FTC Gets Court To Halt Allegedly Fake Inmate Calling Plans

By Julia Arciga
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Law360 (October 16, 2020, 6:59 PM EDT) -- A California federal court has temporarily blocked two companies from doing business after the Federal Trade Commission claimed they were falsely advertising unlimited inmate calling plans that they could not actually provide, the agency announced Friday.

According to the commission, Disruption Theory LLC and Emergent Technologies LLC — operated by Marc and Courtney Grisham — were advertising and marketing inmate calling plans with unlimited minutes. However, the FTC said inmate calling services are run by specialized service providers that "have not and do not currently offer unlimited calling plans."

The commission said the court issued a temporary restraining order against the Grishams and their businesses earlier this month, which enjoins them from operating their businesses.

"It is likely that defendants, in numerous instances, have falsely claimed to provide unlimited minutes calling plans for a set monthly rate, and have falsely claimed affiliation with specialized telecommunication companies that have exclusive contracts to provide prison and jail telephone call services," the order read. "This conduct has likely led to significant consumer harm."

The order also prevents the businesses from billing customers, requires them to suspend their businesses' websites and freezes the businesses' assets. In addition, the court ordered expedited discovery in the case.

The FTC initially accused the Grishams and their businesses of violating the FTC Act in a complaint filed earlier this month, marking the first case the commission has brought involving inmate calling plans.

The complaint alleged that the businesses' websites — inmatecall.com and inmatecallsolutions.com — charged prices ranging from $29.97 for one month of "unlimited" minutes for inmate calls, to $49.97 for three months and $89.97 for one year.

After paying for the "unlimited" plans through the websites, customers were told they would still have to pay the specialized service provider approved by their correctional facility in order to make calls. The Grishams' companies allegedly made it difficult for customers to contact them to receive refunds, which the FTC said caused hundreds of complaints to the commission.

According to the commission, the scheme preyed on family and friends of inmates who wanted to keep in contact with their loved ones in prison — especially during the COVID-19 pandemic when in-person visitation at prisons has been halted.

"These defendants ripped off families with loved ones in prison, selling them fake calling plans that were supposed to allow unlimited calls with those inmates," Andrew Smith, director of the FTC's Bureau of Consumer Protection, said in the Friday release. "Especially with COVID-19 restrictions now in place, the phone is a lifeline for these families, who shouldn't have to deal with this kind of exploitation."

Inmate calls have been the subject of increased scrutiny, with the Federal Communications Commission seeking ways to rein in the rates prisons and jails may charge for out-of-state calls this year. Jail phone service Securus Technologies LLC was also hit with two consumer lawsuits this year — one accusing it of price-fixing and another alleging it recorded inmate calls.

The FTC is represented in-house by Alden F. Abbott, N. Diana Chang, Emily Cope Burton and Sarah Schroeder.

Counsel information for the Grishams and their businesses was not immediately available.

The case is Federal Trade Commission v. Disruption Theory LLC et al., case number 3:20-cv-06919, in the U.S. District Court for the Northern District of California.

--Additional reporting by Kelcee Griffis and Christopher Cole. Editing by Kelly Duncan.

For a reprint of this article, please contact reprints@law360.com.

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