plaintiffs’ claims are timely under any applicable statute of limitations, in

as much as the earliest date their claims could have accrued was October 30, 2003, the
effective date of the PSC decision approving MCI’s revised tariff and ordering
bifurcation of the rate for future tariffs.
As discussed below, the nature of the relief sought and the relationship of the
parties dictates that the claims set out in Counts II through VII of the Complaint could not
have been brought through an Article 78 proceeding. Counts II, III, IV, V and VII are
each subject to a six-year statute of limitations, and Count VI is subject to a three-year
statute of limitations. The court below erred in that it failed to determine the true nature
of each of these claims and their respective statutes of limitation.
Moreover, even if the court below properly determined that the claims arising in
Counts II through VII each accrued on April 1, 2001 and are Article 78 claims, they are
nevertheless timely. Because Plaintiffs’ claims result from a continuing harm perpetrated
upon them each time they are billed unlawfully, the claims accrue as of the most recent
bill and Plaintiffs may properly challenge all billings made within the limitations period
preceding the filing of this action on February 25, 2004.
A.

Plaintiffs’ Claims in Counts II through VII Are Timely because they
Accrued Well Within the Applicable Statute of Limitations.

The court below correctly stated that assessing the proper statute of limitations for
a combined Article 78 / declaratory judgment action requires the Court to “determine the
true nature of the case and the relief requested … . If the Court determines that the
matters at issue can be resolved in the context of an Article 78 proceeding then the four
month Statute of Limitations period will govern.” Walton v. New York State Department
of Correctional Services, No. 1048-04, Oct. 8, 2004 Opinion (“Op.”) at 4 (citing Llana v.

Pittstown, 651 N.Y.S.2d 675, 676 (3d Dept. 1996), Solnick v. Whalen, 401 N.E.2d 190,
194 (1980)).2 [R. 22].
To determine which statute of limitations applies, the court’s inquiry must focus
on the nature of the claims brought and the relief Plaintiffs seek, and then determine
whether that relief is available in an Article 78 proceeding. Solnick, 401 N.E.2d at 193.
As the Court of Appeals stated in Solnick:
it is the nature of the relief sought…rather than its substance, which gives the
action its identity…. In order to determine therefore whether there is in fact a
limitation prescribed by law for a particular declaratory judgment action it is
necessary to examine the substance of that action to identify the relationship out
of which the claim arises and the relief sought.... If that examination reveals that
the rights of the parties sought to be stabilized in the action for declaratory relief
are…open to resolution through a form of proceeding for which a specific
limitation period is statutorily provided, then that period limits the time for
commencement of the declaratory judgment action.
Id.
In this case, the court’s task was to determine whether Plaintiffs sought relief
from each Defendant that was available pursuant to Article 78 or any other cause of
action with a specific statute of limitations, or whether the default six-year statute under
CPLR §213 (2) applies. Solnick, 401 N.E.2d at 194.
In Count I, Plaintiffs seek a declaration that MCI and DOCS’ past, present, and
future collection and retention of the unauthorized DOCS “commission” is unlawful, an
order restraining DOCS and MCI from continuing to collect the DOCS tax, and a refund

Despite its recitation of the correct inquiry, the court below relied in part on the fact that
“petitioners styled this action as one seeking judgment pursuant to Article 78 of the New
York Civil Practice Law and Rules…”. [R. 23]. The court erred in making this
conclusion. Plaintiffs quite clearly styled their action as a “petition and complaint”
seeking both a declaratory judgment and Article 78 relief. Furthermore, even if this were
not the case, the manner in which Plaintiffs characterized their action is irrelevant, for as
the court below acknowledged, it is the court’s duty to determine the true nature of the
relief sought and to treat the claims accordingly.
10

of all unlawful charges collected, with interest. [R. 55]. Defendants have conceded, and
the court below agreed, that Plaintiffs’ first claim was timely commenced, as it was
brought within four months of the PSC’s approval of MCI’s new rate tariff, and
disavowal of jurisdiction over the DOCS “commission.” [R. 22-25].
In Counts II through VI, Plaintiffs request a declaration from the Court that the
DOCS “commission” is: (1) an illegal and unlegislated tax in violation of Articles I, III,
and XVI of the State Constitution; (2) a taking of Plaintiffs’ property without due process
of law, in violation of Article I §§ 6 and 8 of the State Constitution; (3) a violation of
Plaintiffs’ right to equal protection guaranteed by Article I § 11 of the State Constitution;
(4) a violation of Plaintiffs’ speech and association rights guaranteed by Article I § 8 of
the State Constitution; and (5) a deceptive act or practice in violation of General Business
Law § 349. [R. 56-63]. In Count VII, Plaintiffs request an accounting of the unlawful tax
collected from them. [R. 63-64]. The court below held that each of these claims was timebarred, as they “emanate from two contracts entered into by DOCS and MCI … effective
on April 1, 1996 and April 1, 2001 respectively” and are challenges to “the actions of
DOCS, an administrative agency, in entering into the contracts at issue.” [R. 12]. This
holding rests on a fundamental misunderstanding of the nature of Plaintiffs’ claims and
the relief sought.
First, Plaintiffs’ claims accrued, at the very earliest, on October 30, 2003, the
effective date of the PSC decision approving MCI’s revised tariff, and ordering
bifurcation of the rate for all future tariffs, and thus are timely no matter which statute of
limitations applies. In disregarding the October 30, 2003 date and holding that Plaintiffs’
claims accrued on April 1, 2001, the court relied, without analysis, on the Appellate

Division, Third Department’s decision in Bullard v. State,763 N.Y.S.2d 371, 373-74 (3d
Dept. 2003), a case challenging an earlier incarnation of the same prison telephone
system. In Bullard, the court held that a set of challenges similar to those of the instant
case stemmed from DOCS’ April 1, 1996 contract with MCI. [R. 12].
Plaintiffs’ current challenge to the rates charged by MCI and DOCS could not
possibly have accrued upon the signing of the April 1, 2001 contract however, because
that contract did not establish the rates charged to recipients at the date of the filing of
this Complaint. The 2001 contract did purport to set rates, in that it required that “the
rates charged for inmate calls shall not exceed the rates and rules listed in Attachment G.”
[R. 269]. However, the rate ceilings listed in Attachment G were changed by contract
modification in July of 2003 and approved by the PSC in October of 2003. [R. 220-224,
67-92]. It defies all logic to hold, as did the court below, that Plaintiffs should have filed
this challenge to the 2003 rates charged by MCI and DOCS in 2001, two years before
those rates were proposed and put into effect.
The Bullard court itself recognized the impact new rates might have on the
timeliness of a legal challenge and explicitly rested its decision, not just on the effective
date of the contract, but on the date the rates relevant to that challenge were approved by
the PSC. Bullard, 763 N.Y.S.2d at 373 (“All [claimants’] allegations stem from the April
1, 1996 agreement with Worldcom and the rates thereafter approved by the PSC on
December 16, 1998 – the date after which damages were reasonably ascertainable.”)
(emphasis added, citations omitted). The lower court in Bullard emphasized the same
factor in holding that “it was the date of entering into the contract governing the cost and
terms of service which gives rise to the claimants’ causes of action” because “there is no

allegation or argument made that the terms of the agreement have been changed or
modified since that date.” [R. 108]. Moreover, it was not until the effective date of the
PSC decision that Plaintiffs were informed that the PSC would not exercise jurisdiction
over the DOCS “commission,” and would not undertake a statutory review of whether
that rate is “just and reasonable.” The unauthorized and un-reviewed nature of the rate is
an important component of Plaintiffs’ challenge, and of Counts I & II specifically. [R.
55-58].
An Article 78 proceeding is to be commenced within “four months after the
determination to be reviewed becomes final and binding upon the petitioner….”
N.Y.C.P.L.R. § 217 (1) (McKinney 2005). The current rate and commission structure
challenged by Plaintiffs was not final and binding upon them until after the PSC decision.
Cf., Carter v. State, 739 N.E.2d 730, 732 (2000) (“An agency determination is final—
triggering the statute of limitations—when the petitioner is aggrieved by the
determination…. A petitioner is aggrieved once the agency has issued an unambiguously
final decision that puts the petitioner on notice that all administrative appeals have been
exhausted.”) (citations omitted). Moreover, “[i]f an agency has created ambiguity or
uncertainty as to whether a final and binding decision has been issued, the courts should
resolve any ambiguity created by the public body against it in order to reach a
determination on the merits and not deny a party his day in court.” Id. (citations
omitted).3

Indeed, the lower court’s opinion is internally inconsistent, for if, as the court
concluded, Plaintiffs’ primary challenge is to the contract between MCI and DOCS, than
it is this Court’s duty to convert the proceeding into an action for monies had and
received (as explained below) or for equitable reformation of the contract, brought by
Plaintiffs as third party beneficiaries to that contract, and subject to the six year statute of
13

