New York State Court of Claims

New York State Court of Claims

SMITH v. THE STATE OF NEW YORK, #2002-001-036, Claim No. 101720, Motion No. M-64458


Synopsis



Case Information

UID:
2002-001-036
Claimant(s):
RUTH D. SMITH and CONSTANCE L. COAD ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED The claim names "New York State" as well as "the New York State Department of Correctional Services, Glenn S. Goord, individually and in his official capacity as Commissioner of the New York State Department of Correctional Services, Office of the Comptroller of the State of New York, H. Carl McCall, individually and in his official capacity as New York State Comptroller, G. Ronald Courington, individually and in his official capacity as Director, Management Information Services, New York State Department of Correctional Services, William Ginsburgh, individually and in his official capacity as Principal Auditor of State Expenditures, Office of the Comptroller of the State of New York." The Court of Claims does not have jurisdiction to hear claims against individuals (see, Smith v State of New York, 72 AD2d 937), a point made by defendant State of New York in this motion to dismiss. In this instance, the Court sua sponte has amended the caption to reflect the only proper defendant here, the State of New York (see, Court of Claims Act § 9).
Claimant short name:
SMITH
Footnote (claimant name) :

Defendant(s):
THE STATE OF NEW YORK
Footnote (defendant name) :
The claim names "New York State" as well as "the New York State Department of Correctional Services, Glenn S. Goord, individually and in his official capacity as Commissioner of the New York State Department of Correctional Services, Office of the Comptroller of the State of New York, H. Carl McCall, individually and in his official capacity as New York State Comptroller, G. Ronald Courington, individually and in his official capacity as Director, Management Information Services, New York State Department of Correctional Services, William Ginsburgh, individually and in his official capacity as Principal Auditor of State Expenditures, Office of the Comptroller of the State of New York." The Court of Claims does not have jurisdiction to hear claims against individuals (see, Smith v State of New York, 72 AD2d 937), a point made by defendant State of New York in this motion to dismiss. In this instance, the Court sua sponte has amended the caption to reflect the only proper defendant here, the State of New York (see, Court of Claims Act § 9).
Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
101720
Motion number(s):
M-64458
Cross-motion number(s):

Judge:
SUSAN PHILLIPS READ
Claimant's attorney:
William T. Martin & AssociatesBy: William T. Martin, Esq., Of Counsel
Defendant's attorney:
Hon. Eliot Spitzer, NYS Attorney GeneralBy: Kathleen M. Resnick, Esq., Assistant Attorney General, Of Counsel
Third-party defendant's attorney:

Signature date:
July 8, 2002
City:
Albany
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision

The following papers were read and considered on defendant's motion to dismiss the claim pursuant to CPLR 3211 (a) (2), (7) and (8): Notice of Motion, dated and filed December 14, 2001; Affirmation in Support of Kathleen M. Resnick, Esq., AAG, dated and filed December 14, 2001, with annexed Exhibits 1-5; Affirmation in Opposition of William T. Martin, Esq., dated March 12, 2002 and filed March 13, 2002, with annexed Exhibits A-B; Claim, dated December 1999 and filed January 4, 2000; and Verified Answer, undated and filed February 8, 2000. Claimants Ruth D. Smith and Constance L. Coad ("claimants") filed this claim as a class action against, among others (see, n 1, supra), defendant State of New York ("defendant" or "the State") on January 4, 2000 to challenge the call-home program operated by the New York State Department of Correctional Services ("DOCS") (see, 7 NYCRR 723 et seq.). The State now moves to dismiss the claim on various jurisdictional and substantive grounds.

