Case 4:16-cv-04816-YGR Document 26 Filed …...CONSOLIDATED MOTION TO DISMISS Case Nos....

CONSOLIDATED MOTION TO DISMISS Case Nos. 16-CV-04455-YGR, et al.

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MARK R. CONRAD (CA Bar No. 255667) WARREN METLITZKY (CA Bar No. 220758) CONRAD & METLITZKY LLP Four Embarcadero Center, Suite 1400 San Francisco, CA 94111 Tel: (415) 343-7100 Fax: (415) 343-7101 Email: [email protected] Email: [email protected] Attorneys for Defendant County of Santa Clara ADDITIONAL COUNSEL OF RECORD LISTED ON SUBSEQUENT PAGES

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

OAKLAND DIVISION

ALFRED BANKS, et al.,

Plaintiffs,

v.

COUNTY OF SAN MATEO, et al.,

Defendants.

CASE NO. 16-CV-04455-YGR CONSOLIDATED MOTION TO DISMISS BY THE COUNTIES OF ALAMEDA, CONTRA COSTA, SAN MATEO, AND SANTA CLARA, FRCP 12(B)(1), 12(B)(6), 12(B)(7)

THIS DOCUMENT RELATES TO: Thatcher et al. v. County of Santa Clara et al., No. 16-cv-04781-YGR Harris et al. v. Contra Costa County et al., No. 16-cv-04795-YGR Clark-Russell et. al. v. County of Alameda et al., No. 16-cv-04816-YGR

Date: March 21, 2017 Time: 2:00 p.m. Judge: Hon. Yvonne Gonzalez Rogers Courtroom: Courtroom 1, 4th Floor

Case 4:16-cv-04816-YGR Document 26 Filed 01/19/17 of 60


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GREGORY B. THOMAS, SBN 239870 [email protected] ADAM A. VUKOVIC, SBN 301392 [email protected] Boornazian, Jensen & Garthe A Professional Corporation 555 12th Street, Suite 1800 Oakland, California 94607 Telephone: 510-834-4350 Attorneys for Defendant County of Alameda DAVID CAMERON BAKER, SBN 154432 [email protected] Contra Costa County Counsel 651 Pine Street, 9th Floor Martinez, CA 94553 Telephone: 925-335-1890 Attorneys for Defendant County of Contra Costa JOHN C. BEIERS, COUNTY COUNSEL, SBN 144282 [email protected] DAVID SILBERMAN, CHIEF DEPUTY COUNTY COUNSEL, SBN 211708 [email protected] San Mateo County Counsel 400 County Center, 6th Floor Redwood City, CA 94063 Tel: 650-363-4749 Fax: 650-363-4034 Attorneys for Defendant County of San Mateo MICHAEL VON LOEWENFELDT (SBN 178665) FRANK BUSCH (SBN 258288) KERR & WAGSTAFFE LLP 101 Mission Street, 18th Floor San Francisco, CA 94105 Tel: (415) 371-8500 Fax: (415) 371-0500 Email: [email protected] Email: [email protected] Attorneys for Defendant County of San Mateo



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JAMES R. WILLIAMS (CA Bar No. 271253) Acting County Counsel DANNY Y. CHOU (CA Bar No. 180240) MICHAEL LEONGUERRERO (CA Bar No. 183818) Office of the County Counsel 70 West Hedding Street, East Wing, Ninth Floor San Jose, CA 95110 Tel: (408) 299-5900 Fax: (408) 292-7240 Email: [email protected] Email: [email protected] Attorneys for Defendant County of Santa Clara


CONSOLIDATED MOTION TO DISMISS - i - Case Nos. 16-CV-04455-YGR, et al.

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TABLE OF CONTENTS

TABLE OF AUTHORITIES ..................................................................................................................... iii

NOTICE OF MOTION AND MOTION TO DISMISS ..............................................................................1

MEMORANDUM OF POINTS AND AUTHORITIES .............................................................................3

I. INTRODUCTION .....................................................................................................................3

II. FACTS AND PROCEDURAL BACKGROUND.....................................................................3

The California Legislature Has Decreed That County Sheriffs Operate Jails ................................................................................................................................4

The Penal Code Authorizes County Jails To Offer Pay Telephone Services and To Collect Commissions for the Benefit of Their Inmates ......................5

As Contemplated by the Penal Code, Each of the County Defendants Has Contracted with a Telephone Services Provider That Pays the County Commissions .....................................................................................................5

The FCC Recently Proposed Rate Caps for Inmate Calling Systems ...........................6

Plaintiffs’ Lawsuits, Allegations, and Claims................................................................7

Related Class Actions Regarding Prison Phone Systems ..............................................8

III. SUMMARY OF ARGUMENT .................................................................................................9

IV. ARGUMENT ...........................................................................................................................10

Under Rule 12(b)(7), the Related Cases Must Be Dismissed Because Plaintiffs Failed To Join GTL and Securus, Which Are Necessary and Indispensable Parties .............................................................................................10

1. GTL and Securus Have “An Interest Relating to the Subject of the Action.” ......................................................................................................11

2. Disposing of the Related Cases in the Absence of GTL and Securus Would Impair and Impede Their Ability To Protect Their Interests ..................................................................................................13

3. The County Defendants Cannot Adequately Represent GTL or Securus .............................................................................................................13

Plaintiffs’ Claims Under the Sherman Act Should Be Dismissed ...............................15

1. Plaintiffs’ Sherman Act Claims Are Barred as a Matter of Law Under the State Action Doctrine ......................................................................16


CONSOLIDATED MOTION TO DISMISS - ii - Case Nos. 16-CV-04455-YGR, et al.

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2. Plaintiffs Fail To State a Claim Under Both Section 1 and Section 2 of the Sherman Act ..........................................................................21

a. Plaintiffs Allege No Violation of Section 1 of the Sherman Act.........................................................................................22

i. Plaintiffs Do Not Allege Any Antitrust Impact .......................23

ii. Plaintiffs Do Not Allege Unlawful Conspiracy .......................25

iii. Plaintiffs Do Not Allege Antitrust Injury ................................28

b. Plaintiffs Allege No Violation of Section 2 of the Sherman Act.........................................................................................28

i. The County Defendants Acquired Their Monopolies Lawfully ...............................................................29

ii. Plaintiffs Allege No Abuse of Monopoly Power .....................30

aa. High Prices Alone Do Not Trigger Section 2 Liability ........................................................31

bb. Exclusive Dealing Does Not Trigger Section 2 Liability ........................................................32

cc. Plaintiffs Do Not Allege Specific Anticompetitive Intent .................................................32

3. Plaintiffs’ Sherman Act Claims Are Barred Because Plaintiffs Purchased No Services or Products Directly from the County Defendants .......................................................................................................33

4. The Local Government Antitrust Act Affirmatively Bars Plaintiffs’ Claims Under the Sherman Act for Damages, “Restitution,” Costs, and Attorneys’ Fees .......................................................35

Plaintiffs’ Section 1983 Claims Must Be Dismissed ...................................................36

1. Plaintiffs Fail To State a Claim Under the First Amendment ..........................36

2. Plaintiffs Fail To State a Claim Under the Equal Protection Clause ...............................................................................................................41

3. Plaintiffs Fail To State a Claim Under the Takings Clause or the Doctrine of Unconstitutional Conditions ...................................................44

a. Plaintiffs Fail to State a Claim Under the Takings Clause ..................44

b. Plaintiffs Fail to Allege a Violation of the Doctrine of Unconstitutional Conditions ................................................................46

V. CONCLUSION ........................................................................................................................47


CONSOLIDATED MOTION TO DISMISS - iii - Case Nos. 16-CV-04455-YGR, et al.

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TABLE OF AUTHORITIES

Cases

Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., 836 F.3d 1171 (9th Cir. 2016) ...................................................................................................22, 23, 29

Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536 (9th Cir. 1991) ...........................................................................................................23, 31

Am. Ad Mgmt., Inc. v. Gen. Tel. Co., 190 F.3d 1051 (9th Cir.1999) ................................................................................................................28

Angelotti Chiropractic, Inc. v. Baker, 791 F.3d 1075 (9th Cir. 2015) ...............................................................................................................43

Armour v. City of Indianapolis, 132 S. Ct. 2073 (2012) ...........................................................................................................................42

Arsberry v. Illinois, 244 F.3d 558 (7th Cir. 2001) ......................................................................................................... passim

Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...............................................................................................................................40

AT&T Corp. v. Iowa Utilities Bd., 525 U.S. 366 (1999) ...............................................................................................................................18

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .........................................................................................................................21, 40

Bowman v. Idaho State Bd of Corr., No. CV06-208-S-BLS, 2008 WL 2445279 (D. Idaho June 16, 2008) ..................................................39

California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97 (1980) .................................................................................................................................17

Carefusion Corp. v. Medtronic, Inc., No. 10-CV-01111-LHK, 2010 WL 4509821 (N.D. Cal. Nov. 1, 2010) ................................................30

Cascades Computer Innovation LLC v. RPX Corp., No. 12-CV-1143, 2013 WL 6247594 (N.D. Cal. Dec. 3, 2013) ......................................................21, 22

City of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365 (1991) ...............................................................................................................................20

Coalition for ICANN Transparency, Inc. v. VeriSign, Inc., 611 F.3d 495 (9th Cir. 2010) .................................................................................................................26


CONSOLIDATED MOTION TO DISMISS - iv - Case Nos. 16-CV-04455-YGR, et al.

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Commonwealth Edison Co. v. United States, 271 F.3d 1327 (Fed. Cir. 2001) .............................................................................................................45

Countryman v. Access Securepak Keefe Commissary/Network, LLC, No. 3:12-CV-00253-LRH, 2012 WL 6962294 (D. Nev. Nov. 2, 2012) ................................................19

Daleure v. Commonwealth of Kentucky, 119 F. Supp. 2d 683 (W.D. Ky. 2000) ...................................................................................................25

Dawavendewa v. Salt River Project Agric. Improvement & Power Dist., 276 F.3d 1150 (9th Cir. 2002) ...............................................................................................................13

Deere v. Brown, No. 11cv1579 WQH (JMA), 2012 WL 4740328 (S.D. Cal. Oct. 3, 2012) ...........................................39

Del. Valley Surgical Supply Inc. v. Johnson & Johnson, 523 F.3d 1116 (9th Cir. 2008) ...............................................................................................................33

E.E.O.C. v. Peabody W. Coal Co., 610 F.3d 1070 (9th Cir. 2010) ...............................................................................................................13

Eastern Enterprises v. Apfel, 524 U.S. 498 (1998) ...............................................................................................................................45

Engquist v. Or. Dep’t of Agric., 478 F.3d 985 (9th Cir. 2007) .................................................................................................................45

F.T.C. v. Indiana Fed’n of Dentists, 476 U.S. 447 (1986) ...............................................................................................................................24

Fennell v. Gregory, 414 F. App’x 32 (9th Cir. 2011) ............................................................................................................42

Florence v. Bd. of Chosen Freeholders of Cty. of Burlington, 132 S. Ct. 1510 (2012) ...........................................................................................................................25

Garrity v. New Jersey, 385 U.S. 493 (1967) ...............................................................................................................................47

Godoy v. Horel, No. C 09-4793 PJH, 2010 WL 890148 (N.D. Cal. 2010) ......................................................................46

Holloway v. Magness, 666 F.3d 1076 (8th Cir. 2012) .........................................................................................................36, 39

Home Buyers Warranty Corp. v. Hanna, 750 F.3d 427 (4th Cir. 2014) .................................................................................................................15

Hood ex rel. Mississippi v. City of Memphis, 570 F.3d 625 (5th Cir. 2009) .................................................................................................................15


CONSOLIDATED MOTION TO DISMISS - v - Case Nos. 16-CV-04455-YGR, et al.

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Hoover v. Ronwin, 466 U.S. 558 (1984) ...............................................................................................................................21

Horne v. Dep’t of Agric., 135 S. Ct. 2419 (2015) ...........................................................................................................................44

Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) ...........................................................................................................1, 9, 33, 34, 35

Image Tech. Servs. v. Eastman Kodak Co., 125 F.3d 1195 (9th Cir.1997) ..........................................................................................................30, 32

In re Apple IPhone Antitrust Litig., No. 11-cv-06714-YGR, 2013 WL 4425720 (N.D. Cal. Aug. 15, 2013) ...............................................33

In re Apple IPhone Antitrust Litig., No. 11-cv-06714-YGR, 2013 WL 6253147 (N.D. Cal. Dec. 2, 2013) ..................................................33

In re ATM Fee Antitrust Litig., 686 F.3d 741 (9th Cir. 2012) .....................................................................................................33, 34, 35

In re Cathode Ray Tube (CRT) Antitrust Litig., 911 F. Supp. 2d 857 (N.D. Cal. 2012) ...................................................................................................33

In re Lithium Ion Batteries Antitrust Litig., No. 13-MD-2420, 2014 WL 309192 (N.D. Cal. Jan. 21, 2014) ......................................................21, 35

In re Lithium Ion Batteries Antitrust Litig., No. 13-MD-2420 YGR, 2014 WL 4955377 (N.D. Cal. Oct. 2, 2014) ..................................................35

In re Multidistrict Vehicle Air Pollution, 538 F.2d 231 (9th Cir. 1967) .................................................................................................................36

In Re TFT-LCD (Flat Panel) Antitrust Litig., 37 F. Supp. 3d 1102 (N.D. Cal. 2014) ...................................................................................................35

Jackson v. Taylor, 539 F. Supp. 593 (D.D.C. 1982) ............................................................................................................18

Jayne v. Bosenko, No. 2:08-cv-02767, 2009 WL 4281995 (E.D. Cal. Nov. 23, 2009) ......................................................39

Jefferson Par. Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984) ...................................................................................................................................24

Johnson v. State of California, 207 F.3d 650 (9th Cir. 2000) .......................................................................................2, 9, 36, 37, 38, 39

Jordan v. Mills, 473 F. Supp. 13 (E.D. Mich. 1979) ........................................................................................................19


CONSOLIDATED MOTION TO DISMISS - vi - Case Nos. 16-CV-04455-YGR, et al.

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Joyce v. Mavromatis, 783 F.2d 56 (6th Cir. 1986) ...................................................................................................................41

Kadrmas v. Dickinson Pub. Schs., 487 U.S. 450 (1988) ...............................................................................................................................43

Kaplan v. Burroughs Corp., 611 F.2d 286 (9th Cir. 1979), cert denied, 447 U.S. 924 (1980) ...........................................................23

Keenan v. Hall, 83 F.3d 1083 (9th Cir. 1996) .................................................................................................................37

Kendall v. Visa U.S.A., Inc., 518 F.3d 1042 (9th Cir. 2008) ...................................................................................................21, 23, 28

Kern-Tulare Water Dist. v. City of Bakersfield, 828 F.2d 514 (9th Cir. 1987) ...........................................................................................................16, 17

Kirk v. Foster, No. 3:13-cv-00296-RCJ-WGC, 2014 WL 6792028 (D. Nev. Dec. 1, 2014) ........................................39

Lafayette v. Louisiana Power & Light Co., 435 U.S. 389 (1978) ...............................................................................................................................17

Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) ...............................................................................................................................14

Llewellyn v. Crothers, 765 F.2d 769 (9th Cir. 1985) .................................................................................................................20

Lomayaktewa v. Hathaway, 520 F.2d 1324 (9th Cir. 1975) ...............................................................................................................13

Lyon v. United States Immigration & Customs Enforcement, 171 F. Supp. 3d 961 (N.D. Cal. 2016) ...................................................................................................40

Magnetar Techs. Corp. v. Intamin, Ltd., 801 F.3d 1150 (9th Cir. 2015) ...............................................................................................................29

Managed Pharmacy Care v. Sebelius, 716 F.3d 1235 (9th Cir. 2013) ...............................................................................................................45

McGlinchy v. Shell Chem. Co., 845 F.2d 802 (9th Cir. 1988) .................................................................................................................23

McGuire v. Ameritech Servs., Inc., 253 F. Supp. 2d 988 (S.D. Ohio 2003) ................................................................................19, 20, 39, 46

McIntyre v. Bayer, 339 F.3d 1097 (9th Cir. 2003) ...............................................................................................................45


CONSOLIDATED MOTION TO DISMISS - vii - Case Nos. 16-CV-04455-YGR, et al.