Because Plaintiffs’ claims did not accrue until October 30, 2003, each claim is
timely even if subjected to the short four-month statute of limitations applicable to
Article 78 proceedings. However, application of the four-month Article 78 statute of
limitations is not proper in this case. Contrary to the court’s understanding, Plaintiffs
challenge unauthorized rates charged by MCI and DOCS, not DOCS’ authority to enter
into a contract for the provision of telephone services. Not one of Counts II through VII
could have been brought in an Article 78 proceeding because such a proceeding cannot
provide the declaratory and equitable relief Plaintiffs seek.
Under the CPLR, Article 78 proceedings provide for four limited types of review:
1. whether the body or officer failed to perform a duty enjoined upon it by law;
or
2. whether the body or officer proceeded, is proceeding or is about to proceed
without or in excess of jurisdiction; or
limitations established for such actions by CPLR § 213 (2). See, e.g., Koch v.
Consolidated Edison Co., 468 N.E.2d 1, 7 (1984) (holding city and public benefits
corporation were third-party beneficiaries to agreement between electric utility and the
New York State Power Authority to provide electricity); Pond v. New Rochelle Water
Co., 76 N.E. 211, 214 (1906) (holding villagers are third party beneficiaries to a contract
between village and water supplier to supply water at fixed rates). As third-party
beneficiaries, any challenge by Plaintiffs to the contract between DOCS and MCI sounds
in unconscionability. Under section 2-302 (1) of the Uniform Commercial Code:
If the court as a matter of law finds the contract or any clause of the contract to
have been unconscionable at the time it was made the court may refuse to enforce
the contract, or it may enforce the remainder of the contract without the
unconscionable clause, or it may so limit the application of any unconscionable
clause as to avoid any unconscionable result.
See, e.g., Frostifresh Corp. v. Reynoso, 274 N.Y.S.2d 757, 759 (Sup. Ct. 1966), rev’d on
other grounds, 281 N.Y.S.2d 964 (2d Dept. 1967) (court has power under section 2-302
to refuse to enforce the price and credit provisions of a contract to prevent the
unconscionable result of unfair profit); People v. Two-Wheel Corp., 525 N.E.2d 692, 699
(1988) (“a price may be unconscionably excessive because, substantively, the amount of
the excess is unconscionably extreme, or because, procedurally, the excess was obtained
through unconscionable means, or because of a combination of both factors”). The court
below may not have it both ways: if Plaintiffs seek relief from an unconscionable
contract, then they are entitled to the six-year limitation for contract actions; if their
challenge does not sound in contract then the date of the contract cannot be dispositive.

3. whether a determination was made in violation of lawful procedure, was
affected by an error of law or was arbitrary and capricious or an abuse of
discretion, including abuse of discretion as to the measure or mode of penalty
or discipline imposed; or
4. whether a determination made as a result of a hearing held and at which
evidence was taken, pursuant to direction by law is, on the entire record,
supported by substantial evidence.
N.Y.C.P.L.R. § 7803 (McKinney 2005). Counts II through VII would not be adequately
addressed through any of these four discrete categories because Plaintiffs do not seek to
challenge any procedure utilized by DOCS, MCI or the PSC, attack any determination
made by DOCS, MCI or the PSC, or prohibit action taken by DOCS, MCI or the PSC in
excess of jurisdiction.
In finding Article 78 applicable, the court below relied on one case, Abiele
Contracting v. New York City School Construction Authority, 689 N.E.2d 864 (1997).
[R. 23-24]. Abiele however, provides no support for the court’s decision – it merely restates the well-established proposition that Article 78 review is the appropriate vehicle to
address an assertion that the determination of a governmental body or officer is “in
violation of lawful procedure, was affected by an error of law or was arbitrary and
capricious or an abuse of discretion.” Id. at 866-67. The lower court’s only exploration
of the nature of Plaintiffs’ actual claims was to note that there is nothing “unique” about
them “which would take them outside normal Article 78 review.” [R. 24]. Fortunately,
uniqueness is not a pre-requisite for a valid legal claim in New York.
The lower court’s insistence upon the suitability of an Article 78 proceeding is not
supported by the case law. An Article 78 proceeding, as opposed to an action for a
declaratory judgment, provides only for review of an individual determination affecting
one’s rights or an agency action taken in violation of the agency’s own procedures or

applicable law. See, e.g., New York City Health & Hosps. Corp. v. McBarnette, 639
N.E.2d 740, 744-45 (1994) (“[W]here a quasi-legislative act by an administrative agency
such as a rate determination is challenged on the ground that it was made in violation of
lawful procedure, was affected by an error of law or was arbitrary and capricious or an
abuse of discretion a proceeding in the form prescribed by article 78 can be
maintained….”) (internal citations omitted); McCarthy v. Zoning Bd. of Appeals, 724
N.Y.S.2d 798, 799 (3d Dept. 2001) (holding Article 78 proceeding is appropriate to
challenge the procedures followed in enacting a local law, but not the substance of that
law); Llana v. Pittstown, 651 N.Y.S.2d 675, 677 (3d Dept. 1996) (holding Article 78
proceeding is appropriate because “each of petitioners’ causes of action concern matters
of procedure only, eschewing any intrusion into the substance of the matter voted on”)
(emphasis added, internal citations omitted); DiMiero v. Livingston-Steuben-Wyoming
County Bd. of Cooperative Educ. Srvs., 606 N.Y.S.2d 92, 94 (3d Dept. 1993) (“Because
plaintiffs seek only to challenge discrete, ad hoc determinations regarding their
employment benefits, CPLR article 78 review is proper.”); Bitondo v. State, 582
N.Y.S.2d 819, 822 (3d Dept. 1992) (“Because plaintiff is seeking … a declaration that
the aforementioned practices violated only his constitutional rights in this particular
instance (as opposed to an across-the-board declaration), these claims likewise could
have been resolved in a proceeding pursuant to CPLR 7803 (3)…”) (emphasis in
original).
The law is clear that an Article 78 proceeding is not the appropriate vehicle for a
constitutional challenge to the substance of a continuing and generally applicable policy
or law. Solnick v. Whalen, cited by the lower court, supports this view. 401 N.E.2d 190

(1980). [R. 22]. In Solnick, the court held that petitioners’ procedural due process
challenge to the determination of Medicaid reimbursement rates by the Department of
Health was properly understood as an Article 78 proceeding, and thus barred by the fourmonth statute of limitations. Id. at 194. The Solnick court reiterated the availability of
Article 78 review for a challenge to “individualized rates established for a particular
litigant” and explained that Petitioners’ assertions regarding the lack of due process in the
agency’s determination could be reviewed in an Article 78 proceeding under the third
question authorized by CPLR § 7803, “whether the determination was made in violation
of lawful procedure [or] was affected by an error of law.” Id. at 194. In its reasoning, the
Court reaffirmed the holding of Lakeland Water District v. Onondaga County Water
Authority, that Article 78 review is unavailable for a challenge to an “across-the-board
schedule which increased rates and charges of the authority applicable to all its
customers.” Id., (citing Lakeland Water Dist. v. Onondaga County Water Authority, 248
N.E.2d 855, 858 (1969)). In collecting other cases to support this proposition, the court
carefully distinguished an “ad hoc determination of an individual party’s right of
reimbursement – a determination more accurately classified as administrative rather than
legislative” for which an Article 78 proceeding is appropriate, and a constitutional
challenge to “a rate increase, ordinance, local law, or statute of general applicability” for
which Article 78 review is inapplicable. 401 N.E.2d at 195.
While the Court of Appeals refined the Solnick analysis in New York City Health
and Hospitals Corporation v. McBarnette, 639 N.E.2d 740 (1994), Solnick and Lakeland
retain their precedential value as applied to this case. The McBarnette Court
distinguished between an agency’s quasi-judicial determinations, made upon a record

from an adversarial evidentiary hearing on an individual’s challenge to agency action,
and a quasi-legislative act, in which the agency enacts rules and policies, typically after
holding non-adversarial hearings. 639 N.E.2d at 744 n.2. While the former is routinely
subject to Article 78 certiorari review, the latter is a closer case:
in most situations, agencies' generally applicable decisions do not lend themselves
to consideration on their merits under the provisions for mandamus to review,
because they … [are] not amenable to analysis under the "arbitrary and
capricious" standard. Nonetheless, there are certainly cases in which even a
nonindividualized, generally applicable quasi-legislative act such as a regulation
or an across-the-board rate-computation ruling can be challenged as being
"affected by an error of law," "arbitrary and capricious" or lacking a rational basis
(CPLR 7803[3]). The claim raised by plaintiff here presents precisely such a case.
Id., at 745. The McBarnette court determined that in the particular case before it the
agency action was subject to Article 78 review because petitioners sought “to convince
the court that defendants promulgated a rule affecting hospital rates that represented an
irrational construction of the governing statutes,” Id. However, after McBarnette, it
remains the law that quasi-legislative actions such as across the board rate-setting,
especially those made without notice and hearing, are generally not subject to review
under an Article 78 proceeding because they do not fit within any of the questions set out
in CPLR 7801 and 7803. Id. Accordingly, DOCS’ actions in contracting with MCI and
setting exorbitant telephone rates by contract amendment is simply not reviewable under
any of the Article 78 questions, as there was no hearing, determination, or statutory
interpretation involved. See Solnick, 401 N.E.2d at 194.
Indeed, the only type of action that could conceivably provide Plaintiffs with the
relief they seek in Counts II, III, IV, V and VII4 is an action for moneys had and received,
and such actions are unequivocally subject to the six-year statute of limitations for
4