I. Background

The call-home program, first instituted at Sing Sing Correctional Facility in 1985, allows inmates to place collect calls from coinless telephones without the intervention of a live operator to designated family or friends outside prison facilities (id.; see also, Affirmation in Support of Kathleen M. Resnick, Esq., AAG, dated and filed December 14, 2001 ["Resnick Aff."], Exh. 1, Part 1.3). Numerous restrictions apply; for example, the number of accessible telephone numbers is limited to 15 per inmate (7 NYCRR 723.2); inmates are prohibited from placing calls to those who notify the facility that they do not wish to receive them and to specified categories of individuals or for forbidden purposes (see generally, 7 NYCRR 723.3 [d], [e]); and the calls are subject to electronic monitoring (7 NYCRR 723.3 [c]).

The current telephone-service provider ("provider") for the call-home program, MCI Telecommunications Corporation ("MCI"), was chosen by DOCS as the winning bidder from among seven providers who responded to a Request for Proposal ("RFP") for the exclusive right to operate the program throughout the State's prison system (Resnick Aff., ¶ 6; Exh. 1 [RFP dated October 30, 1995]). The RFP required each bidder to demonstrate extensive security-related capabilities such as the ability to block certain numbers, to record and store phone conversations and to monitor and report the names and addresses of those accepting inmate initiated collect calls (id., Exh. 1, Part 3).

The RFP further required each bidder to commit to pay DOCS a minimum commission of 47% of the gross monthly revenues generated by all calls accepted from prison facilities (id., ¶ 5, Exh. 1, Part 2.4 [d]; claim, dated December 1999 and filed January 4, 2000 ["claim"], ¶ TENTH). The size of the commission rate offered, including administrative rates, counted for 50% of each bidder's evaluation (Resnick Aff., Exh. 1, Parts 3.3, 4.2 [a]). MCI committed to a commission rate of 60% (claim, ¶ TENTH).

The RFP, however, also prescribed the rates to be charged recipients of inmate initiated collect calls, freezing both the interstate and intrastate rates at their respective 1994 levels (Resnick Aff., ¶ 12; Exh. 1, Part 2.12, Attachment G).[1] Pursuant to Federal and State law, MCI subsequently filed the interstate rates, or tariffs, with the Federal Communications Commission ("FCC") (see, 47 USC § 201 et seq.) and the intrastate rates, or tariffs, with the Public Service Commission ("PSC") (see, Public Service Law § 92) (id., Exhs. 2-3).[2]

Claimants object to the contractual requirement for a provider to pay DOCS a commission for the exclusive right to operate the call-home program at prison facilities, which they contend has caused the State to "request phone commissions at an artificially high level" to the detriment of those who accept inmate initiated collect calls (claim, ¶ TENTH). The claim also alleges that DOCS has improperly used the commissions to finance its budget rather than the Family Benefit Fund,[3] "assessing what is in effect a ‘special tax' on the families of inmates . . . in violation of their due process and equal protection rights under the New York State and United States Constitutions" (id., ¶ NINTH). The claim also vaguely alludes to the call-home program and the corresponding use of the commission revenues derived from it as a "price fixing scheme" (id., ¶ ELEVENTH), which amounts to a conversion, misdirection or misappropriation of funds (id., ¶ TENTH).

Claimants seek $250,000,000 in damages "for the overcharges above and beyond fair market value, from 1985 up to and including 1999" and "the restoration of the full amount of all monies determined to be misappropriated or derived from the exorbitant price fixing above and beyond the fair market value" (id., WHEREFORE clause). They also seek equitable and declaratory relief (id., ¶¶ 1-7).