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Memorial Hosp. v. Maricopa County, 415 U.S. 250 (1974) ...............................................................................................................................46

Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527 (6th Cir. 2002) .................................................................................................................18

Minneapolis Star & Tribune Co. v. Minnesota Commissioner of Revenue, 460 U.S. 575 (1983) .........................................................................................................................40, 41

Morning Star Packing Co. v. SK Foods, L.P., No. CIV. S-09-0208 KJM EFB, 2011 WL 4591069 (E.D. Cal. Sept. 30, 2011)...................................27

Morrow v. County of Nassau, No. 15-CV-4793 (SJF)(AKT), 2015 WL 6691672 (E.D.N.Y. Nov. 3, 2015) .......................................39

Name.Space, Inc. v. Internet Corp. for Assigned Names & Numbers, 795 F.3d 1124 (9th Cir. 2015) ...............................................................................................................31

Nordlinger v. Hahn, 505 U.S. 1 (1992) ...................................................................................................................................43

Pac. Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438 (2009) ...............................................................................................................................32

Palm Springs Medical Clinic, Inc. v. Desert Hospital, 628 F. Supp. 454 (C.D. Cal. 1986) ........................................................................................................35

Parker v. Brown, 317 U.S. 341 (1943) .................................................................................................................1, 9, 16, 20

Pickering v. Bd. of Educ., 391 U.S. 563 (1968) ...............................................................................................................................46

Pimentel v. Dreyfus, 670 F.3d 1096 (9th Cir. 2012) ...............................................................................................................41

Police Dep’t of City of Chicago v. Mosley, 408 U.S. 92 (1972) .................................................................................................................................43

Pope v. Hightower, 101 F.3d 1382 (11th Cir. 1996) .......................................................................................................25, 36

Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984) ...............................................................................................................................46

Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729 (9th Cir.1987) ..................................................................................................................32

Semler v. Ludeman, No. 09-0732 ADM/SRN, 2010 WL 145275 (D. Minn. Jan 8, 2010) ....................................................39


CONSOLIDATED MOTION TO DISMISS - viii - Case Nos. 16-CV-04455-YGR, et al.

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Shermoen v. United States, 982 F.2d 1312 (9th Cir. 1992) .........................................................................................................10, 13

Single Moms, Inc. v. Montana Power Co., 331 F.3d 743 (9th Cir. 2003) .................................................................................................................42

Strandberg v. City of Helena, 791 F.2d 744 (9th Cir 1986) ......................................................................................................36, 37, 38

Tahoe–Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002) ...............................................................................................................................44

Taylor v. San Diego Cty., 800 F.3d 1164 (9th Cir. 2015) ...............................................................................................................42

Thornton v. City of St. Helens, 425 F.3d 1158 (9th Cir. 2005) ..........................................................................................................................2, 9, 10, 41

Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985) .....................................................................................................................16, 17, 20

Traweek v. City & County of San Francisco, 920 F.2d 589 (9th Cir. 1990) .................................................................................................................20

Turner v. Safely, 482 U.S. 78 (1986) .....................................................................................................................38, 40, 41

United States v. Footman, 215 F.3d 145 (1st Cir. 2000) ..................................................................................................................36

United States v. Van Poyck, 77 F.3d 285 (9th Cir. 1996) ...................................................................................................................25

Valdez v. Rosenbaum, 302 F.3d 1039 (9th Cir. 2002) .........................................................................................................38, 40

Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) .........................................................................................................................29, 32

Waganfeald v. Gusman, 674 F.3d 475 (5th Cir. 2012) .................................................................................................................25

Walton v. New York State Dep’t of Corr. Servs., 13 N.Y. 3d 475 (2009) ...........................................................................................................................46

Wash. Legal Found. v. Legal Found. Of Wash., 271 F.3d 835 (9th Cir. 2001) .................................................................................................................45

Washington v. Reno, 35 F. 3d 1093 (6th Cir. 1994) ................................................................................................................36


CONSOLIDATED MOTION TO DISMISS - ix - Case Nos. 16-CV-04455-YGR, et al.

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White v. Univ. of California, 765 F.3d 1010 (9th Cir. 2014) .........................................................................................................10, 14

William O. Gilley Enters., Inc. v. Atl. Richfield Co., 588 F.3d 659 (9th Cir. 2009) ...........................................................................................................21, 28

Wolfe v. City of Anaheim, 305 Fed.Appx. 488 (9th Cir. Dec. 31, 2008) .........................................................................................35

Woods v. Carey, No. CIVS050049MCEDADP, 2005 WL 3436366 (E.D. Cal. December 14, 2005) .............................39

Federal Constitution & Statutes

U.S. Const. amend. I .......................................................................................................................... passim

15 U.S.C. § 1 .................................................................................................................................................. passim § 2 .................................................................................................................................................. passim § 34 ....................................................................................................................................................1, 35 § 35 ................................................................................................................................................1, 9, 16 § 35(a) ....................................................................................................................................................35 § 36(1) ....................................................................................................................................................35

18 U.S.C. § 1791(d)(1)(F)..........................................................................................................................25

42 U.S.C. § 1983 ............................................................................................................................2, 3, 9, 36

State Constitution & Statutes

Cal. Const. art XI § 1(a) ........................................................................................................................................................4 § 1(b) ........................................................................................................................................................4 § 4(c) ........................................................................................................................................................4

Cal. Govt. Code § 8557(b) ..................................................................................................................................................4 § 8557(f) ..................................................................................................................................................4

Cal. Penal Code § 4000 ..........................................................................................................................................4, 17, 30 § 4001 ......................................................................................................................................................4 § 4002 ......................................................................................................................................................4 § 4004 ......................................................................................................................................................4 § 4004.5 ...................................................................................................................................................4 § 4005 ......................................................................................................................................................4 § 4006 ......................................................................................................................................................4 § 4006.5 ...................................................................................................................................................4 § 4016 ......................................................................................................................................................4 § 4017-4018 .............................................................................................................................................4 § 4019.1-4019.3 .......................................................................................................................................4


CONSOLIDATED MOTION TO DISMISS - x - Case Nos. 16-CV-04455-YGR, et al.

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§ 4018.5 ...................................................................................................................................................4 § 4019.1-4019.4 .......................................................................................................................................4 § 4024-4024.4 ..........................................................................................................................................4 § 4025 ..............................................................................................................................................19, 20 § 4025(a) ..................................................................................................................................................5 § 4025(b) ..................................................................................................................................................5 § 4025(c) ................................................................................................................................................20 § 4025(d) ....................................................................................................................1, 5, 6, 9, 16, 17, 30 § 4025(e) ..........................................................................................................................1, 4, 5, 9, 16, 17 § 4025(i) ...............................................................................................................................................4, 5

Mich. Comp. Laws Ann. § 117.3(j) ...............................................................................................................................................18 § 117.4(e) ...............................................................................................................................................18

Ohio Rev. Code § 307.01(A) .....................................................................................................................19

Federal Rules

Fed. R. Civ. P. 12(b)(1) ....................................................................................................................................................1 12(b)(6) ....................................................................................................................................................1 12(b)(7) ....................................................................................................................................1, 9, 10, 15 19(a)(1) ..................................................................................................................................................10 19(a)(1)(B) .............................................................................................................................................10 19(b) .......................................................................................................................................................15 19(c) .......................................................................................................................................................15


CONSOLIDATED MOTION TO DISMISS - 1 - Case Nos. 16-CV-04455-YGR, et al.

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NOTICE OF MOTION AND MOTION TO DISMISS

PLEASE TAKE NOTICE THAT, on March 21, 2017, at 2:00 p.m., before the Honorable

Yvonne Gonzalez Rogers, Courtroom 1, 4th Floor, 1301 Clay Street, Oakland, California, 94612,

Defendants County of Alameda, County of Contra Costa, County of San Mateo, and County of Santa

Clara (collectively, “County Defendants”) will and hereby do move this Court for an order dismissing

the Complaints in the four above-captioned cases, pursuant to Federal Rules of Civil Procedure 12(b)(1),

12(b)(6), and 12(b)(7). The County Defendants’ motion is made on the following grounds:

Plaintiffs’ claims are all based upon the rates and fees charged by Global Tel*Link

Corporation (“GTL”) and Securus Technologies, Inc. (“Securus”), who provide pay

telephone services in jails that are owned and operated by the County Defendants. GTL and

Securus are necessary and indispensable parties to these actions, and Plaintiffs’ failure to join

them requires the dismissal of their Complaints under Rule 12(b)(7).

Plaintiffs’ claims under the Sherman Act must be dismissed under the state action doctrine,

because the County Defendants engaged in the conduct challenged by Plaintiffs’ claims

pursuant to a clearly articulated policy of the State of California. See Cal. Penal Code §§

4025(d) & (e); see also Parker v. Brown, 317 U.S. 341 (1943). Plaintiffs’ antitrust claims

also should be dismissed because the Complaints do not allege facts sufficient to support a

claim—neither the use of exclusive services contracts nor the collection of commissions by

the County Defendants violates either Section 1 or Section 2 of the Sherman Act. Further,

because Plaintiffs did not purchase telephone services directly from any of the County

Defendants, their antitrust claims are barred by Illinois Brick Co. v. Illinois, 431 U.S. 720

(1977). Not only should Plaintiffs’ antitrust claims be dismissed in their entirety, their claims

for monetary relief, including restitution, are also statutorily barred because the County

Defendants are local governmental entities. 15 U.S.C. §§ 34-35.



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Plaintiffs fail to state any claim under 42 U.S.C. section 1983. Under the First Amendment,

Plaintiffs assert they were charged “excessive” or “extortionate” telephone rates and fees,

purportedly in violation of their rights of free speech and free association; however, Plaintiffs

do not allege that the rates or fees constituted an actual or effective denial of telephone access

and thus do not state a claim under the First Amendment. Johnson v. State of California, 207

F.3d 650, 656 (9th Cir. 2000). Plaintiffs fail to state a claim under the Equal Protection

Clause because they do not allege that the County Defendants treated them differently from

other similarly-situated individuals. Thornton v. City of St. Helens, 425 F.3d 1158, 1167 (9th

Cir. 2005). Finally, Plaintiffs’ claim under the Taking Clause (which is alternatively styled as

a claim based on the “doctrine of unconstitutional conditions”) fails for multiple reasons,

including that Plaintiffs were not compelled to make phone calls. Arsberry v. Illinois, 244

F.3d 558, 565 (7th Cir. 2001).

The Defendant Counties’ motion is based on this Notice; the Court’s files and records in this

action; Plaintiffs’ Complaints in these related cases; the accompanying Memorandum of Points and

Authorities; the Request for Judicial Notice and exhibits thereto, filed concurrently herewith; the

Declaration of Mark R. Conrad and exhibits thereto, filed concurrently herewith; and any other matter

the Court may consider at any oral argument that may be presented by the County Defendants in support

of this motion.

DATED: January 17, 2017 Respectfully submitted, CONRAD & METLITZKY LLP

/s/ Mark R. Conrad MARK R. CONRAD Attorneys for Defendant County of Santa Clara



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MEMORANDUM OF POINTS AND AUTHORITIES

I. INTRODUCTION

This motion seeks dismissal of the Complaints in four related actions: Banks et al. v. County of

San Mateo et al., No. 16-cv-04455-YGR (N.D. Cal. filed Aug. 8, 2016); Thatcher et al. v. County of

Santa Clara et al., No. 16-cv-04781 (N.D. Cal. filed Aug. 18, 2016); Harris v. Contra Costa County et

al., No. 16-cv-04795-JD (N.D. Cal. filed Aug. 19, 2016); and Clark-Russell et al. v. County of Alameda

et al., No. 16-cv-04816-EDL (N.D. Cal. filed Aug. 22, 2016) (collectively, the “Related Cases”).

Each Related Case involves identical causes of action. Plaintiffs allege that they are or were

either inmates in defendants’ jails or family members of such inmates, and that the high cost of using the

telephone while in jail was unconstitutional or a violation of antitrust law. Plaintiffs’ central concept is

that the statutorily authorized commissions that telephone carriers pay the County Defendants caused

those telephone carriers (whom Plaintiffs have not sued) to charge so much for phone calls that

Plaintiffs’ rights were violated. See generally Complaints ¶¶ 1-13.1 Plaintiffs attempt to plead claims

under the Sherman Act (for alleged violations of antitrust law) and under 42 U.S.C. section 1983 (for

alleged violations of their constitutional rights).

As explained below, Plaintiffs’ claims are meritless and legally unsupportable, and each Related

Case should be dismissed.

II. FACTS AND PROCEDURAL BACKGROUND

The facts necessary to understand the basis for this motion can be summarized in three sentences.

First, counties are political subdivisions of the State of California, and each county operates a county

jail, as required by state law. Second, the California Penal Code expressly contemplates that (a) sheriffs

will offer pay telephone services to inmates, (b) counties will contract with telephone companies to

provide these services, (c) counties will receive commissions from the charges that inmates incur for

those services, (d) those commissions will be deposited into an inmate welfare fund (“IWF”), and (e)

1 The operative pleadings in each of the Related Cases are: the Second Amended Complaint in

Banks (Dkt. No. 37) and the First Amended Complaints in Thatcher (Dkt. No. 31), Harris (Dkt. No. 24), and Clark-Russell (Dkt. No. 25). For ease of reference, all citations to the individual operative pleadings in the Related Cases are made by reference only to the case name and paragraph number, e.g., Banks ¶ 1. For economy, if there is no significant difference between the Complaints, then citation is made collectively, e.g. Complaints ¶ 1.



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each county’s IWF will be used for specific purposes, all of which benefit inmates but are unrelated to

the operation of the jail’s telephone systems. See Cal. Pen. Code § 4025(e) & (i). Third, the authority to

regulate telephone rates, including in county jails, rests with the Federal Communications Commission

(“FCC”), which recently set rate caps for inmate calling systems in jails and other correctional facilities.

Thus, the commissions challenged by Plaintiffs are affirmatively authorized by California statute

and, to the extent that these charges can be regulated, they are subject to the FCC’s exclusive authority.

The California Legislature Has Decreed That County Sheriffs Operate Jails.

The County Defendants are “legal subdivisions” of the State of California. Cal. Const. art XI, §

1(a); see also Cal. Govt. Code § 8557(b). The California Constitution states that “[t]he Legislature shall

provide for” all “county powers.” Id. § 1(b).

Under California law, county jails are “public facilities.” Id. § 8557(f). The California

Legislature, through the Penal Code, has established that “common jails in the several counties of this

state” must be “kept by the sheriffs of the counties in which they are respectively situated.” Cal. Penal

Code § 4000. Each county is constitutionally required to have “an elected county sheriff” as part of its

executive apparatus. Cal Const. art XI, §§ 1(b), 4(c).

The California Legislature has enacted a comprehensive statutory scheme to govern the

management of county jails. See generally Cal. Penal Code § 4000 et seq. For example, there are

requirements regarding the number of rooms that jails must have and how inmates may be confined in

them. Id. §§ 4001, 4002. There are rules for transporting and releasing prisoners. Id. § 4004. There are

statutes that govern interactions between county jails, city facilities, and the California Department of

Corrections, as well as the management of prisoners in federal custody. Id. §§ 4004.5, 4005, 4006,

4006.5, 4016. There are statutes that govern the manner in which legal papers are to be served on

inmates, id. § 4013; the conditions under which inmates may be employed, id. §§ 4017-4018, 4019.1-

4019.3; programming for vocational training and rehabilitation; id. § 4018.5, 4019.1-4019.4; and the

terms of supervised release, id. § 4024-4024.4. In short, the Legislature has decreed that county sheriffs

should run county jails and provided extensive direction about how they must do so.



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The Penal Code Authorizes County Jails To Offer Pay Telephone Services and To

Collect Commissions for the Benefit of Their Inmates.

The California Legislature has expressly authorized county jails to sell goods and services to

inmates, as well as to recoup proceeds from such sales for the benefit of inmates. For example, Penal

Code section 4025(a) states that the “sheriff of each county may establish, maintain and operate a store

in connection with the county jail” and that these stores may sell “goods, articles, and supplies for cash

to inmates in the jail.” Id. § 4025(a). The Legislature has established that “sale prices of the articles

offered for sale at the store shall be fixed by the sheriff,” and that any profit from the sale of these goods

“shall be deposited in an [IWF] to be kept in the treasury of the county.” Id. § 4025(b).

The Penal Code also specifically anticipates that county jails will allow inmates to use “pay

telephones.” Id. § 4025(d). Recognizing that sheriffs do not run telephone companies, the Penal Code

contemplates that telephone services in the county jails will be provided by “a telephone company or

pay telephone provider.” Id. The Penal Code states that counties may receive a “money, refund, rebate,

or commission” that is “attributable to the use of pay telephones which are primarily used by inmates

while incarcerated.” Id. Such funds do not benefit the County’s general coffers, but are required by law

to be deposited in the IWF for the benefit of inmates. Id.

Funds in an IWF must be “expended by the sheriff primarily for the benefit, education, and

welfare of the inmates confined within the jail.” Id. § 4025(e). This includes “maintenance of county jail

facilities.” Id. IWF funds may also be used for “essential clothing and transportation expenses” for

“indigent inmates, prior to release.” Id. § 4025(i).

As Contemplated by the Penal Code, Each of the County Defendants Has Contracted with a Telephone Services Provider That Pays the County Commissions.

Pursuant to California Penal Code section 4025, each County Defendant entered into an

exclusive contract with a telecommunications company to offer phone services to its jail inmates. The

County of San Mateo contracted for several years with Global Tel*Link Corporation (“GTL”) and later

with Securus Technologies, Inc. (“Securus”). Banks ¶ 27. The Counties of Alameda, Contra Costa, and

Santa Clara contracted only with Global Tel*Link Corporation (“GTL”). Thatcher, ¶ 26; Harris ¶ 28;

Clark-Russell ¶ 28. Under these contracts, GTL and Securus establish rates to charge to inmates who use



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pay telephones. Banks ¶ 27; Thatcher, ¶ 26; Harris ¶ 28; Clark-Russell ¶ 28. Each contract provides that

a “commission” will be paid to the county based on the services used, as contemplated by Penal Code

section 4025(d). Banks ¶ 28; Thatcher, ¶ 27; Harris ¶ 29; Clark-Russell ¶ 29.