Counts VI is dealt with separately, below.
18

contract challenges. First Nat’l City Bank v. New York Finance Admin., 324 N.E.2d 861
(1975). For example, in Scarborough School Corporation v. Assessor of Ossining, 467
N.Y.S.2d 674 (2d Dept. 1983), petitioners challenged the Town Assessor’s actions in
placing on the assessment rolls real property that had previously been tax exempt. The
petitioners sought to recover the back taxes paid. Id. at 675. The court held that
“[a]lthough petitioners have cast this matter as an article 78 proceeding, an examination
of the allegations in the petition reveals that the petitioners’ claim for a refund of taxes
paid under protest is in the nature of a plenary action for moneys had and
received…[s]uch an action is based, in theory, upon a contractual obligation or liability,
express or implied in law or fact and is controlled by a six-year Statute of Limitations.”
Id. at 675 (internal citations omitted, emphasis added). See also CKC, Inc. v. Kleiman,
679 N.Y.S.2d 637, 638 (2d Dept. 1998) (applying six-year statute of limitations to a
challenge by property owners to tax levy based on a contract between village and
owners); Riverdale County Sch. v. City of New York, 213 N.Y.S.2d 543, 545 (1st Dept.
1961) (“As a general proposition it is clear that an action to recover back taxes paid is an
action for money had and received, and the six-year statute has application.”).
If Plaintiffs’ claims sound in an action for moneys had and received, than the
proper remedy is conversion of the action, not dismissal. New York law directs courts to
convert a proceeding into a form proper for its prosecution rather than to dismiss it on the
basis of the form in which it was plead. N.Y.C.P.L.R. § 103(c) (McKinney 2005). See,
e.g., First Nat’l City Bank, 36 N.Y.2d at 94 (holding in action to recover improperly
levied taxes, it is proper for the court to convert an Article 78 proceeding into an action
for moneys had and received, “to avoid dismissal as to a substantial part of the relief

sought... in the interest of justice and equity.”) In Niagara Mohawk Power Corp. v. City
School District, 451 N.E.2d 207, 208 (1983), for example, the Court of Appeals treated a
case brought under Article 78 to challenge the school district’s authority to impose a tax
as a suit for moneys had and received, and applied the six-year statute of limitations. The
Niagara Mohawk Court emphasized that the critical question was whether the challenge
amounted to one alleging that the taxing authority erroneously acted within its authority,
a claim for which Article 78 could provide relief, or whether it exceeded its authority
entirely, for which Article 78 could not. Id., at 209. Accord, Trizec Western, Inc. v. City
of New York, 489 N.E.2d 235, 236 (1985) (finding that City had authority to tax, so
action challenging collection was properly dismissed under Article 78 statute of
limitations). In this case there can be no doubt that plaintiffs’ claim that DOCS exceeded
its authority when it imposed an unlegislated tax falls in the same category as the
plaintiffs’ claim in Niagara Mohawk Power.
An action for moneys had and received is “an obligation which the law
creates…when one party possesses money that in equity and good conscience he ought
not to retain and that belongs to another…. It lies when taxes have been collected without
jurisdiction or in violation of constitutional authority, and the taxpayer paid the tax under
formal written protest or duress.” Kahal Bnei Emunim v. Town of Fallsburg, 607
N.Y.S.2d 858, 860-61 (Sup. Ct. 1993) (internal citations omitted). This type of plenary
action is most frequently used in the context of overpaid taxes, but it is available for other
forms of unlawful payment. In Eichacker v. New York Telephone Company, 14
N.Y.S.2d 17, 20 (Mun. Ct. 1939), rev’d on other grounds, 30 N.Y.S.2d 723 (2d Dept.
1940), for example, a doctor sued his telephone provider for charging him in excess of

the tariff on file with the Public Service Commission. The court found that the action
was “essentially one to recover back money which the defendant received from the
plaintiff, but had no legal right to withhold from him” and as such, was subject to the sixyear statute of limitations applicable to contract actions. Id. at 24.
Whether the court should convert this action into one for moneys had and
received or merely apply the catch-all six year statute of limitation for declaratory
judgments, as is equally appropriate, it is clear that Plaintiffs are entitled to a six-year
statute of limitations period. It is also clear that they cannot receive the relief they seek
through an Article 78 proceeding and for that reason, the court below erred in dismissing
Counts II, III, IV, V and VII as untimely.
Finally, in dismissing Counts II – VII with little analysis, the court below
completely ignored the well-established statute of limitations period applicable to Count
VI, brought under General Business Law section 349, for deceptive business practices.
[R. 62-63]. The three-year statute of limitations for statutory causes of action under
C.P.L.R. § 214 (2) applies to cases brought pursuant to GBL § 349. See Busbee v. KenRob Co., 720 N.Y.S.2d 785, 786 (1st Dept. 2001). For this reason, Plaintiffs’ sixth claim
is timely whether it accrued, as the lower court held, on April 1, 2001, or as Plaintiffs’
claim, on October 30, 2003.
B.

Plaintiffs’ Claims in Counts II through VII are Timely Because
Defendants Actions Constitute a Continuing Wrong Causing
Plaintiffs’ Claims to Accrue Each Billing Cycle

Even if this court were to agree with the holdings of the court below that Plaintiffs
seek relief available through an Article 78 proceeding and that their claims initially

accrued on April 1, 2001, it must nevertheless find that the lower court erred in
dismissing Plaintiffs’ claims as untimely because the court failed to recognize the
applicability of the continuing wrong doctrine to Plaintiffs’ claims. [R. 24]. Under New
York law, a cause of action ordinarily accrues at the time of the wrongful act. However,
“certain wrongs are considered to be continuous wrongs, and the statute of limitations,
therefore, runs from the commission of the last wrongful act.” Neufeld v. Neufeld, 910
F. Supp. 977, 982 (S.D.N.Y. 1996) (citations omitted). If the wrongful acts do not cease,
a cause of action for a continuing harm continuously accrues. Davis v. Rosenblatt, 559
N.Y.S.2d 401, 404 (3d Dept. 1990) (citing 1 Weinstein-Korn-Miller, NY Civ. Prac., Para
213.04).
The court below declined to apply the continuing wrong doctrine in reliance once
again upon the decision in Bullard v. State. [R. 24]. The Bullard opinion however,
involved a very limited analysis of the issue, and went against the significant weight of
precedent. For this reason, no weight should be accorded that decision.5
The Bullard Court acknowledged the validity of the continuing violation6
doctrine, but found it inapplicable to claimants’ challenges to the telephone rates charged
to them as recipients of prisoners’ collect calls, because it believed that claimants were
really challenging the “continuing effects of the April 1, 1996 Worldcom contract.”
Bullard v. State, 763 N.Y.S.2d 371, 374 (3d Dept. 2003). In reaching this conclusion, the

“It is now well settled in this State and elsewhere, that the courts will not, as a general

rule, follow a former decision ‘where it can be shown that the law has been misapplied,
or where the former determination is evidently contrary to reason.’” In re Estate of
Eckart, 348 N.E.2d 905, 908 (1976) (citing Rumsey v. New York & New England R.R.
Co., 133 N.Y. 79, 85 (1892)).
6
The doctrine is variously referred to as “continuing harm” “continuing wrong” or
“continuing violation” doctrine.
22

court cited one case, Commack Self-Service Kosher Meats, Inc. v. State (which in turn
cited Selkirk v. New York), for the proposition that the continuing harm doctrine requires
continuing unlawful acts, not just the continuing effect of earlier unlawful conduct. See
Commack Self-Service Kosher Meats, Inc. v. State, 704 N.Y.S.2d 737, 739 (3d Dept.
2000); Selkirk v. New York, 671 N.Y.S.2d 824, 825 (3d Dept. 1998).
In Commack, the Department of Agriculture and Markets cited a kosher meats
business with violation of an Agriculture and Market Law provision regarding the sale
and preparation of kosher foods. 704 N.Y.S.2d at 738. The Department later withdrew
the penalty but failed to expunge the violation from claimants’ record, causing injury to
their reputation. Id. In defending against a statute of limitations argument, claimants
characterized the ongoing damage to their reputation as a continuing injury and argued
that this continuing injury caused their claim to accrue on a daily basis. Id. at 739. The
Third Department found against claimants because “the mere fact that claimants may
continue to suffer damage to their reputation does not alter the fact that the Department’s
unlawful conduct, if any, occurred five years before the claim was filed.” Id. In short,
claimants’ injury emanated from one harmful act on the part of the agency.
Selkirk involved a similar challenge to a single, discrete wrongful act -- the
state’s wrongful seizure of claimant’s assets -- that caused continuing damage to
claimant’s credit and financial reputation. 671 N.Y.S.2d at 825. Once again, the Third
Department refused to apply the continuing violation because the case challenged “the
continuing effects of earlier unlawful conduct” rather than “continuing unlawful acts.”
Id.

