UPDATE: Judge Weinstein Dismisses Pre-Paid Phone Card Class Action
Last month I posted about an advisory opinion issued by Judge Jack Weinstein in which he indicated that he likely would dismiss a putative class action over allegedly fraudulent sales practices involving pre-paid phone cards because the issue was better handled by the federal regulatory authorities than the courts. I pointed out at that time Judge Weinstein's unusual tactic of summoning the federal government, in the presence of an assistant US Attorney, to explain the federal government's activities in combatting fraud in the pre-paid phone card industry.
Well, it's now official. Last week Judge Weinstein denied class certification and granted summary judgment in the case, holding that the superior method for dealing with the allegations of fraud in the litigation would be to have the Federal Trade Commission and Federal Communications Commission uniformly regulate the industry. See Ramirez v. Dollar Phone Corp., 2009 WL 3747215 (E.D.N,Y. Nov. 10, 2009). Judge Weinstein explained:
In general it is inappropriate to deny those wronged civilly a fallback court-supervised remedy when the administrative law segment of our justice system has neglected to provide an available superior form of protection. There are, however, instances where the litigation remedy is relatively so inferior as to warrant denying it altogether in the hope that administrative justice will prevail. This is such an instance.
The superior and sensible way to deal with this controversy, involving as it does a multibillion-dollar national and international communications industry that serves millions of people in every state, many of them poor and uneducated, is for the Federal Trade Commission ("FTC") or another federal agency with authority in this area to issue appropriate regulations. Certification is denied.
. . . [N]either the FTC nor any other governmental agency has comprehensively addressed the serious problems raised by the instant litigation. Plaintiff's allegations present issues better addressed and resolved on a uniform, national basis, rather than by piecemeal state-law-based litigation. While utilization of cy pres or the fluid recovery doctrine might provide a viable remedy with some benefit to the class and society, this is the unusual situation where the present action's limited patchwork repairs are not worth the costs or benefits of allowing the case to go forward.
Id. at *1 - *2.
Judge Weinstein observed that providing relief to the class would require using cy pres and fluid recovery remedies, and complained that these types of remedies have been rejected by appellate courts. It also would require injunctive relief, which "would engage the court in inappropriate detailed continuing supervision of the industry." Id. at *19.
Ramirez is an important precedent, but it is all the more important because its author historically has been such an advocate of using courts to solve social problems. Ramirez is an articulate recognition of the principle that regulation by litigation can create chaos and inconsistencies in the law that do not help consumers or industry. Where that is the case, the answer is not serial class actions, but rather uniform government action, and sometimes the wisest course of action is for a court to stay its hand.