The FCC Recently Proposed Rate Caps for Inmate Calling Systems.

In December 2012, the FCC issued a notice of proposed rulemaking to regulate inmate calling

system (“ICS”) rates, such as the ones challenged in these Related Cases. Req. for Jud. Notice (“RJN”)

Ex. A. The FCC said that it considered “regular telephone contact between inmates and their families

[to be] an important public policy matter” and that, through rulemaking, it intended to explore the

“impact that interstate ICS rates have” on inmate-family communications. Id. at 3-4. The FCC noted that

many correctional facilities grant “an exclusive contract to a single ICS provider for a particular facility,

essentially creating a monopoly at that facility,” and that such contracts “often include a site commission

or location fee paid to the correctional facility.” Id. at 4. The FCC also noted that ICS systems raise

security considerations, including the need for “listening and recording capabilities for all calls” and

“blocking mechanisms to prevent inmates from making direct-dialed calls … to restricted individuals,

such as judges or witnesses.” Id. The FCC explained that “the costs of these security features, hardware

and software costs, and training for staffers make ICS more costly to provide than public payphone

service.” Id. The FCC acknowledged that ICS rates “reflect the higher security and network costs that

are inherent in ICS,” including site commissions. Id. at 4-5. Seeking “to balance the goal of ensuring

reasonable ICS rates for end users with the security concerns and expense inherent to ICS,” the FCC

solicited comment on its proposals to set rate caps or issue other regulations. Id. at 8.

In August 2013, the FCC adopted a Report and Order setting forth a proposed rulemaking. RJN

Ex. B (“2013 Order”). The 2013 Order was based on the FCC’s review of an extensive evidentiary

record, including expert testimony, and comments from a diverse group of ICS stakeholders, including

inmates and their families, prison rights and consumer organizations, ICS providers, the National

Sheriff’s Association and numerous county sheriff’s offices, and several state Departments of

Correction. See id. at 92-94. Among other things, the 2013 Order established interim “safe harbor” rates.

Id. at 34. If telephone service providers charged rates below the safe harbor, they would benefit from a

presumption of reasonableness if those rates were challenged as unlawful and would be insulated from



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refund liability. Id. After the FCC issued its 2013 Order, several ICS providers, including GTL and

Securus, sued to challenge the FCC’s proposals. This suit was held in abeyance while the FCC

continued its rulemaking process. See Securus Techs. v. FCC, No. 13-1280 (D.C. Cir. Dec. 16, 2014).

In November 2015, the FCC issued a second Report and Order with its final proposed rules. RJN

Ex. C (“2015 Order”). According to the FCC, the 2015 Order answered “the call of those millions of

citizens seeking comprehensive reform of interstate and intrastate ICS calls to ensure just, reasonable

and fair ICS rates.” Id. at 3. The 2015 Order established rate caps for interstate and intrastate ICS calls

based on the size of the correctional facility and the nature of the call (debit or prepaid). Id. at 7-8. As

with the 2013 Order, the FCC considered comments from a wide variety of ICS stakeholders, including

inmates and their families, ICS providers, and the owners of correctional facilities. Id. at 164-68. The

2015 Order did not prohibit ICS providers “from sharing their profits and paying site commissions to

[correctional] facilities.” See id. at 7.

In August 2016, based in part on complaints that the FCC had failed to account for the costs

incurred by correctional facilities in administering ICS programs, the FCC issued an Order on

Reconsideration that amended its final order and raised the proposed rate caps slightly. RJN Ex. D at 3.

A lawsuit challenging the amended 2015 Order is now pending in the D.C. Circuit. See Global Tel*Link

v. FCC, No. 15-1461 (D.C. Cir. filed Dec. 18, 2015).

Plaintiffs’ Lawsuits, Allegations, and Claims

In August 2016—nearly four years after the FCC issued its notice of proposed rulemaking—

Plaintiffs filed the four putative class actions now pending before this Court. See Banks, Dkt. No. 1;

Clark-Russell, Dkt. No. 1; Harris, Dkt. No. 1; Thatcher, Dkt. No. 1. Plaintiffs’ attorneys also filed five

separate actions in the Central District of California against the Counties of Orange, Los Angeles,

Riverside, San Bernardino, and Ventura (“Central District Cases”).2

2 The Defendants in the Central District Cases have filed two rounds of motions to dismiss. The

parties’ briefing in the Central District Cases and the district court’s orders on those motions are summarized by and attached to the Declaration of Mark R. Conrad, which accompanies this motion.



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Each Related Case alleges that county jail inmates pay “grossly unfair and excessive phone

charges.” Complaints ¶ 1. According to Plaintiffs, the exclusive contracts between the County

Defendants and the telephone companies are “nothing but money making schemes” that “extort” money

from jail inmates, who are “from mostly poor and minority families trying to get by and stay in contact

with loved ones.” Id. However, Plaintiffs have not sued the telephone companies, GTL or Securus, that

actually provide services to, assess charges against, and collect money from inmates. Instead, their

complaints focus exclusively on the County Defendants, alleging that their receipt of “commissions”

from GTL and Securus is unlawful. See Complaints ¶¶ 4-7. Plaintiffs seek to recover millions of dollars

(which they variously characterize as “general and special damages,” “economic damages,”

“disgorgement,” “restitution,” “equitable relief,” or “a refund”), as well as physical and emotional

distress damages, injunctive relief, and fees and costs. Banks at 30-31; Thatcher at 29-31; Harris at 30-

31; Clark-Russell at 30-31.

Related Class Actions Regarding Prison Phone Systems.

In addition to the nine federal cases that have been filed by Plaintiffs’ counsel in the Central and

Northern Districts of California, similar claims have been filed in putative national class actions that are

currently pending in the Western District of Arkansas. See Jacobs et al. v. Global Tel*Link Corporation,

No. 15-cv-05136 TLB (W.D. Ark. filed June 12, 2015) (“GTL”); Mojica et al. v. Securus Techs., Inc.,

No. 14-cv-05258 TLB (W.D. Ark. filed Aug. 15, 2015) (“Securus”). The national class actions in

Arkansas rest on a nearly identical set of factual allegations regarding the allegedly unlawful exclusivity

of the contracts between telephone carriers and the governmental entities that own and operate

correctional facilities. See RJN Exs. E & F. Indeed, the plaintiff classes in the Arkansas cases cover the

same inmates as the Related Cases here, and in those cases, the plaintiffs seek similar if not identical

forms of recovery, namely, to recoup the “commissions” that the telephone carriers have paid to the

governmental entities with whom they contracted. The principal difference between the two sets of cases

is that the Arkansas plaintiffs have sued only the telephone carriers (GTL and Securus) while the

California plaintiffs have sued only the County Defendants. Plaintiffs’ failure to join the telephone

companies in these Related Actions is one of the reasons why their Complaints should be dismissed. See

Section III.A, infra, at pp. 10-15.



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III. SUMMARY OF ARGUMENT

Plaintiffs’ Complaints must be dismissed in their entirety for the following reasons:

First, the Complaints must be dismissed because Plaintiffs failed to join GTL and Securus as

defendants. GTL and Securus are the parties that actually provided pay telephone services to Plaintiffs.

They, and not the County Defendants, imposed and collected the rates and fees that Plaintiffs challenge

as unlawful. Moreover, the disposition of this action will affect GTL’s and Securus’ interests. The

Complaints in these cases actually seek to invalidate these companies’ contracts with the County

Defendants, and the County Defendants cannot adequately represent these companies’ interests.

Although it was feasible for Plaintiffs to sue GTL and Securus, they chose not to do so, for reasons they

have not explained. Accordingly, GTL and Securus are necessary and indispensable parties in these

cases, and the Complaints must be dismissed under Rule 12(b)(7).

Second, Plaintiffs’ claims under the Sherman Act should be dismissed. These claims are barred

by the state action doctrine, because the County Defendants engaged in the conduct challenged by

Plaintiffs’ claims pursuant to a clearly articulated policy of the State of California. See Cal. Penal Code

§§ 4025(d) & (e); see also Parker v. Brown, 317 U.S. 341 (1943). Further, the conduct alleged does not

violate either Section 1 or Section 2, because neither exclusive contracting nor the decision to collect

commissions by legitimate monopolists is a violation of the antitrust laws. Moreover, because Plaintiffs

did not purchase telephone services directly from any of the County Defendants, their antitrust claims

are barred by Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). To the extent that Plaintiffs’ antitrust

claims are not dismissed in their entirety, which they should be, their claims for monetary relief,

including restitution, are barred by federal statute and should be dismissed on that basis. 15 U.S.C. § 35.

Third, Plaintiffs’ Section 1983 claims fail to allege any unconstitutional act. Plaintiffs assert that

their rights of free speech and free association were infringed because they were charged “excessive” or

“extortionate” telephone rates and fees. But Plaintiffs do not and cannot allege that the rates or fees

constituted an actual and effective denial of telephone access, which is required to assert a First

Amendment claim. Johnson v. State of California, 207 F.3d 650, 656 (9th Cir. 2000). Plaintiffs cannot

maintain a claim under the Equal Protection Clause because they do not allege that the County

Defendants treated them differently from other similarly-situated individuals. Thornton v. City of St.



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Helens, 425 F.3d 1158, 1167 (9th Cir. 2005). Finally, Plaintiffs’ claim under the Taking Clause (which

is alternatively styled as a claim based on the “doctrine of unconstitutional conditions”) fails, primarily

because Plaintiffs’ phone calls were voluntary. Arsberry v. Illinois, 244 F.3d 558, 565 (7th Cir. 2001).

IV. ARGUMENT

Under Rule 12(b)(7), the Related Cases Must Be Dismissed Because Plaintiffs Failed To Join GTL and Securus, Which Are Necessary and Indispensable Parties.

Federal Rule of Civil Procedure 19 provides that certain parties “must be joined” in order for a

lawsuit to proceed. Fed. R. Civ. P. 19(a)(1). Specifically, Rule 19 requires the joinder of any party that

“claims an interest relating to the subject of the action,” if disposing of the action in that party’s absence

would “as a practical matter impair or impede the person’s ability to protect the interest.” Fed. R. Civ. P.

19(a)(1)(B). Failure to join a necessary party under Rule 19 is a basis for dismissal where, as here, the

existing parties to the lawsuit are either unable or unwilling to represent the interests of the absent

parties, and Plaintiffs offer no justification for failing to join them. Fed. R. Civ. P. 12(b)(7).

Determining whether GTL and Securus are necessary parties does not require the Court to assess

the merits of Plaintiffs’ claims. Instead, “the finding that a party is necessary to the action is predicated

only on that party having a claim to an interest.” Shermoen v. United States, 982 F.2d 1312, 1317 (9th

Cir. 1992). An absent party’s interest is particularly clear where it already “has made formal claims”

regarding the interests involved. White v. Univ. of California, 765 F.3d 1010, 1027 (9th Cir. 2014).

Here, GTL and Securus have an obvious interest in the resolution of Plaintiffs’ claims, given

that, on the face of the Complaints, Plaintiffs are seeking a judicial determination that the rates charged

by those companies are unlawful and that those rates exceed the “reasonable cost of providing the

service of allowing telephone access.” Their interests are also implicated by the fact that Plaintiffs have

asked the Court to issue an order prohibiting the County Defendants from renewing or entering into

additional contracts with GTL and Securus under negotiated terms. Banks at 30-31; Thatcher at 30;

Harris at 30; Clark-Russell ¶ at 31. Further, GTL and Securus have asserted “formal claims” (or have

been subjected to “formal claims” against them) in other cases involving the same subject matter as

these Related Cases. As explained below, Plaintiffs have not explained their failure to join GTL and

Securus (even though they are required to do so under the pleading rules). Plaintiffs should not be



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permitted to plead around parties whose interests are directly implicated and affected by their claims,

and for this reason, the Related Cases should be dismissed.

1. GTL and Securus Have “An Interest Relating to the Subject of the Action.”

GTL and Securus have an interest in these Related Cases based on (1) Plaintiffs’ own allegations

and demands for relief; (2) GTL and Securus’ pending affirmative challenge to the FCC’s proposed

rulemaking regarding ICS rate caps; and (3) GTL and Securus’ defense of related litigation currently

pending in the Western District of Arkansas.

First, GTL’s and Securus’s interest in these cases is apparent from their Complaints. Indeed, the

entire foundation for Plaintiffs’ claims is the “exclusive contracts” between the County Defendants and

GTL or Securus. Banks ¶¶ 5, 27; Thatcher ¶¶ 5, 26; Harris ¶¶ 5, 28; Clark-Russell ¶¶ 5, 28. The

Complaints describe GTL and Securus as wrongdoers whose conduct provides the basis for Plaintiffs’

remedy in these cases. For example:

Plaintiffs allege that the challenged contracts give GTL and Securus “the exclusive right to establish a phone system” in county jails. Complaints ¶ 5.

Plaintiffs allege that the contracts create “a monopoly for GTL and Securus,” which the telephone companies exploit by charging and collecting “unreasonable, unjust and exorbitant rates.” Banks ¶¶ 5, 27; Thatcher ¶¶ 5, 26; Harris ¶¶ 5, 28; Clark-Russell ¶¶ 5, 28.

Plaintiffs allege that inmates establish prepaid accounts not with the County Defendants, but rather “with the telecommunications companies.” Complaints ¶ 5.

Plaintiffs allege that it is GTL and Securus, not the County Defendants, who “impose unnecessary and unconscionable fees and charges.” Banks ¶ 28; Thatcher ¶ 27; Harris ¶ 29; Clark-Russell ¶ 29.

Plaintiffs allege that GTL and Securus actually set the prices that they challenge as excessive. Banks ¶ 27 (“there are no competitive market forces to constrain the prices set by GTL and Securus” (emphasis added)); see also Thatcher ¶ 26; Harris ¶ 28; Clark-Russell ¶ 28.

Plaintiffs allege that they were “injured by being charged supra-competitive prices for use of inmate phone services within the County’s jails.” Banks ¶ 98; see also Thatcher ¶ 99; Harris ¶ 101; Clark-Russell ¶ 101.

Plaintiffs seek a judicial determination that the prices charged by GTL and Securus are unlawful and seek to prevent GTL and Securus from entering into future contracts with the County Defendants. Banks at 30-31; Thatcher at 30; Harris at 30; Clark-Russell at 31.



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In light of Plaintiffs’ allegations and demands for relief, GTL and Securus have an “interest” in the

Related Cases, and the Court cannot issue the relief requested by Plaintiffs without affecting the interests

and contractual rights and obligations of these absent parties.

Second, while the Complaints are sufficient on their face to establish that GTL and Securus have

an interest in the Related Cases, this is further illustrated by the fact that GTL and Securus are parties in

other related litigation. GTL and Securus are among the plaintiffs that have filed suit to challenge the

validity of the FTC’s recent rulemaking regarding ICS rates. See RJN Ex. G. In that lawsuit, GTL and

Securus assert that the FCC’s new proposed rates are too low, and illegally deprive them “of fair

compensation for the use of their payphones.” RJN Ex. H at *4. Thus, GTL and Securus have a self-

professed interest in judicial determinations regarding the relationship between the telephone rates they

charge and the cost of providing ICS services.

Third, GTL and Securus are currently defending claims in substantially similar class actions in

the Western District of Arkansas. See RJN Exs. E & F. In those cases, claims have been asserted on

behalf of a putative nationwide class of inmates for damages based on the “exorbitant rates and fees”

charged by GTL and Securus “pursuant to exclusive contracts with correctional facilities throughout the

United States.” See RJN Ex. E ¶ 1 & Ex F ¶ 1. The Arkansas cases purport to cover the same challenged

contracts between GTL, Securus, and the County Defendants in these Related Cases. See RJN Ex. E ¶

11 & Ex. F ¶ 11. The members of the plaintiff classes in the Arkansas cases overlap with the members of

the plaintiff classes in these cases (namely, they all include inmates at the jails operated by the

Defendant Counties). See RJN Ex. E ¶ 32 & Ex. F ¶ 32. The Arkansas cases and these Related Cases all

rest on the telephone companies’ “exclusive contracts with correctional facilities.” See RJN Ex. E ¶ 1 &

Ex. F ¶ 1. They all attack the “site commissions” received by the County Defendants as unlawful

“kickbacks.” Compare RJN Ex. E ¶ 12 & Ex. F ¶ 12, with Banks ¶ 28; Thatcher ¶ 27; Harris ¶ 29;

Clark-Russell ¶ 29. GTL and Securus are defending the Arkansas cases vigorously, including on

grounds not asserted by the County Defendants in these cases. See RJN Exs. I & J (motions to dismiss).

The Arkansas cases demonstrate that GTL and Securus have a direct interest in these Related Cases as

well, and were Plaintiffs to name these clearly interested parties, the substantial overlap between the

Arkansas cases and these Related Cases would warrant an explanation from Plaintiffs about how they



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could maintain claims here that duplicate previously filed suits involving indistinguishable factual

allegations, overlapping classes of plaintiffs, and identical recoveries.