The Bullard court, and by its reliance thereon the court below, erred in relying on
these cases to deny Plaintiffs the benefit of the continuing wrong doctrine. Selkirk and
Commack each involved a single, discrete wrongful act which resulted in ongoing
economic injury to claimants. While the 2001 contract between MCI and DOCS
contained the DOCS “commission” requirement, it was not the beginning or end of the
agency’s unlawful conduct. Defendants continue to act unlawfully to this day. [R. 36].
MCI and DOCS engage in a discrete wrongful act each time MCI mails a bill to Plaintiffs
charging them the DOCS tax and DOCS retains that unlawful tax. Application of the
continuing violation doctrine in such a situation is well established.
New York courts have consistently applied the continuing wrong doctrine to
repeated billings or withholding of monies owed. In Davis v. Rosenblatt, for example,
former and current City Court Judges from Syracuse, Rochester, Buffalo, and Niagara
Falls challenged a disparity between their wages and the wages paid Yonkers judges. 559
N.Y.S.2d 401, 402-3 (3d Dept. 1990). The State conceded, and the Third Department
held, that the judges were challenging a continuing harm for which a claim continuously
accrues for statute of limitations purposes. Id. at 404. While the salary differential was
created by statute (just as the DOCS “commission” at issue in this case was created by
contract) the date of that statute was irrelevant to the Third Department’s statute of
limitations discussion. Id. Rather, the Third Department found that the claims were
timely for all judges who had received the allegedly unlawful pay rate within the
operative six-year statute of limitations. Id. In other words, the claim accrued upon each
pay period until the allegedly discriminatory pay differential ceased. Id., accord Nelson

v. Lippman, 709 N.Y.S.2d 210, 214 (3d Dept. 2000), rev’d on other grounds, 745 N.E.2d.
386 (2000).
Similarly, in Merine v. Prudential-Bache Utility Fund, Inc., 859 F.Supp. 715, 725
(S.D.N.Y. 1994), the federal court applied New York’s continuing wrong doctrine to a
shareholders’ state law claim regarding excessive fees. The Defendants argued that since
the fees were charged pursuant to a Distribution Plan approved more than three years
prior to commencement of the action, the claim should be barred as falling outside the
operative three-year statute of limitations. Id. The court disagreed, and held that under
the continuing wrong doctrine, “a new cause of action arose each time defendants
charged excessive fees.” Id.
Finally, the Third Department applied the continuing harm doctrine in Cahill v.
Public Service Commission, a case strikingly similar to the one at hand. 498 N.Y.S.2d
499 (3d Dept. 1986).7 In Cahill, a customer of New York Telephone Company and
Central Hudson Gas & Electric filed an Article 78 proceeding seeking an order directing
Defendants to cease passing along the cost of charitable contributions to customers. Id.
at 500. The petitioner claimed that a PSC policy, established in 1970, permitted utilities
to pass along these costs to ratepayers, in violation of ratepayers’ First Amendment
rights. Id. at 501. Although the claim was not commenced until 1984, fourteen years
after creation of the challenged policy, the Third Department held that the Article 78

Indeed, the Bullard Court cited Cahill for the proposition that the Bullard plaintiffs
could have brought an Article 78 action to challenge the relevant conduct, and thus did
not require recognition of a constitutional tort cause of action. 763 N.Y.S.2d at 374

proceeding was timely because the petitioner sought relief to address a continuing
violation of his constitutional rights. Id. at 500, 502.8
The Walton plaintiffs challenge to the continuing imposition of an illegal and
discriminatory tax is indistinguishable from the Judges’ challenges to continuing unequal
pay in Davis, the shareholders’ challenge to continuing excessive fees in Merine, and the
customer’s challenge to continuing charitable contributions in Cahill. In each case, the
petitioners or claimants challenged continuing wrongful acts triggered by a policy or law
created outside the operative statute of limitations period. And in each case the court
held, as it must, that the challenge was timely. To hold otherwise would not only go
against the weight of precedent but would also result in a serious injustice to petitioners.
The same injustice would arise here. If this Court affirms the lower court’s holding that
Plaintiffs’ claims accrued on April 1, 2001 and are subject to a four-month statute of
8

For other cases involving application of the continuing wrong doctrine for money
wrongfully collected or withheld see Barash v. Estate of Sperlin, 706 N.Y.S.2d 439, 440
(2d Dept. 2000), (“the plaintiff’s claims of withheld profits, etc., constitute a continuing
wrong which accrued anew each time the defendants collected income and profits …”);
Butler v. Gibbons, 569 N.Y.S.2d 722, 723 (1st Dept. 1991) (“[p]laintiff's allegations
clearly make out a continuing wrong, i.e., Gibbons’ repeated and continuing failure to
account and turn over proceeds earned from renting the properties since 1979. Thus … a
new cause of action accrued each time defendant collected the rents and kept them to
himself”); and Subin v. City of New York, 229 N.Y.S. 628, 629 (Mun. Ct. 1928)
(regarding action to recover illegal water tax paid over series of years). The New York
Courts have also applied the doctrine in the context of a continuing violation of a
constitutional right, Cash v. Bates, 93 N.E.2d 835, 836 (1950); Amerada Hess Corp. v.
Acampora, 486 N.Y.S.2d 38, 41 (2d Dept. 1985); continuing trespass, Town of Saranac
v. Town of Plattsburgh, 630 N.Y.S.2d 394, 395 (3d Dept. 1995); Cranesville Block Co. v.
Niagara Mohawk Power Corp., 572 N.Y.S.2d 495, 497 (3d Dept. 1991); continuing
breach of a contract or continuing obligation, Bulova Watch Co. v. Celotex Corp., 389
N.E.2d 130, 132 (1979); Orville v. Newski, 547 N.Y.S.2d 913, 914 (3d Dept. 1989);
continuing exposure to a harmful substance, Bikowicz v. Nedco Pharmacy, Inc., 517
N.Y.S.2d 829, 832 (3d Dept. 1987); and continuing sexual harassment, Town of
Lumberland v. New York State Div. of Human Rights, 644 N.Y.S.2d 864, 868 (3d Dept.
1996).

limitations, and does not recognize the applicability of the continuing wrong doctrine, no
individual who began accepting calls from a loved one in prison after August 1, 2001
could challenge the allegedly unlawful charges. Moreover, any challenge would be
completely foreclosed for the family, friends, and lawyers of the thousands of prisoners
who have entered New York State prisons since that date. Such a result would not only
be against the weight of significant precedent, but would also be manifestly unjust. For
this reason, this court should reverse the decision below.
II.

