United States District Court, D. New Jersey
BOBBY JAMES, et al., on behalf of themselves and all others similarly situated,, Plaintiffs,
GLOBAL TEL*LINK CORP., INMATE TELEPHONE SERVICE, and DSI-ITI LLC, Defendants.
WILLIAM J. MARTINI, U.S.D.J.
bring this class action against Defendant Global Tel*Link and
its subsidiaries (collectively, “GTL”) in
connection with the company's provision of inmate calling
services (“ICS”) to state and county correctional
facilities in New Jersey. GTL moves for summary judgment of
all four remaining claims pursuant to Federal Rule of Civil
Procedure 56. Plaintiffs have cross-moved for partial summary
judgment as to whether GTL violated the Takings Clause of the
Fifth Amendment. U.S. Const. amend. V. No oral argument was
held. Fed R. Civ. P. 78(b). For the following reasons, both
competing motions for summary judgment are
DENIED. This case will proceed to trial.
following facts are described in further detail in the
Court's Opinion granting class certification under Rule
23. ECF No. 179. Since 2006, GTL has been the exclusive
provider of ICS to all prisons and jails operated by the
State of New Jersey and to each county facility except
Passaic. These include 20 New Jersey Department of
Corrections (“DOC”) facilities and 21 county
facilities. See Taylor Decl. in Supp. Cert.
(“Taylor Decl.”), Ex. E. New Jersey law
classifies GTL as an “alternative operator
service” (“AOS”),  subject to regulation by the
New Jersey Board of Public Utilities (“BPU” or
“the Board”). GTL's interstate calling
services are subject to regulation by the Federal
Communications Commission (“FCC”). Historically,
however, federal and state regulators have declined to
interpose rate limits on New Jersey correctional
are inmates of New Jersey correctional facilities between
2006 and 2016 who used GTL's phone services, as well as
non-inmates (generally, their friends and family) who used
GTL's services to communicate with inmates during that
time.Plaintiffs allege that, in the absence of
rate regulation, they were charged excessive rates and fees
for ICS. They estimate they were overcharged more than $150
million over the class period. See Taylor Decl., Ex.
M., Extended Rebuttal Report of Michael F. Finneran, at 2.
2005, GTL won an exclusive contract to provide ICS for the
DOC and most county correctional facilities. Remaining
counties, except for Passaic, formed independent contracts
with GTL or one of its subsidiaries. As part of these
contracts, GTL paid the facilities “site commissions,
” defined as “a straight percentage of all
originating, billable revenue.” Taylor Decl., Ex. J,
Report of Melissa Copeland at 5. Because commissions produce
substantial revenue for the State and counties, ICS contracts
are often awarded to the provider who offers the highest
commissions to facilities. See, e.g., Taylor Decl., Ex.
Q, Rebuttal Report of Dr. Roy Epstein, ¶¶ 24-27;
Van Nostrand Decl., Ex. 11, Essex County Decision Memorandum
(June 6, 2006) (“[T]his is a revenue generating
arrangement.”). Stephen Yow, GTL's CFO, agreed that
site commissions were likely the most important feature of
ICS service agreements. Yow Dep. Tr. 42:4-5. GTL offered a
range of commission options within each contract; the DOC
chose to receive a 40% commission for calls from state
facilities. Most counties selected options that paid the
highest commissions, either 55% and 56%. See, e.g.,
Epstein Report ¶ 25.
a profit, GTL paired higher commission rates with higher
per-minute rates, surcharges, and “ancillary
fees” incurred by GTL's end users. See,
e.g., Yow Dep. 170:16-20. Ancillary fees included, for
instance, a 19% fee each time a non-inmate set up or
deposited funds into a GTL Advance Pay account by
telephone. Taylor Decl., Ex. H, Baker Dep. Tr.
37:8-38:11. As Mr. Yow explained, “imposing deposit
fees is a way to generate enough revenue from the facility to
administer the commission they're expecting and also to
cover all the other costs that we have to provide the service
in that jail.” Yow Dep. 170:16-20; see, e.g.,
Dr. Epstein Rebuttal Report (“[D]eposit fee revenue can
be used to recoup site commissions paid to
argue that this “revenue sharing” configuration
resulted in calling rates and fees that were far in excess of
the actual cost of providing ICS. They claim, for example,
that GTL was charging as much as $1.00 per minute for calling
time that GTL purchased from telecom providers for as little
as $.00018 per minute. Pls.' Br. Supp. Cert. at 1; Van
Nostrand Decl., Ex. I, Decl. Michael Barth ¶ 8. Because
GTL's contracts with the DOC and counties were exclusive,
Plaintiffs-unlike normal telephone users-could not choose
among different providers, and generally paid amounts far in
excess of industry standards. See, e.g., Global
Tel*Link, 866 F.3d at 401 (“ICS per-minute rates
and ancillary fees together are extraordinarily
high.”). In effect, GTL operated a state-sanctioned
monopoly that generated substantial revenue for the
government and GTL by imposing artificially high rates and
fees on inmates and their loved ones. See Id.
(“Winning ICS providers thus operate locational
monopolies with a captive consumer base of inmates and the
need to pay high site commissions.”)(citation omitted).
2013, when this case was filed, there were roughly 23, 000
inmates in New Jersey correctional facilities. Ms. King's
challenges are typical of many individuals who could not
afford to stay connected with their incarcerated loved ones.
As the FCC has formally acknowledged, the social and economic
impacts of ICS are grave:
Excessive ICS rates also impose an unreasonable burden on
some of the most economically disadvantaged in our society.
Families of incarcerated individuals often pay significantly
more to receive a single 15-minute call from prison than for
their basic monthly phone service. We have received tens of
thousands of comments from individuals, including many
personal stories from inmates, their family members and their
friends about the high price of staying in touch using ICS.
