6. Disposition of Appeal
On April 15, 2005, CPSD and the Latino Issues Forum appealed the Presiding Officer's Decision (the POD) pursuant to Rule 8.2 of the Rules of Practice and Procedure. Clear World responded to the appeals on April 28, 2005.
The appeals for the most part reargue positions taken and rejected above. Primarily, they challenge the determination that CPSD did not prove by a preponderance of evidence that Clear World had engaged in widespread slamming of customers. CPSD states that it introduced evidence of 100,000 PIC disputes involving Clear World over a six-year period. (In fact, the evidence suggests that there were about 50,000 individual PIC disputes, since most PIC disputes include two complaints for a long distance switch and a local toll switch.) CPSD contends that the Commission has previously concluded that so large a number of PIC disputes "is sufficient evidence to support an inference of wide-spread unauthorized customer transfers." (Communication TeleSystems (1997) 72 CPUC2d 621, 633.) CPSD contends that a contrary finding in this case would change the Commission's policy and would make enforcement of slamming violations more difficult.
CPSD errs. The Commission has not changed its policy. What it required in Communication TeleSystems is exactly what it requires here - proof that the alleged violations occurred. A high incidence of PIC disputes supports an inference of slamming, but more is required to establish proof of slamming. In Communication TeleSystems, Commission staff produced evidence that the utility did not have verifications for 39,200 PIC disputes associated with a program that recaptured customers who had transferred to another long distance service. The utility's PIC dispute rate was found to be 10.84% above industry average. By contrast in this case, Clear World produced recorded verification and evidence of a confirming letter as to all of the PIC disputes examined at hearing. Clear World's PIC dispute rate, according to CPSD's witness, was about 2% above average.
More importantly, CPSD and Latino Issues Forum in their appeals simply disregard the evidence that tended to rebut their allegations. In doing so, they lose sight of the shifting burden of producing evidence on this issue and their role in presenting probative evidence when the burden has shifted back to them.
Here, CPSD had the burden of proof in this proceeding, and it had the initial burden of producing evidence to prove slamming. (See, e.g., Evidence Code § 550; Tusher v. Gabrielsen (1998) 68 Cal.App.4th 131.) With the introduction of the PIC records and the testimony of customers that their switch in service was unauthorized, CPSD met its burden. If no further evidence had been forthcoming, CPSD would have prevailed on the slamming issue. At this point, however, the burden of producing evidence shifted to respondents to disprove these claims. Unlike the Communication TeleSystems case (where verification of the switched service was lacking or incomplete), the respondents here presented a recorded verification in which each customer who testified confirmed his or her authorization to switch long distance service. Moreover, the evidence showed and CPSD acknowledged that each such customer received a "welcome to Clear World" letter that again confirmed the switch and invited the customer to call if he or she had questions.
With this rebuttal evidence by the respondents, the burden shifted back to CPSD and Latino Issues Forum. To meet this burden, they sought to show that the verifications were fraudulently obtained. That is, while the switch in service had in fact been authorized, the authorization was obtained through trickery and false promises. CPSD and Latino Issues Forum were unable to show fraudulent misrepresentations through the testimony of customers, most of whom had only vague recollections of their conversations with Clear World representatives. When they were unable through the customers' testimony to show fraud, CPSD and Latino Issues Forum asked the Commission to infer fraud because of the testimony of some Clear World telemarketers that they had overheard their colleagues make fraudulent statements during sales calls. There was, however, only the most attenuated and highly speculative link to be inferred between these largely uncorroborated hearsay allegations and the testimony of the customers produced by CPSD. As CPSD and Latino Issues Forum were instructed from the bench during the fifth day of hearing:
"There always has to be, in order to establish a probative fact, a link between one event and another event. It cannot be a situation in which we just suppose something happened just because somebody asserts it and because we have some evidence out there that in other particular situations people were doing things. That's too far a stretch." (Transcript, at 740-41.)
The POD does not contradict prior Commission decisions regarding PIC disputes. However, it does conclude, as did every party who testified on the subject, that while a PIC dispute may be evidence of a slam, it is not proof of a slam unless unchallenged or unless supported by other evidence. In contrast to the fact situation in Communication TeleSystems, the evidentiary value of PIC disputes here was refuted by contrary evidence.
Finally, as Clear World notes in its response to the appeals, CPSD failed to provide source documents verifying the number of PIC disputes lodged against Clear World. (Transcript, at 400-402.) The record, therefore, reflects CPSD's investigatory conclusions as to the PIC dispute rate, but it is silent as to the supporting data confirming those conclusions.