THE COURT BELOW ERRED IN DISMISSING COUNT I FOR FAILURE
TO STATE A CLAIM
The lower court erred in dismissing Plaintiffs’ first claim9 seeking a declaration

that MCI and DOCS’ past, current, and future collection and retention of the
unauthorized DOCS tax is unlawful, an order restraining DOCS and MCI from
continuing to collect the tax, and a refund from DOCS of all unlawful charges collected,
with interest. In dismissing Count I, the lower court did not cite a single case or engage
in any analysis. Rather, the court found “nothing to enforce in the PSC order” because it
looked only at the “decretal paragraphs,” rather than considering the impact of the PSC’s
order as a whole. [R. 13-14]. Plaintiffs’ first claim for relief, however, cannot rest on the
PSC’s own failure spell out the logical and necessary consequences of its order. The
PSC’s expert determination that it lacks jurisdiction over the DOCS tax has clear
implications. Because the DOCS tax is not a filed telephone rate calculated based on the
reasonable costs incurred by a telephone company, and because it has not been approved

Count I is the only count that the court below found to have been timely filed within the
four-month Article 78 statute of limitations period and therefore was the only claim
decided on the merits.
27

as “just and reasonable” by the PSC, it is the responsibility of this Court to order DOCS
to cease imposing its unlawful tax, and require MCI to cease collecting it from Plaintiffs.
Under the Public Service Law, MCI is prohibited from charging a rate that is not
on file with the PSC and has not been determined “just and reasonable.” This conclusion
is compelled by the plain language of the Public Service Laws. New York Public Service
Law §91(1) states:
All charges made or demanded by any telegraph corporation or telephone
corporation for any service rendered or to be rendered in connection therewith
shall be just and reasonable and not more than allowed by law or by order of the
commission. Every unjust or unreasonable charge made or demanded for any
such service or in connection therewith or in excess of that allowed by law or by
order of the commission is prohibited and declared to be unlawful.
Defendants cannot dispute that the DOCS tax is a charge imposed over and above the
“jurisdictional rate” reviewed and declared just and reasonable by the PSC. Nor can they
dispute that this separate rate is not validated by any other law. [R. 88-89].
Because the DOCS tax is in excess of the approved jurisdictional rate, MCI may
not continue to collect it from Plaintiffs or other consumers.
No utility shall charge, demand, collect or receive a different compensation for
any service rendered or to be rendered than the charge applicable as specified in
its schedule on file and in effect. Nor shall any utility refund or remit directly or
indirectly any portion of the rate or charge so specified…except such as are
specified in its schedule filed and in effect....
N.Y. Pub. Ser. §92(2)(d). The law is clear that MCI cannot demand or collect any charge
over the filed rate – that portion deemed “jurisdictional” and approved by the PSC. Any
surcharges that increase the rate a customer pays over the tariffed rate are invalid. For
example, in People ex rel. Public Service Commission v. New York Telephone Co., 29
N.Y.S.2d 513, 514 (3d Dept. 1941), aff’d, 40 N.E.2d 1020 (1942), the court considered
whether hotels may charge guests for telephone service in excess of the rate specified in

the tariff schedules. The hotels attempted to justify the practice as a charge for hotel
services only, not subject to regulation by the PSC. Id. at 515. The court held that
because the hotel was primarily providing telephone service their rates could not exceed
the filed rate held just and reasonable by the PSC. Id. at 516-17. See also, United States
v. AT&T, 57 F. Supp. 451 (S.D.N.Y. 1944), aff’d sub nom, Hotel Astor v. United States,
325 U.S. 837 (1945) (per curiam) (hotel surcharge which raises cost of call over tariffed
rate is invalid and should be enjoined). These cases are directly analogous to the one at
hand. DOCS’ surcharge raises the cost of inmate calls over the tariffed rate and is
therefore invalid.
The fact that MCI filed a bifurcated rate pursuant to the PSC Order does not in
any way legitimize the DOCS tax. [R. 433-434]. Although the DOCS tax is physically
listed on MCI’s tariff, it is not a “filed rate” within the meaning of the Public Service
Law. The DOCS tax cannot logically be on file because the PSC, according to its own
ruling, does not have jurisdiction over that portion of the total telephone charge, and
under the Public Service Law, the PSC has jurisdiction to review any rate or charge that
has been “filed” with the Commission. N.Y. Pub. Ser. §92(2)(e). Since the PSC does not
have jurisdiction over the DOCS tax, the DOCS tax cannot be a part of MCI’s “filed rate”
as defined by the Public Service Law.
MCI has a duty to cease collecting the DOCS tax because that surcharge is in
excess of the rate determined “just and reasonable” by the PSC. See N.Y. Pub. Serv. §
92(2)(d). “[I]t shall be the duty of every…telephone corporation…to obey each and
every such order so served upon it and to do everything necessary or proper in order to
secure compliance with and observance of every such order…according to its true intent

and meaning.” N.Y. Pub. Ser. §97(2) (emphasis added). As a telephone company, MCI
may not continue to bill consumers in excess of its filed rate.
And just as the Court must order MCI to cease collecting and remitting the
unlawful tax to DOCS, it must also order DOCS to cease demanding and accepting the
tax from MCI.10 As demonstrated below, DOCS has no right to continue to assess its
unauthorized tax. See infra, Point III, Sections A – E. When an agency acts in violation
of a clear legal duty, this Court has the power to order compliance with the law through
mandamus and to declare the agency’s actions unlawful. See, e.g. Huff v. C.K. Sanitary
Sys. Inc., 688 N.Y.S.2d 801, 806 (3d Dept. 1999) (holding that court properly enjoined
town sewage system’s operator from charging additional fees without town’s approval
for statutorily-mandated duty to maintain the pumps).
By its Order, the PSC determined that it lacks jurisdiction over the DOCS tax.
This tax has not been approved by the PSC and is not a filed rate under the Public Service
Law. It is an unauthorized charge assessed upon Plaintiffs and putative class members
without any basis in the law. For this reason, Plaintiffs seek an order from this Court
reversing the lower court’s dismissal of Count I and prohibiting MCI and DOCS from
continuing to collect this tax.
III.

THE COURT BELOW ERRED WHEN IT FAILED TO ASSESS
PLAINTIFFS’ PROPERLY PLED AND SUPPORTED CLAIMS
In Counts II through VI of their Complaint, Plaintiffs allege that the DOCS

telephone tax is: (1) an unlegislated tax imposed in violation of Articles I, III, and XVI
of the State Constitution; (2) a taking of Plaintiffs’ property without due process of law in
10

Under the current contract between MCI and DOCS, MCI must continue to remit to the
State the DOCS tax. [R. 234] (“Contractor is obligated to make commission payments to
DOCS in strict accordance with [the terms of the contract]”).
30

violation of Article I, §§ 6 and 8 of the State Constitution; (3) a violation of Plaintiffs’
right to equal protection guaranteed by Article I, § 11 of the State Constitution; (4) a
violation of Plaintiffs’ speech and association rights guaranteed by Article I, § 8 of the
State Constitution; and (5) a deceptive act or practice in violation of General Business
Law § 349. Despite Plaintiffs’ comprehensive showing that each claim was properly pled
and supported by facts, the court below dismissed them out of hand as untimely. As
shown above, this dismissal was erroneous.11
A.

Plaintiffs Have Adequately Pled the Existence of the DOCS Telephone
Tax

With regard to their contention that the DOCS telephone surcharge constitutes an
unconstitutional tax, Plaintiffs have alleged that: (a) under the Contract, MCI remits to
DOCS a “commission” of 57.5 percent of its gross annual revenue from operating the
prison telephone system, [R. 33]; (b) to finance this “commission,” MCI charges
recipients of prisoners’ collect calls a surcharge of $3.00 for every call accepted, [R. 33];
(c) the surcharge is paid by Plaintiffs to MCI, tendered by MCI to the State, and
deposited by the State into the general fund, [R. 46]; (d) these funds are then earmarked
and appropriated to DOCS for its “Family Benefit Fund,” [R. 35]; (e) the Family Benefit
Fund monies are used to cover the costs of Departmental operations wholly unrelated to
the maintenance of the prison telephone system, [R. 35]; and (f) the DOCS telephone tax
has neither been authorized by the State Legislature nor approved as a legitimate
component of MCI’s filed telephone rate by the PSC. [R. 36]. No more is necessary to
adequately plead the imposition of an unlawful tax.
The following sections summarize the merits of Plaintiffs’ Counts II through VI.
Plaintiffs would welcome the opportunity to provide additional briefing on these claims
should the Court reverse the lower court and reach the merits of Plaintiffs’ claims.
11

The surcharge Plaintiffs pay can be nothing other than a tax. It cannot be a user
fee, intended to defray the costs of the services to which it is attached (i.e., the prison
telephone service) given that DOCS uses only 1.5 percent of the revenue it receives from
the surcharge to cover the costs of operating the prison telephone system. [R. 102]. See
Jewish Reconstructionist Synagogue, Inc. v. Roslyn Harbor, 352 N.E.2d 115, 118 (1976)
(User fees must be “reasonably necessary to the accomplishment” of the authorized
service and “assessed or estimated on the basis of reliable factual studies or statistics.”)
In addition to the required connection between a user fee and the actual cost of the
service provided, a user fee must -- by definition -- represent “a visitation of the costs of
special services upon the one who derives a benefit from them,” Jewish Reconstructionist
Synagogue, 352 N.E.2d at 117 (emphasis added), and must be used to finance the same
service to which they are pegged, not merely any service that might indirectly benefit the
fee-payers. Id. at 119. The telephone tax fails these tests as well. While the Family
Benefit Fund does in (very small) part benefit Plaintiffs and others who receive collect
calls from prisoners, the vast majority of the money levied through the DOCS tax pays
for unrelated services which would otherwise have been paid for out of the State’s or
DOCS’ general budget. [R. 94-103]. As DOCS itself has explained, “while [the DOCS
tax monies spent on medical care] are certainly legitimate state expenditures, the fact they
are made from the [Family Benefit Fund] reduces the taxpayers’ burden.” [R. 102].
The small portion of the tax revenue used to cover DOCS’ actual costs for
providing prison telephone service simply cannot justify the huge surcharge imposed, and
the law is clear that a fee that exceeds any reasonable relationship to the cost of its
service is an unauthorized tax. “To the extent that fees charged are exacted for revenue