These rates discourage communication between inmates and
their families and larger support networks, which negatively
impact the millions of children with an incarcerated parent,
contribute to the high rate of recidivism in our nation's
correctional facilities, and increase the costs of our
justice system. Familial contact is made all the more
difficult because “mothers are incarcerated an average
of 160 miles from their last home, so in-person visits are
difficult for family members on the outside to manage.”
FCC Report & Order & Notice of Further Rulemaking,
FCC 13-113 (Sept. 26, 2013).
the FCC issued the above Report and Plaintiffs filed this
lawsuit, New Jersey's legislature has taken measures to
eliminate the practices at issue and to reduce the future
costs of ICS to end users. In August 2016, the legislature
enacted a statute prohibiting site commissions in all state,
county, and private correctional facilities in New Jersey;
limiting rates to 11 cents per minute for domestic debit,
prepaid, and collect calls, and outlawing “any service
charge or additional fee exceeding the per minute rate,
including, but not limited to, any per call surcharge,
account set up fee, bill statement fee, monthly account
maintenance charge, or refund fee.” N.J.S.A. §
30:4-8.12. GTL now charges roughly 5 cents per minute for all
calls. Taylor Decl., Ex. K.
Instant Motions for Summary Judgment
parties should be familiar with the procedural history of
this case. A detailed account is nonetheless provided in the
Court's Opinion granting class certification. ECF No.
179. The remaining claims include:
• Count One: Violation of CFA, N.J.S.A. § 56:8-2,
for “unconscionable business practices”;
• Count Two: Violation of CFA Disclosure Requirements,
N.J.S.A. § 56:8-176(h);
• Count Four: Unjust Enrichment; and
• Count Six: Violation of the Takings Clause, brought
under 42 U.S.C. § 1983.
moves for summary judgment on all claims. Plaintiffs oppose
and cross-move for summary judgment on their Takings claim.
This Opinion disposes of both motions.
Rule of Civil Procedure 56 provides for summary judgment
“if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a);
see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986); Turner v. Schering-Plough Corp., 901 F.2d
335, 340 (3d Cir. 1990). A factual dispute is genuine if a
reasonable jury could find for the non-moving party, and is
material if it will affect the outcome of the trial under
governing substantive law. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). The Court considers all
evidence and inferences drawn therefrom in the light most
favorable to the non-moving party. Andreoli v.
Gates, 482 F.3d 641, 647 (3d Cir. 2007). “When
confronted with cross-motions for summary judgment, the court
must rule on each party's motion on an individual and
separate basis, determining, for each side, whether a
judgment may be entered in accordance with the summary
judgment standard.” Marciniak v. Prudential Fin.
Ins. Co. of Am., 184 Fed.Appx. 266, 270 (3d Cir. 2006).
Defendants' Motion for Summary Judgment
seeks judgment as to all remaining claims against it. It
argues (A) that the CFA claims do not apply to GTL because
they interfere with ICS regulation by other state and federal
agencies; (B) plaintiffs alleging “unconscionable
business practices” under the CFA must show deceptive
conduct, which Plaintiffs cannot; (C) the CFA's
disclosure requirements do not apply to GTL; (D) the Takings
claims under § 1983 fail because GTL is not a
“state actor” and because the claims are not
ripe; and (E) the claims for unjust enrichment fail because
there is no evidence of unjust conduct, and because the
voluntary payment doctrine bars these claims. The Court now
addresses each defense.
Conflicts between the CFA and State and Federal
related arguments form the bulwark of GTL's motion for
summary judgment: (1) applying the CFA to GTL would encroach
upon the Board's exclusive authority to regulate
alternate operator service (“AOS”) providers
pursuant to the AOSP Act, and (2) permitting private actions
against GTL under the CFA would create “actual”
and “potential” conflicts with existing state and
federal ICS regulatory schemes. Both arguments fail.
The AOSP Act does not Prohibit CFA Claims
“strong and sweeping legislative remedial purpose
apparent in the CFA” creates a presumption that the CFA
applies even to conduct regulated by other agencies.
Lemelledo v. Beneficial Corp. of Am., 696 A.2d 546,
553 (N.J. 1997). “The CFA explicitly states that the
rights, remedies and prohibitions that it creates are
cumulative to those created by other sources of law.”
Id. (citing N.J.S.A. § 56:8-2.12). The New
Jersey Supreme Court has explained that the CFA's
cumulative reach and its creation of a private cause of
action “reflect an apparent legislative intent . . . to
delegate  authority among various governmental and
nongovernmental entities, each exercising different forms of
remedial power.” Id.
GTL claims that the AOSP Act explicitly precludes CFA
application by the following language:
Notwithstanding the provisions of [the Telecommunications
Act] or any other law to the contrary, the Board of Public
Utilities shall regulate the rates and terms and conditions
of service of an alternate operator service provider, in a
manner consistent with federal law, and use any other means
necessary pursuant to law, rule, or regulation to protect the
users of the services of an alternate operator service
N.J.S.A § 48:2-21.23.
argument falls short for two reasons. First, genuine issues
of material fact remain as to whether GTL violated the
Takings Clause by imposing excessive fees and rates. See
infra at 14. If the jury finds that compliance with
BPU's regulations was nevertheless unconstitutional, then
the Board was not acting “in a manner consistent with
federal law” when it passed these regulations, and was
therefore not acting within its statutory limits. See
Lourdes Med. Ctr. of Burlington Cnty v. Board of Review,
963 A.2d 289, 312 (N.J. 2009) (citations omitted) (“If
a regulation is plainly at odds with the statute, the court
must set it aside . . . the meaning of enabling legislation
is pivotal to any analysis of ...