2. Disposing of the Related Cases in the Absence of GTL and Securus Would Impair and Impede Their Ability To Protect Their Interests

The Related Cases present a paradigmatic example of how the interests of an absent party would

be impaired. Here, the Court is being asked to rule on the legality of the rates that GTL and Securus

have charged inmates. But those companies are not here to present their views on the subject, and they

cannot otherwise respond to Plaintiffs’ claims here, even though they are actively litigating overlapping

if not identical issues in other forums. E.E.O.C. v. Peabody W. Coal Co., 610 F.3d 1070, 1082 (9th Cir.

2010) (finding joinder necessary where, absent joinder, the unjoined party “will be unable to defend his

interest in the legality of the lease provisions”). Moreover, these Related Cases may have the practical

effect of setting aside or invalidating the contracts (or portions of the contracts) held by GTL and

Securus with the County Defendants. In such circumstances, all parties to the contracts must be before

the Court. Lomayaktewa v. Hathaway, 520 F.2d 1324, 1325 (9th Cir. 1975) (“No procedural principle is

more deeply imbedded in the common law than that, in an action to set aside a lease or a contract, all

parties who may be affected by the determination of the action are indispensable.”); Dawavendewa v.

Salt River Project Agric. Improvement & Power Dist., 276 F.3d 1150, 1157 (9th Cir. 2002) (“a party to a

contract is necessary, and if not susceptible to joinder, indispensable to litigation seeking to decimate

that contract”).

3. The County Defendants Cannot Adequately Represent GTL or Securus.

When necessary parties are not joined, courts consider three factors in deciding whether present

parties nevertheless can adequately represent absent parties: “whether the interests of a present party to

the suit are such that it will undoubtedly make all of the absent party’s arguments; whether the party is

capable of and willing to make such arguments; and whether the absent party would offer any necessary

element to the proceedings that the present parties would neglect.” Shermoen, 982 F.2d at 1318 (citation

and internal quotations omitted). Under this test, the County Defendants cannot adequately represent

GTL or Securus.



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First, as governmental actors, the County Defendants do not operate ICS systems and do not

compete in the nationwide ICS service provider market. As a result, the County Defendants are poorly

positioned to defend the rates and fees in the same manner that GTL or Securus could. Indeed, GTL and

Securus are currently litigating the reasonableness of their rates and fees before the D.C. Circuit in their

challenge to the FCC’s proposed rulemaking and, given their expertise in the telecommunications

industry, could defend their rate schedule fare more effectively than the County Defendants can or

would in these cases. Similarly, the County Defendants will not be able to explain any non-price features

of the rates set and charged by GTL and Securus. For example, the County Defendants will not be able

to explain the competitive strategies used by GTL or Securus (aspects of which likely have nothing to do

with price), or the degree to which lowering telephone rates may actually harm competition (for

example, by preventing some providers from competing by offering better equipment, service, or other

non-price vectors of competition). See Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877,

894 (2007) (discussing potential pro-competitive results of vertical restrictions on price).

Second, as government entities, the County Defendants are differently situated under the law, so

it cannot be said that the County Defendants will make all arguments that would be available to GTL or

Securus. To take just one example, the County Defendants assert in this motion that they are immune

from antitrust liability under the state action doctrine. See Section III.B.1, infra, at pp. 16-20. While such

a defense is potentially available to GTL and Securus, too, it is clear that the state action doctrine would

apply very differently to them as private companies. See p. 17 & n.3, infra. Furthermore, public entity

defendants have “a broad obligation to serve the interests of the people of California, rather than any

particular subset,” and therefore “the different motivations” of the County Defendants and the

telecommunications providers likely will lead “to a later divergence of interests.” White v. Univ. of

California, 765 F.3d 1010, 1027 (9th Cir. 2014). For this reason, the unique status of the County

Defendants as public entities renders them ill-suited as proxies to represent the interests of GTL or

Securus as absent parties. Indeed, given that they are counterparties to the challenged contracts, it is

foreseeable that GTL and Securus may be adverse to the County Defendants on certain issues.



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In short, the County Defendants are differently situated, and they have strikingly different rights,

immunities, obligations, and legal and economic interests than do GTL and Securus. For these reasons,

the County Defendants cannot adequately represent GTL’s or Securus’ interests in the Related Cases.

4. Plaintiffs Offer No Excuse for Failing To Join GTL and Securus.

Plaintiffs give no reason why they did not join GTL or Securus. See Fed. R. Civ. P. 19(c)

(“When asserting a claim for relief, a party must state: (1) the name, if known, of any person who is

required to be joined if feasible but is not joined; and (2) the reasons for not joining that person.”).

Defendants are aware of no reason why it would not have been “feasible” for Plaintiffs to add GTL and

Securus as defendants. (Indeed, the feasibility of joining GTL and Securus is demonstrated by the

Arkansas cases, where they are defendants.) Instead, Plaintiffs appear to have made a tactical decision to

challenge the validity and constitutionality of the telephone rates and fees in the County Defendants’

jails without involving the carriers who actually provided the challenged services and charged and

collected the rates and fees.

Rule 19 forbids the pursuit of claims without the involvement of the parties whose interests and

conduct are at stake. Given Plaintiffs’ omission of GTL and Securus as defendants, there can be no basis

for the Court to conclude that, “in equity and good conscience, the action should proceed among the

existing parties.” Fed. R. Civ. P. 19(b); Home Buyers Warranty Corp. v. Hanna, 750 F.3d 427, 435 (4th

Cir. 2014) (considering indispensability in light of reasons required parties cannot be joined); Hood ex

rel. Mississippi v. City of Memphis, 570 F.3d 625, 633 (5th Cir. 2009) (requiring Courts applying Rule

19(b) to “tak[e] full cognizance of the practicalities involved”). The Related Cases should be dismissed

under Rule 12(b)(7).

Plaintiffs’ Claims Under the Sherman Act Should Be Dismissed.

Plaintiffs’ claims under the Sherman Act should be dismissed for four reasons. First, the state

action doctrine forbids antitrust claims brought against governmental entities acting pursuant to clearly

expressed state policies. Second, the Complaints do not establish a violation of either Section 1 or

Section 2 of the Sherman Act, since Plaintiffs allege only that they have been charged high prices under

exclusive government contracts. Third, Plaintiffs’ antitrust claims are barred because they are indirect

purchasers who never had a direct economic relationship with the County Defendants regarding the



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purchase of telephone services. Fourth, Plaintiffs’ monetary claims (including for restitution) are barred

by 15 U.S.C. section 35 because the County Defendants are local governmental entities.

1. Plaintiffs’ Sherman Act Claims Are Barred as a Matter of Law Under the State Action Doctrine.

All of the conduct challenged in these Related Cases is state action. The California Legislature

has expressly authorized the County Defendants to contract with telephone companies in order to

provide pay telephone services, to collect commissions from the use of the jail telephones, and to use the

collected commissions to support inmate welfare. Cal. Penal Code §§ 4025(d) & (e). The use of

exclusive contracts to accomplish all of these objectives is a “foreseeable result” of the California

Legislature’s authorization, so the County Defendants are immune from antitrust liability. Kern-Tulare

Water Dist. v. City of Bakersfield, 828 F.2d 514, 518–19 (9th Cir. 1987) (quoting Town of Hallie v. City

of Eau Claire, 471 U.S. 34, 42 (1985)).

The Sherman Act does not allow a plaintiff to bring antitrust claims that challenge “state action.”

Parker v. Brown, 317 U.S. 341, 352 (1943). This is because we have a “dual system of government in

which, under the Constitution, the states are sovereign.” Id. at 351. Federalism precludes antitrust claims

that would nullify a State’s exercise of its sovereign power. Id. Thus, under the “state action doctrine,”

the Sherman Act does not “restrain state action or official action directed by a state.” Id. Rather, the

Sherman Act’s prohibitions on restraints of trade and attempted monopolizations apply only to

“individuals and corporations” and to “private agreement[s] or combination[s].” Id. at 351-52.

Absolute immunity from antitrust liability extends to a State’s political subdivisions if they are

“engaging in the challenged activity pursuant to a clearly expressed state policy.” Town of Hallie, 471

U.S. at 40. To receive immunity, it is not necessary for a county to show that the State compelled

specific action; rather, a county defendant only needs to show that the State authorized the challenged

conduct. Id. at 45.

In determining whether a State has provided the necessary authorization, federal courts apply the

“clear articulation” test. Under this standard, a county does not need to show that a State “expected the

[county] to engage in conduct that would have anticompetitive effects.” Id. at 42. According to the

Supreme Court, requiring “explicit authorization” of anticompetitive conduct reflects “an unrealistic



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view of how legislatures work and of how statutes are written.” Id. at 43-44. Instead, a county defendant

must show only that “‘the legislature contemplated the kind of action complained of.’” Id. at 44 (quoting

Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 415 (1978)) (emphasis added).3 “So long as

the restraint is a ‘foreseeable result’ which results logically from a broad grant of regulatory authority

…, the ‘clear articulation’ requirement is satisfied.” Kern-Tulare Water Dist. v. City of Bakersfield, 828

F.2d 514, 518–19 (9th Cir. 1987) (quoting Town of Hallie, 471 U.S. at 42).

Here, the California Legislature has given explicit direction regarding the management of the

“common jails in the several counties of this state.” Cal. Penal Code § 4000. As discussed above, the

Legislature has stated that county jails may allow inmates to use “pay telephones,” has specified that pay

telephone systems may be installed and operated by “a telephone company or pay telephone provider,”

and has provided that county jails may receive “commissions” that are “attributable to the use of pay

telephones which are primarily used by inmates while incarcerated.” Id. § 4025(d). The Legislature has

further directed that such commissions must be deposited into inmate welfare funds and used “primarily

for the benefit, education, and welfare of the inmates confined within the jail,” including for “education,

drug and alcohol treatment, welfare, library, accounting, and other programs.” Id. § 4025(e).

Penal Code sections 4025(d) & (e) thus provide a “clear articulation” of the policy of the State of

California authorizing the County Defendants to receive commissions from telephone companies based

on their inmates’ use of pay telephones in county jails. Not only is the collection of pay telephone

commissions affirmatively authorized by the California Legislature, but higher prices are clearly a

“foreseeable result” of the County Defendants’ collection of those authorized commissions, as Plaintiffs

have affirmatively alleged in these cases. Kern-Tulare Water District, 828 F.2d at 518–19 (quoting

Town of Hallie, 471 U.S. at 42); see also Banks ¶ 29 (“it is obvious that, without the commissions, the

3 Many cases applying the state action doctrine describe a two-part test set forth by the Supreme

Court in California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97 (1980). Under Midcal, the state action doctrine applies when (1) the challenged restraint is one that is clearly articulated an affirmatively expressed as state policy and (2) the policy is actively supervised by the State itself. Id. at 105 (quoting City of Lafayette, 435 U.S. at 410). However, the second element of this test—active supervision—is not required when the challenged actions are those of a State’s own political subdivisions, as opposed to those of private actors or market participants. Town of Hallie, 471 U.S. at 46 (“the active state supervision requirement should not be imposed in cases in which the actor is a municipality”).



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charges would be substantially lower, and they bear no reasonable relationship to the actual cost of

providing the ICS service”); Thatcher ¶ 28 (same); Harris ¶ 30 (same); Clark-Russell ¶ 30 (same). It is

noteworthy that the California Legislature enacted the basic policy authorizing counties’ receipt of

telephone commissions into the Penal Code in September 1987. See 1987 Cal. Legis. Serv. 1217 (West).

This was at a time when telecommunications technology had not even advanced far enough to allow for

competition in the market for local phone service. See AT&T Corp. v. Iowa Utilities Bd., 525 U.S. 366,

371 (1999) (“Until the 1990’s, local phone service was thought to be a natural monopoly. States

typically granted an exclusive franchise in each local service area to a local exchange carrier . . . .”).

Given the historical context of the statute’s enactment, it was not only foreseeable that California

counties would enter into exclusive contracts to provide telephone services to their inmates, it was

technologically impossible for the California Legislature to have imagined anything else.

Significantly, other courts have held that similar antitrust claims over jail telephone contracts are

barred by the state action doctrine—even in situations that involved a much less specific articulation of

State policy. In Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527 (6th Cir. 2002), the City

of Detroit awarded an exclusive contract to a telephone company to provide in-cell telephone services.

Id. at 531-33. A competing but unsuccessful bidder then sued Detroit, asserting claims under Sections 1

and 2 of the Sherman Act, based on the city’s alleged collusion in maintaining the unlawful monopoly of

the winning bidder. Id. at 534-35. The Sixth Circuit dismissed those claims and held that the City of

Detroit was immune from antitrust liability. Id. at 535-36. The court so held even though “[n]o Michigan

statute expressly authorizes the City to execute an exclusive contract with a telephone service provider

for telephone service in its prisons.” Id. at 536. Instead, the Sixth Circuit ruled that Detroit had immunity

by virtue of the general authority granted to it under Michigan law “to bid out public contracts and to

contract for the maintenance of its prisons.” Id. at 536 (citing Mich. Comp. Laws Ann. §§ 117.3(j) &

117.4(e))). Other cases involving antitrust challenges to the operation of correctional facilities reach

similar conclusions, and federal courts have routinely relied on statutory grants of authority that do not

apply nearly as directly as the California Penal Code does here. See, e.g., Jackson v. Taylor, 539 F.

Supp. 593, 595 (D.D.C. 1982) (dismissing price-fixing claims under the Sherman Act for allegedly

excessive telephone charges on the ground that the District of Columbia’s prison system was “exempt



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from the antitrust laws”), aff’d, 713 F.2d 865 (D.C. Cir. 1983); Jordan v. Mills, 473 F. Supp. 13 (E.D.

Mich. 1979) (dismissing antitrust claims regarding price fixing and other monopolistic activities at a

prison inmate store, even absent a statute authorizing the specific challenged activity); Countryman v.

Access Securepak Keefe Commissary/Network, LLC, No. 3:12-CV-00253-LRH, 2012 WL 6962294, at

*2 (D. Nev. Nov. 2, 2012) (dismissing antitrust claims against a private company that allegedly used a

“monopoly contract” to charge “inflated prices” and to give “kick-backs” to a correctional facility),

adopted by, No. 3:12-CV-00253-LRH, 2013 WL 357821 (D. Nev. Jan. 29, 2013).

In the Central District Cases, although the issue was neither raised as a defense nor meaningfully

briefed by the defendants, Plaintiffs argued that the state action doctrine did not apply by relying almost

exclusively on a 2003 district court case from Ohio, McGuire v. Ameritech Servs., Inc., 253 F. Supp. 2d

988 (S.D. Ohio 2003).4 In that case, the district court held there was a “question of fact” about whether,

“in giving . . . county sheriffs the authority to operate the jails,” the Ohio Legislature had contemplated

that “the counties would, in turn, establish their collect calling phone systems on a monopolistic basis.”

Id. at 1018. In other words, the McGuire court denied the motion to dismiss because it perceived a

“factual dispute” over whether the Ohio legislature anticipated that counties would enter into exclusive

telephone contracts.

Plaintiffs’ anticipated reliance on McGuire here would be misplaced for three reasons. First, in

McGuire there was no “clear articulation” by the State of Ohio regarding its policy on telephone

commissions. Thus, in McGuire, the county defendants relied only on general statutory provisions

authorizing them to operate public facilities and to enter into contracts using competitive bidding

processes. See id. at 1017-18 (citing Ohio Rev. Code § 307.01(A)). By contrast, California Legislature

has enacted specific statutes that expressly authorize the precise conduct challenged in these cases. Cal.

4 In the Central District Cases, the defendants did not mention the state action doctrine as a

defense in their motion to dismiss. See Conrad Decl. Ex. C. Plaintiffs then discussed the issue extensively in their opposition brief. See Conrad Decl. Ex. D at 35-37. In their reply brief, the defendants did not discuss the issue in any depth, much less assert, as do the County Defendants here, that the doctrine barred the plaintiffs’ Sherman Act claims entirely. See Conrad Decl. Ex. E at 16. In the absence of a fulsome presentation of the issue by the Central District defendants, the court then erroneously adopted the reasoning of McGuire. See Conrad Decl. Ex. G at 30-31.



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Penal Code § 4025. So even if the Ohio Legislature’s intent in McGuire was unclear, the California

Legislature’s intent here is not.

Second, to the extent that the district court in McGuire held it was appropriate to use discovery to

resolve a “factual dispute” over the intent of the Ohio legislature, the court’s ruling not only conflicts

with controlling Ninth Circuit precedent, it was also wrong. “The Supreme Court has made clear that an

in-depth substantive review of a statute to determine the legislature’s intent is not appropriate.” Traweek

v. City & County of San Francisco, 920 F.2d 589, 593 (9th Cir. 1990) (citing Hallie, 471 U.S. at 41–43).

Thus, the Ninth Circuit has held that legislative intent is a legal matter to be resolved at the pleadings

stage, based on what can reasonably be anticipated as a result of the Legislature’s actions. As the Ninth

Circuit held in Traweek, the legislature “is deemed to have intended anticompetitive conduct as long as it

may foreseeably result from a broad authority to regulate.” Id. (emphasis added). Here, all of the

allegedly anticompetitive conduct described in Plaintiffs’ Complaints is “reasonably foreseeable” in

light of the statutory authorization to collect telephone commissions.