purposes or to offset the cost of general governmental functions they are invalid as an
unauthorized tax.” Torsoe Bros. Constr. Corp. v. Bd. of Trustees, 375 N.Y.S.2d 612,
616-17 (2d Dept. 1975). See also New York Tel. Co. v. City of Amsterdam, 613
N.Y.S.2d 993, 995-96 (3d Dept. 1994) (holding that an excavation permit “fee” which is
disproportionate to associated costs and utilized as a revenue-generating measure is an
unlawful tax); State University of New York v. Patterson, 346 N.Y.S.2d 888, 891 (3d
Dept. 1973). Because the DOCS “commission” is not reasonably related to the necessary
costs to DOCS of providing prison telephone service, and the monies Plaintiffs pay fund
unrelated programs that are beneficial to all New Yorkers, the surcharge is an unlawful
tax and not a legitimate user fee.
Similarly, Defendants cannot show that its surcharge is a valid telephone service
“commission.” Valid commissions are specifically based on expenses incurred by
telephone companies to gain access to property in order to be able to provide services
there, In re AT&T’s Private Payphone Comm’n Plan, 3 F.C.C.R. 5834, ¶ 20 (1988), and
must be included in the tariffed rate. Id. The DOCS tax is obviously unrelated to the cost
of gaining access to the prisons, because it runs the prisons. It cannot be a valid
commission because it is not claimed as an expense by MCI included in its filed rate.
Furthermore, the law is clear that “commissions” which increase the rate a customer pays
over the tariffed rate are invalid. See People ex rel. Public Serv. Comm’n v. New York
Tel. Co., 29 N.Y.S.2d 513, 514 (3d Dept. 1941), aff’d, 40 N.E. 2d 1020 (1942) (hotel can
not impose surcharge over filed rate); United States v. AT&T, 57 F. Supp. 451 (S.D.N.Y.
1944), aff’d sub nom, Hotel Astor v. United States, 325 U.S. 837 (1945) (per curiam)

(hotel surcharge which raises cost of call over tariffed rate is invalid and should be
enjoined).
B.

Plaintiffs Have Shown that the Telephone Tax is Unauthorized,
Violates Their Rights to Substantive Due Process and is an Unlawful
Taking

In Counts II & III Plaintiffs have adequately pled violations of their constitutional
rights based on the unauthorized and unlawful DOCS tax. The law in New York is
eminently clear that “the exclusive power of taxation is lodged in the State Legislature.”
Castle Oil Corp. v. City of New York, 675 N.E.2d 840, 842 (1996) (citing N.Y. Const.,
art. XVI, § 1). While the taxing power may be delegated to “legislative bodies of
municipalities and quasi-municipal corporations . . . [t]he power to tax may not . . . be
delegated to administrative agencies or other governmental departments.” Greater
Poughkeepsie Library Dist. v. Town of Poughkeepsie, 618 N.E.2d 127, 130 (1993)
(internal citations omitted, emphasis added). “Only after the Legislature has, by clear
statutory mandate, levied a tax on a particular activity, and has set the rate of that tax,
may it delegate the power to assess and collect the tax to an agency.” Yonkers Racing
Corp. v. State, 516 N.Y.S.2d 283, 284 (2d Dept. 1987). Because DOCS can neither point
to a law delegating it general taxing authority nor show that the Legislature has provided
it with specific authority to levy taxes upon prisoners’ families as a means of raising
revenue for the State’s general operations, its taxing activities are ultra vires and
unconstitutional under Article XVI, § 1. Id.
Plaintiffs’ allegations properly delineate their substantive due process claims. It is
a well-established principle that “[t]axes, or more specifically, the monies used to pay
taxes, are a type of ‘property’ of which a citizen cannot be deprived without due process

of law.” Weissinger v. Boswell, 330 F. Supp. 615, 624 (M.D. Ala. 1971) (three-judge
constitutional panel); Sunday Lake Iron Co. v. Township of Wakefield, 247 U.S. 350,
352-53 (1918). Substantive due process violations may be found when there are “[a]ny
substantial departures . . . in the collection of taxes, from the law, either as to the
authority for a tax, for its purpose, or the provisions for the just distribution of its
burdens.” Chicago Union Traction Co. v. State Bd. of Equalization, 114 F. 557, 566
(C.C.S.D. Ill. 1902). There can be no doubt that Plaintiffs have shown that the prison
telephone taxation scheme -- from the lack of any authority to impose the tax, to the use
of an undefined and unbounded surcharge to collect that tax, to the inequitable
distribution of that tax burden among the State’s citizens -- violates due process.
Given that the prison telephone tax is wholly unauthorized, it follows that there is
not now – nor has there ever been – any delineation of the appropriate tax rate or any
guidelines governing the parameters of any tax to be levied. The courts have consistently
concluded that such schemes violate due process requirements. See Yonkers Racing
Corp., 516 N.Y.S.2d at 284 (holding that any tax imposed pursuant to a limited agency
delegation, “must be accompanied by proper guidelines set by the legislature”); Rego
Properties Corp. v. Finance Adm’r of New York, 424 N.Y.S.2d 621, 625 (Sup. Ct. 1980)
(quoting Weissinger, 330 F. Supp. at 625) (“Delegating to an administrative agency the
power to fix the ratio of assessment, without formulating a definite and intelligible
standard to guide the agency in making its determination, constitutes an unconstitutional
delegation of legislative power.”).
Beyond DOCS’ ultra vires action in exercising taxing power that exceeds its
jurisdictional mandate and the State Constitution, and its unfounded claim to the power to

levy taxes in any amount it sees fit, it has also violated the well-established principle of
substantive due process that “assessments for public improvements laid upon [specific
individuals] are ordinarily constitutional only if based on benefits received by them.”
HBP Assocs. v. Marsh, 893 F. Supp. 271, 278-79 (S.D.N.Y. 1995).12 The tax monies
paid by Plaintiffs under DOCS’ scheme are added to the general State fisc to cover
DOCS’ general operating costs; they compensate for what otherwise would be funded by
general tax dollars or would be a budgetary shortfall. Plaintiffs receive no special benefit
from the general operation of the State Correctional System; they merely benefit as do all
State residents. For this reason, the tax imposed bears no relationship to Plaintiffs as a
group. The distinction drawn by the tax scheme between Plaintiffs and other State
taxpayers for the purpose of serving the Department’s general revenue raising objective is
thus unconstitutionally baseless and irrational. See Foss v. City of Rochester, 480 N.E.2d
717, 722 (1985).
The Department’s revenue raising scheme also violates the prohibition against
double taxation by imposing a tax on Plaintiffs in addition to the state taxes they already
pay that are apportioned through the budgetary process to DOCS. “Double taxation is
prohibited unless specifically authorized by the legislature.” Radio Common Carriers v.
State, 601 N.Y.S.2d 513, 517 (Sup. Ct. 1993) (citing Sage Realty Corp. v. O’Cleireacain,
586 N.Y.S.2d 118 (1st Dept. 1992)). As the Supreme Court observed in Tennessee v.
Whitworth, 117 U.S. 129, 137 (1886):
Justice requires the burdens of government shall as far as practicable be laid
equally on all, and, if property is taxed once in one way, it would ordinarily be
12

See also Norwood v. Baker, 172 U.S. 269, 279 (1898); Aldens, Inc. v. Tully, 416
N.Y.S.2d 425, 427 (3d Dept. 1979); Board of Ed. v. Village of Alexander, 92 N.Y.S.2d
471, 477-78 (Sup. Ct. 1949).
36

wrong to tax it again in another way, when the burden of both taxes falls on the
same person. Sometimes tax laws have that effect; but if they do, it is because the
legislation was unmistakably so enacted. All presumptions are against such an
imposition.
In sum, Plaintiffs have properly alleged their substantive due process and unauthorized
taxation claims.
Plaintiffs have also stated a claim for an unlawful taking. The Takings Clause of
Article I, § 7(a) of the New York State Constitution prohibits the taking of private
property for public use without just compensation. Here, DOCS imposed an assessment
that confiscates Plaintiffs’ property in violation of their rights to due process under
Article I of the New York Constitution. More specifically, Plaintiffs allege that the
prison telephone tax system: (1) works a taking of their property – the fees they pay to
cover the costs imposed by the DOCS tax, [R. 33, 34-35, 37 – 39, 46]; (2) for a public
purpose – funding a portion of the Department’s general operating costs [R. 46]; and (3)
without just compensation.
The sums paid by Plaintiffs for the DOCS tax constitute their personal property.
The United States Supreme Court has stated that the Takings Clause of the Constitution
applies to such monetary interests. See, e.g., Phillips v. Washington Legal Found., 524
U.S. 156, 172 (1998); Webb’s Fabulous Pharmacies v. Beckwith, 449 U.S. 155, 160
(1980). And the New York Court of Appeals has followed suit, ruling that Article 1 § 7
of the State Constitution applies to monetary interests as well. See Alliance of Am.
Insurers v. Chu, 571 N.E.2d 672 (1991). Because New York does not provide a
procedure for seeking just compensation of claims such as those alleged, Plaintiffs have
adequately pled their takings claim.