II. The State's Motion to Dismiss and Claimants' Response

On this motion, the State urges dismissal of the claim or dismissal of particular causes of action or parties on various grounds: that claimants did not timely serve a notice of intention or a claim upon the Attorney-General (Resnick Aff., ¶¶ 18-19); that the Court does not possess jurisdiction to grant the declaratory and/or injunctive relief sought or to award attorneys' fees (id., ¶¶ 20-22); that the Court lacks jurisdiction to the extent that the claim alleges Federal constitutional claims (id., ¶ 23); that the Court lacks jurisdiction over the named elected or appointed officials and State employees (id., ¶ 24) (see, n 1, supra); that the Court lacks jurisdiction because claimants' relief lies by way of a CPLR article 78 proceeding (id., ¶¶ 25-26); that the installation and operation of an inmate communications system and the appropriation of funds related to it are purely governmental functions involving discretionary decision making for which the State is immune from tort liability (id., ¶ 29-30); that claimants have not stated a viable State constitutional claim (id., ¶¶ 35-40); and that the claim fails to state a cause of action because, among other things, it is barred by the filed-rate doctrine (id., ¶¶ 41-42). The State also argues that claimants have no standing to bring this claim as a class action because they have not been granted class status pursuant to article 9 of the CPLR and have not even alleged that they are actual recipients of inmate initiated collect calls (i.e., parties injured by the allegedly artificially inflated rates) (id., ¶¶ 31-34).

Claimants slough off defendant's statute-of-limitations defense as "ludicrous" because "the conduct complained of . . . is ongoing and . . . the harm visited upon the friends and families will not be abated without Court intervention because [the State's] profit motive is to [sic] great" (Affirmation in Opposition of William T. Martin, Esq., dated March 12 and filed March 13, 2002, with annexed Exhibits A-B ["Martin Aff."], ¶ 7).[4] Although repeated readings of the claim have failed to disclose anything hinting at breach of contract, in opposition to defendant's motion claimants principally rely on the novel theory that they are third-party beneficiaries of the exclusive provider contract between DOCS and MCI and therefore have standing to sue for breach of contract, by which they seem to mean the RFP/contractual requirement for a commission (id., ¶¶ 3-6, 9-14, 16-18).[5]

III. Discussion

A. The claim's untimeliness

For the reasons explained in detail by the Honorable Francis T. Collins in a recently decided motion concerning a similar claim (see, Bullard v State of New York, Ct Cl, unreported decision filed May 1, 2002, Collins J., Claim No. 103138, Motion Nos. M-64624, M-64630), this claim is untimely. Briefly, claimants identify an accrual date as March 1985 and then attempt to circumvent their claim's obvious untimeliness when measured from this date (or from April 1, 1996, the effective date of the contract between MCI and the State) by invoking the "continuing violation doctrine"; however, as Judge Collins pointed out, this doctrine presupposes continuing unlawful acts rather than, as is alleged here, the continuing effects of earlier unlawful conduct; namely, the State's entry into a supposedly unconstitutional and otherwise unlawful contract (Selkirk v State of New York, 249 AD2d 818; see also, Alston v State of New York, 97 NY2d 159). The State, however, only interposed the defense of untimeliness for wrongdoing alleged from 1985 until September 3, 1999, or 90 days preceding service of a notice of intention on the Attorney-General (Verified Answer, undated and filed February 8, 2000, ¶ Eleventh), and so this ground does not dispose of the entire claim, which arguably seeks damages from March 1985 through the end of 1999.[6] Accordingly, the Court proceeds to consider as necessary the other grounds for dismissal proffered by the State.

B. The Court of Claims' jurisdiction

The jurisdiction of the Court of Claims is generally limited to awarding money damages in claims against the State and other entities specified by statute for appropriation of real or personal property, tort or breach of contract (see, Court of Claims Act §§ 9, 10, 11). More particularly for purposes of this motion, this Court does not possess jurisdiction to review determinations of the State's administrative agencies (see, Harvard Fin. Servs. v State of New York, 266 AD2d 685; Bertoldi v State of New York, 164 Misc 2d 581, 587, affd 275 AD2d 227, lv denied 96 NY2d 706; Lublin v State of New York, 135 Misc 2d 419, affd 135 AD2d 1155, lv denied 71 NY2d 802). If the award of a money judgment would require the Court of Claims to review an administrative agency's determination, "then the primary relief sought is not money damages" (Ouziel v State of New York, 174 Misc 2d 900, 905) and the proper remedy lies in Supreme Court by way of a CPLR article 78 proceeding with any incidental monetary relief available there (see, Matter of Gross v Perales, 72 NY2d 231).

