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To Arbitrate or Not — JPay Can’t Have it Both Ways

By Wesley M. Griffith of Tycko & Zavareei LLP and Karla Gilbride of Public Justice

For the past seven years, Tycko & Zavareei, Public Justice, and Morgan & Morgan have been litigating a putative class action against JPay, a privately-run, for-profit prison service company, before the American Arbitration Association. The arbitration focuses on excessive fees charged by JPay on money transfers made from friends and family to inmates.

The arbitration was brought by two JPay customers on behalf of a class of consumers who paid fees to JPay in order to transfer money to incarcerated people. As detailed in claimants’ allegations, while traditional paper money orders cost consumers only a few dollars (or less) when sent through the U.S. Post Office, once JPay contracts with a prison, it charges consumers fees that are many times that for functionally similar electronic services. Claimants contend that JPay is only able to secure such lucrative prison contracts because it pays kickbacks to the prisons. JPay contracts with dozens of prisons throughout the United States.

While JPay’s terms of service purport to require arbitration, for the past seven years, JPay has done everything it can to avoid arbitrating claimants’ case because it does not want claimants to be able to band together with others and pursue their claims as a class action. Having tried to get the Southern District of Florida, the Eleventh Circuit Court of Appeals, and the U.S. Supreme Court to stop the arbitration and having lost at every turn, JPay is now asking a Texas court to divest the arbitrators of their jurisdiction.

Claimants have asked the Texas court to dismiss that challenge to the arbitration, arguing, among other things, that JPay is not entitled to a fourth attempt at avoiding its own arbitration agreement. Claimants asked the Texas court to permit the putative consumer class to proceed with their claims in arbitration. Copies of claimants’ filings can be seen here and here.

JPay is one of a growing number of companies who attempt to use arbitration clauses not as a true alternative dispute mechanism, but as a wholesale bar on consumer remedies.

“These types of tactics are particularly problematic for marginalized consumers where the costs and the complexities of navigating these supposed ADR clauses can prevent the impacted consumers from ever raising their potential claims,” said Wesley M. Griffith, an attorney with Tycko & Zavareei.

“JPay drafted its terms of service agreement to provide for disputes with consumers to be handled in arbitration,” said Karla Gilbride, co-director of Public Justice’s Access to Justice Project. “Public Justice often challenges contracts like these where consumers don’t have any real choice or where the terms are unfair and one-sided. But in this case, our clients chose to bring their claims against JPay in arbitration as the contract provides. Ever since they filed their claims though, JPay has been trying everything it can think of to get out of its own contract and change the rules under which this case will be decided. JPay can’t have it both ways—it can’t force its customers out of court and into arbitration but then run back to court when it doesn’t like the decisions the private arbitrators are making.”

Tycko & Zavareei, Public Justice, and Morgan & Morgan all have broad experience litigating these issues, and are dedicated to ensuring that consumers have the opportunity to hold companies accountable for their actions.

Claimants are represented by Andrea Gold, David Lawler, Wes Griffith, and Leora Friedman of Tycko & Zavareei, Karla Gilbride, Shelby 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. Ellen Presby of Ferrer, Poirot, Wansbrough, Feller, Daniel, is also counsel for claimants in the Texas action.

The case is JPay LLC v. Shalanda Houston, Case No.: 3:23-cv-00165 in the United States District Court for the Northern District of Texas.

Please be advised that this article may be considered attorney advertising in certain jurisdictions. Past results do not guarantee future results.

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