Plaintiffs Have Properly Alleged Violations of Their Free Speech and
Associational Rights

Plaintiffs have stated a cause of action for violation of their free speech and
associational rights by their allegations regarding (1) the States’ imposition of a fee on
their expressive activity that bears no relationship to related regulatory costs, [R. 35]; (2)
the burden the telephone tax places on their ability to maintain contact with incarcerated
family members, [R. 48 – 52]; and (3) the attenuated relationship between the surcharge
and any penological objective [R. 35, 75-76, 85].
The prison telephone system clearly implicates Plaintiffs’ rights to freedom of
speech and association under the State Constitution. While incarceration – for prisoners
and non-prisoners alike – necessarily limits the complete enjoyment of some
constitutional freedoms, it does not “bar free citizens from exercising their [First
Amendment] rights” to contact family and friends who are in prison. Thornburgh v.
Abbott, 490 U.S. 401, 407 (1989). Our free speech guarantees protect Plaintiffs’
communication with their friends and family not only by mail, but also by telephone.
See, e.g., Washington v. Reno, 35 F.3d 1093, 1100 (6th Cir. 1994) (recognizing that noninmates’ rights may be implicated by prison telephone regulations). To the extent they
restrict Plaintiffs’ ability to communicate with family members in prison, DOCS’ policies
also burden Plaintiffs’ rights to familial and marital association protected by the New
York Constitution. Because “[i]t is through the family that we inculcate and pass down
many of our most cherished values,” Moore v. City of East Cleveland, 431 U.S. 494,
503-504 (1977), the states are required to protect the “[i]ntegrity of the family unit.”
Stanley v. Illinois, 405 U.S. 645, 651 (1972). Plaintiffs’ right to familial association
survives the incarceration of their loved ones, see Turner v. Safley, 482 U.S. 78, 95-97

(1987), because attributes of the family relationship – expressions of emotional support,
decision-making regarding family obligations and child-rearing, and expectations of the
prisoner’s reentry into the family – exist despite the fact of imprisonment. See id. at 9596.
In Turner, the Supreme Court limited judicial scrutiny of the “day-to-day”
decisions of prison administrators to address “security problems,” 482 U.S. at 89. It then
applied this reasoning to prison rules regulating “the order and security of the internal
prison environment” in Thornburgh v. Abbott, 490 U.S. at 407. However, courts have
expressly declined to apply the Turner standard to prison policies that do not implicate
such concerns. Thus, in Pitts v. Thornburgh, 866 F.2d 1450 (D.C. Cir. 1989), the D.C.
Circuit applied traditional intermediate scrutiny to the District of Columbia’s decision to
incarcerate female offenders in federal prisons far from the city while similarly situated
male offenders were incarcerated nearby. The D.C. Circuit reasoned that Turner was
applicable only to cases involving “regulations that govern the day-to-day operation of
prisons and that restrict the exercise of prisoners’ individual rights within prisons.” Id. at
1453. Because the District’s policy was the result of “general budgetary and policy
choices” that “[did] not directly implicate either prison security or control of inmate
behavior, [or] go to the prison environment and regime,” the Court concluded Turner was
inapposite. Id. at 1454.13 Like the policy decision in Pitts, DOCS’ tax reflects a purely
“budgetary” choice that does not implicate prison security, control of prisoners’ behavior,
13

See also Beauchamp v. Murphy, 37 F.3d 700, 704 (1st Cir. 1994) (refusing to apply
Turner deference to challenge to denial of sentencing credit because considerations of
discipline and security are “greatly diluted when the issue is the calculation of a sentence,
a task performed by an administrator with a pencil”); Jordan v. Gardner, 986 F.2d 1521,
1530 (9th Cir. 1993) (declining to apply Turner standard to inmates’ Eighth Amendment
challenge to cross-gender clothed body searches).
39

or the internal prison environment. As such, it is subject to the level of scrutiny
traditionally applied to challenges to fees that burden free speech rights. Pitts, 866 F.2d
at 1453-54.
As noted above, while government may assess a fee to recoup the costs incurred
in regulating expressive activity, Cox v. New Hampshire, 312 U.S. 569, 576-77 (1941), it
may not impose a fee that bears no relationship to those regulatory costs. See Murdock v.
Pennsylvania, 319 U.S. 105 (1943). Thus, in Murdock, the Supreme Court struck down a
licensing fee for distributing literature because it was not “imposed as a regulatory
measure to defray the expenses of policing the activities in question” but rather served as
“a flat license tax levied and collected as a condition to the pursuit of activities whose
enjoyment is guaranteed by the First Amendment.” Id. at 113-14. Since Murdock, courts
have consistently applied its simple rule -- defraying costs is permissible, taxing speech is
not -- in striking down similar measures.14 Similarly here, because the surcharge
imposed on inmate telephone calls bears minimal relationship to the regulatory costs
incurred by DOCS in connection with the prison telephone service, [R. 35], it is, in effect,

See, e.g., Eastern Conn. Citizens Action Group v. Powers, 723 F.2d 1050, 1056 (2d
Cir. 1983) (invalidating fee charged to hold demonstration on abandoned railway because
state agency had offered no evidence that fee was necessary to defray “cost incurred or to
be incurred . . . for processing plaintiffs’ request to use the property”); Sentinel
Communications Co. v. Watts, 936 F.2d 1189, 1205 (11th Cir. 1991) (holding that “[t]he
government may not profit by imposing licensing or permit fees on the exercise of first
amendment rights ... and is prohibited from raising revenue under the guise of defraying
its administrative costs”); Fernandes v. Limmer, 663 F.2d 619, 633 (5th Cir. 1981)
(striking down license fee for literature distribution at airport, in part because defendants
failed to show that fee matched regulatory costs incurred); Baldwin v. Redwood City,
540 F.2d 1360, 1371 (9th Cir. 1976) (striking down fees on postering in part because
“[t]he absence of apportionment suggests that the fee is not in fact reimbursement for the
cost of inspection but an unconstitutional tax upon the exercise of First Amendment
rights”).
40

“a flat tax imposed on [prisoners’] exercise of [their free speech rights].” Murdock, 319
U.S. at 113.
The DOCS surcharge also fails traditional free speech scrutiny because it is not
narrowly tailored to achieve a legitimate governmental interest and leaves Plaintiffs
without ample alternative channels of communication. National Awareness Found. v.
Abrams, 50 F.3d 1159, 1165 (2d Cir. 1995); accord Forsyth County v. Nationalist
Movement, 505 U.S. 123, 130 (1992). Plaintiffs have made extensive allegations
describing the “undu[e] burden” Defendants’ surcharges place on their speech. [R. 48 –
52]. See Natl. Awareness, 50 F.3d at 1165. There are obviously less speech-restrictive
ways to fund the Family Benefit Program, such as appropriating monies from the General
Treasury.
Finally, even assuming the Turner standard were applicable here, Plaintiffs would
still make out a constitutional claim for violation of their associational and speech rights.
Turner requires an analysis of (1) whether there is a rational connection between the
prison regulation and the legitimate governmental interest set forth to justify it; (2)
whether alternative means of exercising the right remain open; (3) what impact
accommodation of the right will have on guards and other inmates, and on the allocation
of prison resources generally; and (4) whether easy alternatives to the regulation exist.
Turner, 482 U.S. at 89-90. The Turner Court noted that “if an inmate claimant can point
to an alternative that fully accommodates the prisoner’s rights at de minimis cost to valid
penological interests, a court may consider that as evidence that the regulation does not
satisfy the reasonable relationship standard.” Id. at 90-91. Defendants have failed to
articulate a satisfactory penological justification for the telephone tax. While raising

