3. The Settlements

Initially, we note that each Settlement Agreement was preceded by a properly noticed settlement conference pursuant to Rule 12.1 of the Commission's Rules of Practice and Procedure (Rules), and the fact that the Settlement Agreements are unopposed generally supports their adoption.

3.1. Standard of Review

The Commission's Rules of Practice and Procedure set a standard for review of any settlement:

12.1(d) The Commission will not approve settlements, whether contested or uncontested, unless the settlement is reasonable in light of the whole record, consistent with the law, and in the public interest.

We find all three Settlement Agreements meet the criteria for approval pursuant to Rule 12.1(d), and discuss each of these three criteria in relation to each settlement in detail below.

Intella II, an S-corporation organized under the laws of Texas with its principal place of business in San Diego, California, principally provides conference calling and voicemail services.29 The company's President, Vice-President, and Treasurer is Paul Cohen; Robert Taylor is the corporate Secretary. CSGI and Intella II co-registered eight payphone lines at the San Diego business address where Intella II connected ADADs to each payphone line in April 2007.30

The Staff Report found that these lines generated DAC revenue between April and December 2007 which was included in a $5,322.29 check for DAC revenue issued to CSGI by the billing aggregator, G-Five.31 In the Settlement Agreement, Intella agreed that in 2007 and 2008, it programmed the ADADs to automatically dial toll-free numbers sequentially in order to collect DAC for successfully completed toll-free calls dialed from their payphones.

TNT is a business owned and operated by John and Norma Tomlinson in Inglewood, California. The primary purpose of the business is undisclosed.32 TNT operated one payphone line at the Inglewood business address from July 27, 2007 to January 14, 2008 and connected an ADAD.33

The Staff Report found that TNT's payphone generated $4,661.39 in DAC revenue, of which $4,545.79 is currently held in escrow by G-Five.34 In the Settlement Agreement, TNT agreed that in 2007 and 2008, it programmed the ADAD to automatically dial toll-free numbers sequentially in order to collect the DAC.

As part of the Settlement Agreements, the Respondents each acknowledged that (1) anyone operating an ADAD must comply with §§ 2872-2875.5, (2) they failed to follow these requirements, (3) they will disconnect their payphone lines (if any are still connected), and (4) they will not operate payphone lines in the future.

In addition, TNT agreed to pay a penalty of $500.00, and Intella II agreed to pay a penalty of $1000.00, to the State of California General Fund within thirty days of the Commission's approval of the Settlement Agreement. TNT released its claims and/or rights to the $4,545.79 in DAC revenue currently held in escrow by G-Five. Intella II released its claims and/or rights to any portion of the $67,815.83 in DAC revenue currently held in escrow by G-Five for payphones owned solely or jointly with CSGI.

Limo Services is a California corporation owned and operated by Jose and Barbara Quezada with its principal office in San Jose, California (the same location as CSGI). Barbara Quezada is the Chief Executive Officer.35

The Staff Report found that Limo Services operated six payphone lines at the San Jose business address, two of which were co-registered with CSGI, and connected ADADs to each payphone line from August 20, 2007 to February 6, 2008. The Staff Report also stated that the four payphone lines operated only by Limo Services generated $6,002.10 in DAC revenue, currently held in escrow by G-Five, while the DAC revenue generated by the two co-registered payphones is included in CSGI's total DAC revenue.

In the Settlement Agreement, the parties agreed that the Quezadas acted in their individual capacities, rather than as Limo Services.36 Thus, the Settlement Agreement is between CPSD and the Quezadas and the parties jointly filed a motion to dismiss Limo Services, Inc. and substitute the Quezadas as individual respondents. The Quezadas have not otherwise disputed the allegations that, in 2007 and 2008, they programmed the ADADs to automatically dial toll-free numbers sequentially in order to collect DAC.

As part of the Settlement Agreement, the Quezadas each acknowledged that (1) anyone operating an ADAD must comply with §§ 2872-2875.5, (2) they failed to follow these requirements, (3) they will disconnect their payphone lines (if any are still connected), and (4) they will not operate payphone lines in the future. In addition, after providing documentation of financial hardship, they agreed to pay a penalty of $2,000 in three monthly installments of $666.66 to the State of California General Fund with the first payment due within thirty days of the Commission's approval of the Settlement Agreement.37 The Quezadas released their claims and/or rights to any portion of the DAC revenue currently held in escrow by G-Five for payphones owned solely or jointly with CSGI.

The Settlement Agreements are reasonable in light of the whole record. None of the settling Respondents challenge the basic accuracy of the facts as set forth in the Staff Report.38 The Settlement Agreements establish the essential facts of violation of §§ 2872-2875.5 by each Respondent, which are undisputed and supported by the record. The Settlement Agreements are also reasonable based on the year-long investigation by CPSD, and opportunities for each Respondent to offer objections or contrary information into the record. Instead, each repeatedly acknowledged the violations, but asserted ignorance of the law restricting use of ADADs.

The Settlement Agreements are also consistent with the law and precedent. They do not contravene any statute or Commission decision or rule. These Respondents do not contest the Commission's jurisdiction over their operations and accept that § 2871 et seq. requires anyone operating an ADAD to comply with the law, which they failed to do. The proposed fines are consistent with § 2876 authorizing the Commission to impose fines for violation of the ADAD rules.

Lastly, the proposed Settlement Agreements are in the public interest. They are consistent with Commission decisions on settlements, which express the strong public policy favoring settlement of disputes if they are fair and reasonable in light of the whole record.39 Approval will avoid the time, expense, and uncertainty of evidentiary hearings and further litigation.

For all of the foregoing reasons, we approve the three Settlement Agreements and grant the motion to substitute Jose and Barbara Quezada for Limo Services as Respondents and settling parties.

29 Staff Report at 11.

30 Joint Motion #1 at 3.

31 Staff Report at 14.

32 Joint Motion #1 at 2.

33 Ibid.

34 Staff Report at 13.

35 Staff Report at 12.

36 Joint Motion #2 at 3.

37 Joint Motion #2 at 4.

38 Joint Motion #1 at 4; Joint Motion #2 at 5.

39 See e.g., D.05-03-022 at 9.

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