Prison Phone Justice

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF ALBANY
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _.x
NEY WALTON; RAMONA AUSTIN;
JOANN HARRIS; the OFFICE OF THE
APPELLATE DEFENDER; and the
NEW YORK STATE DEFENDERS
ASSOCIATION,
Petitioners-Plaintiffs,

Index No. 04-1048

ORAL ARGUMENT
REQUESTED

- against-

THE NEW YORK STATE DEPARTMENT
OF CORRECTIONAL SERVICES; and
MCI WORLDCOM COMMUNICATIONS,
INC.,
Respondents-Defendants.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _.x

MEMORANDUM OF LAW IN OPPOSITION TO
DEFENDANTS DEPARTMENT OF CORRECTIONAL SERVICES'
AND MCI WORLDCOM COMMUNICATIONS' MOTIONS
TO DISMISS THE VERIFIED PETITION AND COMPLAINT

Rachel Meeropol
Barbara J. Olshansky
Craig S. Acorn
CENTER FOR CONSTITUTIONAL RIGHTS
666 Broadway, 7th Floor
New York, NY 10012
(212) 614-6432
June 17,2004

PRELIMINARY STATEMENT
Plaintiffs-Petitioners lvey Walton, Ramona Austin, Joann Harris, Office of the Appellate
Defender, and the New York State Defenders Association ("Plaintiffs") are the family members
and advocates of prisoners incarcerated in various New York State correctional institutions.
They bring this combined Article 78/declaratory judgment proceeding seeking relief from the
imposition of an unlawful tax. Plaintiffs challenge this tax (the "DOCS tax" or "surcharge")
collected by Defendant-Respondent MCI WorldCom Communications ("MCr') and paid to the
New York State Department of Correctional Services (the "State," "Department" or "DOCS") as

a surcharge imposed upon them when they receive telephone calls from prisoners. 1 The DOCS
tax is a charge imposed over and above the telephone rate filed by MCI which was deemed "just
and reasonable" by the New York State Public Service Commission ("PSC"). Plaintiffs seek
relief from the unlawful DOCS tax by means of: (l) an order that MCI and DOCS cease
collecting and assessing the unlawful tax; (2) a refund of the taxes unlawfully assessed upon
them during the six years proceeding initiation ofthis action; and (3) a declaration that the
DOCS tax is: (a) an illegal and unlegislated tax in violation of Articles I, III, and XVI ofthe New
York State Constitution; (b) a taking of Plaintiffs' property without due process oflaw in
violation of Article I §§ 6 and 8 of the State Constitution; (c) a violation of Plaintiffs' right to
equal protection guaranteed by Article I § 11 of the State Constitution; (d) a violation of
Plaintiffs' speech and association rights guaranteed by Article I § 8 of the State Constitution; and
(e) a deceptive act or practice in violation of General Business Law § 349. See Plaintiffs'
Verified Petition and Complaint, dated February 25,2004 ("Complaint").

1 MCI

and DOCS will be referred to collectively as "Defendants."

On May 6, 2004, Defendants moved to dismiss the Complaint on several grounds,
alleging jurisdictional defects and the failure to state a claim for relief. See Memorandum of
Law in Support of Respondent Department of Correctional Services' Motion to Dismiss the
Verified Petition and Complaint, ("DOCS Br."), see also Memorandum of Law in Support of
Motion to Dismiss, ("MCI Br."). Plaintiffs oppose these motions on the following grounds:
1) Plaintiffs' claims are not moot;
2) Plaintiffs' claims were all timely commenced within the applicable statute of
limitations;

3) Plaintiffs' claims are not barred by either the filed rate doctrine or the doctrine of
primary jurisdiction;
4) Plaintiffs' have adequately stated a claim for enforcement of the PSC October 30,
2003 order;
5) Plaintiffs have adequately stated a claim for a declaration that the DOCS tax
constitutes: (a) an unconstitutional tax; (b) a taking ofPlainitffs property without due
process of law; (c) a violation of Plaintiffs' rights to equal protection under the law; and
(d) a violation of Plaintiffs' speech and association rights;
6) Plaintiffs have adequately stated a claim under New York General Business Law
Section 349;
7) Plaintiffs are entitled to an accounting to determine the extent of damages; and
8) Class action certification is appropriate in this action.
For the reasons set forth above, Defendants' motions to dismiss the Complaint should be
denied in their entirety.

2

STATEMENT OF FACTS
Any New York State prisoner who wishes to speak to a loved one, friend, or lawyer must
do so by placing a collect call from a telephone in his or her facility. Complaint at '48. Pursuant
to a contract between MCI and DOCS (the "Contract"), MCI is the exclusive provider of
telephone services to the New York State Department of Correctional Services. Id. at "5,6.
Under the Contract, MCI remits to DOCS as a "commission" 57.7 percent of the gross annual
revenue garnered from its operation of the telephone system. Id. at '6. To finance the State's
57.5 percent tax. Mel charges recipients of prisoners' collect calls a surcharge of$3.00 for every

call accepted. Id. at '7. A copy ofthe Contract is attached to the Affirmation of Rachel
Meeropol ("Meeropol Aff.") as Exhibit 1.
The Contract between MCI and DOCS is extremely lucrative for the State. For instance,
between April 1, 1996 and March 31, 2001, prisoners' telephone calls paid for by Plaintiffs and
putative class members provided the State with revenues totaling approximately $109 million.
Complaint at '44. The 57.5 percent DOCS tax is paid by Plaintiffs and tendered by MCI to the
State, which deposits it into the general fund. Id. at '45. The proceeds are then appropriated and
earmarked for deposit into DOCS' "Family Benefit Fund." Id. at '12. The monies deposited in
the Fund are used to cover the costs of Departmental operations wholly unrelated to the
maintenance of the prison telephone system. Id. For example, the vast majority of these monies
are spent on services, like medical care, that the State is required by law to provide for prisoners.
Id. at '45. The high cost of collect calls from New York State prisoners is a direct result of the
DOCS tax. Id. at'7. The DOCS tax places a substantial financial burden on Plaintiffs and
putative class members and limits the duration and numbers of calls that they can accept from
New York State prisoners. Id. at "52 - 66.

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The DOCS tax has not been authorized by the New York State legislature, nor has it been
approved as a legitimate component of MCl's filed telephone rate by the PSC. Complaint at'14.
On August 15,2003, MCI filed revised tariffs setting out the new rate to be charged to the
recipients of prisoners, collect calls beginning on September 14, 2003. Id. at '39. Family
member, friends, lawyers, and other recipients ofprisoner collect calls (including Plaintiffs
Austin and Office ofthe Appellate Defender and counsel for Plaintiffs) filed comments on the
proposed tariff amendments in a timely manner. Id. at '40; Complaint Ex. E. In their comments,
Plaintiffs and putative class members requested a hearing on the entire Mel rate, and directed the

PSC's attention to the constitutional and legal infirmities of certain aspects ofthe prison
telephone system. Id.
By order effective October 30, 2003 ("PSC Order"), the PSC held that it did not have
jurisdiction over the DOCS tax. Complaint at '42, Ex. A at 23. The PSC reasoned that because
DOCS is not a telephone corporation subject to the Public Service Laws, the agency does not
have jurisdiction over either the Department or the tax charged by it. Complaint Ex. A at 23.
The PSC called the non-jurisdictional portion ofthe total charge the "DOCS commission" and
referred to the other portion of the rate, the 42.5 percent retained by MCI, as the "jurisdictional
rate." Id. The PSC reviewed the jurisdictional portion of the MCI rate by comparing it to rates
MCI charges for analogous services. Id. Based upon this comparison and other factors, the PSC
approved the jurisdictional rate as 'Just and reasonable." Id. at 24. The PSC did not undertake

any review of the reasonableness of the DOCS tax or of the entire rate. Id. The PSC directed
MCI to file a new tariff reflecting the two separate charges: the DOCS tax and MCl's filed rate.
Id. See also, MCl's tariff November 20,2003 tarifffiling, a copy of which is attached to the
Affirmation of Rachel Meeropol as Exhibit B. Since the October 30, 2003 PSC Order, MCI has

4

continued to bill Plaintiffs and putative class members for both charges, the 42.5 percent of the
total that the PSC approved as ajust and reasonable telephone rate, and the unapproved 57.5
percent DOCS' tax.

ARGUMENT
I.

PLAINTIFFS' CLAIMS FOR MONEY DAMAGES AND INJUNCTIVE RELIEF
ARE NOT MOOT
Defendants argue that because a portion of Plaintiffs' claims reach wrongdoing under a

contract that is no longer operative,2 "all claims prior to April 1,2001 should be dismissed as
moot." DOCS Br. at 6. While Defendants are correct that Plaintiffs are entitled to declaratory
relief only with respect to the current contract and not with respect to prior contracts,
Defendants' argument ignores the fact that Plaintiffs' claims based on Defendants' actions under
the prior contract are for money damages only. Complaint at "77-117. This Court has made
clear that claims for money damages are not mooted by the expiration of a contract. See Schulz
v. Warren County Bd. of Supervisors, 581 N.Y.S.2d 885, 887 (3d Dept. 1992) (holding that a
claim for recovery of money paid under a contract remains viable after the contract has expired).

II.

PLAINTIFFS' CLAIMS II THROUGH VII ARE TIMELY
Plaintiffs' claims3 are timely because they were commenced within the applicable six-

year statute of limitations. Because Plaintiffs seek relief that is unavailable through an Article 78
proceeding, their suit is governed by the six-year catch-all statute oflimitations set out in CPLR

The first contract between MCI and DOCS was effective from April I, 1996 through March 31,
2001. MCI entered into the current contract with DOCS on April 1, 2001. This new contract
runs through March 31,2006. Complaint at 15 (plaintiffs mistakenly alleged that the new
contract became effective on August 1,2001. Plaintiffs have since leamed that the contract
actuallybecatne effective on April 1, 2001).

2

3 Defendants concede that Plaintiffs' first claim is timely as it was commenced within four
months of the PSC's October 30,2003 order. DOCS Br. at 10 n.6.

5

§213(1) or, in the alternative, the six-year statute oflimitations applicable to plenary actions for
money had and received under CPLR §213 (2).4 N.Y.C.P.L.R. §§213(I) and (2) (McKinneys
2003). Defendants have been unlawfully assessing the State's unauthorized DOCS tax upon
Plaintiffs every month for over a decade and their illegal charges continue to this day. For this
reason, Plaintiffs' claims accrue anew with each successive monthly telephone bill that includes
collect calls from New York State prisoners. Plaintiffs' claims have been timely filed, and they
are entitled to a refund of the unlawful taxes paid during the six-year period prior to the filing of
this lawsuit.

A. Plaintiffs' Claims II Through V Are Governed By the Six-Year Statute of
Limitations Set Out in CPRL §§213(1) or (2) Not the Four-Month Statute of
Limitations Applicable to Article 78 Proceedings.
.
While Article 78 proceedings are subject to a four-month statute oflimitations,
declaratory judgment actions have no express statutory limitations period, and when they are not
subject to another period, they are controlled by the six-year catch-all limitations period set out
in CPLR §213(1). Solnick v. Whalen, 401 N.E.2d 190, 194 (1980). In any action for a
declaratory judgment, "it is the responsibility of the court in the first instance to determine the
true nature of [the] case in order to discover whether the six-year Statute of Limitations for
declaratory judgment actions or the much shorter four-month Statute of Limitations for CPLR
Article 78 proceedings applies." Llana v. Pittstown, 651 N.Y.S.2d 675,676 (3d Dept. 1996).

The only exception is Plaintiffs' sixth claim. The three-year statute oflimitations for statutory
causes of action under C.P.L.R. 214(2) applies to New York cases brought pursuant to GBL §
349. Gaidon v. Guardian Life Ins. Co., 725 N.E.2d 598 (2001); Busbee v. Ken-Rob Co., 720
N.Y.S.2d 785 (Ist Dept. 2001); Wender v. Gilberg Agency, 716 N.Y.S.2d 40 (Ist Dept. 2000).
However, under the continuing harm doctrine, explained below, Plaintiffs' GBL § 349 claim
accrued anew each time Defendants unlawfully charged the DOCS tax. As a result, Plaintiffs'
sixth claim for relief is not time barred.
4

6

See also, Litz v. Town Bd., 602 N.Y.S.2d 966,969 nA (3d Dept. 1993) (applying six-year catchall statute oflimitations to mixed Article 78 and declaratory judgment action).
To determine which statute of limitations applies, the court's inquiry must focus on the
nature of the relief Plaintiffs seek, and then determine whether that relief is available in an
Article 78 proceeding. Solnick, 401 N.E.2d at 193 (1980). As the Court of Appeals stated in
Solnick:
It is the nature of the relief sought. ..rather than its substance, which gives the action its
identity... .Ifthat examination reveals that the rights of the parties sought to be stabilized
in the action for declaratory relief are...open to resolution through a form ofproceeding
for which a specific limitation period is statutorily provided, then that period limits the
time for commencement ofthe declaratory judgment action.

Plaintiffs seek relief in this case that would be unavailable to them in an Article 78
proceeding. Under the CPLR, Article 78 proceedings provide for only four very limited types of
reVIew:
1. whether the body or officer failed to perform a duty enjoined upon it by law;
2. whether the body or officer proceeded, is proceeding or is about to proceed without or
in excess ofjurisdiction; or
3. whether a determination was made in violation oflawful procedure, was affected by
an error oflaw or was arbitrary and capricious or an abuse of discretion, including
abuse of discretion as to the measure or mode of penalty or discipline imposed; or
4. whether a determination made as a result of a hearing held and at which evidence was
taken, pursuant to direction by law is, on the entire record, supported by substantial
evidence.
N.Y.C.P.L.R. §7803 (McKinneys 2003). Plaintiffs' second through sixth causes of action would
not be adequately addressed through any ofthese four discrete categories because Plaintiffs do
not seek to challenge any procedure utilized by any agency, attack any agency determination, or
prohibit agency action taken in excess ofjurisdiction.

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In its Order, the PSC determined that it did not have jurisdiction over the DOCS tax. 5

This means there is no action that the PSC can take to review the legality of the tax. Because the
DOCS surcharge is not a telephone rate, and is not subject to PSC review, it is up to this Court to
decide the constitutionality of this tax. Plaintiffs have only this Court to tum to for a declaration
that the DOCS surcharge is an unlawful tax, levied without legislative approval in violation of
the New York State Constitution.
Defendants' insistence upon the suitability of an Article 78 proceeding is not supported
by the case law. An Article 78 proceeding, as opposed to an action for a declaratory judgment,
provides only for review of an individual determination affecting one's rights or an agency
action taken in violation ofthe agency's own procedures or applicable law. See, e.g., New York
City Health & Hosp. Corp. v. McBarnette, 639 N.E.2d 740, 744 (1994) ("[W]here a quasilegislative act by an administrative agency such as a rate determination is challenged on the
ground that it was made in violation of lawful procedure, was affected by an error of law or was
arbitrary and capricious or an abuse of discretion a proceeding in the form prescribed by Article
78 can be maintained.") (internal citations omitted); McCarthy v. Zoning Bd. of Appeals, 724
N.Y.S.2d 798, 799 (3d Dept. 2001) (holding Article 78 proceeding is appropriate to challenge
the procedures followed in enacting a local law, but not the substance of that law); Llana, 651
N.Y.S.2d at 677 (Even though all ofthe petitioners claims could have been raised in an Article
78 proceeding, because "each of petitioners' causes of action concern matters of procedure only,
eschewing any intrusion into the substance of the matter voted on the four month statute of
limitations is appropriate") (emphasis added, internal citations omitted); Dimiero v. LivingstonSteuben-Wyoming, 606 N.Y.S.2d 92, 94 (3d Dept. 1993) ("Because plaintiffs seek only to

5

Complaint, Ex. A at 23.

