Prison phone providers deny inflating price of inmate calls

RICHMOND, Va. (CN) — Family members of inmates told a Fourth Circuit panel Thursday they are being overcharged for prison phone calls in violation of federal law.

The prison phone providers they sued – Global Tel Link Corp.,  Securus Technologies and 3Cinteractive Corp. – are accused of misrepresenting the price of their services when negotiating contracts with local governments. The relatives claim the misrepresentations and resulting inflated prices for single calls violate the Racketeer Influenced and Corrupt Organizations, or RICO, Act. 

"Our RICO claim alleges that the defendant[s] systematically lied to local governments around the country about transaction fees in order to charge extraordinarily high prices for a certain kind of collect call made by prisoner inmates," attorney George Farah of Handley Farah and Anderson, representing the plaintiffs, told the appeals court panel. 

From 2010 to 2019, inmates and their families were given the choice of conducting single calls through the call service for $14.99 or signing up for an account and being charged by the minute. The call service also allegedly did not give local governments the right amount of commissions while consumers paid the inflated price for single calls. 

"To justify charging consumers excessive single call prices, defendants routinely made misrepresentations to contracting governments about the magnitude of transaction fees," the plaintiffs' brief to the Richmond-based appeal court states.

A federal judge in Maryland dismissed the case in September 2021, ruling the alleged injuries are derivative of the harm suffered by contracting governments and the causation allegations are too speculative. 

U.S. Circuit Judge Albert Diaz, a Barack Obama appointee, asked Farah why inmates and their families would choose to use the single-call method instead of creating an account. Farah explained that when inmates are first incarcerated in jail and call their families, the phone gives them the option to continue the call using the single-call method, or they can hang up, create an account and then hope that the inmate will have another time that day when they can call. 

"Folks are trapped into positions of having to pay these inflated and absurdly high prices," the attorney said.

Farah argued that the local governments and the families of inmates were both harmed but in different ways. The families were harmed by overpaying for calls, he said, while the governments were hurt by not receiving the appropriate compensation per call. 

He said the families' injuries were not derivative of the local government's injuries because they are not conditional on the government's damages. He said that even if the phone providers began giving the government $10 per call rather than $1, it would not affect the $14.99 price families are charged for a single call.

"They are separate damages," the attorney said. "Tomorrow, county governments can bring their own RICO claim, and their damages calculation would not affect ours." 

Attorney Jason Scherr of Morgan Lewis, representing Securus Technologies, argued the focus should be less on whether the injuries are derivative and more on how they are contingent upon the harm allegedly suffered by contracting governments.

"Plaintiffs' injuries premised upon alleged misrepresentations or omissions made to the contracting governments are indirect and too remote," the phone providers' brief to the Fourth Circuit states. 

Scherr also argued that courts should not be forced to answer precisely how his client could not have harmed the consumers by changing its price. 

"How does one determine how much the rates would have changed in any given circumstance?" Scherr said. "They are too complicated for a RICO cause of action." 

The providers argue in their brief that even if there are RICO violations, the government would be able to recover funds, not the inmates' families.

U.S. District Judge Catherine Eagles, another Obama appointee sitting on the panel by designation from the Middle District of North Carolina, asked Scherr why the relatives would not be able to recover damages.

"It seems difficult to me for your position to say that these folks weren't harmed," Eagles said. "[The governments] didn't pay, it's the consumers who paid."

The phone providers argue the local governments bear the responsibility for agreeing to the contracts.

"The claimed injury flows from that decision made by the local agency," Scherr said. "It does not flow directly from the alleged misrepresentations."

U.S. Circuit Judge Stephanie Thacker, another Obama appointee, rounded out the three-judge panel. The judges did not indicate when they would issue a decision.

Neither attorney responded to requests for comment.

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