revenues from prisoners can sometimes be deemed a legitimate penological objective,
see Allen v. Cuomo, 100 F.3d 253, 261 (2d Cir. 1996), raising revenue from their
families and other outsiders, who have not been found guilty of any crime, is not. And
while the revenues derived from the surcharge are earmarked for the Family Benefit
Fund, this money is spent on correctional programs that have no relation to the prison
telephone system. [R. 94 – 103]. Moreover, the immediate effect of the surcharge is to
deter the families and friends of inmates from communicating with them – a goal
precisely contrary to the rehabilitative justification asserted by DOCS. [R. 85].
Plaintiffs have alleged that those among them who are elderly, impoverished,
and/or disabled have limited access to other alternative avenues of communication (letter
writing and visitation). [R. 48, 50]. See Allen v. Coughlin, 64 F.3d 77, 80 (2d Cir. 1995).
They have also pled the existence of an “obvious, easy alternative[]” policy, Turner, 482
U.S. at 90, -- a debit card system like that utilized by the Federal Bureau of Prisons -- that
meets the security concerns allegedly addressed by the current system. [R. 52-53]. Such
an alternative would have no deleterious “ripple effect” for prison administration, making
the accommodation of Plaintiffs’ constitutional rights readily attainable. Turner, 482
U.S. at 90.
While DOCS proffers penological justifications for various structural limitations
on prison telephone service, none of these justifications are relevant to Plaintiffs’ specific
challenge here to the telephone tax. [R. 85]. The Department has merely asserted that
there are legitimate penological objectives served by other features of the system -- such
as the limitation on the number of people on a prisoner’s calling list – and in doing so,
merely reinforce Plaintiffs’ allegations that the surcharge aspect of the system serves only

purely economic ends. In fact, Defendants have never identified a single penological
justification for the imposition of the telephone surcharge. Plaintiffs contend there is no
such justification. Given the unequivocal burden on Plaintiffs’ free speech and
associational rights, Plaintiffs have stated a constitutional challenge to the system.
D.

Plaintiffs Have Adequately Stated an Equal Protection Claim

Under the New York Constitution, equal protection rights are implicated when a
group of persons is treated differently from others who are similarly situated. In re K.L,
806 N.E.2d 480, 486 (2004). By the challenged system, DOCS has created two classes of
taxpayers and has arbitrarily imposed upon one an additional tax burden that is not only
unauthorized by the Legislature, but also cannot be justified by any legitimate state
interest. "The equal protection clause . . . protects the individual from state action which
selects him out for discriminatory treatment by subjecting him to taxes not imposed on
others of the same class." Allegheny Pittsburgh Coal Co. v. County Comm’r, 488 U.S.
336, 345 (1989) (holding re-valuing property for purposes of setting tax assessment at the
time of recent sales violated equal protection because there was no justification for not
also re-valuing similar property). See also Corvetti v. Town of Lake Pleasant, 642
N.Y.S.2d 420, 422 (3d Dept. 1996) (equal protection violated when property taxes
arbitrarily increased subject to “welcome neighbor” policy).
When a challenged provision establishes a classification that burdens fundamental
rights, “it must withstand strict scrutiny and is void unless necessary to promote a
compelling State interest and narrowly tailored to achieve that purpose.” Golden v.
Clark, 564 N.E.2d 611, 613-14 (1990). Here, the telephone tax unreasonably burdens
Plaintiffs’ ability to freely speak and associate with their loved ones and clients. [R. 48-

52]. The Court of Appeals has recognized that speech and association are among the
fundamental rights that, when burdened by a governmental act, trigger strict scrutiny of
that act. Golden, 564 N.E.2d at 616; Roth v. Cuevas, 624 N.E.2d 689 (1993). New York
courts also recognize that “the creation and sustenance of a family” is a constitutionally
protected associational right. People v. Rodriguez, 608 N.Y.S.2d 594, 597 (Sup. Ct.
1993) (citing Roberts v. Jaycees, 468 U.S. 609 (1984)).
Under strict scrutiny review, Defendants must show that its discriminatory
treatment of Plaintiffs is warranted by a compelling state interest, and that the method
chosen to achieve that goal is narrowly tailored to achieve that purpose. See Golden, 564
N.E.2d at 614. In this case, DOCS has advanced no theory under which its differential
treatment of Plaintiffs can be justified. While the DOCS telephone tax may be used to
fund legitimate corrections programs, the method employed to fund these programs is
improper and cannot be rationally related to any legitimate State interest. See
Metropolitan Life Ins. Co. v. Ward, 470 U.S. 869, 881 (1985) (state law which sought to
promote domestic business by discriminating against nonresident competitors could not
be said to advance a legitimate state purpose). The burden of supporting a general public
welfare program cannot be imposed disproportionately on particular individuals. See
Manocherian v. Lenox Hill Hosp., 643 N.E.2d 479, 484-85 (1994).
E.

Plaintiffs Have Properly Pled a Violation of General Business Law
Section 349

Plaintiffs’ deceptive business practices claim meets the statutory requirements
under New York General Business Law section 349(a) (“GBL §349”).15 A prima facie

Section 349 of the General Business Law provides, “[d]eceptive acts or practices in the conduct
of any business, trade or commerce or in the furnishing of any service in this state are hereby

case of deceptive practices requires a showing that: 1) the Defendant’s acts are directed
to consumers; 2) the Defendant’s acts are deceptive or misleading in a material way; and
3) the Plaintiff has been injured by the Defendant’s acts. Oswego Laborers’ Local 214
Pension Fund v. Marine Midland Bank, 647 N.E.2d 741, 744 (1995). Defendants’
provision of telephone service while failing to disclose the DOCS tax, making false
representations regarding purported penological justifications for the tax, and profiting
from the illegal tax constitutes a prima facie case under GBL § 349.
The provision of telephone service is a consumer-oriented practice. See, e.g,
Drizin v. Sprint Corp., 771 N.Y.S.2d 82, 84 (1st Dept. 2004); Naevus Int’l, Inc., v.
AT&T, 713 N.Y.S.2d 642, 646 (Sup. Ct. 2000) aff’d, 724 N.Y.S.2d 721 (1st Dept. 2001).
“Practices that have a broad[] impact on consumers at large” Oswego, 647 N.E.2d at 744,
or “affect[] numerous consumers,” Drizin, 771 N.Y.S.2d at 84, meet the threshold
“consumer-oriented” requirement. The Department’s provision of telephone service is
consumer-oriented because it affects numerous people and is available to any individual
in New York called by a prisoner.
The Department cannot escape liability by claiming that MCI alone provides
telephone services to Plaintiffs; it is a clear participant in the prison telephone taxation
scheme. DOCS is the agency that has arranged for prisoners in its facilities to be able to
place collect calls; it established the criteria for the prison telephone system through its
Request for Proposals, and it required the provider to restrict Plaintiffs to collect-calls
only. [R. 220 – 431]. Moreover, DOCS receives 57.5 percent of the proceeds from
Plaintiffs’ calls. [R. 32].

declared unlawful.” N.Y. Gen. Bus. Law § 349 (Consol. 2004).

Plaintiffs have adequately pled that DOCS engaged in acts that are “deceptive or
misleading in a material way” such that they are “likely to mislead a reasonable consumer
acting reasonably under the circumstances.” Oswego, 647 N.E.2d at 744. Excessive
charges and misrepresentations in billing practices may constitute “deceptive acts and
practices.” Naevus Int’l, Inc., 713 N.Y.S.2d at 645. Several of DOCS’ actions constitute
“deceptive acts or practices” under GBL § 349 including, among others, that: (1)
Defendant DOCS failed to disclose to the public and Plaintiffs that it was receiving
surcharges amounting to nearly 60 percent of the revenue generated from prison initiated
telephone calls from April 1, 1996 through October 30, 2003; (2) Defendant DOCS
represented falsely that the prison telephone system was necessary to meet security and
penological concerns; and (3) Defendant DOCS has wrongfully profited from the taxes
imposed on Plaintiffs even after the PSC failed to approve that portion of the rate. [R.
62-63].
Each of these allegations, if proven, would amount to a deceptive act or practice
under New York law. See e.g., McKinnon v. Int’l Fidelity Ins. Co., 704 N.Y.S.2d 774,
778 (Sup. Ct. 1999) (holding false representations “as to the amounts defendant was
authorized to charge for bail premiums, which exceeded the statutory maximum” and
false representation of expenses “which had no relation to actual expenses” established a
prima facie case of “deceptive acts and practices” under GBL § 349). Plaintiffs have
clearly alleged financial, emotional, and constitutional injury by these practices. [R. 48 –
53, 55- 63].

CONCLUSION
For all of the foregoing reasons, the Supreme Court erred in dismissing Counts I
through VII of Plaintiffs’ Complaint. We therefore respectfully request that this Court
reverse the judgment of the Supreme Court and direct that trial be held as promptly as
possible.
Dated: August 15, 2005
Respectfully Submitted,

__________/s/_________
Rachel Meeropol
Barbara J. Olshansky
Craig S. Acorn
Robert Bloom
CENTER FOR
CONSTITUTIONAL RIGHTS
666 Broadway, 7th Floor
New York, NY 10012
(212) 614-6432
On Brief, Law students:
Kevin James, Nicole Crifo