N.Y. Court of Appeals Revives Suit to Recover Excessive Charges for Inmate Telephone Calls

Litigation has been pending for years in state and federal courts challenging excessive rates and charges for collect calls made by state prison inmates to relatives and friends, who often are so poor they experience financial hardship or simply cannot accept the calls. The main cause of the expense is a high "commission" on each call paid to the state; in New York, the commission is established under a contract between the New York State Department of Corrections (DOCS) and the telephone company contractor. In soliciting bids for telephone companies to provide secure calling services, a major factor in selection of the winning bid is the amount of the commission the company will remit to the state.

Currently, the commission paid by Verizon Business Services to the state is 57.5%, amounting to approximately $20 million per year collected from some of the poorest people in the state. The high commissions make it unaffordable for many New Yorkers living in poverty to accept calls. In 2003, according to a DOCS newsletter:

Approximately 500,000 inmate calls are now completed each month, totaling roughly 9.5 million minutes. Attempted calls that are not completed add in excess of 2 million phone uses per month.

All contracts and rates for telephone service in New York state must be approved by the Public Service Commission (PSC). When the PSC approved a contract between DOCS and MCI (now Verizon Business Services, after a merger) in 1998, it approved the entire rate -- including the commission -- in an order that was quietly issued without any SAPA notice and which waived the general statutory requirement for publication of notice in newspapers. The order in Case 98-C-1765 was not posted on the PSC website, and was not published by LEXIS until PULP brought it to the attention of LEXIS after it was referred to in a court decision in a case begun in 2000, Bullard v. DOCS. That case was dismissed by the state court of claims on May 1, 2002 (ironically, "Law Day") because the plaintiffs had failed to exhausted administrative remedies at the PSC in what amounted to a secret order in a secret proceeding. The Appellate Division affirmed, stating, in its decision on July 3, 2003:

since the alleged injury asserted by claimants arose directly from their payment of the filed rate approved by the PSC,'[t]he filed rate doctrine bars [judicial proceedings] against regulated utilities grounded on the allegation that the rates charged by the utility are unreasonable.'

Meanwhile, the DOCS contract was revised in 2001 and again in 2003. When the PSC considered the revision of the contract in 2003, public notice was given. In light of the 2002 court of claims decision faulting plaintiffs for not objecting about the rate at the PSC, many parties, including relatives of inmates, community, legal, and religious organizations intervened and filed comments protesting the commissions. Even though the PSC had approved the entire rate in 1998 (when no one had intervened in the case), this time, the PSC decided it had no jurisdiction over the commission portion of the rate on October 30, 2003.

PULP promptly petitioned for rehearing on November 26, 2003, pointing out the plenary power of the PSC over all contracts for telephone service under section 92 of the Public Service Law and precedent of PSC modification of rates set in a contract between the state police and a telephone company. Although N.Y. Public Service Law § 22 specifies that "the decision of the commission granting or refusing the application for a rehearing shall be made within thirty days," the PSC denied that petition more than a year later, on January 12, 2005.

Meanwhile, following the PSC's refusal to review the DOCS commissions, plaintiffs represented by the Center for Constitutional Rights commenced a new action against DOCS in 2004, Walton v. DOCS, challenging the 2001 DOCS contract as modified and approved by the PSC in November 2003. The plaintiffs asserted numerous causes of action, including violations of equal protection, freedom of association, unconstitutional taxation, and due process. Judge Ceresia dismissed the action at the trial level in a decision finding six of the seven causes of action to be untimely because plaintiffs had sued too late to challenge the underlying 2001 contract within four months of its approval, and rejecting one cause of action based on the November 2003 PSC decision. The Appellate Division affirmed in a January 19, 2006 decision.

The state's highest court, the Court of Appeals, granted a motion for leave to appeal in Walton v. DOCS. On the brink of oral argument held January 9, 2007, New York Governor Spitzer announced that the practice of collecting commissions on inmate calls would cease as of April 1, 2007. See Governor Spitzer Promises Reform of Prison Inmate Telephone Charges. With the need for a prospective injunction mooted, the issue of damages claims remained. In a decision issued February 20, 2007, the Court of Appeals effectively reversed the decisions of the lower courts insofar as they held that the constitutional claims were untimely, and remanded the matter to the trial court for consideration of four claims and damages flowing from any constitutional violations. In a concurring opinion, Judge Smith indicated his belief that some of the constitutional claims are "quite substantial" and joined with three other judges in finding that the case had been timely commenced.

Plaintiffs and petitioners in Walton v. DOCS are represented in their herculean effort to reform the prison inmate telephone commission system by Rachel Meeropol of the Center for Constitutional Rights. For more information on inmate telephone issues in New York and other states, see PULP's web pages and archive web page on the topic.