8

challenge discrete, ad hoc detenninations regarding their employment benefits, CPLR Article 78
review is proper."); Bitondo v. New York, 582 N.Y.S.2d 819, 822 (3rd Dept. 1992) ("Because
plaintiff is seeking ... a declaration that the aforementioned practices violated only his
constitutional rights in this particular instance (as opposed to an across-the-board declaration),
these claims likewise could have been resolved in a proceeding pursuant to CPLR 7803 (3)")
(emphasis in original).
The law is clear that an Article 78 proceeding is not the appropriate vehicle for a
constitutional challenge to the substance of a continuing and generally applicable policy or law.
See Allen v. Blum, 447 N.E.2d 68,68 (1983) ("[B]ecause the action seeks review ofa
continuing policy, a declaratory judgment class action rather than individual Article 78
proceedings is proper"); Zuckennan v. Bd. ofEduc., 376 N.E.2d 1297, 1301 (1978) (holding
Article 78 relief is inadequate and inappropriate when "[p]etitioners seek more than just a review
of a single detennination of the respondents; they seek review of the continuing policy");
McCarthy, 724 N.Y.S.2d at 799 (holding six-year statute oflimitations for declaratory judgments
applies to a cause of action directed at the substance of an ordinance, rather than the procedures
followed in its enactment); Brookhaven v. New York, 535 N.Y.S.2d 773, 774-75 (3d Dept.
1988) (holding declaratory judgment action, rather than Article 78 proceeding, is the proper
vehicle to challenge the constitutionality of a legislative enactment); DeLuca v. Kirby, 441
N.Y.S.2d 1005, 1006 (2d Dept. 1981) (same).
In Counts II through VI, Plaintiffs request a declaration from the Court that the DOCS tax

is: (1) an illegal and unlegislated tax in violation of Articles I, III, and XVI ofthe State
Constitution; (2) a taking of Plaintiffs' property without due process oflaw, in violation of
Article I §§6 and 8 ofthe State Constitution; (3) a violation of Plaintiffs' right to equal protection

9

guaranteed by Article I §ll of the State Constitution; (4) a violation of Plaintiffs' speech and
association rights guaranteed by Article I §8 ofthe State Constitution; and (5) a deceptive act or
practice in violation of General Business Law § 349. Not one of these claims could have been
brought in an Article 78 proceeding because such a proceeding cannot provide the declaratory
and equitable relief Plaintiffs seek. Plaintiffs do not seek review of unreasonable, unlawful, or
ultra vires agency determinations or actions; they take issue instead with the collection and
assessment of the DOCS tax.
Defendants have proffered no precedent to the contrary. Indeed, the only case
Defendants cite for the proposition that Plaintiffs could bring their claims in an Article 78
proceeding is Bullard v. New York, 763 N.Y.S.2d 371 (3d Dept. 2003). But that case was
decided before Plaintiffs submitted comments to the PSC and the PSC determined that it lacked
jurisdiction over both the Department and its tax. Had the PSC actually reviewed and approved
the DOCS tax as part ofMCI's filed rate, Plaintiffs would admittedly be in a very different
situation. But that did not happen.
Contrary to Defendants' arguments, the only other action that would conceivably provide
Plaintiffs with the relief they seek is an action for money had and received. Such actions are
subject to the six-year statute oflirnitations for contract challenges under CPLR § 213(2). First
Nat'l City Bank v. New York Finance Admin., 324 N.E.2d 861 (1975). For example, in
Scarborough School Corp. v. Assessor of Ossining, 467 N.Y.S.2d 674 (2d Dept. 1983),
petitioners challenged the Town Assessor's actions in placing on the assessment rolls real
property that had previously been tax exempt. The petitioners sought to recover the back taxes
paid. Id. The court held that "[a]lthough petitioners have cast this matter as an Article 78
proceeding, an examination of the allegations in the petition reveals that the petitioners claims

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for a refund of taxes paid under protest is in the nature of a plenary action for moneys had and
received...[s]uch an action is based, in theory, upon a contractual obligation or liability, express
or implied in law or fact and is controlled by a six-year Statute of Limitations." Id. at 674-75
(internal citations omitted). See also CKC v. Kleiman, 679 N.Y.S.2d 637 (2d Dept. 1998)
(applying six-year statute oflimitations in a challenge by property owners to a tax levy based on
a contract between the village and the owners); Riverdale County Sch. v. New York, 213
N.Y.S.2d 543, 545 (1st Dept. 1961) ("As a general proposition it is clear that an action to recover
back taxes paid is an action for money had and received, and the six-year statute has
application.").
An action for money had and received is "an obligation which the law creates ...when one
party possesses money that in equity and good conscience he ought not to retain and that belongs
to another.... It lies when taxes have been collected without jurisdiction or in violation of
constitutional authority, and the taxpayer paid the tax under formal written protest or duress."
Emunim v. Fallsburg, 607 N.Y.S.2d 858,860-61 (Sup. Ct. 1993) (internal citations omitted).
This type of plenary action is most frequently used in the context of overpaid taxes, but it is
available for other forms of unlawful payment. In Eichacker v. New York Telephone Company,
14 N.Y.S.2d 17,20 (Mun. Ct. 1939), for example, a doctor sued his telephone provider for

charging him in excess of the tariff on file with the Public Service Commission. The court found
that the action was "essentially one to recover back money which the defendant received from
the plaintiff, but had no legal right to withhold from him" and as such, was subject to the six-year
statute of limitations applicable to contract actions. Id. at 24.
Plaintiffs' claims II through V are closely related to an action for money had and
received, and for this reason, they are subject to the six-year statute oflimitations set out in

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CPLR §213(2). If the Court finds that this limitations period is inapplicable, then Plaintiffs
claims are subject to the catch-all provision of §213(l) because they seek relief unavailable in
any other act, including an Article 78 proceeding.

B. Plaintiffs' Claims Accrued Anew Each Time MCI Collected and DOCS Retained
the Unlawful Tax.
Plaintiffs' claims are timely because they accrued within the applicable six-year
limitations period. When, as here, wrongful conduct is continuous in nature, the accrual period
of a claim is extended until such conduct ceases. Boland v. New York, 284 N.E.2d 569, 571
(1972); Mahoney v. Temp. Comm'n of Investigation, 565 N.Y.S.2d 870,875 (3d Dept. 1991) ("a
continuous course of conduct extends the accrual period until such conduct terminates").
New York courts have consistently applied this doctrine to repeated billings or
withholding of monies owed. In Barash v. Estate of Sperlin, 706 N.Y.S.2d 439,440 (2d Dept.
2000), for example, the plaintiffs challenged the defendant's continued collection of income and
profits from property that was allegedly co-owned. At the time of each improper collection, the
defendant allegedly failed to tum over the proper percentage of the profits to plaintiffs. Id. The
court explained that "the plaintiffs claims of withheld profits, etc., constitute a continuing wrong
which accrued anew each time the defendants collected income and profits ...". See also, Butler
v. Gibbons, 569 N.Y.S.2d 722, 723 (1st Dept. 1991) ("Plaintiffs allegations clearly make out a
continuing wrong, i.e., [Defendants'] repeated and continuing failure to account and tum over
proceeds earned from renting the properties since 1979. Thus .,. a new cause of action accrued
each time defendant collected the rents and kept them to himself."); Cash v. Bates, 93 N.E.2d
835,836 (1950) (continuing violation of constitutional rights); Orville v. Newski, 547 N.Y.S.2d
913, 914 (3d Dept. 1989) (Breach of contract claim accrued each year in which the defendant
failed to make the minimum payment); Cahill v. Public Service Commission, 498 N.Y.S.2d 499,

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502 (3d Dept. 1986) (continuing violation of petitioner's free speech rights); Stalis v. Sugar
Creek Stores, Inc., 744 N.Y.S.2d 586, 587 (4th Dept. 2002) (when contract provides for
continuous perfonnance over a period of time, "each breach may begin the running of the statute
anew such that accrual occurs continuously").
Because a new cause of action accrued here each time Plaintiffs were billed for and paid
the unlawful DOCS tax, their claims for prospective relief are not time-barred, and they are
entitled to all proceeds unlawfully taken by Defendants in the six years preceding the
commencement of this action. 6 See Stalis, 744 N.Y.S.2d at 588; Barash, 706 N.Y.S.2d at 440;
Butler, 569 N.Y.S.2d at 723. The continuing harm doctrine thus also protects Plaintiffs' claims
from being time barred in the event that the Court disagrees with Plaintiffs argument and
imposes the four-month statute of limitations applicable to Article 78 proceedings.
If, as Plaintiffs allege, their claims are subject to a six-year statute of limitations, than
they are entitled to damages dating back six years from the filing ofthis action, February 25,
1998. 7 However, at the very least, even under the Defendants' theory, Plaintiffs are entitled to
restitution of the DOCS taxes paid in the four months previous to the filing ofthis action.

III.

PLAINTIFFS' CLAIMS ARE NOT BARRED BY EITHER THE FILED RATE
OR PRIMARY JURISDICTION DOCTRINES
A.

The Filed Rate Doctrine Has No Applicability in This Case

6 Even ifthe Court rejects Plaintiffs' argument that their claims have accrued anew with each
billing, claims II through V are still timely. In the absence ofthe continuing violation doctrine,
Plaintiffs' claim would have accrued, at the earliest, on the effective date of the current MCI I
DOCS contract. See DOCS Br. at 11. The effective date ofthat contract is April 1, 2001, well
with in the six-year limitations period. Thus, if Plaintiffs prove their claims, they are entitled, at
the very least, to damages dating back to 2001.
7 Plaintiffs concede that they are not entitled to damages for the harms they suffered under the
first two years of the MCI I DOCS contract, before February 25, 1998.

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Defendants DOCS and MCI claim the protection of the filed rate doctrine in urging this Court to
dismiss Plaintiffs' claims. However, because the DOCS tax was not approved by the PSC the
filed rate doctrine has no applicability in this case.
When applicable, the filed rate doctrine bars suits against regulated utilities that challenge
the rates charged by that utility. Keogh v. Chicago & Northwestern Ry., 260 U.S. 156 (1922).
"Simply stated, the doctrine holds that any 'filed rate' - that is, one approved by the governing
regulatory agency - is per se reasonable and unassailable in judicial proceedings brought by
ratepayers." Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 18 (2d Cir. 1994) (emphasis added).
Quite simply, the filed rate doctrine does not bar Plaintiffs' clams because Plaintiffs do
not challenge the reasonableness of a filed rate; rather, they challenge DOCS' authority to charge
and retain an un-filed and unauthorized surcharge and MCl's authority to collect such a
surcharge. The DOCS tax challenged in this action was not approved by the PSC. 8 In its
October 30, 2003, the PSC determined that it lacked jurisdiction over the DOCS tax because
DOCS is not a telephone corporation pursuant to the Public Service Law. Complaint, Ex. A at
23. The PSC determined that it would "review only the jurisdictional portion of the rate that
reflects what MCI retains from the provision of the inmate calling service" or 42.5 percent of the
rate charged to recipients of prisoner collect calls. Id. The PSC then examined the 42.5 percent

Plaintiffs submit that because the PSC does not have jurisdiction over the DOCS tax, and did
not review that tax, that surcharge is not a "filed rate" within the meaning of the Public Service
Law. See Point IV, infra. However, even ifthe commission were deemed part of MCl's filed
rate, the PSC's failure to affirmatively approve that portion of the rate bars invocation ofthe
filed rate doctrine. See Wileman Bros. & Elliott, Inc. v. Giannini 909 F.2d 332, 337-338 (9th
Cir. 1990) (The mere fact of failure to disapprove ...does not legitimize otherwise
anticompetitive conduct....[Non-disapproval] does not guarantee any level of review
whatsoever....There is no affirmative process of non-disapproval which can be relied upon fairly
to evaluate a committee's regulations .... [N]on-disapproval is equally consistent with lack of
knowledge or neglect as it is with assent).

8

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portion of the rate, and after comparing it to other rates charged by MCI for analogous services,
determined that "the jurisdictional portion of the rate ... is just and reasonable." Id. at 24. The
PSC effectively separated MCl's telephone charges into two legally distinct portions: 1) the
jurisdictional rate charged by MCI, retained by MCI, approved by the PSC, and filed pursuant to
the Public Service Law, and 2) the non-jurisdictional DOCS
tax charged by MCI, retained by
,
DOCS, un-reviewed by the PSC, and not filed within the meaning of the Public Service Law.
Since the PSC only reviewed and approved the jurisdictional portion ofthe rate, or 42.5
percent ofthe total charges to Plaintiffs and putative class members, it is only that portion of the
rate which is insulated from attack by the filed rate doctrine. See Concord Assocs., L.P., v.
Public Service Commission, 754 N.Y.S.2d 93,95 (3d Dept. 2003) (filed rate doctrine applies
when a petitioner is challenging "a rate the PSC has previously determined to be just and
reasonable"); Wegoland Ltd., 27 F.3d at 20 ("the [filed rate] doctrine is designed to insulate from
challenge the filed rate deemed reasonable by the regulatory agency"). Cf. Brown v. Ticor Title
Ins. Co., 982 F.2d 386,394 (9 th Cir. 1992) (Ifthe rates "were not subjected to meaningful review
by the state, then the fact that they were filed does not render them immune from challenge.")
Plaintiffs do not challenge the reasonableness of any filed rate, so the filed rate doctrine cannot
bar Plaintiffs' claims.
The inapplicability of the filed rate doctrine in this instance is further demonstrated by the
policy justifications behind the doctrine. Since the doctrine was first established by Justice
Brandeis in the Keogh opinion, courts have identified two primary interests served by the
doctrine. The first concern includes elements ofjusticiability -- that agencies are designed by the
legislature for the "specific purpose of setting uniform rates" and the "agencies' experience and
investigative capacity make them well-equipped to discern ... what rates are reasonable" while

15

the courts are "not institutionally well suited to engage in retroactive rate setting." Wegoland,27
F.3d at 19. Thus, the filed rate doctrine guards against courts becoming enmeshed in the ratemaking process, and thereby subverting the authority of the regulating agency. Id. at 19, 21.
The filed rate doctrine is designed to avoid a situation where, to properly discern damages, the
court itself would be forced to determine ajust and reasonable rate. Id. at 21; Porr v. NYNEX
Corp., 660 N.Y.S.2d 440,443 (2d Dept. 2997).
The second concern relates to potential discrimination -- the doctrine protects against the
rate disparity that might result were nonparty subscribers to the same service forced to pay a
higher rate then those who successfully challenged a rate in court. Porr, 660 N.Y.S.2d at 444,
446. Awarding retroactive damages to an individual plaintiff would result in "unequal rates
being charged to members of the same class of ratepayers" Wegoland, Ltd. v. NYNEX Corp.,
806 F. Supp. 1112, 1114 (S.D.N.Y. 1992), affd, 27 F.3d 17 (2d Cir. 1994). However, uniform
treatment would result where all potential claimants sued and the courts awarded each of them
the same measure of relief. See Keogh v. Chicago & N. R. Co., 260 U.S. 156, 163 (1922)
(stating that uniform treatment would only result if all rate-payers sued and received the same
relief); Wegoland, 27 F.3d at 22 ("[T]he concerns for discrimination are substantially alleviated
in [a] putative class action.").
Neither ofthese concerns warrants application of the filed rate doctrine in this case. The
PSC has determined that because DOCS is not a telephone company, and the DOCS tax is not a
telephone rate, it has no jurisdiction over either. Despite Defendants claims to the contrary,
DOCS Br. at 14, there is no need for the Court to engage in its own determination of a
reasonable rate in this instance; the PSC has already exercised its expertise and Plaintiffs do not
challenge that determination, or MCl's resulting filed rate. By ordering MCI to collect and

16

retain the filed rate, and the filed rate alone, this Court would protect, rather than subvert, the
PSC's exercise of its discretion. No judicial determination of fair market value is required. And
because Plaintiffs style this action as a class action, no discrimination will result.
In this unique context, where Plaintiffs challenge only a portion of the total charge billed
to consumers as a telephone charge that was never approved by the PSC, the filed rate doctrine
can only protect the filed rate portion of the total charge deemed ''just and reasonable." The
unreviewed DOCS tax has no claim to such protection.

B.

