Prison phone providers must face suit over high cost of calls

RICHMOND, Va. (CN) — The Fourth Circuit on Thursday sided with families of inmates who claim telecom companies overcharged them 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 illegally conspiring to inflate the price of single calls and materially misrepresenting the amount of their transaction costs to justify the high consumer prices and low site commissions. 

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 plaintiffs allege that the defendants lied to local governments about transaction fees to charge high prices. 

Thursday's opinion penned by U.S. Circuit Judge Albert Diaz, a Barack Obama appointee, vacates the district court's determination that the government, rather than the contractors, inflicted financial injury on the inmates and their families by agreeing to the contract.

Attorneys representing the telecom companies argued before the Fourth Circuit in January that the racketeering charges couldn't stand because the plaintiffs' injuries derive from those suffered by parties more closely impacted by the alleged wrongdoing, in this case the government.

The three-judge panel unanimously disagree. Diaz noted that if the contractors had paid a high site commission, the government's injuries could have been cured even if the inmates' families had paid the high prices. The judge wrote that one fraudulent scheme can produce two classes of direct victims. 

"So plaintiffs' injuries aren't derivative of those suffered by the governments." the opinion states. "Rather, plaintiffs and the governments are both direct victims."

Diaz also disagreed with the district court's finding that the alleged racketeering violations were "too distinct" from the plaintiffs' injury.

"The alleged RICO violation (misrepresentations to the governments, via mail and wire communications) and the cause of plaintiffs' injuries (charging inflated prices) were both committed by the same parties—defendants," the ruling states, referring to the Racketeer Influenced and Corrupt Organizations Act. "And the mail and wire fraud were part of the same scheme that triggered...the inflated prices plaintiffs paid." (Parentheses in original.)

Diaz's opinion relied heavily on the 2008 Supreme Court decision Bridge v. Phoenix Bond & Indemnity Co. In Bridge, the high court held that bidders at a county tax-lien auction plausibly alleged RICO proximate causation when they lost to a competing bidder who lied to the county about complying with the auction's rules. The county government and fellow bidders suffered injury from the misrepresentation, the justices found.

"Plaintiffs allege a RICO-violating scheme that first required defendants to trick government entities, which led to their own independent injuries," Diaz wrote. "This was good enough for Bridge to hold that the plaintiffs' injuries were the 'direct result' of the defendants' scheme." 

The Fourth Circuit sent the case back to the Maryland district court for further proceedings consistent with its advice.

Attorneys representing the families and the communication providers did not respond to requests for comment. 

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