Third, the plaintiffs in McGuire asserted a fundamentally different theory of antitrust liability

than Plaintiffs in these Related Cases. In McGuire, the plaintiffs challenged only the exclusivity of

Ohio’s contracts and, on that basis, attempted to recoup the contractor’s profits. Here, Plaintiffs

challenge the receipt of commissions by the County Defendants. Banks ¶¶ 4-7, 27-28; Thatcher ¶¶ 4-7,

26-27; Harris ¶¶ 4-7, 28-29; Clark-Russell ¶ 4-7, 28-29. In other words, Plaintiffs’ have tailored their

antitrust claims in these Related Cases to the precise conduct authorized in Penal Code section 4025(c),

which therefore brings their claims squarely within the state action doctrine.

Accordingly, notwithstanding allegations of bad faith and conspiracy on the part of the County

Defendants,5 Plaintiffs’ claims under the Sherman Act must be dismissed under the state action doctrine.

Town of Hallie, 471 U.S. at 45; Parker, 317 U.S. at 351-52.

5 Immunity under the Parker state action doctrine cannot be defeated by allegations of improper

motive or conspiracy. Claims of malice or bad faith are therefore irrelevant to the Parker analysis. Traweek, 920 F.2d at 592 (“subjective motivation plays no part at any point in determining whether state action immunity protects the conduct of municipalities”); Llewellyn v. Crothers, 765 F.2d 769, 774 (9th Cir. 1985) (same). Similarly irrelevant are allegations that a state actor entered into a corrupt bargain with private companies. City of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 379 (1991) (rejecting “any interpretation of the Sherman Act that would allow plaintiffs to look behind the actions (continued on next page)



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2. Plaintiffs Fail To State a Claim Under Both Section 1 and Section 2 of the

Sherman Act.

Plaintiffs sued each of the County Defendants under both Sections 1 and 2 of the Sherman Act.

At their core, these claims are based upon conclusory allegations that Defendants “did the opposite” of

“obtain[ing] the most competitive phone prices for its consumers,” conducting “a typical bidding

process,” and “allowing more than one company to provide inmate phone services.” Banks ¶ 92;

Thatcher ¶ 93; Harris ¶ 95; Clark-Russell ¶ 95. Thus, Plaintiffs claim that Defendants allowed GTL and

Securus “to prey on Plaintiffs and the class they seek to represent by charging exorbitant rates, without

any competitive pressures.” Banks ¶ 93; Thatcher ¶ 94; Harris ¶ 96; Clark-Russell ¶ 96. The only factual

allegation supporting the claim that the rates are exorbitant is that “[t]he charges paid by consumers to

use inmate telephone services are significantly above the actual cost of providing the telephone

services.” Banks ¶ 97; Thatcher ¶ 98; Harris ¶ 100; Clark-Russell ¶ 100.

At the pleading stage, the “expense of antitrust discovery authorizes district courts ‘to insist upon

some specificity in pleading before allowing a potentially massive factual controversy to proceed.’” In

re Lithium Ion Batteries Antitrust Litig. (“Lithium Ion”), No. 13-MD-2420, 2014 WL 309192, at *9

(N.D. Cal. Jan. 21, 2014) (Gonzalez Rogers, J.) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 558

(2007)). This insistence is reflected, in part, by a pleading standard that “calls for enough fact[s] to raise

a reasonable expectation that discovery will reveal evidence of illegal agreement.” Kendall v. Visa

U.S.A., Inc., 518 F.3d 1042, 1047 (9th Cir. 2008); see also Lithium Ion, 2014 WL 309192, at *9

(describing an illegal agreement as one that “consists of a conscious commitment to a common scheme

designed to achieve an unlawful objective.”). For these reasons, the Supreme Court has emphasized a

“need at the pleading stage for allegations plausibly suggesting (not merely consistent with) [an illegal]

agreement.” Twombly, 550 U.S. at 557. Furthermore, in the antitrust context, “a court must determine

whether an antitrust claim is ‘plausible’ in light of basic economic principles.” William O. Gilley

Enters., Inc. v. Atl. Richfield Co., 588 F.3d 659, 662 (9th Cir. 2009). Thus, “a claim may proceed only if

the facts alleged foster a reasonable inference of liability, stronger than a mere possibility.” Cascades

of state sovereigns to base their claims on ‘perceived conspiracies to restrain trade’” (quoting Hoover v. Ronwin, 466 U.S. 558, 580 (1984))).



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Computer Innovation LLC v. RPX Corp., No. 12-CV-1143, 2013 WL 6247594, at *5 (N.D. Cal. Dec. 3,

2013) (Gonzalez Rogers, J.)

Here, Plaintiffs’ vague and conclusory allegations fall well short of establishing a violation of the

antitrust laws. This is because they have not alleged any harm to competition, which is the necessary

foundation of a claim under the Sherman Act, either under Section 1 or Section 2. Simply stated, high

prices do not provide the basis for an antitrust suit, and neither does the government’s use of exclusive

contracts. Plaintiffs make no mention of the actual prices charged by any telephone company in any jail.

There is no allegation that the price exceeds the FCC’s initial or final proposed rate caps and regulations.

There is no allegation of bid rigging by or other conspiracy involving any County Defendant—or, for

that matter, by GTL and Securus. Plaintiffs’ bare assertion that they believe ICS rates are too high or

that they believe the County Defendant should have contracted with multiple telephone companies is not

enough to state an antitrust claim.

This is why federal courts have repeatedly rejected similar antitrust challenges to ICS rates. As

Judge Posner explained in dismissing claims that are indistinguishable from the ones presented here,

“the plaintiffs’ real argument has nothing to do with any horizontal conspiracy; it is rather that a

monopolist, . . . exercising as it does an iron control over access to the inmate market, has rented pieces

of the market to different phone companies, in much the same way that an airport will charge a high fee

to concessionaires eager to sell to the captive market represented by the airline passengers who perforce

spend time in the airport.” Arsberry v. Illinois, 244 F.3d 558, 566 (7th Cir. 2001). “States and other

public agencies do not violate the antitrust laws by charging fees or taxes that exploit the monopoly of

force that is the definition of government.” Id. Succinctly put, “charging high prices as a state

concessionaire is not a recognized species [of anticompetitive behavior].” Id.

a. Plaintiffs Allege No Violation of Section 1 of the Sherman Act.

Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign

nations” 15 U.S.C. § 1. Despite the breadth of this statutory language, the Supreme Court “has long

recognized that Congress intended to outlaw only unreasonable restraints.” Aerotec Int’l, Inc. v.

Honeywell Int’l, Inc., 836 F.3d 1171, 1177–78 (9th Cir. 2016).



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“To state a claim under Section 1 of the Sherman Act, 15 U.S.C. § 1, claimants must plead not

just ultimate facts (such as a conspiracy), but evidentiary facts which, if true, will prove: (1) a contract,

combination or conspiracy among two or more persons or distinct business entities; (2) by which the

persons or entities intended to harm or restrain trade or commerce among the several States, or with

foreign nations; (3) which actually injures competition.” Kendall, 518 F.3d at 1047 These elements

cannot be replaced by mere allegations that an agreement results in a high price. Alaska Airlines, Inc. v.

United Airlines, Inc., 948 F.2d 536, 549 (9th Cir. 1991) (“setting a high price may be a use of monopoly

power, but it is not in itself anticompetitive”). Here, Plaintiffs have failed to plead the existence of an

agreement that actually injures competition, as opposed to one that results in high prices. Plaintiffs may

consider the challenged contracts subjectively harmful, but the harm they describe in their Complaints is

not a form of antitrust injury.

i. Plaintiffs Do Not Allege Any Antitrust Impact.

Plaintiffs’ Section 1 claim fails because they do not allege facts showing an impact on

competition for ICS services. “Proof that the defendant’s activities had an impact upon competition in a

relevant market is an absolutely essential element of the rule of reason case. It is the impact upon

competitive conditions in a definable market which distinguishes the antitrust violation from the

ordinary business tort.” McGlinchy v. Shell Chem. Co., 845 F.2d 802, 812–13 (9th Cir. 1988) (quoting

Kaplan v. Burroughs Corp., 611 F.2d 286, 291 (9th Cir. 1979, cert denied, 447 U.S. 924 (1980)).

Here, Plaintiffs have alleged no anticompetitive impact, presumably because there is no

economically rational reason to believe that a contract with another telephone company, or with multiple

telephone companies, would have any different economic effect than the contracts challenged here. As

the Seventh Circuit concluded in dismissing a similar inmate phone charge action, “[t]he plaintiffs don’t

want to clear away an obstacle to a voluntarily negotiated lower tariff; they want a lower tariff.”

Arsberry, 244 F.3d at 566–67.

The types of exclusive supply contracts that Plaintiffs challenge here are ordinarily permissible,

and they can have numerous pro-competitive effects. Such contracts “may be substantially

procompetitive by ensuring stable markets and encouraging long term, mutually advantageous business

relationships.” Jefferson Par. Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 45 (1984) (O’Connor, J.,



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concurring). They can also create “efficiencies in the operation of a market or the provision of goods and

services.” F.T.C. v. Indiana Fed’n of Dentists, 476 U.S. 447, 459 (1986). For these reasons, and others,

“[e]xclusive dealing is an unreasonable restraint on trade only when a significant fraction of buyers or

sellers are frozen out of a market by the exclusive deal.” Jefferson Parish Hospital District, 466 U.S. at

45 (emphasis added); see also id. (observing that “[w]hen the sellers of services are numerous and

mobile, and the number of buyers is large, exclusive-dealing arrangements of narrow scope pose no

threat of adverse economic consequences.”). Here, there is no allegation that the ICS providers who

were not chosen to provide services to the County Defendants had any shortage of other opportunities to

compete (nor could there be, since the County Defendants operate only four of the thousands of county

jails in this country).

Plaintiffs’ other allegations confirm there was no anticompetitive conduct. Plaintiffs allege that

Defendants should have either “obtain[ed] the most competitive phone prices for its consumers (inmates

and call recipients)” or “allowed more than one company to provide inmate phone services.” Banks ¶ 92;

Thatcher ¶ 93; Harris ¶ 95; Clark-Russell ¶ 95. Neither of these courses of action is required under the

antitrust laws. Plaintiffs’ first suggestion fails because Defendants have no obligation to minimize price

for inmates. (Indeed, price is not the only basis upon which the County Defendants select ICS

providers.6) Plaintiffs’ second suggestion fails because Plaintiffs allege no facts connecting receipt of

commissions to the exclusivity of the County Defendants’ contracts with GTL or Securus.

Contrary to Plaintiffs’ suggestion, there is no rational economic relationship between the County

Defendants’ use of exclusive contracts and their alleged attempts to maintain high prices. To the

contrary, prisons have a well understood penological interest in controlling the circumstances under

which inmates may communicate with the outside world. Non-privileged phone calls are routinely

6 San Mateo, for example, established seven separate criteria to evaluate its RFP responses. Along with the cost and rate structure, it considered technical specifications of the required system, commissions and call accountability, ongoing service and support, company background and qualifications, installation requirements, and merits of the proposal. See RJN Ex. K at SMCSO 103. San Mateo’s RFP process is illustrative of a point that is common to all the County Defendants—namely, that each County Defendant has a different facility with unique conditions that the counties consider during their contracting process. As set forth in a separate accompanying brief, in these cases, the specific details of certain of the County Defendants’ contracting processes provide an independent basis for the dismissal of Plaintiffs’ antitrust claims.



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monitored. United States v. Van Poyck, 77 F.3d 285, 291 (9th Cir. 1996). Access to unmonitored

telephones is strictly prohibited. 18 U.S.C. § 1791(d)(1)(F) (defining as contraband “a phone or other

device used by a user of commercial mobile service”); Waganfeald v. Gusman, 674 F.3d 475, 485 (5th

Cir. 2012) (jail prevented inmates or guards from having cell phones). Even the people an inmate may

call may be strictly limited. Pope v. Hightower, 101 F.3d 1382 (11th Cir. 1996). Each of these reasons

justifies having an exclusive contract with one telephone company, whether or not having more than one

provider would be less expensive. It is doubtful that Plaintiffs could identify any jail in California that

allows inmates to choose between more than one ICS provider.

Given these legitimate penological interests, federal law holds that jails “must have substantial

discretion to devise reasonable solutions to the problems they face.” Florence v. Bd. of Chosen

Freeholders of Cty. of Burlington, 132 S. Ct. 1510, 1515 (2012). For this reason, federal courts have

repeatedly rejected claims, such as the ones presented by Plaintiffs here, that try to leverage antitrust

laws as a basis for undermining prison administration. See, e.g., Daleure v. Commonwealth of Kentucky,

119 F. Supp. 2d 683, 692 (W.D. Ky. 2000) (dismissing antitrust claims based on an exclusive jail

telephone contract, and holding that any resulting “[r]estraint on trade would certainly be permissible if

needed because of security concerns, and prisons across the country have opted to restrict inmates to

collect calls with an exclusive carrier”); see also id. (concluding that “exclusive contracts, even when

commissioned,” are not “inherently anti-competitive” and “do not involve horizontal restraints of trade,

price fixing or territorial market division”).

ii. Plaintiffs Do Not Allege Unlawful Conspiracy.

It is undisputed that the County Defendants entered into exclusive contracts with GTL and

Securus to provide telephone services. However, Plaintiffs allege no facts—with or without

specificity—suggesting that these contracts were the result of prohibited collusion between the County

Defendants and the telephone providers to harm or restrain competition. Instead, Plaintiffs make the bare

allegation that the counties collected commissions, which had the effect of raising prices. To that, they

add two purely conclusory allegations. First, Plaintiffs allege that each County Defendant “entered into

the previously described contract and agreement with the full knowledge and intent to restrain trade.”

Banks ¶ 100; Thatcher ¶ 101; Harris ¶ 103; Clark-Russell ¶ 103. Plaintiffs do not say what trade was



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restrained or what facts demonstrate the County Defendants’ knowledge and intent. Second, Plaintiffs

allege that, together with GTL and Securus, the County Defendants “have injured competition, and

caused an antitrust injury resulting from that anti-competitive conduct to the end consumers (inmates

and call recipients) who avail themselves of inmate phone services.” Banks ¶ 100; Thatcher ¶ 101;

Harris ¶ 103; Clark-Russell ¶ 103. Again, however, careful examination of the Complaints reveals no

alleged injury to competition, only Plaintiffs’ subjective harm of paying high prices, which is not a form

of antitrust injury. Id. Further, notwithstanding Plaintiffs’ characterization of the exclusive contracts as

the products of a “conspiracy,” there are no factual allegations that support a claim of illegal collusion

between the County Defendants and either GTL or Securus, as opposed to merely agreement on the

terms of a contract.

The inadequacy of Plaintiffs’ conspiracy claims is illustrated by Coalition for ICANN

Transparency, Inc. v. VeriSign, Inc., 611 F.3d 495, 499 (9th Cir. 2010). In that case, the Ninth Circuit

reviewed allegations involving two allegedly unlawful contracts. The first, which was not competitively

bid, contained a gradually-increasing price cap for the vendor’s charges. The second, which was

competitively bid, contained a limited-term price cap that would then “leav[e] no limitation on the price

that could be charged.” Id. Both contracts had the same renewal provision. Id. At the motion to dismiss

stage, the Court found that the plaintiffs had adequately alleged a conspiracy, because, in exchange for

the service contract, the service provider was alleged to have promised to “cease its predatory behavior,

which had put [operator] in financial jeopardy.” Id. at 503. Here, however, there is no such allegation of

anticompetitive conduct, because the County Defendants are not alleged to have entered into any such

anticompetitive arrangement with either GTL or Securus—they are merely alleged to have entered into

an exclusive service agreement. Moreover, in Coalition for ICANN Transparency, even though the court

found sufficient allegations of conspiracy, the Ninth Circuit nevertheless concluded that Plaintiffs had

not stated a Section 1 claim as to the second agreement because “the [second] contract was reached after

a competitive bidding process.” Id. The Ninth Circuit held that the plaintiff “has not adequately alleged

[any] conspiratorial conduct to restrain trade” because it “has not alleged, with sufficient specificity, that

the bidding process used to reach the [second] Agreement was in any way rigged.” Id. Similarly, in this



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case, there are no allegations that any of the County Defendants used contracting processes that could be

described as unlawful.

Here, the County Defendants all reached their respective agreements with GTL and Securus

through different contracting processes. The details of these processes are described in a separate brief,

filed concurrently with this motion, which explains why the specific features of certain County

Defendants’ contracting processes provides an additional basis for Plaintiffs’ Sherman Act claims to be

dismissed. However, with respect to the antitrust claims as they are currently pled in all of the Related

Cases, none of the Complaints contains any facts whatsoever to suggest that any County Defendant took

steps to prevent their contracting processes from resulting in a competitive outcome. Indeed, none of the

Complaints contains an allegation or even a suggestion that there was any attempt to rig bids on the part

of the Defendant Counties, nor is there any suggestion in Plaintiffs’ Complaints that the County

Defendants engaged in any kind of horizontal anticompetitive behavior, as opposed to reaching entirely

independent contracting decisions. Morning Star Packing Co. v. SK Foods, L.P., No. CIV. S-09-0208

KJM EFB, 2011 WL 4591069, at *2 (E.D. Cal. Sept. 30, 2011) (describing bid rigging as horizontal

collusion among bidders). Because Plaintiffs have not alleged that either GTL or Securus acted

unlawfully in order to secure their contracts, or that the County Defendants’ engaged in rigged processes

to grant those contracts, Plaintiffs cannot maintain a claim under Section 1.

