Watch Out for Those Hidden Charges the Next Time You Buy a Pre-Paid Calling Card

Ramirez v. Dollar Phone Corp., 09-cv-2290 (E.D. N.Y. November 10, 2009).

On November 10, 2009, Senior United States District Judge Jack B. Weinstein, writing for the Eastern District of New York, handed down a 35-page opinion denying class certification and dismissing a case for lack of jurisdiction. We would like to thank Judge Weinstein for his table of contents which was very helpful in reviewing the opinion.

The plaintiff in this matter, Orlando S. Ramirez, filed suit against the defendant, Dollar Phone Corp., alleging that it violated consumer fraud acts of eleven states and was unjustly enriched at the consumers’ expense through deceptive practices relating to pre-paid calling cards. The court went to great lengths to describe the pre-paid calling card industry and pointed out many deceptive and abusive practices in the industry. Some of those include imposing undisclosed junk fees, charging exorbitant rates, selling cards that expire shortly after consumers start using them, charges for calls when consumers receive busy signals, imposing a weekly maintenance fees, and billing for calls in three minute increments. The court noted that purchasers of these cards are typically low income consumers who cant afford traditional phone service. Many of them are recent non-English speaking immigrants who use the cards to telephone their families abroad. This causes special concerns because the cards are widely marketed to this particularly vulnerable group.

In the present litigation, the plaintiff alleged that he himself was cheated out of some portion of the value of a $2.00 card he purchased. (Apparently, he did not intend to call too many people. Do we smell a set up?) The facts show that the plaintiff purchased a $2.00 pre-paid calling card in June of 2007 in Great Neck, New York and used the card to place an international call to El Salvador. At the initiation of the call, a voice prompt announced the plaintiff had 48 minutes of calling time. The call terminated after approximately 25 minutes, apparently because the card’s balance was depleted. According to the plaintiff, the defendants have failed to disclose certain information including 1) the price the consumer pays per billing increment, 2) the per call fee on calls using the card, 3) that the defendants impose a higher rate for calls to mobile telephones, and 4) that defendants impose a weekly fee of $0.60.

The plaintiff sought money damages, a permanent injunction, and a declaratory judgment that the defendant unlawfully failed to disclose material facts about the fees and conditions applying to their cards. Jurisdiction over the case was based on the Class Action Fairness Act.

The defendants moved to dismiss the complaint on the grounds including the plaintiff’s lack of standing and the court’s lack of subject matter jurisdiction over a number of the consumer fraud act claims. The court directed the parties to treat the defendants motion as one for summary judgment.

After evaluating the plaintiff’s claims in the industry as a whole, the Court denied class certification under Rule 23(b)(3) because the only adequate and appropriate way to protect the rights of this particular class is through regulation and enforcement by a federal administrative agency. The court did state that reformation of the practices of the industry might justify a class under Rule 23, but the result would be best achieved by administrative regulation rather through repetitive, overlapping civil actions.

As to the court’s decision on lack of jurisdiction, Judge Weinstein stated that CAFA diversity requirement was not met since the plaintiff and defendants are all citizens of New York. The Judge stated that as an individual, the plaintiff failed to meet the requirement that the class consist of at least one hundred members and the plaintiff’s individual claim for the value of his calling card, $2.00, is well below CAFA’s five million dollar jurisdictional minimum.

The Judge also denied a request for amendment of the complaint since the $75,000.00 amount in controversy requirement for a garden variety diversity action could not be established.

Finally, the court held that there was also no basis for federal question jurisdiction over the plaintiff’s claims. The court concluded by dismissing the action for lack of jurisdiction.