The Doctrine of Primary Jurisdiction Does Not Bar This Court From
Considering The Merits Of The Complaint

In this case, Plaintiffs seek redress for the constitutional injuries suffered when the State
collects an unlegislated tax from them generated by prisoners' collect telephone calls. Plaintiffs'
constitutional challenges are premised on the following two conditions: (a) the State's use of the
prison telephone system as a means to raise revenue to cover the operating costs of its
correctional system - a public cost that should be borne by the State as a whole; and (b) the
prison telephone system's infringement upon people's right to communicate with their family
members. These are the unlawful conditions that lie at the heart ofPlaintiffs, claims before this
Court.
Contrary to the State's characterization of the case, Plaintiffs' references to the structure
of the prison telephone system - i.e., the fact that the State has aggregated all correctional
facilities in order to let the contract out to a single provider and it has required the use ofthe
collect-cali-only mechanism - are included solely to advise the Court ofthe means by which the
State has sought to justify the egregiously high rates attributed to the DOCS tax and charged
under the system. Plaintiffs seek no adjudication from this Court regarding the propriety ofthe
structure of the system; they seek only to notify the Court that, in addition to the DOCS tax,

17

which significantly raises the cost of prisoners' telephone calls, the State also requires other
structural mechanisms that further inflate the cost of such calls. 9
The State's desperate effort to evade adjudication ofthe DOCS tax by this Court could
not be plainer. Rather than address the PSC's determination that it has no jurisdiction over
DOCS, the Department's actions challenged here, or the portion of the prison telephone system
charges attributable its surcharge, the State merely seeks to divert the Court's attention to a
secondary and non-dispositive issue by raising - yet again - the flag of primary jurisdiction. 10
See DOCS Br. at 15-17. This effort is flawed for five reasons.
First, Plaintiffs have already brought their case to PSC for its adjudication of the issues
raised in this case and have received the agency's determination on those issues. See PSC Order,
Complaint, Ex. A at 23 - 24 (holding that the PSC lacks jurisdiction over the DOCS tax, but that
the MCI filed rate is just and reasonable).
Second, referral back to the PSC for a second review would constitute a request for a
determination on matters that are plainly beyond the agency's jurisdiction. The principle is well
established under New York law that the PSC has o~ly those powers specifically conferred upon
it by statute, together with such implied powers as are necessary to carry out the specific grant.
See, e.g., New York v. Public Service Comm'n 385 N.Y.S.2d 634,635 (3d Dept. 1976), affd
366 N.E.2d 1359 (1977); New York Tel. Co. v. Public Service Comm'n 684 N.Y.S.2d 829,834

To the extent that any allegation in the Complaint gives the impression that Plaintiffs here are
challenging the structure oHhe prison telephone system, Plaintiffs wish to make clear that no
such claim was intended.

9

10 The doctrine of primary jurisdiction permits a court to refer claims requiring special expertise
to the appropriate administrative agency for an initial determination. Reiter v. Cooper, 507 U.S.
258,268 (1993). The doctrine is principally invoked in those limited situations in which a
judicially cognizable claim is initially presented to a federal court, but "the issue involves
technical questions of fact uniquely within the expertise and experience of an [administrative]
agency." Nader v. Alleghany Airlines Inc., 426 U.S. 290, 304 (1976).

18

(Sup. Ct. 1998); Ceracche Television Corp. v. Public Service Comm'n 267 N.Y.S.2d 969,972

(Sup. Ct. Sp. Term 1960); Kovarsky v. Brooklyn Union Gas Co., 3 N.Y.S.2d 581 (2d Dept.
1938), affd. 18 N.E.2d 287 (1938). When a party seeks to challenge a telephone company
practice falling within those powers enumerated at §90-101(a) ofthe Public Service Law, the
PSC has primary jurisdiction over the matter. Thus, if Plaintiffs here were challenging the
reasonableness ofMCI's filed rate or the adequacy of its service, for instance - technical matters
within the agency's particular competence - the PSC would indeed provide the appropriate
forum for resolution of the complaints. See, e.g., Capital Tel. Co. v. Patterson Tel. Co., 436
N.E.2d 461,466 (1982).
However, in cases involving questions of law beyond the PSC's administrative expertise
and outside its statutory authority, the courts have refused to confer primary jurisdiction on the
Commission. See, e.g., Rochester Gas & Electric Corp. v. Greece Park Realty Corp., 600
N.Y.S.2d 985,987 (4th Dept. 1993) (primary jurisdiction doctrine inappropriate in "the absence
of technical administrative questions"); MCI Telecommunications Corp. v. Public Service
Comm'n, 572 N.Y.S.2d 469 (3d Dept. 1991) (pSC has no authority to permit "special
arrangements" in derogation oflegislative directives); Warren v. New York Telephone Co., 335
N.Y.S.2d 25,29 (Civ. Ct. 1972) ("[a]lthough the courts may not pass upon the adequacy of
service generally, they do have original jurisdiction to remedy a case of gross negligence or
willful misconduct, as applied to the individual subscriber"); F.R. Von Damm, Inc. v. New York
Tel. Co.. 303 N.Y.S.2d 763 (Civ. Ct. Tr. Term 1969), quoting Kovarsky v. Brooklyn Union Gas
Co., 3 N.Y.S.2d 581, affd 18 N.E.2d 287 (1938) ("[i]t seems equally evident that it is not the
function of the Commission to determine questions oflaw. The Commission has no judicial
functions to discharge") (internal citations omitted); State v. McBride Transp., Inc., 288

19

N.Y.S.2d 170, 175 (Sup. Ct. Sp. Term 1968) (PSC's primary jurisdiction over discrete matters
did not "furnish an umbrella under which defendants may with impunity engage in the additional
activities [including Donnelly Act violations] of which the plaintiffcomplains"); Ceracche
Television Corp. 267 N.Y.S.2d at 972-73 (jurisdiction ofPSC does not extend to "nonutility
activity of a telephone company" that is "not part ofthe public service performed by [NYTel] in
the business of telephonic communication"). The PSC ruled that it has no jurisdiction over the
Department because the Department is not a telephone corporation. Thus, the PSC itself has
determined that it has no authority to rule on the claims raised by Plaintiffs in this case.
Furthermore, the Court of Appeals has specifically ruled that the PSC has no jurisdiction
over claims based on other agencies' actions such as those made by Plaintiffs in this case. See
New York v. Public Service Comm'n 366 N.E.2d 1359, affg. 385 N.Y.S.2d 634 (3d Dept.
1976). Because Plaintiffs' constitutional claims challenge DOCS' actions, an agency that is not
regulated by the PSC, these claims are beyond the PSC's jurisdictional reach. See, e.g., Matter
ofCeracche Television Corp., 267 N.Y.S.2d at 972-973. See also Public Service Law §94.
Fourth, this case presents precisely the type of claims that the courts have deemed
improper for resolution by the PSC. First, the heart ofthe constitutional claim here requires that
a determination be made regarding the State's authority to levy a tax on those seeking to speak
with prisoners, as well as an assessment of the burdens placed on family members' speech and
association rights by the telephone system mandated by the contract between the State and MCI.
These issues do not involve any technical considerations within the PSC's particular field of
expertise. See National Communications Ass'n, Inc. v. AT&T, 813 F. Supp. 259,262-63
(S.D.N.Y. 1993), affd, 46 F.3d 220,223 (2d Cir. 1995); RCA Global Communications, Inc. v.
Western Union Tel. Co., 521 F. Supp. 998, 1006 (S.D.N.Y. 1981). Indeed, the constitutional

20

issues Plaintiffs raise here are far afield from the statutory mandates ofthe PSC. 11 See, e.g.,
Spiegel, Inc. v. F.T.C., 540 F.2d 287, 294 (7th Cir. 1976); New York v. Public Servo Comm'n,
385 N.Y.S.2d at 635; cf. Benton v. Belt Lind Ry. C., 268 U.S. 413,417-418 (1925). When a
"matter is not one peculiarly within the agency's area of expertise, but is one which the courts or
jury are equally well-suited to detennine, the court must not abdicate its responsibility" to
adjudicate the matter. MCI Telecomms. Corp. v. Teleconcepts, Inc., 71 F.3d 1086, 1104 (3d Cir.
1995). In this regard, the courts have noted that resolution of constitutional questions is a
quintessential judicial function. See, e.g., Califano v. Sanders, 430 U.S. 99, 109 (1977); Gete v.
I.N.S., 121 F.3d 1285 (9th Cir. 1997); Environmental Tech. Council v. Sierra Club, 98 F.3d 774,
789 (4th Cir. 1996).
Finally, referral to the PSC would greatly prejudice Plaintiffs. In deciding whether to
refer a matter to an agency, courts "must consider how long an administrative process will run
before its work is done," Rom Indus., Inc. v. WMATA, 720 F.2d 1319, 1326 (D.C. Cir. 1983),
and "must take care that its deferral not unfairly disadvantage either party." Johnson v. Nyack
Hosp., 86 F.3d 8, 11 (2d Cir. 1996). Courts also consider whether adequate remedies are
available in the administrative forum to prevent irreparable injury. Roberts v. Chemlawn Corp.,
716 F. Supp. 364, 368-69 (N.D. Ill. 1989). Each factor weighs heavily against invoking the
primary jurisdiction doctrine in this case. Faced with a potential lengthy delay for agency
decision-making many courts have declined to invoke the primary jurisdiction doctrine. See,
~,

National Communications Ass'n, 46 F.3d at 225 (citing 2 Kenneth C. Davis et a/.,

Administrative Law Treatise § 12.1, at 211 (3d ed. 1994); Goya Foods, Inc. v. Tropicana

The PSC has no authority to enforce, invalidate, or evaluate the terms and conditions of the
contract at issue. Cf. Fulton Cogeneration V. Niagara Mohawk Power, 84 F.3d 91,97 (2d Cir.
1996).
11

21

Products, Inc., 846 F.2d 848, 853-54 (2d Cir. 1988). Unquestionably, referral will substantially
delay adjudication of Plaintiffs' claims. See, e.g., Quincy Cable TV, Inc. v. FCC, 768 F.2d
1434, 1446 (D.C. Cir. 1985). Since the claims concern constitutional and civil rights issues, the
interest in prompt adjudication is paramount. See Goya, 846 F.2d at 854. In this case, referral to
the PSC for yet another determination will not address the substance of Plaintiffs' constitutional
claims. The principle is well-established that where "the prescribed administrative procedure ...
[is] shown to be inadequate to prevent irreparable injury, courts should decline to require
exhaustion," Roberts v. Chemlawn Corp., 716 F. Supp. at 368_69,12 and referral is inappropriate.
Ryan v.-Chemlawn Corp., 935 F.2d 129, 131 (7th Cir. 1991). Moreover, the PSC would not be
able to grant the required monetary relief. See Niagara Mohawk Power Corp. v. Public Service
Comm'n, 507 N.E.2d 287, 291-92 (1987) (noting that the courts have consistently rejected the
PSC's efforts to assert the power to order refunds paid to ratepayers). Certainly, under these
circumstances, referral to the PSC for adjudication of Plaintiffs' constitutional claims would be
unjust.

IV.

PLAINTIFFS HAVE ADEQUATELY STATED A CLAIM FOR ENFORCEMENT
OF THE PSC ORDER
Defendants urge this Court to dismiss Plaintiffs' first claim seeking enforcement of the

PSC Order for failure to state a claim. Defendants base this argument on their allegation that
"nothing in [the PSC] order compelled DOCS to take any action," and that nothing in the order
required either MCI or DOCS to stop collecting the DOCS tax. DOCS Br. at 18-19; MCI Br. at
2-3. Plaintiffs' first claim for relief, however, cannot rest on the PSC's failure to recite certain

12 See Babcock & Wilcox Co. v. Marshall, 610 F.2d 1128, 1138 (3d Cir. 1979); see, e.g., United
States v. Elrod, 627 F.2d 813, 818 (7th Cir. 1980); Lloyd v. Regional Transp. Auth., 548 F.2d
1277, 1287 (7th Cir. 1977).
22

magic words or spell out every consequence of its order. 13 The PSC's expert determination that
it lacks jurisdiction over the DOCS tax has clear implications. Because the DOCS tax is not a
.filed rate, and has not been approved as just and reasonable by the PSC, it is the responsibility of
this Court to enforce the PSC's finding, and order DOCS to cease imposing its unlawful tax and
MCI to cease collecting it from Plaintiffs.
Under the Public Service Law, MCI is prohibited from charging a rate that is not on file
with the PSC and has not been determined "just and reasonable." This conclusion is compelled
by the plain language of the Public Service Laws themselves. New York Public Service Law
§91(1) states:
All charges made or demanded by any telegraph corporation or telephone corporation for
any service rendered or to be rendered in connection therewith shall be just and
reasonable and not more than allowed by law or by order ofthe commission. Every
unjust or unreasonable charge made or demanded for any such service or in connection
therewith or in excess of that allowed by law or by order of the commission is prohibited
and declared to be unlawful.
Defendants cannot dispute that the DOCS tax is a charge imposed over and above the
"jurisdictional rate" reviewed and declared just and reasonable by PSC; nor is this rate validated
by any other law. Complaint, Ex. A at 23-24.
Because the DOCS tax is in excess ofthe approved rate, MCI may not continue to collect
it from Plaintiffs and other consumers nor may it continue to remit the surcharge to DOCS.
No utility shall charge, demand, collect or receive a different compensation for any
service rendered or to be rendered than the charge applicable as specified in its schedule
on file and in effect. Nor shall any utility refund or remit directly or indirectly any
portion of the rate or charge so specified...except such as are specified in its schedule
filed and in effect.. ..

Cf. Rochester Tel. Corp. v. Public Service Comm'n, 60 N.E.2d 1112, 1118 (1995) ("Although
it would have been preferable for the PSC to explicitly state that RTC acted imprudently, we find
no reason to require the incantation of certain 'magic' words when PSC's opinion clearly
contains, through the use of other words, a finding of imprudence.").
13

23

N.Y. Pub. Ser. §92(2)(d). Any surcharges that increase the rate a customer pays over the tariffed
rate are invalid. For example, in People ex reI. Public Service Commission v. New York tel
Co., 29 N.Y.S.2d 513,514 (3d Dept. 1941), affd, 40 N.E.2d 1020 (1942), the court considered
whether hotels may charge guests for telephone service in excess of the rate specified in the tariff
schedules. The hotels attempted to justify the practice as a charge for hotel services only, not
subject to regulation by the PSC. rd. at 515. The court held that because the hotel was primarily
providing telephone service, their rates could not exceed the filed rate held just and reasonable
by the PSc. rd. at 516-17. See also, United States v. AT&T, 57 F. Supp. 451 (S.D.N.Y. 1944),
affd sub nom, Hotel Astor v. United States, 325 U.S. 837 (1945) (per curiam) (hotel surcharge
which raises cost of call over tariffed rate is invalid and should be enjoined).
The fact that MCr filed a bifurcated rate pursuant to the PSC Order does not in any way
legitimize the DOCS tax. See Meeropol Aff., Ex. B. Although the DOCS tax is physically listed
on MCl's tariff, it is not actually a "filed rate" within the meaning of the Public Service Law.
The DOCS tax cannot logically be on file because the PSC, according to its own ruling, does not
have jurisdiction over that portion of the total telephone charge, and under the Public Service
Law, the PSC has jurisdictionto review any rate or charge that has been "filed" with the
Commission. N.Y. Pub. Ser. §92(2)(e). Since the PSC does not have jurisdiction over the
DOCS tax, the DOCS tax cannot be a part of MCr s "filed rate" as defined by the Public Service
Law.
Mcr has a duty to cease collecting the DOCS tax because it is in excess of the rate
detennined "just and reasonable" by the PSC. "[I]t shall be the duty of every...telephone
corporation...to obey each and every such order so served upon it and to do everything necessary
or proper in order to secure compliance with and observance of every such order. . .according to

24

its true intent and meaning." N.Y. Pub. Ser. §97(2) (emphasis added). As a telephone company,
MCI may not continue to bill consumers in excess of its filed rate.
And just as the Court must order MCI to cease collecting and remitting the tax to DOCS,
it must also order DOCS to cease demanding and accepting the tax from MCI. 14 As
demonstrated below, DOCS has no right to continue to assess its unauthorized tax. See infra,
Point V. Sections A-E. When an agency acts in violation of a clear legal duty, this Court has
the power to order compliance with the law through mandamus, and to declare the agency's
actions unlawful. See, e.g. Huffv. C.K. Sanitary Sys. Inc., 688 N.Y.S.2d 801, 806 (3d Dept.
1999) (holding that court properly enjoined town sewage system's operator from charging
additional fees without town's approval for statutorily mandated duty to maintain the pumps);
Bloom v. Mayor of New York, 312 N.Y.S.2d 912 (2d Dept. 1970), affd, 971 N.E.2d 919 (1971)
(complaint seeking declaration that the tax levy of defendant-city is invalid stated a claim for
relief).
By its Order, the PSC determined that it lacks jurisdiction over the DOCS tax. IS This tax
has not been approved by the PSC, and is not a filed rate under the Public Service Law. Instead,
it is an unauthorized charge, assessed upon Plaintiffs and putative class members without any
basis in the law. Plaintiffs seek an order from this Court enforcing the PSC's determination, and
prohibiting MCI and DOCS from continuing to collect this tax.

