Cynthia Kobel and Shalanda Houston v. JPay LLC

Cynthia Kobel and Shalanda Houston v. JPay LLC

Family members or friends of people detained in jail or prison  often need to send money to prisoners to pay for their basic needs such as toothpaste, toilet paper, and clothes. Historically, this would cost family members and friends nothing more than the cost of a stamp and the value of the money order when sending a paper money order to the prison or jail. However, within the last decade, privately-run, for-profit prison service companies like JPay have taken control of money transfers to incarcerated people, charging exorbitant prices for electronic money transfers.

And JPay’s Terms of Service require its customers to bring any disputes with JPay in private arbitration rather than in court. So in 2015, two women who had sent money to incarcerated people using JPay—Cynthia Kobel and Shalanda Houston—filed a demand with the American Arbitration Association, seeking to represent a class of people charged fees for JPay’s electronic money transfers.

The arbitration demand stated that as of October 2015, JPay had control of money transfers in 70 percent of prison systems throughout the country, with more than 1.7 million inmates and their friends and families being held financially captive by JPay. The demand alleges that rather than paying for the cost of a stamp to send an inmate $20, JPay charges family members and friends a fee as high as 45 percent of the amount transferred. These fees fall, in large part, on the shoulders of families already struggling to survive in the absence of a jailed family member. The claimants allege that JPay is only able to secure such lucrative prison contracts because it pays kickbacks to the prisons, kickbacks that are not disclosed to the family and friends who are pressured into using JPay’s services and who in many cases have no other way to send money to their loved ones.

For the last seven years, Tycko & ZavareeiPublic Justice, and Morgan & Morgan have been seeking to pursue these class claims in arbitration, but JPay has done everything it can to avoid arbitrating the claimants’ case despite its terms of service requiring arbitration because it doesn’t want claimants to be able to band together with others and pursue their claims as a class action. JPay has gone before the Southern District of Florida, the Eleventh Circuit Court of Appeals, and even the U.S. Supreme Court in its repeated attempts to stop the arbitration, and have been turned down each time.

Next, JPay changed its Terms of Service to call for jurisdiction in Texas, and in January of 2023, JPay invoked those new Terms of Service and asked a Texas court to divest the arbitrators of their jurisdiction. On February 28, 2023, claimants filed their motion to dismiss JPay’s challenge to the arbitration, arguing, among other things, that JPay is not entitled to a fourth attempt at avoiding its own arbitration agreement. Claimants have asked the Texas court to permit the putative consumer class to proceed with their claims in arbitration.

This case highlights how companies like JPay attempt to use arbitration clauses not as a true alternative dispute mechanism but as a barrier to consumer remedies and relief.

Read more about the case and JPay’s efforts to avoid its own contract in this recent blog.

Claimants are represented by Andrea GoldDavid LawlerWes Griffith, and Leora Friedman of Tycko & Zavareei, Karla GilbrideShelby Leighton, and Ellen Noble of Public Justice, and Kenya Reddy and Jennifer Winn of Morgan & Morgan. The team is also supported by paralegal Aaron McReynolds of Tycko & Zavareei and legal assistant Yvonne Stewart of Public Justice. Ellen Presby of Ferrer, Poirot, Wansbrough, Feller, Daniel, is also counsel for claimants in the Texas action.

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