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Indiana Court Denies Challenge to Monopolistic Prison Phone Contracts
The Indiana Court of Appeals has rejected a class-action suit brought by families and friends of prisoners who challenged prison telephone contracts as monopolistic and prison phone rates as oppressive. The appellate court held that it was not illegal for the Indiana Department of Corrections (IDOC) and the Marion County Sheriff to enter into monopolistic contracts, and that the phone rates were reasonable.
Chanelle Alexander and family members, friends and attorneys of prisoners who paid for collect calls from IDOC facilities and the Marion County Jail filed suit to stop excessive billings from the sole-source telephone service providers. They claimed that state law prohibited such sole-source contracts, and that the excessive phone rates were the result of this state-sponsored monopoly.
In 1995, the Marion County Sheriff contracted with Ameritech for a two-year renewable contract wherein the company would install and maintain at least 222 prisoner phones at no cost. In return, Ameritech guaranteed the county 40% of gross revenues from the phones plus a signing bonus of $524,000. The payments were to be placed in the Marion County Jail Commissary Trust. There were no contractual limits placed on phone rates.
Separately, the IDOC contracted with AT&T to provide prison telephone services; the contract provided the state a 53% commission on all phone revenues from prisons and other state facilities. The IDOC later contracted with T-Netix, with a 35% commission on prison calls.
In July 2007, the trial court ruled in favor of the defendants on summary judgment motions. Specifically, the court found they had acted under legal authority to enter into such contracts and the phone rates were “reasonable and appropriate.”
On appeal, the plaintiffs countered that the state’s “reaping a benefit” from the phone contracts contravened state laws prohibiting excessive license fees, unreasonable user fees and restraint of trade. Based upon precedent, the appellate court found that the challenged phone revenue commissions did not amount to an actual “license fee.”
“The Sheriff was not granting a permit to Ameritech to provide telephone services,” the Court of Appeals stated. “Rather, the Sheriff entered into a bilateral contract with Ameritech in which the Sheriff granted Ameritech the right to provide telephone service to inmates of the county jail and in exchange, Ameritech agreed to pay commissions and an annual signing bonus to the Sheriff.” The Court also rejected the plaintiffs’ claims that the high phone rates amounted to an improper tax.
Regarding the “restraint of trade” argument, the appellate court observed that the phone contracts were awarded after a proper request-for-proposal process, and that the defendants were free to contract with just one provider for all phone services.
The plaintiffs further argued that a March 2002 emergency state law expressly regulating the payment of telephone commissions to governmental entities retroactively superseded the earlier prison phone contracts. Disagreeing, the Court of Appeals reasoned that the law’s language requiring such contracts to “emphasize lower per call charges, per minute rates, and commission rates” implicitly validated the propriety of commission agreements; e.g., the legislature did not ban the commissions but only sought to regulate them.
As to the phone rates themselves, the Court compared the prison rates of $3.00 per call plus $0.39 per minute with Ameritech’s collect public payphone rate of $4.90-$5.50 plus $1.71 per minute, and with competitor MCI’s filed rate of $3.15-$3.85 plus $0.10-$0.31 per minute. Because the prison rates were less than the public payphone rates, the appellate court found they were “reasonable.” Of course this ignores the fact that the public can use lower-cost home phone or cell phone plans instead of ridiculously expensive payphones, while prisoners and their families have no such choice when the state enters into monopolistic prison phone contracts.
Although the Court recognized that telephone communication between prisoners and their families aids with rehabilitation, helps to maintain family cohesion and lowers recidivism rates, it held that impairing those laudable public goals would not inherently render the phone rates per se unreasonable.
Accordingly, the Court of Appeals affirmed the trial court’s dismissal of the suit. See: Alexander v. Marion County Sheriff, 891 N.E.2d 87 (Ind.Ct.App. 2008), rehearing denied. On January 29, 2009, the Indiana Supreme Court declined to hear this case on appeal.
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Related legal case
Alexander v. Marion County Sheriff
|Cite||891 N.E.2d 87 (Ind.Ct.App. 2008)|
|Level||State Court of Appeals|