14 Under the current contract between MCI and DOCS, MCI must continue to remit to the State
the DOCS tax, see Meeropol Aff., Ex. A at 2 ("Contractor is obligated to make commission
payments to DOCS in strict accordance with [the terms ofthe contract]").

[5 Even ifthis Court were to decide that the PSC erred in ruling that it lacked jurisdiction over
the DOCS tax, the PSC could not have found the DOCS tax just and reasonable, as it is not a
valid commission, as discussed in Point V. Section A, infra.

25

V.

PLAINTIFFS HAVE ADEQUATELY STATED CLAIMS FOR RELIEF FROM
THE VIOLATION OF THEIR RIGHTS TO DUE PROCESS, EQUAL
PROTECTION, AND FREEDOM OF SPEECH AND ASSOCIATION
In addition to seeking an order that MCI and DOCS cease collecting and retaining the

DOCS tax, Plaintiffs also seek relief from past and future payments of the DOCS surcharge
under the theory that it is an unlawful and discriminatory tax. 16
A. The DOCS Charge is an Unlawful Tax, Not a User Fee or a Telephone

Commission
The DOCS tax is so disproportionate to the Department's actual costs in providing prison
telephone services that it must be considered a tax and not a user fee. Defendants correctly state
that user fees and taxes are distinguishable in that fees are intended to defray the cost of a
particular service, while taxes defray the cost of services to which they are not attached. DOCS
Br. at 20. However, Defendants do not - and cannot - show that the DOCS tax is used to defray
the costs of operating the prison telephone service.
The amount of a user fee must be reasonably close to the necessary cost of the particular
service to which the fee is attached. Jewish Reconstructionist Synagogue. Inc. v. Roslyn Harbor.
352 N.E.2d 115, 118 (1976). Reasonable user fees are those that are "estimated on the basis of
reliable factual studies or statistics." Id. The burden is on the agency charging the user fee to
show that the costs are necessary. Id. at 119-120. Defendants offer no evidence to show that the
57.5 percent of the revenue from each telephone call that is paid to DOCS is based on any
reasonable estimate of the cost of a telephone call. Nor could they; in 2003, for example, the
State estimated that it would receive $23.4 million from the DOCS tax. Of that sum, only
$330,000 was earmarked for operation of the prison telephone system. Complaint, Ex. B.

16 Defendant MCI correctly points out that Count I is the only claim against them. MCI Br. at 1.
Plaintiffs concur that they have no right to seek money damages from MCI in this action.

26

Defendants point out that "a portion of the commissions received by DOCS are expended... for
maintenance of the Call Home Program," DOCS Br. at 20, but they fail to infonn

that portion is approximately 1.5 percent of the revenue DOCS receives.

17

this Court that

Id. The tiny portion

of the DOCS tax used to finance the actual cost of the prison telephone system simply cannot
justify the huge surcharge. I8
Fees must also be paid by those to whom the service benefit accrues. Fees are by
definition "a visitation of the costs of special services upon the one who derives a benefitfrom
them." Jewish Reconstructionist Synagogue, 352 N.E.2d at 117 (emphasis added). While the
Family Benefit Fund does in (very small) part benefit those who wish to receive collect calls
from prisoners, the vast majority of the money taken from prisoners' advocates and families
through the DOCS tax is used to benefit programs unrelated to telephone service. Complaint,
Ex. B. Defendants argue that these separate services, such as prison medical care, also benefit
prisoners' families because the call recipients probably want their loved ones to receive proper
treatment. DOCS Br. at 21-22. While this is of course true, a family member's desire for the
loved one to be treated humanely cannot justify charging that family for services the state is
obligated by law to fund and which are already paid for by Plaintiffs and others through their
taxes.
Along with benefiting the actual rate-payers, fees must be also used to finance the same
services to which they are attached, not merely services which may indirectly benefit some ofthe
same people that pay the fee. See, e.g., Jewish Reconstructionist Synagogue, 352 N.E.2d at 119

Under the MCr I DOCS contract, all maintenance on the telephone equipment and wiring will
be provided by Mcr at no cost to DOCS. Meeropol Aft:, Ex. A at 31.
17

18 Plaintiffs understand that DOCS must fmance the telephone system somehow, and Plaintiffs
do not oppose including a proportional commission (amounting to around $300,000 a year)
payable to DOCS as a valid business expense to be included in MCl's filed rate.

27

(finding zoning application fee must be used only to pay an expert to review the document, and
cannot go to cover related costs like renting an auditorium for the zoning hearing, making extra

copies of the application and paying a lawyer for advice on how to conduct the process); Albany
Area Builders Ass'n v. Guilderland, 534 N.Y.S.2d 791, 794-95 (3d Dept. 1988), aff'd on other
grounds, 546 N.E.2d 920 (1989) (holding property owners cannot be charged a building fee that
supports general highway maintenance, even when their property is adjacent to, and benefits
from, a highway). Accord mdiana Waste Systems, mc. v. County of Porter, 787 F. Supp. 859
(N.D. Ind. 1992) (revenue from landfill oversight fee was tax rather than fee, because it was used
to fund recycling programs). 19
More than two-thirds ofthe DOCS tax revenue is spent to finance medical care for
prisoners. Complaint, Ex. B at 4. This is care that the State must provide for prisoners under
state and federal law. 20 These services would otherwise be paid for out of the general budget.
See Complaint, Ex. B at 4 ("[W]hile [the DOCS tax monies spent on medical care] are certainly
legitimate state expenditures, the fact they are made from the [Family Benefit Fund] reduces the
taxpayers' burden.") The families and friends of prisoners pay for medical services, visiting
programs, and family service programs not in any reasonable relation to their usage of these
services, but solely in proportion to their usage of the telephone. Under the logical consequences

19 Defendants rely for support on the holding in Joslin v. Regan, 406 N.Y.S.2d 938 (4th Dept.
1978), that a filing fee could be merged with a larger budget for the court system; but the court's
justification for that ruling was that it was impossible to isolate the cost of filing services from
the rest ofthe system's costs, and so filing could not be considered a separate service. Id. at 94142. In contrast, in this case, it is possible to isolate and determine the cost of the prison
telephone system.

See Estelle v. Gamble, 429 U.S. 97 (1976) (holding the Eighth Amendment prohibition of
cruel and unusual punishment requires the state to provide prisoners with adequate medical
care); Kagan v. State, 646 N.Y.S.2d 336,337 (2d Dept. 1996); N.Y. Compo Codes R & Regs.
Tit. 9, §701O.2(h) (1990) ("[A]dequate heath service and medical records shall be maintained.").
20

28

of Defendants, argument, there would be no legal barrier to DOCS declaring that all prison
services - food, bedding, heat, sanitation - are part ofthe same "fund" that benefits prisoners and
therefore can be charged to families in proportion to their use of the telephone. While DOCS has
not yet gone so far, its current use of disproportionate charges - whether labeled a "user fee" or a
"commission" - has already gone beyond the bounds oflegitimacy. The Court cannot find that
this is a reasonable user fee for a service.
The law is equally clear that a fee which exceeds any reasonable relationship to the cost
of its service is an unauthorized tax. "To the extent that fees charged are exacted for revenue
purposes or to offset the cost of general governmental functions they are invalid as an
unauthorized tax." Torsoe Bros. Constr. Corp. v. Rd. of Trustees, 375 N.Y.S.2d 612,616-17 (2d
Dept. 1975) (water tap-in fee was a tax because it was used to fund other municipal services
besides water); New York Tel. Co. v. City of Amsterdam, 613 N.Y.S.2d 993,995-96 (3d Dept.
1994) ($ 13/sq. ft. excavation permit fee was a tax because it went far beyond the cost to the city
of processing the permit); State University of New York v. Patterson, 346 N.Y.S.2d 888.891 (3d
Dept. 1973) (water fees could cover the quantity ofwater used, but if used to cover related
equipment costs they became a tax); Hanson v. Griffiths, 124 N.Y.S.2d 473 (Sup. Ct. 1953),
affd, 127 N.Y.S.2d 819 (1954). Accord Indiana Waste Systems, Inc., 787 F. Supp. at 865.
Because the DOCS surcharge is not proportional to DOCS' cost ofproviding the prison
telephone service, and does not proportionally and directly benefit the recipients ofprisoner
collect calls, it is an unlawful tax, rather than a lawful fee.
This distinction is important; what is at stake in the difference between user fees and
taxes is not simply the amount of the charge, but whether there will be any accountability with
regard to DOCS' power to draw money from prisoners' friends and families. "Without the

29

safeguard of a requirement that fees bear a relation to average costs, a board would be free to
incur ... not only necessary costs but also any which it, in its untrammeled discretion, might
think desirable or convenient, no matter how oppressive or discouraging ..." Jewish
Reconstructionist Synagogue, 352 N.E.2d at 118. The authority to set user fees is granted more
easily to non-legislative bodies in part because it is constrained by the scope of the actual costs
ofthe services to which the fees attach. Id.; New York Tel. Co., 613 N.Y.S.2d at 995.
Defendants' attempt to reclassify the DOCS tax as a user fee is an attempt to escape this limit on
their power to exact money. They seek to have their cake and eat it too: to call on their authority
to charge user fees while at the same time avoiding its limitations. DOCS' use of "fees" to shift
its general operating costs onto low-income families is exactly the kind of abuse ofwhich courts
have warned. 21 See Jewish Reconstructionist Synagogue, 352 N.E.2d at 118-19 ("At stake are
the terms upon which citizens may have access to a governmental function and their right to have
those terms, whether or not they are in the form of fees, fixed by standards which lend assurance
that they are not 'unreasonable, discriminatory nor oppressive. "') (internal citation omitted);
Albany Area Builders Ass'n, 534 N.Y.S.2d at 796 (using fees for taxation would "create a fund
of money subject to limited accountability, not subject to statutory requirements...").
It is equally clear that the DOCS tax is not a "commission" under the applicable law. In

the context of telephone services, a "commission" is a charge included in a filed rate that
compensates the owner of premises on which telephones are placed for his/her expenses in
making telephone service available to.its guests. AT&T's Private Payphone Comm'n Plan, 3

Nor is DOCS deserving of such deference as was granted by the court in Joslin v. Regan, 406
N.Y.S.2d 938 (4th Dept. 1978), on which Defendants rely. In that case, the charges in question
had been enacted by the legislature, which is the proper body to levy taxes. The authority to tax
was not at issue in that case, but only the fairness of a particular rate.

21

30

F.C.C.R. 5834,20 (1988). In this way, the "commission" is merely one of many business
expenses incurred to allow the telephone company to provide telephone service. Id. at 20. As a
business expense, the "commission" must be included in the tariffed rate, such that it does not
alter in any way the rate paid by the telephone user. Id.; see also, International Telecharge, Inc.
v. AT&T, 8 F.C.C.R. 7403, 14 (1993); National Tel. Servs., Inc., 8 F.C.C.R. 654, 9-10 (1993).
These FCC cases cited by Defendants, DOCS Br. at 20, do not legitimize the DOCS tax, they
merely stand for the proposition that a commission may be valid -- despite the fact that the actual
remittance is not explicitly noted on the tariff filing - as long as it meets the two criteria
explained above.
These cases cannot provide support for the DOCS tax, because it changes the tariffed rate
paid by the customer and cannot be explained as a necessary business expense. Commissions
which increase the rate a customer pays over the tariffed rate are invalid. People ex reI. Public
Servo Comm'n v. New York Tel. Co., 29 N.Y.S.2d 513,514 (3d Dept. 1941), affd 40 N.B. 2d
1020 (1942) (hotel can not impose surcharge over filed rate); United States v. AT&T, 57 F.
Supp. 451 (S.D.N.Y. 1944), affd sub nom. Hotel Astor v. United States, 325 U.S. 837 (1945)
(per curiam) (hotel surcharge which raises cost of call over tariffed rate is invalid and should be
enjoined).
Moreover, if the DOCS tax were a "commission" the PSC would have jurisdiction to
review the rate and ensure that it is just and reasonable, as a valid business expense. 22 This
proposition has been repeatedly affinned in the analogous context of hotels which provide

22 The fact that the DOCS tax is mandated by contract does not explain the PSC's lack of
jurisdiction over it. The PSC has jurisdiction to review all rates including those prescribed by
contract. New York Tel. Co. v. New York Div. of State Police, 445 N.Y.S.2d 609 (3d Dept.
1981), affd, 444 N.E.2d 983 (1982) (holding PSC is statutorily authorized to grant an increase
in rates where the situation warrants, even when the current rate is prescribed by contract).

31

telephone service to their guests for a fee. People ex reI. Public Servo Comm'n V. New York Tel.
Co., 29 N.Y.S.2d at 516; Connolly v. Burleson, P.u.R. 1920, C_243 23 (holding the PSC has
jurisdiction over the commission taken by hotels for telephone service), Hotel Pfister v.
Wisconsin Tel. Co., 233 N.W. 617 (1930) (same), In re Hotel Marion Co., P.U.R. 1920, D_46624
(same); Jefferson Hotel Co. v. Southwestern Bell Tel. Co., 15 P.U.R. [N.S.] 265 25 (same).
Indeed, PSC jurisdiction over commissions is necessary to protect consumers:
We think it is supported by logic and practical necessity if the purposes of the Public
Service Law are to be effectuated. A telephone within a hotel, used to furnish service in
connection with outside calls, must be considered an extension of the telephone
company's general system and subject to regulation; otherwise the public will be
subjected to a variety of rates concocted under the guise of hotel service and completely
unregulated. To avoid such an evil is one ofthe main purposes ofthe statute.
People ex reI. Public Servo Comm'n v. New York Tel. Co., 29 N.Y.S.2d at 516. See also, Hotel
Pfister, 233 N.W. at 619 (holding hotel commissions must be subject to regulation so that the
public is not "obliged to pay more for such service than could be demanded ifthe [telephone]
company performed it directly and entirely by means of its own facilities. If such practice were
permitted, it would open the door to discrimination, and thereby afford a means of evading one
of the most important provisions of the statute and render it impotent to accomplish the purpose
of its enactment").
For the above reasons, the PSC correctly determined that it lacked jurisdiction over the
DOCS tax because it is not a "commission" subject to the PSC's regulation. Nor can the DOCS
tax be legitimized as a user fee. Instead, it is an unlegislated, and therefore unconstitutional, tax.

23

A copy of this opinion is included in the appendix as Exhibit 1.

24

A copy ofthis opinion is included in the appendix as Exhibit 2.

25

A copy ofthis opinion is included in the appendix as Exhibit 3.

32

B.

The DOCS Tax Violates Plaintiffs' Rights to Substantive Due Process

To state a substantive due process claim, a plaintiff must allege a constitutionally
protected liberty or property interest, and then must show that the defendant acted in an arbitrary
or irrational manner to deprive them of that interest. 26 See Walz v. Town of Smithtown, 46 F.3d
162, 169 (2d Cir. 1995). Plaintiffs have met these requirements. It is well-established principle
that "[t]axes, or more specifically, the monies used to pay taxes, are a type of 'property' of which
a citizen cannot be deprived without due process oflaw." Weissinger v. Boswell, 330 F. Supp.
615,624 (M.D. Ala. 1971) (three-judge constitutional panel); Sunday Lake Iron Co. v. Township
of Wakefield, 247 U.S. 350, 352-53 (1918). Accordingly, Plaintiffs have properly pled the
existence of their constitutionally protected liberty and property interests. As demonstrated
below, Plaintiffs have also met the requirements for establishing the State's arbitrary deprivation
of these interests. 27
The courts long ago established the parameters for evaluating substantive due process
challenges to government taxation schemes:
Taxes are enforced contributions, levied by the State upon the property of individuals, by
virtue of its sovereignty, for the support of government, and for the public needs. The

In Remley v. State of New York, 665 N.Y.S.2d 1005, 1009 (1997), the court expressly noted
that "the due process provision in Article I, Section 6 is self-executing in that it defines a
judicially enforceable right and provides for a basis for relief against the State if the right is
violated." Furthermore, Plaintiffs' claim is properly interposed as a due process claim here.
See, e.g., Radio Common Carriers v. State. 601 N.Y.S.2d 513 (Sup. Ct. 1993) (challenging
regulatory "fee" on due process grounds); Rego Properties Corp. v. Finance Adm'r of New
York, 424 N.Y.S.2d 621,625-26 (Sup. Ct. 1980) (same).
26

Like the many cases decided by New York courts over the years, Plaintiffs allege that DOCS
has unlawfully imposed a tax upon them by means of the prison telephone system in
contravention of the New York Constitution which reserves such authority exclusively to the
Legislature. See, e.g., Cimato Bros., Inc. v. Town of Pendleton, 654 N.Y.S.2d 888 (4th Dept.
1997); New York Tel. Co. v. City of Amsterdam, 613 N.Y.S.2d 993,995 (3d Dept. 1994);
Torsoe Bros. Constr. Co. v. Bd. of Trustees, 375 N.Y.S.2d 612 (2d Dept. 1975).

