United States District Court, D. New Jersey
WILLIAM J. MARTINI, District Judge.
This is a putative class action involving the fees charged for phone calls originating from prison pay phones in the state of New Jersey. Defendants filed a motion pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss the Complaint. For the reasons set forth below, the motion is hereby denied.
a. Allegations of the Complaint
Defendants provide managed telecommunications services at state and local correctional facilities in New Jersey so inmates can communicate with family members, friends, attorneys, and other approved persons outside the correctional facilities. (Complaint at ¶ 12) Defendants are three corporate entities that operate as a single economic unit with respect to the telecommunications services relevant to the Complaint. (Complaint at ¶ 15) Defendants have the sole right to provide telecommunications services for people incarcerated in certain New Jersey state and county prison and detainee facilities. (Complaint at ¶ 16)
Plaintiffs are all people who had to use the Defendants' services in order to communicate with a friend or family member. Plaintiffs allege that Defendants charged illegally and unconscionably high and undisclosed rates and fees to a captive market. (Complaint at ¶ 22) Plaintiffs filed a Complaint with seven causes of action: (1) violation of the New Jersey Consumer Fraud Act ("NJCFA"); (2) violations of certain sections of the NJCFA and N.J.A.C. § 45A-803; (3) violation of the New Jersey public utilities statutes (N.J.S.A. § 48-3.1 and 3.2); (4) unjust enrichment; (5) violation of the Federal Communications Act, 47 U.S.C. § 201 ("FCA"); (6) violation of the Takings Clause of the Fifth Amendment; and (7) declaratory judgment.
Plaintiffs allege that the State of New Jersey benefits financially from the Defendants' monopoly. (Complaint at ¶¶ 17-19) Specifically, Defendants remit to the state 40% of the rates charged and 50% or more to the counties of Hudson, Bergen, Essex, and Monmouth. (Complaint at ¶¶ 18-19) New Jersey receives $4.42 million per year as its percentage of revenue pursuant to its contract with Defendants. (Complaint at ¶ 19)
The Complaint alleges that Defendants purchase their minutes for calls terminating within the United States for less than 3/10 of a penny per-minute, and Defendants often resell the minutes they buy at more than 100 times their cost to Plaintiffs and other Class Members. (Complaint at ¶ 23) The market rate for competitively priced prepaid calling cards is approximately 1¢ to 2¢ per minute for calls within the United States. Depending upon the country being called, the rates for international calls can be as low as 1¢ per minute. Defendants, however, charge approximately 30¢ per minute for calls within the United States. The Complaint also alleges that Defendants charge exorbitant rates for international calls. (Complaint at ¶ 24)
Plaintiffs allege that Defendants' customers establish their accounts over the phone. (Complaint at ¶ 25) When a prisoner wishes to call someone outside the detention facility, they must place a collect call to that person. ( Id. ) The called person hears a series of automated prompts to set up an account with Defendants in order to accept the call. ( Id. ) The same automated procedures are followed when customers seek to open an account by calling the Defendants' 800 number provided at the prison facility to customers. ( Id. )
Using standardized scripts and prompts, the Defendants' system sets up an account for the customer or called person using a credit or debit card provided by the customer. (Complaint at ¶ 26) These accounts must be set up in amounts of $25, $50, or $100. (Complaint at ¶ 26) After the account is set up, the called person is then provided with a PIN so he or she may accept calls from the prisoner in the future, and charges for all calls are deducted from the called person's account. (Complaint at ¶ 26)
The Complaint alleges that Defendants tell customers that no information on rates and charges are available until they have an account number. (Complaint at ¶ 27) Defendants do not provide customers with a written contract when they establish an advance pay account with Defendants by telephone, nor are they advised of any of the terms and conditions applicable to their accounts. (Complaint at ¶ 28)
The Complaint alleges that Defendants do not issue account statements in writing or electronically to customers in the ordinary course of business. When making or receiving a call, customers hear a voice prompt advising them how much money is left in their accounts, but customers cannot obtain an itemized statement of charges to their accounts, nor can customers determine how many minutes of calling time they have left because Defendants do not disclose rates and applicable charges. (Complaint at ¶ 29)
The Complaint alleges that Defendants fail to inform their customers that they will be charged a service or set-up fee which will be deducted from their advance pay balance when an account is first established. (Complaint at ¶ 30)
The Complaint alleges that Defendants charge an unconscionable service fee of approximately 20% of the deposit, i.e. $4.75 out of the first $25.00 deposit, $9.50 out of the first $50.00 deposit, and $19.00 out of the first $100.00 deposit when an account is first established. (Complaint at ¶ 31)
The Complaint alleges that Defendants fail to inform their customers when an account is first established that they will be charged fees (a per-call transaction or connection fee) for each call placed in addition to the call rates per minute. (Complaint at ¶ 32) Defendants charge upwards of $1.75 per call as a connection or transaction fee. (Complaint at ¶ 33)
The Complaint alleges that Defendants charge a $5.00 fee to close an account and obtain a refund of any remaining balance. However, Defendants fail to inform their customers when an account is first established that they will be charged this ...