Further, the filed-rate doctrine forbids courts generally from modifying a public utility's or common carrier's filed tariffs. In New York State, telephone companies are required to file the intrastate rates to be charged their customers with the PSC (Public Service Law § 92), and the companies cannot charge more than is "just and reasonable" (Public Service Law § 91 [1]). Once filed and approved by the PSC, the filed rate "‘takes on the force and effect of law and governs every aspect of the utility's rates and practices'" (Lauer v New York Tel. Co., 231 AD2d 126, 129, quoting Lee v Consolidated Edison Co. of N.Y., 98 Misc 2d 304, 305-306).

Accordingly, the PSC has been held to have "‘exclusive original jurisdiction over public utility rates'" (Porr v NYNEX Corp., 230 AD2d 564, 570, lv denied 91 NY2d 807) and any challenge to the reasonableness of rates approved by the PSC must be initially submitted to that agency "which has been vested by the legislature with the authority to regulate and review such matters" (Brownsville Baptist Church v Consolidated Edison Co. of N.Y., 272 AD2d 358, 359; see, Staatsburg Water Co. v Staatsburg Fire Dist., 72 NY2d 147, 156; see also, United States v Western Pac. R.R. Co., 352 US 59, 64). Consumer claims for injuries allegedly caused by a payment of a rate on file with the PSC are viewed as attacks upon the rate itself and consequently fall within the ambit of the filed-rate doctrine (see, Porr v NYNEX Corp., supra, at 568; see also, Miranda v Michigan, 168 F Supp 2d 685 [customers precluded by filed-rate and primary-jurisdiction doctrines from recovering damages for alleged overcharges for inmate initiated collect calls]; Daleure v Commonwealth of Kentucky, 119 F Supp 2d 683, appeal dismissed 269 F3d 540 [same]; but see, Arsberry v State of Illinois, 244 F3d 558 [district court erred in dismissing challenge to exclusive provider contracts for inmate initiated collect calls on filed-rate and primary-jurisdiction grounds because plaintiffs sought to annul practice whereby each prison grants one telephone company exclusive right to provide service to inmates in exchange for 50% of revenues generated by service, not to invalidate tariffs; however, dismissal of federal claims was affirmed on merits and district court was therefore directed to relinquish jurisdiction over state claims]).[7] Judicial relief from the filed rate, if any, may only be obtained by way of a CPLR article 78 proceeding challenging the agency's rate determination (see, City of New York v Aetna Cas. & Sur. Co., 264 AD2d 304; Minihane v Weissman, 226 AD2d 152; see also, Discon v NYNEX Corp., 2000 WL 33312196 [Sup Ct, New York]).

Although the matter is hardly free from doubt, claimants here seem to object principally to the RFP's requirement for a commission, or at least to the requirement for a minimum 47% commission, rather than to the particular rates for intrastate calls prescribed in the RFP and contract and subsequently filed and approved by the PSC. But however the claim is parsed, this Court does not have subject matter jurisdiction of it.

To the extent that claimants challenge DOCS' determination to require a commission or to award the contract to MCI for a 60% commission or to the Comptroller's approval of the contract, they must seek relief in Supreme Court by way of a CPLR article 78 proceeding, perhaps combined with a request for declaratory relief. To the extent that they seek a refund of alleged overcharges or otherwise challenge the intrastate rates, their sole route to potential redress lies, in the first instance, through the PSC and, if they are dissatisfied with the outcome there, a CPLR article 78 proceeding in Supreme Court.