An exclusive government contract is not a “conspiracy” within the meaning of the antitrust laws.

That each County Defendant recouped commissions also is not evidence of a restraint on trade. High

telephone charges for jail inmates are no different in kind from the high prices that prevail at county-

operated airports, sports venues, and fairgrounds. Recouping commissions under such contracts does not

harm the companies who compete to provide telephone services to inmates, and it therefore does not

constitute an antitrust violation. Arsberry, 244 F.3d at 566 (“States and other public agencies do not

violate the antitrust laws by charging fees or taxes that exploit the monopoly of force that is the

definition of government.”). Plaintiffs do not allege, and there is no economic rationale to support the

idea, that the County Defendants would have chosen not to collect commissions if they had chosen to

contract, non-exclusively, with multiple vendors. With no factual allegations or economic rationale to

suggest why the County Defendants’ agreements are anything other than contracts obtained in good faith



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and at arms’ length, Plaintiffs have failed to carry their burden of pleading here. Kendall, 518 F.3d at

1047; William O. Gilley Enterprises, 588 F.3d at 662.

iii. Plaintiffs Do Not Allege Antitrust Injury.

The Ninth Circuit has established a four-part definition of antitrust injury: “(1) unlawful conduct,

(2) causing an injury to the plaintiff, (3) that flows from that which makes the conduct unlawful, and (4)

that is of the type the antitrust laws were intended to prevent.” Am. Ad Mgmt., Inc. v. Gen. Tel. Co., 190

F.3d 1051, 1055 (9th Cir.1999). Plaintiffs’ claims fail to establish antitrust injury under prong (1)

because, as explained above, they have alleged no conduct that is prohibited under the antitrust laws.

Plaintiffs’ claims also fail on prong (4) because the antitrust laws are not intended to prevent the harm

allegedly suffered here, namely, the high prices imposed under exclusive government contracts.

In addition, however, Plaintiffs fail to establish antitrust injury under prong (3). That is,

Plaintiffs’ claimed harm is disconnected from anything that might make the challenged conduct

unlawful. Here, Plaintiffs allege that they have suffered harm because of the high prices they paid,

which they allege are based in turn upon Defendants’ desire to collect commissions. Banks ¶ 92, 97;

Thatcher ¶ 93, 98; Harris ¶ 95, 100; Clark-Russell ¶ 95, 100. But the desire to collect commissions was

not a facet of any antitrust conspiracy. As Plaintiffs themselves admit, it was a condition set by the

County Defendants for dealing: GTL and Securus were competing within the context of each County

Defendant’s unilateral choice to collect commissions. Banks ¶ 92, 97; Thatcher ¶ 93, 98; Harris ¶ 95,

100; Clark-Russell ¶ 95, 100. Therefore, the allegedly high rates Plaintiffs paid are not the result of any

collusion by the County Defendants among themselves to reject a cheaper service provider, or any

collusion with GTL or Securus, but rather a result of individual choices regarding the terms and

conditions under which each county would provide telephone service. In short, not only do Plaintiffs not

allege a conspiracy intended to restrain trade, their theory of damages is entirely disconnected from any

such supposed conspiracy.

b. Plaintiffs Allege No Violation of Section 2 of the Sherman Act.

Section 2 of the Sherman Act makes it illegal to “monopolize . . . any part of the trade or

commerce among the several States.” 15 U.S.C. § 2. Section 2, however, does not prohibit monopolies.

Rather, it “seeks merely to prevent unlawful monopolization.” Verizon Commc’ns Inc. v. Law Offices of



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Curtis V. Trinko, LLP, 540 U.S. 398, 415 (2004). To this end, it prohibits “the acquisition or

maintenance of a monopoly by exclusionary conduct.’” Magnetar Techs. Corp. v. Intamin, Ltd., 801

F.3d 1150, 1158 (9th Cir. 2015) (emphasis added). In assessing claimed violations of Section 2,

therefore, Courts are careful not to punish sharp competition: “Even an act of pure malice by one

business competitor against another does not, without more, state a claim under the federal antitrust

laws,” and the antitrust laws do not impose antitrust liability based on “merely anticompetitive

aspirations or an independent decision on terms of dealing.” Aerotec International, 836 F.3d at 1184.

For Section 2 liability to attach, a defendant must either acquire a monopoly by exclusionary means or

exercise monopoly power to the detriment of fair competition. As the Ninth Circuit has defined these

elements, a Section 2 defendant “must (1) possess monopoly power and (2) use that power to foreclose

competition, to gain a competitive advantage, or to destroy a competitor.” Id. at 1183.

Even accepting that an individual county jail is a unique market over which each County

Defendant exercises a meaningful monopoly, Plaintiffs still have not pled a viable Section 2 claim

because they do not allege any unlawful conduct by the County Defendants in their control over their

jails. Instead, Plaintiffs allege in conclusory fashion only that each Defendant “has the power to both

control prices by requiring large commissions,” has “the power to exclude competition by allowing only

one inmate phone provider access to the market,” and “has used its monopoly power to foreclose

competition and gain a competitive advantage in violation of Section 2.” Banks ¶ 99; Thatcher ¶ 100;

Harris ¶ 102; Clark-Russell ¶ 102. In other words, Plaintiffs allege only that the County Defendants’

enjoy exclusive control over their jails, i.e. that a monopoly exists. They do not allege either that the

County Defendants’ monopoly was acquired by exclusionary or anticompetitive conduct or that the

County Defendants used their monopoly power to foreclose competition, gain a competitive advantage,

or destroy a competitor.

i. The County Defendants Acquired Their Monopolies Lawfully.

Regarding the acquisition of monopoly power, a Section 2 plaintiff must show that a defendant

created its monopoly through “anticompetitive conduct”—in other words, that the defendant’s acts

amounted to “exclusionary or predatory conduct”— as opposed to power “gained from growth or

development as a consequence of a superior product, business acumen, or historic accident.” Carefusion



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Corp. v. Medtronic, Inc., No. 10-CV-01111-LHK, 2010 WL 4509821, at *4 (N.D. Cal. Nov. 1, 2010)

(citing Image Tech. Servs. v. Eastman Kodak Co., 125 F.3d 1195, 1208 (9th Cir.1997)).

Here, the County Defendants did not obtain control over their jails by exclusionary or predatory

conduct. Rather, their monopolies are the product of a decision made by the State of California

regarding the organization of its penal system. Specifically, California law requires that “common jails

in the several counties of this state” must be “kept by the sheriffs of the counties in which they are

respectively situated.” Cal. Penal Code § 4000. Thus, the County Defendants acquired monopoly control

over their jails legitimately, not in any manner that could be alleged to violate the antitrust laws. As a

result, Plaintiffs cannot state a claim under Section 2 for unlawful monopolization.

ii. Plaintiffs Allege No Abuse of Monopoly Power.

Regarding the conduct of an existing monopolist, Section 2 prohibits only “the use of monopoly

power ‘to foreclose competition, to gain a competitive advantage, or to destroy a competitor.’” Image

Technical Services, 125 F.3d at 1208. In other words, a monopolist is not liable under the Sherman Act

for conducting business as a monopolist; liability ensues only when the monopolist seeks to exercise its

power in a way that eliminates or destroys competition in its market. Here, however, Defendants are

alleged to have done nothing other than charge a commission that they are authorized by the State of

California to collect. Plaintiffs do not allege any facts to support the theory that the County Defendants

acted to enhance a competitive advantage or destroy their competitors. The reason for this is obvious:

there is no competition to speak of. The County Defendants are charged under California law with the

exclusive authority to operate their jails, and Plaintiffs have no facts to allege under Section 2 because

such allegations would require that Defendants compete for something, rather than merely implement

the authority granted to them by the Legislature to allow inmates to use “pay telephones.” Cal. Penal

Code § 4025(d). Simply stated, county jails have no competitors to destroy, as the State of California

compels them—and only them—to accept the inmates they house.

The fact that the County Defendants are not alleged to have collected commissions in order “‘to

foreclose competition, to gain a competitive advantage, or to destroy a competitor’” is fatal to Plaintiffs’

Section 2 claim. Image Technical Services, 125 F.3d at 1208. In addition, Plaintiffs fail to state a Section

2 claim for three other reasons. First, the only harm alleged by Plaintiffs is that Defendants caused high



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ICS prices, but this is not enough to state a claim because monopolists are entitled to set high prices

unilaterally. Second, Defendants are accused of raising rates by refusing to contract with multiple ICS

providers, but monopolists are entitled to refuse to deal with anyone they choose—or, in this instance,

with only one party of their choosing. Third, Plaintiffs must plausibly allege specific intent to cause

competitive harm, but here they rely instead upon conclusory allegations.

aa. High Prices Alone Do Not Trigger Section 2 Liability.

A monopolist does not violate Section 2 by setting high prices. The only constraint under Section

2 is that it cannot injure competition by doing so. The Ninth Circuit has squarely held that “[b]oth

‘monopoly leveraging’ in an adjacent market, and setting high prices in the original ‘monopoly’ market,

represent the cost that we incur when we permit efficient and natural monopolies.” Alaska Airlines, Inc.

v. United Airlines, Inc., 948 F.2d 536, 548–49 (9th Cir. 1991). Based upon this observation, the Ninth

Circuit has refused to disregard the “settled rule” that “there must be ‘predatory’ conduct to attain or

perpetuate a monopoly for a monopolist to be liable under Section 2.” Id. at 549.

The County Defendants have no antitrust obligation to enter into contracts that are maximally

beneficial to inmates in their jails. Whether the County Defendants’ “choices were wise or fair is an

issue outside the purview of § 2.” Name.Space, Inc. v. Internet Corp. for Assigned Names & Numbers,

795 F.3d 1124, 1132 (9th Cir. 2015). In the specific context of prison phone litigation, the Seventh

Circuit has held that unilaterally-imposed commissions do not violate the antitrust laws because such

commissions are merely the “high fee” that a monopolist, “exercising as it does an iron control over

access to the inmate market,” has the lawful power to impose. Arsberry, 244 F.3d at 566.

The County Defendants thus have no Section 2 obligation to require GTL or Securus to charge

only the “cost of providing the telephone services.” Banks ¶ 97; Thatcher ¶ 98; Harris ¶ 100; Clark-

Russell ¶ 100. Likewise, the County Defendants have no Section 2 obligation to refrain from collecting

commissions. See Banks ¶ 97 (alleging that there are “no requirements that the County receive such

substantial kickbacks, or any kickback at all”); Thatcher ¶ 98; Harris ¶ 100; Clark-Russell ¶ 100. It

therefore does not matter, under Section 2, whether the prices charged to inmates are “far in excess of

the rates that would prevail in a competitive market,” Banks ¶ 93; Thatcher ¶ 94; Harris ¶ 96; Clark-



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Russell ¶ 96. Each jail enjoys a legitimate monopoly over its pay telephone bank and need not operate

those telephones as if they existed in a competitive market.

bb. Exclusive Dealing Does Not Trigger Section 2 Liability.

Courts frequently consider refusals to deal by legitimate monopolists, and they uniformly

conclude that mere refusal to deal does not trigger antitrust liability. Image Technical Services, 125 F.3d

at 1216 (“the right of exclusive dealing is reserved from antitrust liability”). This is true even where the

monopolist has a separate legal obligation to provide services. Verizon Communications, 540 U.S. at

410. A legitimate monopolist with no obligation to deal may also elect to deal on terms not maximally

favorable to counterparties, even when doing so allegedly “prevent[s] rival firms from competing

effectively in the retail market.” Pac. Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438, 450

(2009).

The County Defendants have no obligation to allow multiple telephone companies into their jails

(and thereby to accept responsibility for ensuring that multiple companies meet the security

requirements applicable to operating within the jails). That each County Defendant elected to contract

exclusively with either GTL or Securus therefore provides no support for Plaintiffs’ Section 2 claim.

cc. Plaintiffs Do Not Allege Specific Anticompetitive Intent.

Defendants also cannot be charged with a violation of Section 2 absent the specific intent to

harm competition. “The allegation of specific intent . . . is conclusory in the absence of anticompetitive

conduct from which such specific intent may be inferred.” Rutman Wine Co. v. E. & J. Gallo

Winery, 829 F.2d 729, 735–36 (9th Cir.1987). Allegations of specific intent must be based upon more

than “knowledge that harm to competition will ensue” because such knowledge “does not create an

inference that harm to competition is intended.” Id. at 736.

Here, Plaintiffs’ allegation of specific intent is self-evidently conclusory. The word intent is used

only once in the Complaints, where Plaintiffs assert that each County Defendant and its ICS provider

“entered into the previously described contract and agreement with the full knowledge and intent to

restrain trade, including trade among the various states.” Banks ¶ 100; Thatcher ¶ 101; Harris ¶ 103;

Clark-Russell ¶ 103. Plaintiffs’ failure to allege conduct sufficient to suggest that Defendants intended to

harm competition, as opposed to merely agreeing with GTL and Securus that they would collect revenue



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that the California Legislature authorized them to receive, further demonstrates they have failed to state

a Section 2 claim. For this reason, their Section 2 claims should be dismissed.

3. Plaintiffs’ Sherman Act Claims Are Barred Because Plaintiffs Purchased No Services or Products Directly from the County Defendants.

Plaintiffs’ Sherman Act claims are also barred because Plaintiffs do not have a direct economic

relationship with the County Defendants. Plaintiffs affirmatively admit that they established accounts

with GTL and Securus, not with the County Defendants, and that Plaintiffs pay GTL and Securus for the

charges they incur by using county jail telephones. Consequently, their claims are barred by Illinois

Brick Co. v. Illinois, 431 U.S. 720 (1977), which prohibits Plaintiffs from pursuing Sherman Act claims

against parties from whom they did not directly purchase goods or services.

In Illinois Brick, the Supreme Court precluded indirect purchasers from bringing Sherman Act

claims except in limited circumstances. See id. at 730; see also In re ATM Fee Antitrust Litig., 686 F.3d

741, 748 (9th Cir. 2012) (describing the “bright line rule” under Illinois Brick that “only direct

purchasers have standing” to seek “damages for antitrust violations.’” (quoting Del. Valley Surgical

Supply Inc. v. Johnson & Johnson, 523 F.3d 1116, 1120-21 (9th Cir. 2008))). Under Illinois Brick,

indirect purchasers “are precluded from suing ‘based on unlawful overcharges passed on to them by

intermediaries in the distribution chain who purchased directly from the alleged antitrust violator.’” In

re Apple IPhone Antitrust Litig., No. 11-cv-06714-YGR, 2013 WL 6253147, *3 (N.D. Cal. Dec. 2,

2013) (quoting In re Cathode Ray Tube (CRT) Antitrust Litig., 911 F. Supp. 2d 857, 864 (N.D. Cal.

2012)). On a motion to dismiss, a plaintiff must demonstrate that the theory of antitrust liability alleged,

and the underlying facts supporting that theory, are consistent with the principles set forth in Illinois

Brick. In re Apple IPhone Antitrust Litig., No. 11-cv-06714-YGR, 2013 WL 4425720, *12 (N.D. Cal.

Aug. 15, 2013).

Plaintiffs fail to meet the Illinois Brick test because they admit they did not purchase goods or

services directly from the County Defendants. In their Complaints, Plaintiffs define the relevant market

to be “Inmate Phone Services” in each County Defendant’s jail, but it is undisputed that the County

Defendants themselves do not provide such services and, instead, enter into exclusive contracts for GTL

and Securus to provide them. Indeed, Plaintiffs affirmatively allege that inmates (and their friends and



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families) establish accounts with service providers, GTL and Securus, and purchase services through

those companies, not the County Defendants. Complaints ¶ 5.

It is also clear that the Complaints do not assert facts sufficient to bring them within any of the

limited exceptions to Illinois Brick. Under Illinois Brick and its progeny, there are limited exceptions to

the prohibition on suits by indirect purchasers, such as in the case of a “cost plus contract” or “a price

fixing conspiracy,” i.e. where the specific facts alleged might support treating the conduct of the named

defendant as tantamount to the conduct of the party from whom the plaintiffs directly purchased goods

or services. See In re ATM Fees Antitrust Litig., 686 F.3d at 749. Here, however, Plaintiffs’ Complaints

do not allege any facts that would meet those exceptions.

For instance, Plaintiffs allege that the County Defendants are paid unlawful “commissions,” but

they do not allege any facts concerning the amount of the commissions or how the commissions are

calculated, i.e. whether they are fixed amounts or determined as a percentage of revenues attributable to

the service rates and charges. Banks ¶¶ 32-34; Thatcher ¶¶ 32-33; Harris ¶¶ 33-34; Clark-Russell ¶¶ 34-

36. Similarly, Plaintiffs make numerous allegations that the rates charged are “unreasonable, unjust and

exorbitant” and that the fees and charges on inmate accounts are “unnecessary and unconscionable.”