27

33

money thus taken, until taken, is ... property within the meaning ofthe Constitution of
the United States.
Due process oflaw, as applied to the cases under consideration, is the authorized
procedure whereby the property of the individual can be taken by the State; it includes
the initial authority to levy taxes; the purpose to which the money thus raised is to be
devoted; and the instrumentalities that distribute the burden upon the citizens.

Any substantial departure, therefore, in the collection oftaxes, from the law, either as to
the authorityfor a tax, for its purpose, or the provisions for the just distribution ofits
burdens, is a departure from due process oflaw; and the enforced collection of taxes, in
the laying and distributing of which there is a substantial departure from law, is the
depriving of a citizen of his property without due process of law.
Chicago Union Traction Co. v. State Bd. of Equalization, 114 F. 557, 565-66 (C.C.S.D. m. 1902)
(emphasis supplied), affd sub nom., Raymond v. Chicago Union Traction Co., 207 U.S. 20, 40
(1907). Pursuant to this framework, this Court must examine: (i) DOCS' authority to impose
this special tax on those seeking to communicate with prisoners in its facilities; (ii) the
instrumentality used by DOCS to achieve its objective; and (iii) the distribution ofthis tax
burden upon the State's citizens. See Greater Poughkeepsie Library Dist. v. Town of
Poughkeepsie, 618 N.E.2d 127 (1993). See also Unity Real Estate Co. v. Hudson, 178 F.3d 649,
659-60 (3d Cir. 1999). Even a cursory evaluation of these aspects of the tax levied by means of
the Department's prison telephone system compels the conclusion that the scheme violates the
Due Process Clause of the State Constitution.

i.

The Department has no authority to impose its prison telephone
system tax upon Plaintiffs.

In examining whether a governmental entity has the authority to impose taxes, courts
look at both the state and federal constitutions and the laws governing the power to tax. 28 In this

See, e.g., Allegheny Pittsburgh Coal Co. v. County Comm'n, 488 U.S. 336,345 (1989). See
also, Long Island Lighting Co. v. Assessor of Brookhaven, 552 N.Y.S.2d 336 (2d Dept. 1990);
Radio Common Carriers v. State, 601 N.Y.S.2d 513 (Sup. Ct. 1993); Rego Prop. Corp. v.
Finance Adm'r of New York, 424 N.Y.S.2d 621,625-26 (Sup. Ct. 1980).
28

34

regard, DOCS' activities must first be tested against the principle that "the exclusive power of
taxation is lodged in the State Legislature." Castle Oil Corp. v. City of New York, 675 N.E.2d
840 (1996)(citing N.Y. Const., art. XVI, § 1).29 The law in New York is eminently clear that
while the taxing power may be delegated to "legislative bodies of municipalities and quasimunicipal corporations...[t]he power to tax may not . .. be delegated to administrative agencies

or other governmental departments." Greater Poughkeepsie Library Dist.. 618 N.E.2d 127, 130
(emphasis added); see also Gautier v. Ditmar, 97 N.E. 464, 467 (1912). "Only after the
Legislature has, by clear statutory mandate, levied a tax on a particular activity, and has set the
rate of that tax, may it delegate the power to assess and collect the tax to an agency." Yonkers
Racing Corp. v. State, 516 N.Y.S.2d 283,284 (2d Dept. 1987) (emphasis supplied); cf. Greater
Poughkeepsie Library Dist.. 618 N.E.2d at 129 (noting that the "[d]elegation of purely
administrative functions is constitutionally permissible"). Under these principles, to
constitutionally confer this limited assessment and collection authority upon an administrative
agency, the State Legislature must make the delegation "in express terms by enabling
legislation." Castle Oil, 675 N.E.2d at 842.
Plainly, DOCS' revenue raising scheme does not comport with these constitutional
requirements. The Department can point to no legislative enactment which broadly delegates
taxing authority to it; nor can it show that the New York State Legislature has provided it with
the specific authority to levy taxes upon prisoners' families through the prison telephone system
as a means of raising revenue for the State's or DOCS' generaloperations. 3o The Department's

29 Accord United States Steel Corp. v. Geros~ 166 N.E.2d 489 (1960).
30 The portion of The Appropriations Act of May 14, 2003, ch. 50, Laws of New York 2003
attached as Ex. A to Defendant DOCS' Affidavit of Gerry 1. Rock is, of course, just that - an act
appropriating money. It cannot be construed as enabling legislation, much less a grant with

35

taxing activities have been exercised without any legislative authority whatsoever, and are
therefore ultra vires and unconstitutional. Id., United States Steel v. Geros~ 166 N.E.2d at 491

(holding that a tax "must be within the expressed limitations [of the enabling legislation] and,
unless authorized, a tax so levied is constitutionally invalid"). See also Tze Chun Liao v. New
York State Banking Dept., 548 N.E.2d 911,913 (1989) (stating that "[a]dministrative agencies,
as creatures of the legislature within the executive branch, can act only to implement their charter
as it is written...[they] cannot create rules, through [their] own interstitial declaration, that were
not contemplated or authorized by the Legislature... ,,).31 Given these circumstances, the Court
need go no further in its due process analysis because "[a] citizen is deprived of due process of
law where...there is a substantial departure from the law as to the authority for a tax." Rego
Properties, 424 N.Y.S.2d at 625 (citing Chicago Union Traction Co. v. State Bd. ofEgualization,
114 F. 557 (C.C.S.D. Ill. 1902».32 See Castle Oil, 67 N.E.2d at 842.

ii.

The tax scheme implemented by DOCS violates core due process
requirements.

Even if the State could point to legislation granting DOCS the authority to impose this
tax upon Plaintiffs, in the absence of specific legislative guidelines designating the property to be
taxed and delineating the tax rate as well as the proportionate share of the tax to be raised from
different groups, any exercise of such authority by DOCS would still be unconstitutional. The

"express terms" and "strict guidelines." Castle Oil, 675 N.E.2d at 842; Yonkers Racing, 516
N.Y.S.2d at 284.

In addition, DOCS' tax scheme also violates the constitutional requirement of separation of
powers by encroaching on this uniquely legislative function. See, e.g., Yonkers Racing Corp.,
516 N.Y.S.2d at 284 (New York State's Racing and Wagering Board's action imposing tax
without authority constitutes usurpation of a legislative function). Cf. Skinner v. Mid-America
Pipeline Co., 490 U.S. 212, 220-21 (1989).
31

32

See also Weissinger v. Boswell, 330 F. Supp. 615 (M.D. Ala. 1971).
36

courts in New York have made clear that the legislative delegation ofpower to an agency to
assess and collect a tax on a particular activity "must be accompanied by proper guidelines set by
the Legislature." Yonkers Racing, 516 N.Y.S.2d at 284. Furthermore, any tax imposed pursuant
to such a limited delegation, "must be within the expressed limitations [of the enabling
legislation] ...." Castle Oil, 67 N.E.2d at 842 (citations omitted). "Delegating to an
administrative agency the power to fix the ratio of assessment, without formulating a definite and
intelligible standard to guide the agency in making its determination, constitutes an
unconstitutional delegation oflegislative power." Rego Properties, 424 N.Y.S.2d at 625
(quoting Weissinger v. Boswell, 330 F. Supp. at 625). See also Greater Poughkeepsie Library
Dist.. 618 N.E.2d at130.
In the instant case, DOCS has given itself the unlimited discretion to embed a tax in the
charge structure of the prison telephone system. It has arbitrarily selected the amount to be
raised annually - its annual surcharge from the MCI Contract - and thus the tax burden to be
imposed upon Plaintiffs. Given that the prison telephone system tax is wholly unauthorized, it
follows that there is not now - nor has there ever been - any delineation ofthe appropriate tax
rate or any guidelines governing the parameters ofthe tax to be levied. The courts have
consistently concluded that such circumstances violate due process requirements. See, e.g.,
Rego Properties, 424 N.Y.S.2d at 625 (statute which gave assessors unlimited discretion in
fixing the rate of assessment offended due process); Cimato Bros., Inc. v. Town of Pendleton,
654 N.Y.S.2d 888 (4th Dept. 1997) (ordinance permitting town engineer to set permit fee to
cover town's cost of inspecting public improvements in absence of standards to control
discretion held unconstitutional); Yonkers Racing, 516 N.Y.S.2d at 283. "[A] system of
assessment under which the State [agency] is left without guidelines for determining the major

37

types of property [to be assessed], and the assessor is empowered at his discretion, to select the
ratios at which the different categories may be assessed ... constitutes an unconstitutional
delegation of a basic legislative function ... and necessarily results in the deprivation of due
process and the equal protection of the laws to property owners." Slewett & Farber v. Bd. of
Assessors, 412 N.Y.S.2d 292,300 (Sup. Ct. 1978), affd as modified, 438 N.Y.S.2d 544 (2d
Dept. 1981), affd as modified, 430 N.E.2d 1294 (1982).

In essence, the Department's taxation scheme fails in this regard because it contains the
same structural flaws as the statute challenged in Greater Poughkeepsie Library District. In that
case, the Court of Appeals found unconstitutional a statute creating a library district with the
power to fix the amount of tax revenue to be raised and appropriated by the town to fund the
library. Analyzing the statutory scheme, the Court noted that the Library District set its own
budget, estimated the amount of funds that would be available to it from other sources, and was
not subject to any standards including a fixed cap on the tax rate. In this manner, the Court held,
the Library District set the tax rate for the town. Greater Poughkeepsie Library Dist., 618 N.E.2d
at 129. The Department's taxation scheme suffers from precisely the same deficiencies; DOCS
has arrogated to itself the power to determine whether a tax should be levied, at what rate, upon
what property, and up to what ceiling. Such a scheme is flatly unconstitutional. Id. at 130;
Gautier, 204 N.Y. at 467-68.
111.

The imposition of the prison telephone system tax solely on Plaintiffs
violates due process principles as well.

Contrary to the State's urging, DOCS Br. at 21, the Department's telephone taxation
scheme fares no better under an evaluation ofwhether sufficient evidence exists to support
DOCS' implicit decision that prisoners' families and friends can justly be charged in order to
fund its general operations, or whether it was a rational solution for DOCS to augment its budget

38

through the levying of fees on the recipients of prisoners' telephone calls. See Unity Real Estate
Co., 178 F.3d at 660. Beyond DOCS' ultra vires actions in exercising taxing power that clearly
exceeds its jurisdictional mandate, it has also violated the well-established principle of
substantive due process that "although money raised by general taxation may constitutionally be
applied to purposes from which the individual taxed may receive no benefit ... so called
assessments for public improvements laid upon [specific individuals] are ordinarily
constitutional only ifbased on benefits received by them." HBP Assocs. v. Marsh, 893 F. Supp.
271,278-279 (S.D.N.Y. 1995) (quoting Nashville, C. and St. L. Ry. v. Walters, 294 U.S. 405,
430 (1935».33
The situation in the instant case could not present a clearer violation ofthese principles.
The tax monies paid by Plaintiffs under DOCS' scheme are added to the general State fisc; they
compensate for what otherwise would be funded by general tax dollars or would be a budgetary
shortfall. Consequently, such monies must be deemed a "levy made for the purpose of raising
revenues for a general governmental purpose" and are therefore taxes. Radio Common Carriers,
601 N.Y.S.2d at 575. Plaintiffs' payments are not made in satisfaction of any regulatory fee; no
such fees have been enacted as "an integral part of the regulation of an activity" or "to cover the
cost of regulation." Id Nor are these payments properly designated "user fees" in as much as
the amounts paid by each individual bear no relationship whatsoever to the costs of operating the
prison telephone system. See Point V, Section A., supra. The record here reveals that the fees
imposed by DOCS: (i) are being exacted for revenue purposes; (ii) are disproportionate to the
costs associated with the operation of the prison telephone system; and (iii) are appropriated for
use in covering the general operating costs of the Department. Plaintiffs' surcharge payments,

33 See also Norwood v. Baker, 172 U.S. 269, 279 (1898); Aldeus, Inc. v. Tully, 416 N.Y.S.2d
425,427 (3d Dept. 1979); Board of Ed. v. Alexander, 92 N.Y.S.2d 471, 477-78 (Sup. Ct. 1949).
39

therefore, are taxes imposed pursuant to an unauthorized scheme. See New York Tel. Co. v.
City of Amsterdam, 613 N.Y.S.2d 993,995 (3d Dept. 1994); Torsoe Bros. Constr. Co. v. Bd. of
Trustees, 375 N.Y.S.2d at 616.
Moreover, the tax imposed bears no relationship to Plaintiffs as a group. The distinction
drawn between Plaintiffs and other State taxpayers for the purpose of serving the Department's
general revenue raising objective is thus unconstitutionally baseless and irrational. See Foss v.
City of Rochester, 480 N.E.2d 717, 722 (1985). See also County of Sacramento v. Lewis, 523
U.S. 833 (1998).
Finally, the Department's revenue raising scheme also violates the prohibition against
double taxation by imposing a tax on Plaintiffs in addition to the state taxes they already pay that
are apportioned through the budgetary process to DOCS. "Double taxation is prohibited unless
specifically authorized by the legislature." Radio Common Carriers, 601 N.Y.S.2d at 517 (citing
Sage Realty Corp. v. O'Cleireacain, 586 N.Y.S.2d 118 (1st Dept. 1992». As the Supreme Court
observed in Tennessee v. Whitworth, 117 U.S. 129, 137 (1886):
Justice requires the burdens of government shall as far as practicable be laid equally on
all, and, ifproperty is taxed once in one way, it would ordinarily be wrong to tax it again
in another way, when the burden of both taxes falls on the same person. Sometimes tax
laws have that effect; but ifthey do, it is because the legislation was unmistakably so
enacted. All presumptions are against such an imposition.

In sum, Plaintiffs have established their substantive due process and unauthorized
taxation claims. They have identified the specific constitutional rights at stake, incluqing their
liberty interest in maintaining their associational rights, and their property interests in the monies
collected as taxes. 34 They have demonstrated that the "state action ... was arbitrary in a
constitutional sense and therefore violative of substantive due process." Lowrance v. Achtyl, 20

34

See Collins v. City of Harker Heights, 503 U.S. 115, 127 (1992).

40

F.3d 529,537 (2d Cir. 1994).35 Plaintiffs have shown that DOCS' revenue raising scheme
violates substantive due process mandates at each step ofthe analysis: from implementation, to
the distribution of the burden, and finally to the collection of the tax.

C.

