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Fourth Circuit Reinstates HRDC’s RICO Claim Against Securus and ViaPath

On June 4, 2023, a request for a rehearing en banc before the entire U.S. Court of Appeals for the Fourth Circuit was denied in a suit accusing prison telecom providers Securus Technologies and Global Tel*Link (GTL)—now known as ViaPath Technologies—of illegal price-fixing. That left to stand the Court’s earlier decision on May 25, 2023, reviving a companion claim that the firms violated the Racketeer Influenced and Corrupt Organization (RICO) Act.

Securus and GTL/ViaPath have long faced price-gouging complaints from their “customers”—prisoners and their family members and friends forced to pay inflated costs for poor-quality calls. Despite moves by regulators and some legislators to lower phone rates and ancillary fees, there is still much room improvement.

In 2020, the Human Rights Defense Center (HRDC), publisher of PLN and Criminal Legal News, filed a class-action suit in federal court for the District of Maryland on behalf of four plaintiffs, challenging the practice by GTL and Securus of charging up to $14.99 for a single collect call fromsomeone in prison or jail. Also named as a defendant was 3Cinteractive Corp., whichhandled billing, processing and marketing for Securus and GTL.

Securus began offering the high-cost calls in 2010 through its “Pay Now” service, which charged $14.99 to a recipient’s credit card for a 15-minute call, and a companion service called “Text2Connect,” which cost $9.99 for a 10-minute call charged to the recipient’s mobile phone account. 3Ci received a small transaction fee for each call. GTL soon followed suit, offering a similar “Advance Pay One Call” service that added a $3.00 fee to the recipient’s credit card—a lower rate than Securus was charging. Both companies paid “commission” kickbacks to the prisons and jails they contracted with to provide telecom services, on a per-call basis.

When Securus then purchased 3Ci’s patented technology, it did so on the express condition that GTL agree to increase the fee for its single-call service. GTL complied in 2013, raising its single-call prices to match those of Securus, its competitor. HRDC’s complaint accused GTL, Securus and 3Ci of colluding to fix the cost of the single-call services, noting that such price-fixing is prohibited under the Sherman Antitrust Act, 15 U.S.C. § 1.

As PLN reported, the district court only partially granted Defendants’ motion to dismiss the suit on September 30, 2021, finding the complaint sufficiently stated an antitrust claim but not a civil claim under the Racketeer Influenced and Corrupt Organization (RICO) Act. [See: PLN, Feb. 2022, p.21.]

On appeal, the Fourth Circuit reversed the dismissal of the RICO claim. Citing “unnamed former Securus and GTL executives,” the complaint accused the companies of conspiring to deceive their government contracting partners by falsely claiming that “most of the price consumers paid [for the single-call services] went to 3Ci as unavoidable transaction costs,” to justify the high charges for such calls. The four plaintiffs had paid inflated costs for single-call services, and due to Defendants’ false claims the government agencies received lower commission kickbacks.

The district court dismissed the RICO claim because it found the theory of liability was “too remote to establish proximate cause,” since the plaintiffs’ injuries were dependent on harm suffered by a third party—the government agencies that contracted with Securus and GTL. However, the Fourth Circuit, citing and relying on Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639 (2008), found the complaint sufficiently alleged “a scheme in which Defendants directly injured both consumers and governments in tandem.”

Plaintiffs’ injuries—having to pay inflated prices for single-call services—were distinct from the injuries to the government agencies caused by Defendants’ price-fixing, the Court said. Nor was the RICO violation “too distant” from Plaintiffs’ injuries. “Plaintiffs allege a RICO violating scheme that first required the Defendants to trick government entities, which led to their own independent injuries,” the Court explained. The Fourth Circuit also determined that “no more immediate victim is better suited to sue” over the RICO violations than consumers who were forced to pay inflated costs for single-call services. The government entities that were allegedly defrauded of higher commission payments “may have their own parallel RICO claims,” the Court allowed, “but they’re no better suited” than Plaintiffs to make them.

Accordingly, dismissal of the RICO claim was reversed. The Fourth Circuit also declined to affirm the lower court’s dismissal of 3Ci, finding the complaint alleged wrongdoing by the company that was “part of Defendants’ overall RICO-violating scheme.” Plaintiffs were represented on appeal by attorney George F. Farah with Handley Farah & Anderson PLLC in New York City, and on brief by Benjamin D. Brown and Robert A. Braun with Cohen Milstein Sellers & Toll PLLC in Washington, D.C. See: Albert v. Global Tel*Link Corp., 68 F.4th 906 (4th Cir. 2023); and 2023 U.S. App. LEXIS 15624 (4th Cir.).

Anyone who has paid $14.99 or $9.99 for a single phone call from either Securus or GTL/Viapath in the past 10 years is encouraged to contact HRDC at our mailing address or via e mail   

Related legal case

Albert v. Global Tel*Link Corp.