Complaints ¶ 5. But, under Illinois Brick, inflammatory adjectives are not an adequate substitute for

facts regarding the actual nature of the economic relationship between Plaintiffs and the County

Defendants. Finally, Plaintiffs do not allege any facts regarding what relationship exists, if any, between

the per-minute rates charged by GTL and Securus, any other fees or charges paid by putative class

members to those companies, and the commissions then paid by GTL and Securus to the County

Defendants. Instead, they assert, in conclusory fashion only, “that, without the commissions, the charges

would be substantially lower.” Banks ¶ 29; Thatcher ¶ 28; Harris ¶ 30; Clark-Russell ¶ 30.

Illinois Brick requires much more. After all, it is the theory of every indirect purchaser that he

would have paid lower prices but for the alleged anticompetitive conduct. Without factual allegations

providing the details of the commissions and the ICS rates, fees and charges, the Court (and the County

Defendants) cannot determine what specific impact the commissions are alleged to have had on the

actual ICS rates, fees or charges paid by Plaintiffs, if any, nor whether any of the possible exceptions to

Illinois Brick might apply. See In Re ATM Fees, 686 F.3d at 746-47, 750 (noting absence of similar



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allegations); see also In Re TFT-LCD (Flat Panel) Antitrust Litig., 37 F. Supp. 3d 1102, 1105 (N.D. Cal.

2014). Notably, this Court granted a similar motion to dismiss in its January 21, 2014 Order in the

Lithium Ion Antitrust Litigation. In re Lithium Ion Batteries Antitrust Litig., No. 13-MD-2420, 2014 WL

309192, (N.D. Cal. Jan. 21, 2014) (dismissing claims due to absence of allegations establishing an

exception to Illinois Brick); see also In re Lithium Ion Batteries Antitrust Litig., No. 13-MD-2420 YGR,

2014 WL 4955377, *24-27 (N.D. Cal. Oct. 2, 2014) (holding that Plaintiffs had adequately amended

their complaint to establish standing under the “ownership/control” exception to Illinois Brick).

For the reasons discussed above, the Court should dismiss Plaintiffs’ Sherman Act claims based

on their lack of standing as an indirect purchaser.

4. The Local Government Antitrust Act Affirmatively Bars Plaintiffs’ Claims Under the Sherman Act for Damages, “Restitution,” Costs, and Attorneys’ Fees.

Even if Plaintiffs’ claims under the Sherman Act are not wholly dismissed, their attempt to

recoup the commissions received by the County Defendants is affirmatively barred by federal statute,

and so their Sherman Act claims for monetary relief must be dismissed.

All of the defendants in this case are counties and, therefore, local government entities within the

meaning of the antitrust laws. See 15 U.S.C. § 34 (defining “local government” to include a “county”).

Under 15 U.S.C. section 35, claims for damages, costs and attorneys’ fees against local government

entities for alleged violations of Sections 1 and 2 of the Sherman Act are barred. See also Wolfe v. City

of Anaheim, No. 07-56031, 305 Fed.Appx. 488 (9th Cir. Dec. 31, 2008); Palm Springs Medical Clinic,

Inc. v. Desert Hospital, 628 F. Supp. 454 (C.D. Cal. 1986). Accordingly, under no circumstances can

Plaintiffs sue the County Defendants for damages, costs and attorneys’ fees based on alleged violations

of Section 1 and Section 2 of the Sherman Act.

In the Central District Cases, the court addressed this very issue and correctly recognized that the

“Sherman Antitrust Act prohibits monetary relief to be awarded against governments.” Conrad Decl. Ex.

G at 32 (citing 15 U.S.C. §§ 35(a), 36(a)) (emphasis in original). Accordingly, the court dismissed

Plaintiffs’ antitrust claims insofar as they sought any form of monetary relief from the county defendants

in that case, including restitution. Id. While Plaintiffs may contend that their claim for “restitution” is

not encompassed within this bar on damages against local governments, this Court should reject that



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contention, just as Judge Fitzgerald did in the Central District Cases: “Regardless of how Plaintiffs

characterize their damages, their prayer for restitution seeks monetary relief, which the Sherman

Antitrust Act does not allow.” Id. at 32-33 (citing In re Multidistrict Vehicle Air Pollution, 538 F.2d 231,

234 (9th Cir. 1967)).

Plaintiffs’ Section 1983 Claims Must Be Dismissed.

Plaintiffs assert claims under Section 1983 based on alleged violations of numerous

constitutional rights. For the reasons set forth below, Plaintiffs’ Complaints do not allege facts sufficient

to support a claim under the First Amendment, Equal Protection Clause, or Takings Clause.7

1. Plaintiffs Fail To State a Claim Under the First Amendment.

Plaintiffs’ First Amendment claim fails because their Complaints do not come close to alleging

the denial of telephone access by any of the County Defendants. Johnson v. State of California, 207 F.3d

650, 656 (9th Cir. 2000). Instead, the Complaints allege only that the high cost of using telephones in the

county jails caused them to “limit contact between inmates and their families, friends, [and] associates.”

Complaints ¶ 8. This is not enough to state a claim under the First Amendment, and the Ninth Circuit

has rejected the notion that high cost, standing alone, is sufficient to constitute a violation of a prisoner’s

First Amendment rights. Johnson, 207 F.3d at 656.

Federal courts have expressed different (and arguably inconsistent) views about the implications

of the First Amendment for telephone access in correctional facilities,8 but the only basis that has ever

been recognized by the Ninth Circuit for a First Amendment claim is an actual denial of telephone

access to an imprisoned plaintiff. None of the Ninth Circuit’s cases suggests the broad right that

7 In their original complaints, Plaintiffs alleged a violation of their rights under the Due Process

Clause. See Banks, Dkt. No. 1 ¶ 12; Thatcher, Dkt. No. 1 ¶ 12; Harris, Dkt. No. 1 ¶ 12; Clark-Russell, Dkt. No. 1 ¶ 12. In their amended pleadings, Plaintiffs have withdrawn this claim.

8 Some Courts of Appeals have indicated that prisoners have no constitutional right to telephone service at all. See Holloway v. Magness, 666 F.3d 1076, 1079-80 (8th Cir. 2012), cert. denied, 113 S.Ct. 130 (no obligation to provide telephone service); United States v. Footman, 215 F.3d 145, 155 (1st Cir. 2000) (“Prisoners have no per se constitutional right to use a telephone.”). Others have suggested that, subject to reasonable restrictions, the First Amendment guarantees some degree of access to telephones. See, e.g., Washington v. Reno, 35 F. 3d 1093, 1100 (6th Cir. 1994) (constitutionally guaranteed telephone access is “‘subject to rational limitations in the face of legitimate security interests of the penal institution.’”) (quoting Strandberg v. City of Helena, 791 F.2d 744, 747 (9th Cir 1986)); Pope v. Hightower, 101 F.3d 1382, 1384-85 (11th Cir. 1996) (holding that strict limitations on number of call recipients implicated the First Amendment but was justified by legitimate penalogical concerns).



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Plaintiffs claim to inexpensive phone calls. To the contrary, the Ninth Circuit has rejected that

proposition. In Johnson v. State of California, 207 F.3d 650, 656 (9th Cir. 2000), the plaintiff alleged

that the California Department of Corrections “violated his constitutional rights by . . . extorting money

from inmates by overcharging for telephone use.” Id. at 652. He even alleged that he lost the ability to

speak with his mother when he could not pay the excessive service charges. Id. at 656. In a per curiam

opinion, the Ninth Circuit held that these allegations were inadequate to state a claim under the First

Amendment. Id. The Johnson court stated that “prisoners have a First Amendment right to telephone

access . . . subject to reasonable limitations arising from the legitimate penological and administrative

interests of the prison system.” Id. But the court found “no authority for the proposition that prisoners

are entitled to a specific rate for their telephone calls.” Id. Accordingly, because the claim involved

merely a challenge to telephone rates, and not to telephone access, the Ninth Circuit held that the

prisoner’s First Amendment claim had been properly dismissed, with prejudice. Id.

In Strandberg v. City of Helena, 791 F.2d 744 (9th Cir 1986), the Ninth Circuit considered a

claim that the First Amendment rights of a suicidal inmate had been violated because the police refused

to let him make a telephone call in the first 30 minutes of his detention. 791 F.2d at 747-48. The

Strandberg court cited several district court decisions recognizing a general “first amendment right to

telephone access,” subject to reasonable limitations. Id. But the Ninth Circuit held that a 30-minute

delay was not a constitutional violation, and on that basis, it affirmed the dismissal of the plaintiff’s

claim, without otherwise opinion on the boundaries of any right to telephone access. Id.

By contrast, in other cases, the Ninth Circuit has implied that alleging an actual denial of

telephone access is enough to state a claim under the First Amendment, at least at the pleadings stage. In

Keenan v. Hall, 83 F.3d 1083 (9th Cir. 1996), the Ninth Circuit stated that prisoners “have a First

Amendment right to telephone access, subject to reasonable security limitations.” Id. at 1092 (citing

Strandberg, 791 F.2d at 747). But in that case, the Ninth Circuit found that the evidence actually refuted

the prisoner’s conclusory allegation that he had been denied telephone access. Id. Accordingly, the court

affirmed summary judgment on his First Amendment claim. Id.

Finally, in Valdez v. Rosenbaum, 302 F.3d 1039 (9th Cir. 2002), a pretrial detainee claimed that a

prison had violated his First Amendment rights by denying him telephone access except to call his



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attorney. The court in Valdez suggested that the near-total prohibition on telephone use impinged on the

prisoner’s constitutional rights. Nevertheless, even in the face of such a draconian limitation, the Ninth

Circuit noted that “a prison regulation that impinges on an inmate’s constitutional right ‘is valid if it is

reasonably related to legitimate penological interests.’” Id. at 1048 (quoting Turner v. Safely, 482 U.S.

78, 89 (1986)). Using the four-factor test in Turner v. Safely, the Ninth Circuit concluded that the

limitation on access was justified in light of the Government’s legitimate need to prevent the prisoner

from communicating with alleged co-conspirators who had not yet been arrested. Id. at 1049.9

The Ninth Circuit thus has recognized a right under the First Amendment to have telephone

access, subject to reasonable limitations, in order to ensure the ability of inmates “to communicate with

persons outside prison walls.” Valdez, 302 F.3d at 1048. However, the Ninth Circuit has never

suggested, as Plaintiffs’ argue in this case, that high or excessive telephone rates are sufficient, in and of

themselves, to establish a First Amendment violation. To the contrary, Strandberg and Johnson held that

the dismissal of First Amendment claims is appropriate unless the restrictions render the telephones

inaccessible, and Johnson specifically rejected the theory advanced by Plaintiffs here: that excessive

charges or kickbacks (and the higher rates that result from them) constitute a First Amendment violation.

Johnson, 207 F.3d at 656 (affirming dismissal of First Amendment claim based on “extortionate” or

“outrageous” telephone charges where the allegations were insufficient to support a claim that the

charges were “so exorbitant as to deprive prisoners of phone access altogether”). This case is squarely

controlled by Johnson.

Nor is there anything in the Ninth’s Circuit case to suggest that the First Amendment guarantees,

as Plaintiffs allege here, a right to “meaningful personal communication” or a right to be free from any

limit on the time they “wish” to spend speaking to inmates “because of the cost.” Banks ¶¶ 8, 71;

9 The four Turner factors are: “(1) whether there is a valid, rational connection between the

restriction and the legitimate governmental interest put forward to justify it; (2) whether there are alternative means of exercising the right; (3) whether accommodating the asserted constitutional right will have a significant negative impact on prison guards and other inmates, and on the allocation of prison resources generally; and (4) whether there are obvious, easy alternatives to the restriction showing that it is an exaggerated response to prison concerns.” Valdez, 302 F.3d at 1048-49 (citing Turner, 482 U.S. at 89-90). Applying these factors, in Valdez, the Ninth Circuit noted that the plaintiff still had other means of communicating outside the jail; that allowing telephone access would have required the prison to expend additional resources to monitor the plaintiff’s calls; and that there were no easy, obvious alternatives to the restriction that had been imposed. Id. at 1049.



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Thatcher ¶¶ 8, 72; Harris ¶¶ 8, 73; Clark-Russell ¶¶ 8, 75. The Ninth Circuit in Johnson expressly

rejected this premise. And so has nearly every other district court decision in this judicial circuit to

consider the application of the First Amendment to telephone rates in correctional facilities. Kirk v.

Foster, No. 3:13-cv-00296-RCJ-WGC, 2014 WL 6792028, *12 (D. Nev. Dec. 1, 2014) (dismissing

claim that ICS rates were unreasonably high because “there is no right to a specific phone rate”); Deere

v. Brown, No. 11cv1579 WQH (JMA), 2012 WL 4740328, *2 (S.D. Cal. Oct. 3, 2012) (dismissing claim

that ICS rates were extortionate and noting that “[a]s the Court stated in Johnson, ‘there is no authority

for the proposition that prisoners are entitled to a specific rate for their telephone calls’”); Bowman v.

Idaho State Bd of Corr., No. CV06-208-S-BLS, 2008 WL 2445279, *4 (D. Idaho June 16, 2008)

(dismissing claim based on allegation that long distance calls were too expensive); Jayne v. Bosenko,

No. 2:08-cv-02767, 2009 WL 4281995, at *9-10 (E.D. Cal. Nov. 23, 2009) (prisoner failed to state a

claim under the First Amendment for denial of telephone access where he alleged “price gouging” but

did not allege that prices were so high as to deprive him of phone access); Woods v. Carey, No.

CIVS050049MCEDADP, 2005 WL 3436366, *2-3 (E.D. Cal. December 14, 2005), aff’d 218 Fd. App’x

688 (9th Cir. 2007) (dismissing claim based on prisoner’s allegation that warden was conspiring with

ICS providers to overcharge for long distance calls).10

10 Courts outside the Ninth Circuit have reached generally the same conclusion. See, e.g.,

Holloway v. Magness, 666 F.3d 1076, 1080 (8th Cir. 2012) (jail has no First Amendment obligation to provide telephone service “at a particular cost to users”); Morrow v. County of Nassau, No. 15-CV-4793 (SJF)(AKT), 2015 WL 6691672, *5 (E.D.N.Y. Nov. 3, 2015) (prisoner’s allegation that ICS rates were too expensive failed to state a claim absent allegation that charges were so exorbitant as to deprive him of access altogether); Semler v. Ludeman, No. 09-0732 ADM/SRN, 2010 WL 145275, at *15 (D. Minn. Jan 8, 2010) (involuntarily committed sex offenders did not a have a First Amendment right to a specific rate for their telephone calls and “failed to allege a constitutional violation under the First Amendment” where they “made no allegation that they are precluded from making telephone calls given the rate charged”). The one exception Defendants have found is McGuire v. Ameritech Servs., Inc., 253 F. Supp. 2d 988, 1001-02 (S.D. Ohio 2003), where a district court denied a motion to dismiss a First Amendment claim based on ICS costs that were alleged to be financially burdensome. The court’s reasoning was that plaintiffs might be able to prove facts entitling them to relief, such as showing “that the costs are so exorbitant that they are unable to communicate with their family members,” id. at 1002, despite the fact that plaintiffs had not actually alleged that they were unable to communicate. Notably, McGuire was decided before both Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), which hold that a complaint does not suffice unless there are specific factual allegations to support the elements of a claim. Under the correct standard set forth in Iqbal and Twombley, and in light of Plaintiffs’ clear failure to articulate facts that the commissions received by the County Defendants are tantamount to a denial of access, the Complaints in these related cases fail to state a viable cause of action.



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Plaintiffs no doubt will cite Judge Fitzgerald’s opinion in the Central District Cases to argue that

their First Amendment claim should proceed to discovery. In the Central District, Judge Fitzgerald held

that there is a First Amendment right “to communicate outside prison walls” and declined to determine

before discovery whether, under the four-factor test established in Turner v. Safley, “the commissions

are reasonably related to legitimate penological interests.” See Conrad Decl. Ex. G at 18.

The flaw in Judge Fitzgerald’s decision is that the four-factor Turner test is applied only after a

threshold determination is made that the challenged conduct, standing alone, would, in the absence of a

penological justification, actually violate the First Amendment rights of prisoners. “As a predicate to

applying the Turner four-factor test, the Court must first find that there is a prison regulation that

‘impinges on inmates’ constitutional rights.’ If there is no such impingement, then the Court need not

reach the Turner four-factor test.” Lyon v. United States Immigration & Customs Enforcement, 171 F.

Supp. 3d 961, 985 (N.D. Cal. 2016) (quoting Turner, 482 U.S. at 89) (citation omitted). See also Valdez,

302 F.3d at 1048 (“A prison regulation that impinges on an inmate’s constitutional right ‘is valid if it is

reasonably related to legitimate penological interests.’” (quoting Turner, 482 U.S. at 89) (emphasis

added)). As discussed above, the Ninth Circuit has stated that high telephone charges do not implicate

prisoners’ First Amendment rights unless and until those costs deprive the prisoners of phone access.