The DOCS Tax Works an Unconstitutional Taking of Plaintiffs' Property

Plaintiffs have also stated a claim for an unlawful taking. The Takings Clause of Article
1 § 7(a) of the New York State Constitution prohibits the taking of private property for public
use without just compensation. To establish a takings claim under 42 U.S.C. § 1983, Plaintiffs
must show "(1) a property interest; (2) that has been taken under color of state law; (3) without
just compensation." HBP Assocs. v. Marsh, 893 F. Supp. 271, 277 (S.D.N.Y. 1995).36
Here, DOCS imposed an assessment that confiscates Plaintiffs' property in violation of
their rights to substantive due process under Article 1 of the New York Constitution. More
specifically, Plaintiffs allege that the Department's operation of the prison telephone system: (1)
works a taking of their property - the fees they pay to cover that portion of the costs imposed by
the DOCS tax;37 (2) for a public purpose - funding ofa portion of the cost of the general
operation ofDOCS;38 and (3) without just compensation. 39

35 Accord Foucha v. Louisiana, 504 U.S. 71,80 (1992); Daniels v. Williams, 474 U.S. 327,331
(1986).
36 See also, Frooks v. Town of Cortlandt, 997 F. Supp. 438, 452-53, affd without opinion, 182 F.
3d 899 (2d Cir. 1999); Port Chester Yacht Club v. lasillo, 614 F. Supp. 318, 321 (S.D.N.Y.
1985) (citing Parratt v. Taylor. 451 U.S. 527,535-37 (1981».
37 See Complaint at ~~18 - 22 (specifying costs imposed on each named Plaintiff); ~ 7
(delineating how the costs of prisoners' telephone calls incorporates the State's commission into
the rate structure); "10, 44 (specifying revenue paid to the State pursuant to the Mel contract).
38 See Complaint at "44 - 45 (alleging that the prison telephone system was intended to be a
source of revenue for DOCS, and that its tax is not used to fund the prison telephone system).

41

The State apparently misapprehends the law on takings. See DOCS Br. at 22-23.
Plaintiffs unequivocally possess a constitutionally protected property interest. There can be no
doubt that the sums paid by Plaintiffs attributable to the DOCS tax constitute their personal
property. The United States Supreme Court has made clear that the Takings Clause of the U.S.
Constitution applies to such monetary interests. See. e.g., Phillips v. Washington Legal Found.,
524 U.S. 156, 172 (1998); Webb's Fabulous Pharms. v. Beckwith, 449 U.S. 155, 160 (1980).40
And the Court of Appeals ofNew York followed, ruling that Article 1 § 7 of the New York State
Constitution applies to monetary interests. Alliance of Am. Insurers v. Chu, 571 N.E.2d 672
(1991).
Plaintiffs have plainly alleged that their property has been taken by the State. Complaint
at 1[ 92 ("The States' operation of this system constitutes a confiscation of Plaintiffs' property").
Plaintiffs have further alleged that the monies they have paid which are attributable to the DOCS
tax are used for a public purpose -- to subsidize the cost of DOCS' general operations.
Complaint at 1[ 12. Indeed, the Department itself has admitted this fact. DOCS Br. at 4.
Therefore, DOCS cannot contest that the use to which it has put Plaintiffs' monies constitutes a
"public use.,,41

See Complaint at 1[1[12-14,85 (alleging that the fees imposed are illegal and intended to
subsidize governmental functions and that Plaintiffs have been singled out to be directly
responsible for the burden of subsidizing the DOCS system); 1[ 12 (alleging that Plaintiffs are
subject to tax that bears no relation to the actual administrative and enforcement costs incurred in
facilitating prison telephone service).

39

40 See also Armstrong v. United States, 364 U.S. 40, 44 (1960); Louisville Joint Stock Land
Bank v. Radford, 296 U.S. 661(1935).
41 See Byrne v. New York State Office of Parks. Recreation & Historic Preservation, 476
N.Y.S.2d 42,42 (4th Dept. 1984) (holding that the term "public purpose" is "broadly defined to
encompass any use which contributes to the health, safety, general welfare, convenience or
prosperity of the community").
42

Finally, Plaintiffs have alleged that the deprivation they have suffered has occurred
without due process of law, see Complaint at '93, and that they have received no compensation
for the taking. Because New York does not provide a procedure for seeking just compensation of
claims such as those alleged by Plaintiffs in this case, Plaintiffs have adequately pled their
takings claim.

42

See New York Em. Dom. Proc. Law §104 ("The eminent domain procedure law

shall be uniformly applied to any and all acquisitions by eminent domain of real property within
the state of New York) (emphasis supplied).43
Following the Supreme Court's directives in Dolan v. City of Tigard, 512 U.S. 374,384
(1994), and Nolan v. California Coastal Commission, 483 U.S. 825,834 (1987), the New York
Court of Appeals has held that a "burden-shifting regulation" constitutes a taking: "(1) if it
denies an owner economically viable use of his [or her] property, or (2) ifit does not
substantially advance legitimate State interests." See also Manocherian v. Lenox Hill Hosp., 643
N.E.2d 479,482 (1994) (quoting Seawall Assocs. v. City of New York, 542 N.E.2d 1059
(1989», cert. denied sub nom. Wilkerson v. Seawall Assocs., 493 U.S. 976 (1992). The Court of
Appeals also reiterated its determination that "the substantial State purpose for such legislation
must be bound by a 'close causal nexus' to survive scrutiny." Manocherian, 643 N.E.2d at 482
(citing Dolan v. United States, 512 U.S. 374 (1994».
While the limitations placed on the operation of the prison telephone system - including
those such as call monitoring - undoubtedly serve legitimate governmental purposes, no causal
nexus exists between these regulatory requirements and the additional monetary burdens placed

42 In the absence of any delineated procedure, Plaintiffs sought relief directly from Defendants to
no avail. See Meeropol Aft:
43 See also Kohlasch v. New York State Thruway Auth., 482 F. Supp. 721, 723-24 (S.D.N.Y.
1980).
43

on Plaintiffs by the DOCS tax. The Department does not contest the fact that the revenues
generated by the system are used to fund myriad operating costs of DOCS. DOCS Br. at 4.
Indeed, DOCS has not even attempted to demonstrate the required relationship between the
significant burden placed on Plaintiffs and their use of the prison telephone system - i.e., how
the costs to DOCS associated with its operation of the prison telephone system - which are de

minimis at most, see Complaint, Ex. B at 4 - reasonably relate to its requirement of a system to
provide more than $25 million per year. Given the complete absence of this constitutionally
required nexus, the DOCS' failure to confront this issue is not surprising.
Despite DOCS' intimation, its use of the DOCS tax to subsidize other governmental
operations does not provide any constitutional cover for its unlawful conduct. The Court of
Appeals ofNew York has followed the U.S. Supreme Court in making it clear that while
government may permissibly "adjust[] the benefits and burdens of economic life to promote the
common good," Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 124 (1978), it may not
"forc[e] some people alone to bear public burdens which, in all fairness and justice, should be
borne by the public as a whole" Manocherian, 84 N.Y.2d at 391 (quoting Penn Cent. Transp.
Co., 438 U.S. at 123). See also Armstrong, 364 U.S. at 49. Here, DOCS deliberately singled out
Plaintiffs to bear alone a public burden - operation of the state correctional system - a burden
which they had no role in creating. See Eastern Enterprises v. Apfel, 524 U.S. 498, 537 (1998)
(plurality opinion); Eastern Minerals Int'l, Inc. v. Cane Tenn., Inc., 713 N.Y.S.2d 29,32 (1st
Dept. 2000)
In Webb's Fabulous Pharmacies v. Beckwith, 449 U.S. 155, 164-65 (1980), the Supreme
Court struck downa Florida statute that was intended to accomplish a similar objective by
permitting Seminole County to retain the interest earned on interpleader funds deposited with the

44

county clerk. Noting that a separate statute prescribed a fee for the clerk's services rendered in
receiving monies into the fund and noting them in the court's registry, the Court expressly
rejected the defendants' claim that the retention of interest constituted a reasonable "user's fee".
Id. at 162. Rather, it held that "the exaction is a forced contribution to general governmental
revenues, and it is not reasonably related to the costs of using the COurts.,,44 Id. at 163. See also
Blumberg v. Pinellas County, 836 F. Supp. 839, 845 (M.D. Fla. 1993); Alliance of Am. Insurers
v. Chu, 571 N.E.2d 672 (1991)

In sum, the State has exacted two tolls from Plaintiffs through its operation of the prison
telephone system, the first in the form ofpayment of the customary cost of telephone calls, and
the second in the form of the additional monetary burden resulting from the surcharge demanded
by DOCS. No discernible justification exists for the imposition ofthese additional charges
"other than the bare transfer of private property to the [State]." United States v. Sperry Corp.,
493 U.S. 52, 62 (1989) (discussing the Court's decision in Webb's Fabulous Pharmacies). Such
a "confiscatory regulation" is plainly violative ofthe Takings Clause. See Webb's Fabulous
Pharms., 449 U.S. at 163-64.
For the above reasons, Plaintiffs have adequately stated a claim for an unlawful taking
under the New York State Constitution.

D.

Plaintiffs Have Properly Alleged Claims Based On the Violation of Their
Free Speech and Associational Rights

In order to construct their argument that Plaintiffs have failed to state a cause of action
for violation of their free speech and associational rights, Defendants mischaracterize Plaintiffs
claim as one "based on a purported right to communicate inexpensively via telephone." DOCS

Moreover, here, as in Webb's Fabulous Pharmacies, "[n]o police power justification is offered
for the deprivations" visited upon Plaintiffs. 449 U.S. at 163.

44

I

45

Br. at 30. This inaccurate representation of the allegations lays the foundation for the
Department's facile and unsupported statements that "no such right can credibly be found in the
constitution" and that "seeking to save money does not implicate fundamental speech rights." Id.
Plaintiffs of course assert no such right; rather they complain of: (1) the State's imposition of a
fee on their expressive activity that bears no relationship to related regulatory costs; (2) the
burden the DOCS tax places on their ability to maintain contact with incarcerated family
member, Complaint at "52-63; and (3) the attenuated relationship between the State's surcharge
and the penological objective purportedly served.
The prison telephone system clearly implicates Plaintiffs' rights to freedom of speech and
association under the State Constitution. While incarceration - for prisoners and non-prisoners
alike - of course limits the complete enjoyment of some constitutional freedoms, it does not "bar
free citizens from exercising their [First Amendment] rights" to contact family and friends who
are in prison. Thornburgh v. Abbott, 490 U.S. 401, 407 (1989). Our free speech guarantees
protect Plaintiffs' communication with their friends and family not only by mail, but also by
telephone. See, e.g., Washington v. Reno, 35 F.3d 1093, 1100 (6th Cir. 1994) (recognizing that
non-inmates' rights may be implicated by prison telephone regulations).
To the extent they restrict Plaintiffs' ability to communicate with family members in
prison, DOCS' policies also burden Plaintiffs' rights to familial and marital association protected
by the New York Constitution. Because "[i]t is through the family that we inculcate and pass
down many of our most cherished values," Moore v. City of East Cleveland, 431 U.S. 494, 503504 (1977), the states are required to protect the "[i]ntegrity ofthe family unit." Stanley v.

46

Illinois, 405 U.S. 645, 651 (1972).45 Plaintiffs' right to familial association survives
incarceration of their loved ones, ~ Turner v. Safley, 482 U.S. 78, 95-97 (1987), because

attributes of the family relationship - expressions of emotional support, decisionmaking
regarding family obligations and child-rearing, and expectations of the prisoner's reentry into the
family - exist despite the fact of imprisonment. See id. at 95-96.
These rights, to be sure, are not absolute. Defendants cite cases illustrating the principle
that prison rules needed to maintain security of a correctional facility may reasonably burden the
constitutional rights of both prisoners and non-prisoners. 46 DOCS Br. 32. They ignore,
however, just how dramatically different the policies challenged here - most notably, the
imposition of a surcharge unrelated to the cost of providing the prison telephone system - are
from the prison rules in those cases. As a result, Defendants fail to apply the appropriate level of
scrutiny to Plaintiffs' claims. For this and other reasons, Defendants have not shown that
Plaintiffs' constitutional claims should be dismissed.
The State effectively concedes that but for the 57.5 percent commission which MCI must
pay DOCS under its contract, the charges to Plaintiffs for communicating with their family and
loved ones would be much lower. DOCS Br. at 3. It nonetheless argues that DOCS may
appropriately raise revenues by imposing the DOCS tax on prisoners' telephone calls because the

45See also Zablocki v. Redhail, 434 U.S. 374, 383 (1978) (recognizing right to marry); Adler v.
Pataki, 185 F.3d 35, 44 (2d Cir. 1999) (recognizing First Amendment right ofintimate marital
association); Duchesne v. Sugarman, 566 F.2d 817, 825 (2d Cir. 1977) (recognizing rights of
parents and children to maintain emotional attachment).
46 The Department relies upon numerous unsuccessful constitutional challenges to prison
telephone system features to show that Plaintiffs' claims are foreclosed. See DOCS Br. at 32-33.
However, not one of these cases involved ajusticiable free speech claim by a non-prisoner
containing factual allegations sufficient to demonstrate that the telephone system imposes a
surcharge above and beyond the cost ofthe service.
47

revenues are earmarked for a legitimate penological objective -- the programs supported by the
Family Benefit Fund. rd. at 3-4. That is simply not so.
i.

The Turner standard is inapplicable to Defendants' surcharge
policy.

Contrary to the State's assertion, DOCS Br. at 31-32, the constitutionality of the
Defendants' imposition and collection of the DOCS tax is not governed by the deferential
standard adopted by the Supreme Court in Turner. There the Supreme Court limited judicial
scrutiny ofthe "day-to-day" decisions of prison administrators and official efforts to address
"security problems," 482 U.S. at 89. The Supreme Court applied this reasoning to prison rules
regulating "the order and security of the internal prison environment" in Thornburgh v. Abbott,
490 U.S. at 407.
Courts have expressly declined to apply Turner to prison policies that do not implicate
such concerns. Thus, in Pitts v. Thornburgh. 866 F.2d 1450 (D.C. Cir. 1989), the D.C. Circuit
applied traditional intermediate scrutiny to the District of Columbia's decision to incarcerate
long-term female offenders in federal prisons far from the city while similarly situated male
offenders were incarcerated nearby. Id. at 1453. The D.C. Circuit reasoned that Turner was
applicable only to cases involving "regulations that govern the day-to-day operation of prisons
and that restrict the exercise of prisoners' individual rights within prisons." Because the
District's policy was the result of "general budgetary and policy choices" that "[did] not directly
implicate either prison security or control of inmate behavior, [or] go to the prison environment
47

and regime," the Court concluded Turner was inapposite. Id. at 1454.

See also Beauchamp v. Murphy, 37 F.3d 700, 704 (1st Cir. 1994) (refusing to apply Turner
deference to inmates' challenge to correctional authorities' denial of sentencing credit because
considerations of discipline and security are "greatly diluted when the issue is the calculation of
a sentence, a task performed by an administrator with a pencil"); Jordan v. Gardner, 986 F.2d
47

48

Like the policy decision in Pitts, DOCS' imposition ofthe surcharge reflects a purely
"budgetary" choice that does not implicate prison security, control ofprisoners, behavior, or the
internal prison environment and regime. As such, it is subject to the level of scrutiny
"traditionally applied" to challenges to fees that burden free speech rights. Pitts. 866 F.2d at
1453.

ii.

The surcharge fails to survive the scrutiny applied to challenges to
fees that burden free speech rights.

As noted above, while government may assess a fee to recoup the costs incurred in
regulating expressive activity, Cox v. New Hampshire. 312 U.S. 569, 576-77 (1941), it may not
impose a fee that bears no relationship to those regulatory costs. Murdock v. Pennsylvania, 319
U.S. 105 (1943). Thus, in Murdock, the Supreme Court struck down a licensing fee for
distributing literature because it was not "imposed as a regulatory measure to defray the expenses
of policing the activities in question" but rather served as "a flat tax levied and collected as a
condition to the pursuit of activities whose enjoyment is protected by the First Amendment." Id
at 113-14.
Since Murdock. courts have consistently applied its simple rule -- defraying costs is
permissible, taxing speech is not -- in striking down similar measures. 48 Similarly here, because

1521, 1530 (9th Cir. 1993) (declining to apply Turner standard to inmates' Eighth Amendment
challenge to cross-gender clothed body searches).
48 See, e.g., Eastern Conn. Citizens Action Group v. Powers, 723 F.2d 1050, 1056 (2d Cir. 1983)
(invalidating fee charged to hold demonstration on abandoned railway because state agency had
offered no evidence that fee was necessary to defray "cost incurred or to be incurred ... for
processing plaintiffs' request to use the property"); Sentinel Communications Co. v. Watts. 936
F.2d 1189, 1205 (11 th Cir. 1991) ("[t]he government may not profit by imposing license or
permit fees on the exercise of first amendment rights, ... and is prohibited from raising revenue
under the guise of defraying its administrative costs"); see also, Fernandes v. Limmer, 663 F.2d
619,633 (5th Cir. 1981) (striking down license fee for distribution of literature at Dallas/Fort
Worth airport, in part because defendants had failed to show that fee matched regulatory costs

49

the surcharge imposed on inmate telephone calls bears minimal relationship to the regulatory
costs incurred by DOCS in connection with the prison telephone service, Complaint ~ 12, it is,
in effect, "a flat tax imposed on [prisoners'] exercise of [their free speech rights.]" Murdock, 319
U.S. at 113. As such, it must be struck down.

iii.

