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Apr 16, 2007

The Legal Line

Ed Maldonado

Dear Ed:My company is a prepaid calling card company and we have been in the market for the past five years. After reading the article about the IDT lawsuit in The Prepaid Press last month, our commercial team became very worried about the way we are doing business and if we may become involved in this lawsuit. They have been following it closely and are growing more concerned as the implicated companies settle. I must admit that to keep competitive with others, our company has had to keep pace with the way other prepaid calling cards market and bill their cards. Our concern now is what do we do if we are sued either by IDT, or in the consumer class action lawsuit? We would like to sit with our attorney and work out a plan but our attorney really doesn’t know the details of our business. Are there a few points that you could give us to be able to discuss with our attorney to make this easier? We appreciate your time and your column.Anonymous –Dear Anonymous:Let me begin with a few words on the various lawsuits out there at this time that your attorney should be clear about in relation to your cards and your activity – whatever it may be. At the core of the claims made by IDT and the class action, are allegations related to consumer disclosures as to advertised minutes being dramatically different from the actual minutes rendered to the consumer, after charges by the calling card provider. The IDT lawsuit also seeks injunctive relief and damages against those named in the lawsuit, and is not just a money damage case. Much of the settlement, thus far, by prepaid calling card defendants has been to the injunction. While there are various other aspects of the lawsuit that your attorney can review when he or she actually reads the lawsuits, these are the essential points of venture that your commercial team should be ready to speak of when meeting with your legal counsel. By your e-mail, I imagine that your attorney may be a civil litigation attorney, but does not understand what you may be able to charge for a prepaid calling card, and how the rate decks work. I suggest your commercial team be ready to explain these aspects of the business, so that the attorney has a clear understanding of how your company operates. The following is a general laundry list of items to review with him or her so that your company communicates fully what it is doing in its prepaid calling card business:1.Federal and State Licenses held or pending from regulatory bodies. This would be any license or certification you hold, or have pending, in the states where your company sells cards to consumers. It would probably be wise to also advise your attorney of any administrative complaints that you may be addressing in the State utility commissions related to your cards. 2.Copies of Advertising, Promotional Materials and Cards. Key to this information is the disclosure of your rates, regulatory fees, and charges applicable to the cards you have in the market. This should also include examples of the cards themselves to show how a consumer can determine charges on the cards. If you use voice prompts to inform consumers of minutes and charges, do a dry run of a call through your calling card so that your attorney understands exactly how consumers “see” your card. If you have a consumer complaint escalation through customer service, do a dry run to walk the attorney through each aspect of escalation for them to know how it is actually performed.3.Present a layout of how services are provisioned for the cards you have in the market. This would include disclosing if you have your own switch, if you have partition switch space, if you use a service bureau, or if you have private label cards or PINs through another provider. The idea here is to map out exactly how telecommunication services are performed behind your cards. When present with your legal counsel, such information is privileged under the attorney client relationship, so be clear – not technical – as to what “control” your company has or does not have behind the rates and charges of each of your card products.4.Review the current lawsuits before the courts, and express your concerns. Give copies of the current lawsuits to your attorney and articulate exactly why your commercial team has concerns. The fact may be that your company’s practices do not cross the allegations raised in the IDT or class action lawsuits, but that does not mean you should not discuss, and be ready for the potential of these cases to touch your business. This may need to simply be explored. Likewise, you may be in the potential crosshairs of these lawsuits, but without directing your attorney’s attention to the how and why, he or she may fail to see the potential implication and legal liability of your company clearly. The key here is to clearly communicate the facts surrounding why your company is nervous about these lawsuits.5.Work with your attorney to prepare a litigation plan assuming implication in the lawsuits, whether or not your company’s practices fall within the allegations or not. Lawsuits of this nature that are before the courts now in the class action or IDT unfair trade practice cases often take a shotgun approach to the inclusion of defendants. Because of this, companies can be brought into the lawsuit based on “information and belief” that is flawed or inaccurate. While flawed factual joinder of a defendant is a basis for their eventual dismissal in the case, this takes time and will require that your attorney defend the what, where, when, and why related to such a remedy. It is best to be prepared to defend yourselves even prior to receiving a summons. Again, assuming that your attorney is a civil litigator, mapping out a defense plan should be second nature to them, however, make sure that the attorney articulates that well to your company and that all are clear as to what steps to take. Ask your attorney to go through the plan point by point, starting with what you should do if a summons arrives. Ask your attorney if you should or should not change any commercial practice prior to this or at the time of service. Lay all the alternatives on the table, and be comfortable with them. If your company has a plan, your commercial team is comfortable with it, and your attorney stands ready to defend your company, you are ready for inclusion in these cases, or any others that follow.Anonymous, remember that this is just a suggested point of venture, and it is intended to prime and organize both you and your attorney in formulating a concrete response plan should you become involved in the IDT or class action lawsuits. Your attorney may wish to explore other issues or defenses. Should you do so, also remember that your industry knowledge should balance the attorney’s knowledge of civil action defense – it needs to be a cooperative effort toward a clear and common goal. If you feel this type of working relationship is not the case with you and your attorney, consult another attorney. You and your company need to feel comfortable with who represents you, and how they communicate legal opportunities or barriers in the defense of your case.Good Luck and Success in the Industry.Send your questions

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