Plaintiffs here have alleged no such deprivation, and to the contrary, their entire theory in these cases is

that they are entitled to recoup damages because they actually used the telephones and incurred

allegedly excessive charges as a result. See, e.g. Complaints ¶ 11 (alleging that the County Defendants’

unlawful scheme is to “collect unlawful but small sums of money from large numbers of [class

members]”). Moreover, the Complaints themselves prove that the individual plaintiffs were not denied

phone access. Banks ¶ 25 (alleging Plaintiff “calls [his wife] at least twice a day”). As a result, the Court

need not and should not engage in a Turner analysis, but instead should dismiss Plaintiffs’ First

Amendment claim.11

11 Although not discussed in the Northern District Complaints, Plaintiffs’ attorneys proposed an

additional First Amendment theory in their opposition to the motion to dismiss the First Amendment claims in the Central District cases. C.D. Cal. Opp’n at 7. Based on a line of cases holding that “[a] tax that burdens rights protected by the First Amendment cannot stand unless the burden is necessary to achieve an overriding governmental interest” (Minneapolis Star & Tribune Co. v. Minnesota (continued on next page)



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2. Plaintiffs Fail To State a Claim Under the Equal Protection Clause.

In their latest pleadings, Plaintiffs have revised their Complaints to allege a violation of the

Equal Protection Clause only on behalf of the so-called Call Recipient Class (i.e. class members who are

not and never have been inmates, but who instead established accounts with GTL and Securus to talk to

imprisoned relatives or friends). See Banks ¶ 81; Thatcher ¶ 82; Harris ¶ 84; Clark-Russell ¶ 84.

Specifically, Plaintiffs allege that the Call Recipients are denied equal protection under the laws

“because they must pay highly inflated rates in comparison to the phone rates charged all other persons,

i.e., the public at large.” Banks ¶¶ 82; Thatcher ¶ 83; Harris ¶ 85; Clark-Russell ¶ 85. Stated differently,

Plaintiffs allege that the County Defendants have treated them differently than people who do not talk on

the telephone with jail inmates. This claim fails for two separate and independent reasons.

First, Plaintiffs do not allege that the Call Recipient Class has been treated differently than other

individuals who are similarly situated. Simply put, for purposes of these Related Cases, people who use

the telephone systems in county jails are not “similarly situated” to people who do not. See Thornton v.

City of St. Helens, 425 F.3d 1158, 1167 (9th Cir. 2005) (“An equal protection claim will not lie by

‘conflating all persons not injured into a preferred class receiving better treatment’ than the plaintiff.”

(quoting Joyce v. Mavromatis, 783 F.2d 56, 57 (6th Cir. 1986))); Pimentel v. Dreyfus, 670 F.3d 1096,

1106 (9th Cir. 2012) (“To state an equal protection claim of any stripe, . . . a plaintiff must show that the

defendant treated the plaintiff differently from similarly situated individuals.”).

Second, and relatedly, Plaintiffs do not allege that they have been subjected to differential

treatment by the County Defendants. The Equal Protection Clause does not guarantee that a plaintiff will

be treated equally by everyone with whom she comes into contact. (For example, it does not require

county jails to charge callers the same rates that Verizon or AT&T charge.) Instead, it guarantees equal

treatment by the government. Here, the County Defendants do not provide telephone services to the

Commissioner of Revenue, 460 U.S. 575, 582 (1983)), plaintiffs in the Central District argued that ICS site commissions function as a tax and are not permissible because they burden inmates’ ability to make calls outside prison walls and are higher than necessary to defray the cost of providing ICS. Id. Even assuming arguendo that ICS charges constitute a tax subject to Minneapolis Star Tribune, Plaintiffs’ First Amendment claim cannot stand because, as discussed above, prisoners have no First Amendment right to telephone service at a particular price, and there has been no allegation that the ICS rates at issue here prevented Plaintiffs from communicating with whomever they wanted.



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“public at large.” Rather, the County Defendants provide telephone services only in their jails. In that

context, the County Defendants treat everyone equally, and Plaintiffs do not allege otherwise. Taylor v.

San Diego Cty., 800 F.3d 1164, 1169 (9th Cir. 2015) (stating that “similarly situated” comparators “may

differ in some respects” but “must be similar in the respects pertinent to the State’s policy” (emphasis

added)); Single Moms, Inc. v. Montana Power Co., 331 F.3d 743, 746–47 (9th Cir. 2003) (“Only when

the government is responsible for a plaintiff’s complaints are individual constitutional rights

implicated.”). Because Plaintiffs identify no differential treatment, at least insofar as the conduct of the

County Defendants is concerned, their Equal Protection claim fails.

In the Central District Cases, Judge Fitzgerald initially dismissed Plaintiffs’ claims under the

Equal Protection Clause, for the reasons discussed above. See Conrad Decl. Ex. G at at 19 (“Plaintiffs

fail to address how one group is being treated differently from another, which is key to an Equal

Protection claim.” (citing Fennell v. Gregory, 414 F. App’x 32, 35 (9th Cir. 2011))). After Plaintiffs

amended their complaint, however, Judge Fitzgerald changed his mind and allowed Plaintiffs to proceed

on their Equal Protection Claim. Conrad Decl. Ex. L at 6-11. He did this, however, without requiring

that Plaintiffs establish the elements of an Equal Protection claim.

First, Judge Fitzgerald ruled that, because Plaintiffs had alleged in separate state court actions

that ICS rates and fees constitute an impermissible “tax” under California law, Plaintiffs had sufficiently

pled an Equal Protection claim. Conrad Decl. Ex. L at 7-10. According to Judge Fitzgerald, members of

the Call Recipient Class were unfairly forced to pay for phone calls when other county residents were

not required to shoulder the burden of such a “tax.” Id.

This is incorrect. Plaintiffs’ contention (which the County Defendants dispute) that the ICS rates

and fees are impermissible taxes has nothing whatsoever to do with a claim under the Equal Protection

Clause. To assert an Equal Protection claim, Plaintiffs must allege that the County Defendants treated

them differently on an impermissible basis. Here, however, members of the Call Recipient Class were

treated the same as all other members of the general public: everyone who elected to use jail telephones

had to pay the same rates. Allowing an Equal Protection claim based on the claimed illegality of a tax

“would risk transforming ordinary violations of ordinary state tax law into violations of the Federal

Constitution.” See Armour v. City of Indianapolis, 132 S. Ct. 2073, 2084 (2012). To put it simply, the



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people who place telephone calls to inmates are differently situated than those who do not. Regardless of

whether the charges are legal or illegal under California tax law, the County Defendants must have only

a “rational basis” to pass muster under the Equal Protection Clause. It is clearly “rational” to charge

telephone fees to people who use the telephones, and indeed, the Supreme Court has explicitly held that

“user fees” for government services do not violate the Equal Protection Clause:

We think it is quite clear that a State’s decision to allow local school boards the option of charging patrons a user fee for bus service is constitutionally permissible. The Constitution does not require that such service be provided at all, and it is difficult to imagine why choosing to offer the service should entail a constitutional obligation to offer it for free. . . . It is manifestly rational for the State to refrain from undermining its legitimate objective with such a rule.

Kadrmas v. Dickinson Pub. Schs., 487 U.S. 450, 462 (1988); see also Nordlinger v. Hahn, 505 U.S. 1,

11 (1992) (holding that taxation schemes are immune from challenge under the Equal Protection Clause

“so long as there is a plausible policy reason for the classification”); Angelotti Chiropractic, Inc. v.

Baker, 791 F.3d 1075, 1085 (9th Cir. 2015) (holding that the State’s imposition of a “lien activation fee”

on certain types of lienholders was permissible because the Legislature “might have rationally

concluded” that the affected categories of lienholders were “primarily responsible for the backlog” of

liens in the State’s workers compensation system).

Judge Fitzgerald also upheld Plaintiffs’ Equal Protection claim on the ground that the rates and

fees affected the exercise of a “fundamental right”—namely, Plaintiffs’ right to free speech and free

association under the First Amendment. To begin, as noted above, Plaintiffs have not actually

established a First Amendment claim. But even setting that aside, Plaintiffs cannot establish an Equal

Protection claim merely on the basis that their free speech is affected unless the claim involves

viewpoint discrimination (in which case the suppression of a particular speaker or viewpoint becomes a

form of unequal treatment under the laws). See, e.g., Police Dep’t of City of Chicago v. Mosley, 408

U.S. 92, 95-96 (1972) (“Necessarily, then, under the Equal Protection Clause, not to mention the First

Amendment itself, government may not grant the use of a forum to people whose views it finds

acceptable, but deny use to those wishing to express less favored or more controversial views.”). Outside

the context of a viewpoint discrimination case, however, the First Amendment and the Equal Protection



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Clause require very different things. Whether First Amendment rights are at issue or not, the Equal

Protection Clause requires an allegation that the Government is impermissibly or irrationally

discriminating among citizens. Here, Plaintiffs do not assert that the County Defendants engaged in

viewpoint discrimination, and they do not otherwise allege that the “burden” on their First Amendments

rights is distributed unequally among similarly-situated individuals. Accordingly, their Equal Protection

claim should be dismissed.

3. Plaintiffs Fail To State a Claim Under the Takings Clause or the Doctrine of Unconstitutional Conditions.

Plaintiffs contend that the receipt of commissions by the County Defendants amounts to an

unconstitutional taking under the Fifth Amendment. See Banks, Dkt. No. 37 ¶ 74; Clark-Russell, Dkt.

No. 25 ¶ 78; Harris, Dkt. No. 24 ¶ 78; Thatcher, Dkt. No. 31 ¶ 76. However, Plaintiffs have not

identified a property right that actually falls within the scope of the Takings Clause, and further, they

have not alleged a compulsory taking by the Government, which is required in order for them to

maintain a Takings claim. Although Plaintiffs invoke the “doctrine of unconstitutional conditions” in

their Complaints, Plaintiffs cannot sustain a claim on that theory either, because forcing someone to pay

money for the telephone services they use does not involve the compelled relinquishment of a

constitutional right.

a. Plaintiffs Fail to State a Claim Under the Takings Clause.

In applying the Takings Clause, federal courts distinguish between two types of claims. On the

one hand, a “physical taking” or a “taking per se” involves the Government’s acquisition of specific

property. On the other hand, a “regulatory taking” involves a statute, ordinance, or regulation that

partially or entirely eliminates the economic worth of a piece of property, even though the property is

retained by the plaintiff. See generally Horne v. Dep’t of Agric., 135 S. Ct. 2419, 2422 (2015)

(discussing the “‘longstanding distinction’ between regulations concerning the use of property and

government acquisition of property” (quoting Tahoe–Sierra Preservation Council, Inc. v. Tahoe

Regional Planning Agency, 535 U.S. 302, 323 (2002))). In either context, the legal analysis is similar:

first, a court must “determine whether the subject matter is ‘property’ within the meaning of the Fifth

Amendment,” and if so, then the court must “establish whether there has been a taking of that property,



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for which compensation is due.” Engquist v. Or. Dep’t of Agric., 478 F.3d 985, 1002 (9th Cir. 2007)

(citations omitted). Here, it is unclear whether Plaintiffs allege that there has been a taking per se

(insofar as the County Defendants have received commissions out of the charges paid by Plaintiffs) or a

regulatory taking (insofar as the County Defendants entered into contracts, pursuant to which GTL and

Securus charged Plaintiffs for telephone usage). Under either theory, however, Plaintiffs’ claim fails.

First, being charged money does not implicate a property interest under the Takings Clause.

McIntyre v. Bayer, 339 F.3d 1097, 1099 (9th Cir. 2003) (citing Rucklehaus v. Monsanto Co., 467 U.S.

986, 1000-01 (1984)). The thrust of Plaintiffs’ Takings claim here is that they have paid too much

money to use telephones in county jails. See e.g., Banks, Dkt. No. 37 ¶¶ 75-77; Clark-Russell, Dkt. No.

25 ¶¶ 79-81; Harris, Dkt. No. 24 ¶¶ 79-81; Thatcher, Dkt. No. 31 ¶¶ 77-79. However, the Ninth Circuit

has squarely held that, because money is a fungible asset, there can be no permanent physical occupation

of it, and thus, a requirement to pay money cannot constitute a per se taking. Wash. Legal Found. v.

Legal Found. Of Wash, 271 F.3d 835, 854 (9th Cir. 2001) (citing Eastern Enterprises v. Apfel, 524 U.S.

498, 530 (1998)). Even in the context of a regulatory taking, a government-imposed obligation to pay

money is not enough to give rise to a taking. See Eastern Enters. v. Apfel, 524 U.S. 498, 540 (1998)

(Kennedy, J., concurring in the judgment) (asserting that there is no constitutional “taking” where “[t]he

law simply imposes an obligation to perform an act, the payment of benefits”); Commonwealth Edison

Co. v. United States, 271 F.3d 1327, 1339 (Fed. Cir. 2001) (“Thus five justices of the Supreme Court in

Eastern Enterprises agreed that regulatory actions requiring the payment of money are not takings.”).12

Second, under the Takings Clause, the government need not provide compensation for actions

that were undertaken by a plaintiff voluntarily. See, e.g., Managed Pharmacy Care v. Sebelius, 716 F.3d

1235, 1252 (9th Cir. 2013) (“Because participation in Medicaid is voluntary, however, providers do not

have a property interest in a particular reimbursement rate.”); see also Ruckelshaus v. Monsanto Co.,

467 U.S. 986, 1007 (1984) (“voluntary submission of data by an applicant in exchange for the economic

advantages of a registration can hardly be called a taking”). Here, Plaintiffs chose to use the telephone.

12 Judge Fitzgerald dismissed Plaintiffs’ Taking Clause claim with prejudice in the Central

District cases on the ground that Plaintiffs had failed to identify a property interest. See Conrad Decl. Ex. G at 23-28.



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The County Defendants did not compel them to place or accept calls. This is why, in other cases

regarding jail telephone systems, courts have uniformly dismissed Taking Clause claims to the extent

they are based on the rates, fees, or commissions charged for the use of phones. As Judge Posner put it,

“the contention that by charging a high price for phone calls the defendants have taken the plaintiffs’

property and must pay just compensation is downright absurd.” Arsberry, 244 F.3d at 565; accord

Walton v. New York State Dep’t of Corr. Servs., 13 N.Y. 3d 475, 489 (2009) (“A ‘taking’ cannot occur

in the absence of government compulsion. . . . [P]etitioners were not compelled to pay anything either to

[the correctional facilities] or to [the telephone services provider], nor was their money or other property

confiscated by the state. The acceptance of collect calls was voluntary action and, by taking the calls,

petitioners agreed to pay the associated rate.”) (citation omitted); cf. McGuire, 253 F. Supp. 2d at 1004

(“The prospective recipient of a collect call is in complete control over whether she chooses to accept

the call and thereby relinquish her money to pay for it. There is no taking of which to speak, such as

where the government confiscates property or forecloses its commercial use by fiat or legislation . . . .”);

Godoy v. Horel, No. C 09-4793 PJH, 2010 WL 890148, *6 (N.D. Cal. 2010) (plaintiffs failed to allege a

takings claim based upon raised canteen prices where the they were aware of new prices and willingly

paid for their items).

b. Plaintiffs Fail to Allege a Violation of the Doctrine of Unconstitutional Conditions.

In their Complaints, Plaintiffs alternatively style their Takings Clause claim as a violation of the

doctrine of unconstitutional conditions. Banks ¶¶ 74-80 (“County Defendants’ actions constitute an

unlawful taking of private property without just compensation in violation of the Fifth Amendment

and/or place unconstitutional conditions on Class Members’ constitutional rights”); Thatcher ¶ 76-81

(same); Harris ¶ 78-83 (same); Clark-Russell ¶ 78-83 (same).

At its essence, the unconstitutional conditions doctrine holds that the government may not grant

a benefit on the condition that the beneficiary surrender a constitutional right—even if the government

otherwise would be entitled to withhold that benefit altogether. See, e.g., Memorial Hosp. v. Maricopa

County, 415 U.S. 250 (1974) (ruling that Arizona county could not impose a durational residency

requirement for indigent persons to receive emergency medical services); Pickering v. Bd. of Educ., 391



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U.S. 563, 568 (1968) (holding that public school teachers may not be “compelled to relinquish the First

Amendment rights they would otherwise enjoy as citizens to comment on matters of public interest in

connection with the operation of the public schools in which they work”); Garrity v. New Jersey, 385

U.S. 493, 497 (1967) (holding that police offers under investigation could not be told “either to forfeit

their jobs or to incriminate themselves”).

Plaintiffs’ claims in these Related Cases do not involve such a situation. Instead, the County

Defendants have merely contracted with GTL and Securus, who charge money for Plaintiffs to use the

telephone. Requiring payment for a service is not an unconstitutional condition, and it does not involve

the compelled relinquishment of a constitutional right. The fact that the service being offered by the

government is one way to exercise of a constitutional right—such as speech—does not change the

analysis. Simply because the government offers a service that can be used in the exercise of a

constitutional freedom does not mean it must offer the service for free or at a price that Plaintiffs find

acceptable. Accordingly, the County Defendants have not violated the unconstitutional conditions

doctrine, and Plaintiffs’ claim under the Takings Clause fails under this alternative formulation as well.

V. CONCLUSION

The Complaints in each of the Related Cases should be dismissed in their entirety.

DATED: January 17, 2017 Respectfully submitted, CONRAD & METLITZKY LLP

/s/ Mark R. Conrad MARK R. CONRAD WARREN METLITZKY Attorneys for Defendant County of Santa Clara


Case 4:16-cv-04816-YGR Document 26 Filed …...CONSOLIDATED MOTION TO DISMISS Case Nos....

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