CPSD and Latino Issues Forum also claim error in the finding that much of the testimony of Clear World's former telemarketers was uncorroborated. They contend that the POD "applies a double standard" in requiring corroboration for the testimony of Latino telemarketers while not requiring corroboration for the testimony of two Clear World witnesses. (CPSD Appeal, at 1.) This observation misconstrues the law.
Most of the telemarketers' testimony dealt with statements in which the witnesses said that they overheard some of their colleagues make fraudulent claims during telephone sales calls. Such testimony is hearsay where it offers as truth the content of out-of-court statements of persons not presented for cross-examination. Subject to a number of exceptions, hearsay is inadmissible in civil courts because it cannot be cross-examined for accuracy. (Evidence Code § 1200.) While hearsay is admissible in our administrative hearings, it cannot be the basis for an evidentiary finding without corroboration where the truth of the out-of-court statements is at issue. (Gov. Code § 11513(d).) No such corroboration was offered here, although CPSD attempted to link the out-of-court statements to other evidence that it claimed was related to the statements in question. The POD found the claimed connections indirect and tenuous as evidence corroborating the truth of the out-of-court statements.
By contrast, the testimony of the Clear World witnesses was not hearsay. It was direct testimony, not subject to a rule of corroboration because the witnesses were available for cross-examination. CPSD and the Latino Issues Forum cross-examined the Clear World witnesses at length as to the truth of the matters they asserted. We reject the claim of error as to the hearsay testimony, and we admonish the appellants for suggesting a double standard where a cursory review of the rules of evidence would have refuted such a suggestion.
We find no merit in CPSD's claim that its staff reports and more than 400 exhibits and attachments were not considered as evidence. All purported facts set forth in the staff reports and exhibits were considered and were given evidentiary weight. Little or no weight was given to those documents with no established relevance to the issues in this proceeding or to those documents that constituted argument or speculation. (See transcript, at 1211: "Where there is not really evidence but argument, essentially argument, [we will note] the difference between what is argument and what has been submitted as purported fact.")
CPSD does not contest the POD's findings that respondents operated two reseller companies without CPCNs and acquired the assets of one of those companies without authorization. CPSD also does not contest the findings that it failed to prove cramming, that it failed to prove that respondents underpaid government surcharges, and that it failed to show noncompliance by respondents as to an audit requirement. CPSD appeals other findings of the POD, contending in particular that the failure of respondents to call Clear World's president, Michael Mancuso, to the stand was a "tacit admission" that he had made misrepresentations in prior testimony. (CPSD Appeal, at 28.) CPSD does not explain why, if this testimony was important to its case, it did not itself subpoena the witness to appear. As to the other areas of appeal, we believe that the POD adequately addresses the reasoning that underlies its conclusions, and no further analysis is required here.
Finally, CPSD criticizes the POD for failure to find the respondents unfit to operate a telecommunications company despite an earlier finding in D.03-02-066 that they were unfit to expand their service to include local exchange service. The POD in this case does not make a finding of unfitness for the simple reason that CPSD failed to prove it.
Part of Clear World's response to the appeals requires comment and correction. Clear World argues that the Commission, acting in an appeal function, is required to accept the factual findings of the hearing officer, stating:
"The basis of the Appeal is obvious. Plainly, CPSD objects to the factual findings made by the Trial Court and requests the Commission to reweigh the evidence and return a decision so that CPSD can prevail on every factual dispute. The Commission should be guided by the fundamental principle of law that trial courts decide questions of fact, and appellate bodies decide questions of law. Tupman v. Haberkern (1929) 208 Cal. 256."
Respondents misconstrue the authority of this Commission. While their claim may have merit in civil courts, it is inapplicable to the Commission, which is free to consider the record de novo and to adopt an alternate decision that amends, alters or reverses the POD. (Pub. Util. Code § 1701.2; see also Rule 8.2 of the Rules of Practice and Procedure.) It is the Commission, not the presiding officer, that is responsible for the final decision in this matter, although the Commission is somewhat restrained in the manner in which it may review the record. In adjudicatory cases, such as this one, Pub. Util. Code § 1701.2(a) requires the Commission, should it approve a decision different from that of the POD, to accompany it with a "written explanation of each of the changes made to the decision."
As a final matter, several typographical and other errors in the POD are noted by CPSD and acknowledged by Clear World, and those errors have been corrected where warranted.