IV. Conclusion

Whether the Court of Claims has subject matter jurisdiction to entertain a particular claim depends upon "the actual issues presented," not on how a claimant characterizes the action in a claim or motion papers (Sidoti v State of New York, 115 AD2d 202, 203). Here, claimants have alleged causes of action seeking damages for constitutional tort, misappropriation, conversion, price fixing and, more recently, for breach of contract under some third-party beneficiary theory. But claimants are, in fact, asking this Court to review determinations made by administrative agencies, which it cannot do. Moreover, in order to award the damages sought in this claim--the difference between what claimants paid MCI for inmate initiated collect calls and "fair market value"--the Court would necessarily have to review the reasonableness of the tariffs filed and approved by the PSC, which the filed-rate doctrine precludes (see, Porr v NYNEX Corp., supra, at 573-574, quoting Marcus v AT & T Corp., 938 F Supp 1158, 1170 ["‘As long as the carrier has charged and the plaintiff has paid the filed rate, what bars a claim is not the harm alleged, but the impact of the remedy sought. Any remedy that requires a refund of a portion of the filed rate . . . is barred"']; see also, Bullard v State of New York, supra).

Based on the foregoing, the Court grants defendant's motion and dismisses the claim for want of subject matter jurisdiction. In light of this disposition, the Court need not and does not consider defendant's remaining arguments.


July 8, 2002
Albany, New York

HON. SUSAN PHILLIPS READ
Judge of the Court of Claims




[1]The RFP projected that approximately 85% of the calls placed in the call-home program would be intrastate calls, while the remaining 15% would be interstate calls (Resnick Aff., Exh.1, Part 1.7).
[2]The CFR defines "tariff" as the "[s]chedules of rates and regulations filed by common carriers" (47 CFR 61.3 [ii]). The PSC defines the term as "[a] document that lists the rates, terms and conditions of a local distribution company's services that are subject to review and approval by the [PSC]" (http://www.dps.state.ny.us/enegloss.htm).
[3]The Family Benefit Fund supports certain services provided by DOCS; for example, free buses for family visits, nursery care at women's facilities and various counseling services (Resnick Aff., ¶ 5). The RFP indicates that commissions from the original call-home program at Sing Sing Correctional Facility were deposited into a specially created account, the Family Benefit Fund (id., Exh. 1, Part 1.3). Defendant states that commissions are now appropriated by the Legislature for the Family Benefit Fund (id., ¶ 5).
[4]For ease of reference, the Court has added paragraph numbers to this affidavit.
[5]As noted earlier, the RFP prescribed the rates to be charged by the provider to the customer for intrastate and interstate calls; the bidders competed as to the percentage of the gross monthly revenue generated by these calls to be paid to DOCS as a commission (Resnick Aff., ¶ 12).
[6]The Court recognizes that the claim is a bit inconsistent on the matter of dates, at one point suggesting that the "scheme of conduct, practice and procedure" attacked took place from March 1985 through March 1, 1999 (claim, ¶ SEVENTH). The claim also, however, talks in terms of a "continuous course and pattern of conduct (emphasis added)" commencing in 1985 (id., ¶ EIGHTH); and the claim's WHEREFORE clause seeks damages for conduct allegedly occurring during the entirety of calendar year 1999. As a result, the Court interprets the claim as seeking damages for wrongdoing allegedly taking place after September 3, 1999, the latest date for which the State interposed the defense of untimeliness.
[7]The Court's research has disclosed no PSC cases regarding inmate initiated collect call rates in New York State. In Kentucky, the recipients of inmate initiated collect calls petitioned the Kentucky Public Service Commission for review of the rates and services, and the Commission found some of the rates to be unjust and unreasonable and so lowered them (see, Matter of Establishment of an Operator Surcharge Rate for Collect Telephone Calls from Confinement Facilities, Administrative Case No. 378, Kentucky Public Service Commission, 1999 Ky. PUC Lexis 71; see also, Daleure v Kentucky, 119 F Supp 2d, supra at 685, n 8). The Court notes that in Kentucky the exclusive provider contracts were competitively bid and awarded to the provider bidding the highest commission per call (id., at 686) whereas in New York State, DOCS, in fact, specified the rates in the RFP and contract (Resnick Aff., ¶ 13, Exh. 1, Part 2.12, Attachment G).