The surcharge fails to survive scrutiny under the Forsyth
analysis.

The surcharge at issue here also fails traditional free speech scrutiny because it is not
narrowly tailored to achieve a legitimate governmental interest and leaves Plaintiffs without
ample alternative channels of communication.49 There are obviously less speech-restrictive ways
to fund the Family Benefit Program, for example, appropriating monies from the General
Treasury.
Moreover, Plaintiffs have made extensive allegations describing the "undu[e] burden"
Defendants' surcharges place on their speech. Complaint at ~~ 52-63. Nat!. Awareness, 50 F.3d
at 1165. While Defendants may dispute these claims, DOCS Br. at 30, whether the alternatives
available to Plaintiffs provide a constitutionally adequate substitute for telephone communication
presents a question of fact not properly determined by the Court at this early stage. so

th

incurred); Baldwin v. Redwood City, 540 F.2d 1360, 1371 (9 Cir. 1976) (striking down fees on
postering in part because "[t]he absence of apportionment suggests that the fee is not in fact
reimbursement for the cost of inspection but an unconstitutional tax upon the exercise of First
Amendment rights") (citations omitted).
National Awareness Found. v. Abrams, 50 F.3d 1159, 1165 (2d Cir. 1995); accord Forsyth
County v. Nationalist Movement, 505 U.S. 123, 130 (1992).

49

so Cf. Kleindienst v. Mandel, 408 U.S. 753, 765 (1972) (noting that alternatives to physical
presence of foreign intellectual would not necessarily "extinguish[] altogether any constitutional
interest in this particular form of access" to his ideas); accord Baldwin, 540 F.2d at 1368 (stating
that existence of alternatives to postering was "not alone enough to justify any regulation
[Defendants] may desire to impose on this means of expression").
50

iv.

The surcharge fails scrutiny even under the Turner standard.

Finally, even assuming the Turner standard were deemed applicable here, the motion to
dismiss still must be denied. 51 To begin, Defendants have failed to articulate a satisfactory
penological justification for the DOCS tax. While raising revenues from prisoners can
sometimes be a legitimate penological objective, Allen v. Cuomo, 100 F.3d 253, 261 (2d Cir.
1996) (disciplinary surcharge), raising revenue from theirfamilies and other outsiders, who have
not been found guilty of any crime, can not.
To be sure, the State claims that the revenues derived from the surcharge are earmarked
for the Family Benefit Fund. This fund, however, is spent on correctional programs that have no
relation to the prison telephone system. 52 Defendants' asserted penological justifications, and the
nature of their relationship to the various aspects ofthe prison telephone system, must be proven
at trial. 53

Turner requires an analysis of (1) whether there is a valid, rational connection between the
prison regulation and the legitimate governmental interest set forth to justify it; (2) whether
alternative means of exercising the right remain open; (3) what impact accommodation of the
right will have on guards and other inmates, and on the allocation ofprison resources generally;
and (4) whether easy alternatives to the regulation exist. Turner, 482 U.S. at 89-90. Furthermore,
the Turner Court noted that "if an inmate claimant can point to an alternative that fully
accommodates the prisoner's rights at de minimize cost to valid penological interests, a court
may consider that as evidence that the regUlation does not satisfy the reasonable relationship
standard." Id. at 90-91.
51

Complaint at '12, Ex. B at 4. Nor do these expenditures have any relationship to the
rehabilitation of inmates incarcerated in the State's facilities. Cf. Shimer v. Washington, 100
F.3d 506, 510 (ih Cir. 1996) (reversing grant of summary judgment in favor of prison officials,
noting that "evidence ... to establish a connection between prison administrator's
unsubstantiated justifications and its policy ... should be at the heart of the Turner analysis");
Allen v. Coughlin, 64 F.3d 77,80 (2d Cir. 1995) (defendant prison's "[c]onclusory assertions in
affidavits" supported by only one concrete example are insufficient to establish that publisheronly news clipping rule is rationally related to security).
52

See Swift v. Lewis, 901 F.2d 730, 731 (9 th Cir. 1990) (state must provide evidence that the
interests asserted are the actual bases for the policy).
53

51

In any event, even if a portion ofthe monies deposited into the Family Benefit Fund is
spent on programs aimed at rehabilitation, the attenuated relationship between the surcharge and
the objective purportedly served does not support DOCS' argument here for several
incontrovertible reasons. First, the immediate effect of the surcharge is to deter the families and
friends of inmates from communicating with them - a goal precisely contrary to the
rehabilitative justification asserted. 54 Second, it is far from clear whether any of the intended
benefits accrue to those who are paying for them. Third, the State's articulated objective fails to
provide a complete justification for the surcharge in as much as only a portion ofthe surcharge
monies collected from Plaintiffs is used for the rehabilitative purpose asserted. See Complaint at
~12,

Ex. B at 4.
Plaintiffs have alleged that those among them who are elderly, impoverished, and/or

disabled have limited access to other alternative avenues of communication (letter writing and
visitation). Complaint at ~~52, 53, 58. See Allen v. Coughlin, 64 F.3d at 80. Plaintiffs also have
pled the existence of an "obvious, easy alternative[]" policy, Turner, 482 U.S. at 90, -- a debit
card system like that utilized by the Federal Bureau of Prisons -- that meets the security concerns
allegedly addressed by the current system. Complaint at ~~64-66. Such an alternative will have
no deleterious "ripple effect" for prison administration, making the accommodation of Plaintiffs'
constitutional rights readily attainable. Turner, 482 U.S. at 90.
Defendants make no attempt to show that the burdens on Plaintiffs' free speech and
associational rights are narrowly tailored to serve a significant governmental interest and leave
open "ample alternatives" for communication. See Forsyth County, 505 U.S. at 130. Indeed,
had they even attempted to do so, this Court would nevertheless be constrained to find that

See Shimer, 100 F. 3d at 510 (noting apparent inconsistency of prison policies and need for
argument and evidence on point).

54

52

Plaintiffs' claims survive their motions to dismiss given that Defendants cannot articulate any
applicable governmental interest here. For this reason,

Defendant~'

motions must fail.

While DOCS proffers penological justifications for its general limitations on prison
telephone service, none of these justifications are relevant to Plaintiffs' specific challenge here to
the DOCS tax. Rather, Defendants merely assert that there are legitimate penological objectives
served by other features ofthe system -- such as the limitation on the number of people on a
prisoner's calling list, DOCS Br. at 32 - and in doing so, merely reinforce Plaintiffs' allegations
that the surcharge aspect ofthe system serves purely economic ends.
Indeed, Defendants do not identify a single penological justification for the imposition of
the surcharge. Plaintiffs contend there is no such justification. Given the unequivocal burden on
Plaintiffs' free speech and associational rights, Plaintiffs have stated a constitutional challenge to
the system.

E.

Plaintiffs Have Stated a Valid Equal Protection Claim

Plaintiffs claim that Defendants' prison telephone system violates their right to equal
protection under the State Constitution, Article I, §11. The system imposes a tax on collect
telephone calls Plaintiffs receive from New York State inmates that is not imposed on any other
group of New York State taxpayers. That burden in turn directly affects Plaintiffs' ability to
communicate and associate with their loved ones, a fundamental right protected by the free
speech clause ofthe State Constitution Article I, § 8. Defendants cannot offer any legitimate
governmental interest, let alone a compelling or important one, that can justi"fy this unequal
treatment.

i.

Plaintiffs are treated differently than other New York taxpayers.

Under the New York State Constitution, equal protection rights are implicated

53

whenever a group of persons is treated differently from others who are similarly situated.
Matter of K.L, 806 N.E.2d 480 (2004). Here, Plaintiffs are New York State residents who
receive collect calls from prisoner incarcerated in Defendants' correctional facilities. Except for
being subject to the DOCS tax, they are similarlysituated to other New York State taxpayers.
As alleged in the Complaint, Defendants' system exacts a considerable and unlawful tax
by imposing a surcharge on the collect calls received by inmates families, friends and counselors.
Complaint at '6. Only about 1.5 percent of the surcharge is used to cover State costs of
operating the prison telephone system, as most ofthose costs are borne entirely by MCI.
Complaint, Ex. A at 4; Meeropol Aff., Ex A at 31. Defendants acknowledge that revenue from
the DOCS tax is used to pay for a variety of DOCS correctional system operations - such as
medical personnel, supplies and pharmaceuticals - that are in no way connected to the prison
telephone system. 55
The costs of general operations cannot lawfully be imposed on a particular group of
taxpayers. "The equal protection clause ... protects the individual from state action which
selects him out for discriminatory treatment by subjecting him to taxes not imposed on others of
the same class." Allegheny Pittsburgh Coal v. County Comm'n, 488 U.S. 336, 345 (1989)
(citation omitted). In Allegheny Pittsburgh Coal, the Court held that only re-valuing property for
purposes of setting tax assessment at the time of recent sales violated equal protection because
there was no justification for not also re-valuing similar property. See also Corvetti v. Town of
Lake Pleasant, 642 N.Y.S.2d 420 (3d Dept. 1996) (equal protection violated when property taxes
arbitrarily increased subject to "welcome neighbor" policy). By implementing the challenged
system, the State has created two distinct classes oftaxpayers, and has arbitrarily imposed upon

55 The State is obligated to operate and fund such services. Estelle v. Gamble, 429 U.S. 97, 103
(1976); Kagan v. State, 646 N.Y.S.2d 336,337 (2d Dept. 1996).

54

one - Plaintiffs and putative class members - an additional tax burden that is not only
unauthorized by the legislature, but also cannot be justified by any legitimate state interest.
Defendants attempt to mislead the Court first by misrepresenting Plaintiffs' claim, then
by arguing that the claim is inadequate. DOCS Br. at 25. Plaintiffs do not claim here that they
are similarly situated to recipients of collect calls that are not from prisoners and so Defendants'
citation to the decisional authority on that issue is misplaced. Rather, Plaintiffs claims that they
are taxpayers who are treated differently from other New York taxpayers who are not required to
pay an additional tax to fund the state correctional system.
ii.

Because Defendants' prison telephone system burdens Plaintiffs'
fundamental rights to freedom of speech and association, the system is
subject to strict scrutiny.

When a challenged provision establishes a classification that burdens fundamental
rights, "it must withstand strict scrutiny and is void unless necessary to promote a
compelling State interest and narrowly tailored to achieve that purpose." Golden v.
Clark, 564 N.E.2d 611,613-14 (1990). Here - as explained in Point V, Section D, supraDefendants' imposition ofthe commission surcharge unreasonably burdens Plaintiffs' ability to
freely speak and associate with their loved ones and clients who are inmates. The Court of
Appeal recognizes that speech and association are among the fundamental rights that, when
burdened by a governmental act, trigger strict scrutiny of that act. Golden, 564 N.E.2d at 616;
Roth v. Cuevas, 624 N.E.2d 689 (1993).56
Defendants mistakenly cast Plaintiffs' claim as a purely economic classification because
the burden imposed is financial. But that is not the law. In determining the level ofscrutiny to

56 Indeed, all courts recognize these rights as fundamental within the equal protection context.
Zablocki v. Redhail, 434 U.S. 374, 388 (1978); National Awareness Foundation v. Abrams, 50
F.3d 1159, 1167 (2d Cir. 1994) (quoting Police Dept. of Chicago v. Mosely, 408 U.S. 92, 101
(1972».
55

apply to the challenged action, courts look to the nature of the interest burdened, rather than the
nature ofthe burden. Golden, 564 N.E.2d at 616; ("analysis starts by examining whether the
challenged provision significantly burdens rights protected by the State Constitution.");
Montgomery v. Daniels, 340 N.E.2d 444,455 (1975) (same). Under Defendants' construction of
equal protection jurisprudence, the invidious discrimination imposed by poll taxes, for example,
would be subject to only a rational basis review. DOCS Br. at 25. The Supreme Court, of
course, found that the fundamental right to vote was entitled to considerably more vigorous
protection. Harper v. Virginia Bd. of Elections, 383 U.S. 663 (1966).
Here, the rights of speech and association burdened by Defendants' actions are
entitled to a similarly high level of protection. New York courts recognize both that ''the
creation and sustenance of a family" is a constitutionally protected associational right,
and that freedom of speech protects individuals who attempt to seek redress of grievances.
People v. Rodriguez, 608 N.Y.S.2d 594,597 (Sup. Ct. 1993) (citing Roberts v. Jaycees, 468 U.S.
609 (1984». Plaintiffs here are burdened in their efforts to maintain constitutionally
protected familial associations and consult with legal counsel in order to seek redress of inmate
grievances. Because Defendants have imposed a burden on Plaintiffs' fundamental rights this
Court should apply the strict scrutiny standard to its review ofDefendants' actions.

iii.

Defendants' have offered no sufficient justification for treating
Plaintiffs differently than other taxpayers.

Under the strict scrutiny level of review, Defendants must show that its
discriminatory treatment of Plaintiffs is warranted by a compelling state interest and that the
method chosen to achieve that goal is narrowly tailored to achieve that purpose. Golden v.

56

Clark, 564 N.E.2d at 614. Tellingly, Defendants here do not attempt to offer any justification
under this standard.
Even if the lowest standard of review could be applied to Plaintiffs' equal protection
claim, Defendants have advanced no theory under which its differential treatment of the
Plaintiffs may be justified. Defendants argue that because the DOCS tax is used to fund
legitimate State corrections programs the Court's inquiry should end there. However, because
the method Defendants imposed to fund these programs is improper, it cannot be rationally
related to any legitimate State interest. Metropolitan Life Insurance Co. v. Ward, 470 U.S. 869,
881 (1985) (state law which sought to promote domestic business by discriminating against
nonresident competitors could not be said to advance a legitimate state purpose.)
Plaintiffs agree that the services funded by the DOCS tax are legitimate programs that the
State must provide. However, the burden of supporting a general public welfare program cannot
be imposed disproportionately on particular individuals. Manocherian v. Lenox Hill Hosp., 643
N.E.2d 479,484 (1995). In Manocherian, the court examined a New York law that required
certain landlords to provide renewal leases based on the status of the non-profit hospital's
employee-subtenant, rather than the tenancy status ofthe tenant of record. 57 Id. at 479-80. The
affected landlords challenged the law as an unconstitutional taking. Id. at 480. The court held
that, "the legislation suffers a fatal defect by not substantially advancing a closely and
legitimately connected State interest." Id. The court reasoned that, "the fact that the State has
acted under the 'landlord-tenant relationship does not magically transform general public
welfare, which must be supported by all the public into mere 'economic regulation,' which can

Chapter 940 ofthe Laws of 1984 operated as an amendment to the New York Rent
Stabilization Laws, and was codified as Administrative Code of the City of New York §26-504.

57

57

disproportionately burden particular individuals." Id. at 484, (quoting Pennell v. San Jose, 485
U.S. 1,22 (1988) (Scalia, J., dissenting».
Here, Defendants attempt the same constitutional sleight-of-hand prohibited by
the Manocherian court. Under the guise of advancing the State's interest in providing mandated
correctional services - which must be supported by all of the public - DOCS imposed the burden
of providing those services on a select group of taxpayers: the families, friends and counselors of
inmates. 58 Because Defendants attempt to advance an otherwise legitimate state interest by
impermissibly discriminatory means, there is no rational relationship between the two.
Defendants' attempt to justify imposing the telephone system commission under equal
protection analysis related to taxation is equally unconvincing. Defendants here have no lawful
authority to levy a tax upon any person anywhere,59 let alone a tax that unlawfully burdens a
particular class oftaxpayers. Therefore, while Defendants accurately quote the Supreme Court
that "the power to tax is the power to discriminate in taxation," Leathers v. Medlock, 499 U.S.
439,451 (1991), they miss a critical factor: they do not have such power.
Moreover, the DOCS tax could not be constitutionally imposed by the State legislature,
let alone an administrative agency. Like the taxes found unconstitutional in Allegheny
Pittsburgh Coal, Corvetti, and Metropolitan Life, the DOCS tax imposes the public welfare
burden of providing mandated correctional services - a burden that must be supported by all the
public - disproportionately upon the Plaintiffs. Under such precedent, therefore, the Defendants'
action must be found unlawful.

