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Aug 15, 2005

The Legal Line

Ed Maldonado

I am a phone card distributor involved in a lawsuit over a prepaid card of mine that lost the carrier due to bankruptcy. My attorney has been really good in advancing the case and understanding the business fraud side of phone cards, but we seem to have hit a roadblock when it comes to damages. The attorney for the carrier has argued that we can only recover the costs, if any, of used cards that were on the carrier bill. We are arguing that we can recover the cost of used cards, activating the cards and printing costs. I told him to go after this type of recovery because I hear it has been used before with other distributors.
The problem is that my attorney has not been able to find any legal authority for using our measure of my losses on the cards. While there are a lot of phone card cases in California, none of them really touch on this issue. My question is do you have ANY ideas on cases in California on this topic? Thank you.

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If your case is a federal action, then there may be more cases on point related to phone cards spread out over the various federal district courts. I am really not sure where the issue sits for California at the present time; however, I do have a few suggestions for your legal counsel when it comes to establishing the value of the cards. First, there may not be any cases “on-point” that address that specific issue in your jurisdiction. For this reason it is wise to look to other types of cases implicating phone card values.

Believe it or not, criminal cases for theft are often gems in finding the value of a phone card in a particular jurisdiction. The reason why is not often so obvious. If someone steals something of value, the level of severity and the potential sentence of the offender are anchored in the actual value of that “thing” they stole. If it was phone cards, then the courts had to have made a decision on what constituted the value of those cards in order to establish charges, convict and pass sentence.

Now here’s the aspect that your attorney will likely jump on in research – criminal cases tend to reach appeals at the state and federal level slightly faster than pure civil cases. This means that should your state have criminal cases that ruled on the valuation of stolen phone cards, and these were appealed, there is likely some higher court ruling on the matter that your attorney can reference. This may be fertile ground for researching the legal issue in California, as I know there are a significant number of criminal convictions there annually because of the state’s size.

In my personal experience, the valuation of unused phone cards has been compared to the valuation of blank and unused checks for purposes of sentencing someone of the crime of grand theft of unused phone cards. Whether this is an accurate comparison or not, it is often used by some courts as the “closest” comparison. Since I don’t know all the details of your case – and prefer to let your attorney guide you on this - I cannot tell you what the impact of this rationale will likely be in your case. It is likewise obvious that your claim probably has a mix of unused, activated and returned cards that all need to be researched fully before claiming damages.

A final suggestion that I have for your attorney in fighting your case is based less in the law and more a word of wisdom for the courtroom - sometimes you have to realize that this is a brave new world and nothing like the subject matter you are litigating has come to pass before. That being the case, often it is your argument that sets the precedent. Do not be afraid to advance the argument you have.

Good Luck and Success in the Industry.

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