58

This burden is not a valid user fee. See Point V, Section A, supra.

59

See Point V, Section B, supra.

58

The Supreme Court and New York State cases cited here authoritatively hold that
government may not arbitrarily choose a classification of person to bear undue burdens.
Therefore, the Defendants' use of the prison telephone system to impose a financial burden upon
Plaintiffs to raise revenue for correctional services is unjustifiable. If DOCS requires additional
funds in order to provide mandatory services, the legislature must allot them, and allot them
fairly.

VI.

PLAINTIFFS HAVE STATED A CLAIM UNDER GENERAL BUSINESS LAW
SECTION 349
Plaintiffs' deceptive business practices claim meets the statutory requirements under New

York General Business Law Section 349(a) ("GBL §349,,).60 A prima facie case of deceptive
practices requires a showing that: 1) Defendants' acts are directed to consumers; 2) Defendants'
acts are deceptive or misleading in a material way; and 3) Plaintiffs have been injured by
Defendants' acts. Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 647
N.E.2d 741, 744 (1995). Defendants have charged for the prison telephone service while they
concomitantly fail to disclose the DOCS tax, make false representations regarding the
penological need for the surcharge and profit from the illegal tax. These allegations constitute a
prima facie case under GBL § 349.

A.

The Prison Telephone System Constitutes a Consumer-Oriented Practice61

60 Section 349 of the General Business Law provides, "[d]eceptive acts or practices in the
conduct of any business, trade or commerce or in the furnishing of any service in this state are
hereby declared unlawful." N.Y. Gen. Bus. Law § 349 (Consol. 2004).
61 DOCS does not appear to dispute that Plaintiffs are consumers or that the prison telephone
system is a consumer-oriented practice. See DOCS Br. at 34 ("It is MCI alone that actually
provides that phone service to consumers such as petitioners. (DOCS is not] in the position of
providing any services to consumers."). Rather, DOCS disputes responsibility for violations
pursuant to the system.

59

Contrary to Defendants' contention, Plaintiffs have shown that DOCS has engaged in
consumer-oriented practices. The provision oftelephone service is clearly a consumer-oriented
practice. Practices that "have a broad[] impact on consumers at large" Oswego, 647 N.E.2d at
744, or "affect[] numerous consumers," Drizin v. Sprint Corp., 771 N.Y.S.2d 82, 84 (1st Dept.
2004), meet the threshold "consumer-oriented" requirement. The courts have held that Section
349 "appl[ies] to virtually all economic activity," including an "editing business, wedding singer,
clothing retailer, automobile dealer, and inagazine subscription seller." Karlin v. IVF Am., Inc.,
712 N.E.2d 622, 665 (Sup. Ct. 1999) (collecting cases); see also McKinnon v. Int'l. Fidelity Ins.
Co., 704 N.Y.S.2d 774, 778 (Sup. Ct. 1999) (selling bail bonds is a consumer activity).
Defendants' provision oftelephone service is consumer-oriented because it affects numerous
people and it is available to any individual in the state of New York whom a prisoner calls. 62
The Department cannot escape liability by claiming that MCI alone provides telephone
services to Plaintiffs; it is a clear participant in the prison telephone services scheme. It
established the criteria for operation of the system through its Request for Proposals, and it
required the provider to pay a substantial "commission" to the State. Meeropol Aff., Ex. A.
Moreover, DOCS receives 57.5% percent of the proceeds from Plaintiffs' calls. Complaint at 13.
Defendants even argue in their Motion to Dismiss that the DOCS tax is justified as a "fee which
helps defray the cost ofthe [telephone] service" provided by DOCS. DOCS Br. at 20. Why
would DOCS be entitled to this fee if it were not the entity supplying the service?
The fact that DOCS has contracted with MCI to assist them in providing telephone
service to Plaintiffs and putative class members does not limit DOCS' liability under the General

Disputes pursuant to telephone services are clearly "consumer-oriented." See, e.g, Drizin v.
Sprint Corp., 771 N.Y.S.2d 82, 84 (Ist Dept. 2004); Naevus International, Inc., v. AT&T, 13
N.Y.S.2d 642, 646 (Sup. Ct. 2000).

62

60

Business Law. Private contracts cannot fonn the basis for for litigation under GBL §349 when
they involve disputes "unique to these parties, not conduct which affects the consuming public at
large," New York University v. Continental Ins. Co., 662 N.E.2d 763, 771 (1995), or represent a
"single shot" transaction, rather than a recurring deceptive practice. Quail Ridge Assoc. v.
Chemical Bank, 558 N.Y.S.2d 655, 658 (3d Dept. 1990). The private contract exception has no
application in a case where the services contracted for affects the public at large. See Akgul v.
Prime Time Transp., Inc., 741 N.Y.S.2d 533 (2d Dept. 2002) The telephone service provided by
MCI and DOCS in the instant case cannot be construed as emanating from a private contract.
The service contracted for affects the public at large; it impacts the rates applied to all persons in
New York who accept collect calls from a prison. Finally, Plaintiffs' and other consumers'
transactions with Defendants cannot be characterized as "single shot transactions" since the
services and the tax are ongoing.

B. Defendant's Actions Constitute "Deceptive Acts or Practices"
Plaintiffs have also adequately pled that DOCS engaged in acts that are "deceptive or
misleading in a material way" such that they are "likely to mislead a reasonable consumer acting
reasonably under the circumstances." Oswego, 647 N.E.2d at 745. Excessive charges and
misrepresentations in billing practices constitute "deceptive acts and practices." See Naevus
International, Inc. v. AT&T, 713 N.Y.S.2d 642,645 (Sup. Ct. 2000).
Here, several of DOCS' actions constitute "deceptive acts or practices" under GBL §
349:
(1)

DOCS failed to disclose to the public and Plaintiffs that it was receiving surcharges
amounting to nearly 60 percent of the revenue generated from prison initiated
telephone calls from April 1, 1996 through October 30,2003;

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(2)

DOCS represented falsely that the surcharge and other aspects of the prison
telephone system are necessary to meet security and penological concerns; and

(3)

DOCS has wrongfully profited from the taxes imposed on Plaintiffs and putative
class members even after the PSC failed to take jurisdiction over and approve the
surcharge as part of the filed rate.

Complaint at '115 (a)-(c). Each of these allegations, ifproven, would constitute a deceptive act
or practice under New York law. See McKinnon, 704 N.Y.S.2d at 778 (holding false
representations "as to the amounts defendant was authorized to charge for bail premiums, which
exceeded the statutory maximum" and false representation of expenses "which had no relation to
actual expenses" established a prima facie case of "deceptive acts and practices" under GBL
§349); Kinkopfv. Triborough Bridge & Tunnel Authority. 764 N.Y.S.2d 549, 558-59 (Civ. Ct.
2003) (Misrepresentations about which entity a consumer is actually transacting with may also
amount to "deceptive acts or practices.").
The Department's practices are similar to those of the McKinnon bail-bondsman who
made false representations as to the "amounts defendant was authorized to charge" and "falsely
represented expenses which had no relation to actual expenses." 704 N.Y.S.2d at 778. Here,
Defendants falsely represented the high rates charged as necessary to support a system that meets
security concerns despite the blatant disparity between the DOCS tax and the costs to the
Department of the prison telephone system. Complaint "7, 8, Ex. B. The Department also
failed to disclose in its standard recording or billing statements that it charges and takes the
DOCS tax, and failed to cease demanding that tax despite the PSC Order. See Point IV, infra.
Defendants also misrepresented the parties profiting from the prison telephone system.
Like the deceptive acts in Kinkopf, Plaintiffs were led to believe that MCl was the only entity

62

involved with the transaction. DOCS' involvement was not disclosed until August 2003. 63 To
date, the Department still does not inform recipients ofprisoners' telephone calls that DOCS will
receive a 57.5 percent surcharge. Nor is such information available on a call recipient's monthly
statement.
The Department incorrectly argues that their practices are not "deceptive" under GBL
§349 because: (1) Plaintiffs have not pled a claim for fraud; (2) DOCS' press release and the
rate filing with the PSC informed the public ofthe DOCS tax; (3) security justifications for the
prison telephone system are "not an appropriate subject of review" under the General Business
Law; and (4) DOCS' profit-making by means of the tax is not actionable. DOCS Br. at 35-36.
The Department is mistaken for four reasons.
First, precedent establishes that GBL §349 "contemplates actionable conduct that does
not necessarily rise to the level of fraud." Gaidon v. Guardian Life Ins. Co. of Am. 725 N.E.2d
598,603 (2001). See also Genesco Entm't v. Koch, 593 F.Supp. 743, 751 (S.D.N.Y. 1983)
("[a]legations of fraud are not required" for GBL §349 claim).
Second, neither the August 2003 press release, nor MCrs tariff filing constitute
disclosure of the DOCS tax. The late disclosure through the August 2003 press release cannot
erase the many prior years of deception. Nor does the PSC's bifurcation ofthe rate bar
Plaintiffs' claim for material deception related to "revenue generated from inmate initiated
telephone calls from April 1, 1996 through October 30,2003." Complaint at 1I115(b). Prior to

63

The extent of DOCS' involvement was not divulged until October of 2003.

63

MCl's filing in November 2003, see Meeropol Aff. Ex. F, the DOCS tax was charged to
Plaintiffs and putative class members without any official public record. 64
Third, Plaintiffs' claim that DOCS falsely represented the penological necessity for the
cost structure ofthe prison telephone system is an appropriate claim under GBL §349. Plaintiffs
have pled that the prison telephone system is not justified by penological necessity and is not
actually financed by the DOCS tax. Complaint at ~~8, 12,64-66, Ex. E at 2-3. Defendants
cannot dispute the fact that DOCS uses only about 1.5 percent of the money it makes from the
DOCS tax on the telephone system. Complaint, Ex. B at 4. As for the deference due to prison
officials, such deference does not divest the judiciary of the ability to review the actions of
prison,officials to determine whether they are reasonably related to a legitimate penological
need. Turner v. Safley, 482 U.S. 78, 89-90 (1987) (a regulation "cannot be sustained where the
logical connection between the regulation and the asserted goal is so remote as to render the
policy arbitrary or irrational"). Moreover, Plaintiffs' GBL §349 claim is not based on the
overbroad assertion that no aspect ofthe prison telephone system serves a valid penological
purpose, but rather on the fact that Defendants have misrepresented the necessity for the
surcharge imposed by the system. Deference to prison administrators cannot bar judicial review
of affirmative acts of deception.
Finally, Plaintiffs' counts I - V, see Points VI and VII, properly allege that the DOCS'
tax violates various state laws and constitutional provisions.

64 Porr v. NYNEX, 660 N.Y.S.2d 440 (2d Dept. 1997) does not provide support for DOCS'
proposition that rate filing with the PSC precludes a GBL §349 claim. In Porr, the court
analyzed a GBL §349 claim based on defendants practice of charging telephone users by
rounding up in whole minute increments. Id. at 442. This practice however, had been publicly
disclosed at various rate-setting hearings and explicitly endorsed by the FCC. Id. at 447-48.
DOCS, on the other hand, failed to disclose the existence of the its tax until August 2003 at the
earliest, and never corrected its misrepresentation about the purpose ofthe tax, or the PSC's
failure to approve the rate.

64

For the above reasons, Plaintiffs have properly pled a violation ofGBL §349. 65

VII.

PLAINTIFFS ARE ENTITLED TO AN EQUITABLE ACCOUNTING
Plaintiffs are entitled to an accounting to aid them in determining the amount of damages

owed them by Defendant DOCS. Contrary to Defendants' argument, this form of relief does not
require a fiduciary or confidential relationship. Leveraged Leasing Admin. Corp., v. PacifiCorp
Capital,

me., 87 F.3d 44,49 (S.D.N.Y.

1996). Where, as here, "a party seeks an accounting, but

the primary demand is for monetary damages, 'the accounting is merely a method to determine
the amount of the monetary damages. '" Arrow Communications Labs. v. Pico Prods. Inc., 632
N.Y.S.2d 903,905 (4th Dept. 1995) (quoting Cadwalader Wickersham & Taft v. Spinale, 576
N.Y.S.2d 24,25 (1st Dept. 1991).

VIII. CLASS ACTION CERTIFICATION IS APPROPRIATE IN THIS ACTION
The governmental operations rule does not bar class certification in this action. This rule
militates against certification against government bodies when stare decisis would afford
adequate protection to the present and future members of a proposed class. Oak Beach v.
Babylon, 474 N.Y.S.2d 818, 819 (2d Dept. 1984). However, "[t]he governmental operations
rule is no [absolute] bar to class certification," N.Y.C. Coalition to End Lead Poisoning v.
Giuliani, 668 N.Y.S.2d 90,90 (1st Dept. 1997); and "it remains within the court's discretion to
grant class certification in proper instances," Goodwin v. Gleidman, 463 N.Y.S.2d 693,698
(Sup. Ct. 1983).
The governmental operations rule is inapplicable when damages are sought and there is a
large, readily definable class, with questions oflaw and fact virtually identical as to each
member. Brodsky v. Selden Sanitary Corp., 444 N.Y.S.2d 949,952 (2d Dept. 1981).

m

65 Defendants do not dispute that Plaintiffs have been injured by the Defendant's deceptive
actions.

65

Brodsky, the plaintiffs sought a declaration that sewer rates were illegal, an injunction restraining
the defendant from collecting the illegal rates, and restitution of the illegal rates paid. The court
reasoned that a class was the superior method of adjudication to avoid "a plethora of actions"
brought "for identical relief, with the consequent delay and added expense associated with
multiple actions." Id. See also Dudley v. Kerwick, 444 N.Y.S.2d 965,967 (3d Dept. 1981)
("since petitioners seek money damages, Le., the recoupment of excess taxes paid because of the
allegedly illegal exemptions, and questions oflaw and fact are presented which are virtually
identical for all members of the proposed class, recognition ofa petitioner class of nonexempt
property owners would provide a method of recovery far superior to individual proceedings by
each nonexempt owner even though governmental operations are involved in this case");
Holcomb v. O'Rourke, 679 N.Y.S.2d 698, 699 (2d Dept. 1998) (government operation rules does
not apply where petitioners are a "large, readily definable class seeking relatively small sums of
damages"); Ammon v. Suffolk Co., 413 N.Y.S.2d 469, 470 (2d Dept. 1979) (same); Beeman v.
City ofN.Y., 411 N.Y.S.2d 620,621 (Ist Dept. 1979) (same).
Moreover, where the recovery amount is relatively small, "it is plausible, if not probable,
that many potential plaintiffs ... will find the prospects of individual litigation economically
unappealing." Brodsky. 444 N.Y.S.2d at 952. Thus, there is a strong policy justification in favor
of certifying classes where "members of the putative class are not likely to seek help or gain
access to the courts because of socioeconomic factors." Davis v. Perales, 520 N.Y.S.2d 925, 929
(Sup. Ct. 1987); see also Tindell v. Koch 565 N.Y.S.2d 789, 792 (1st Dept. 1991) (court certified
a class of indigent elderly individuals in an action for small monthly benefits because bringing
individual claims would be "oppressively burdensome" for them).

66

The government operations rule does not bar class certification here because the proposed
class in (the attorneys, family, and friends ofprisoners in the DOCS system) is a large, readily
defined group, seeking monetary damages among other relief. Denying class certification here
would require each Plaintiff to individually file for damages, and would be oppressively
burdensome for putative class members who lack financial resources. Moreover, the relatively
small recovery due each class member would likely cause some potential litigants to forego their
rights to a judicial remedy.
Conclusion

For all of the foregoing reasons, the Court should deny Defendants' Motions to Dismiss
in their entirety.
Dated: New York, New York
June 17,2004
Respectfully submitte ,

~

Rachel Meeropol
Barbara J. Olshansky
Craig S. Acorn
CENTER FOR CONSTITUTIONAL RIGHTS
666 Broadway, i h Floor
New York, NY 10012
(212) 614-6432

On Brief, Law Students: Noura Erakat,
Michael Grinthal, Sunita Patel

67