Joint Motion to Approve the Settlement

In their joint motion to approve the settlement agreement, the parties argue that they have satisfied each of the elements required for approval by Rule 51.1(e); viz,. that the settlement be reasonable in light of the whole record, consistent with law, and in the public interest.

With respect to reasonableness, the parties rely on the statement in D.00-09-034 that "the Commission has held that a proposed settlement is reasonable if it saves the Commission significant expenses and use of its resources, when compared to the risk, expense, complexity and likely duration of further proceedings." Conservation of the Commission's resources has been achieved here, the moving parties argue, because in addition to yielding payments of $340,000 and avoiding a week of hearings, the settlement obviates the need for numerous depositions involving the 6,000 consumer complaints at issue. Moreover, the motion continues, "another factor [favoring settlement is] the age of the alleged violations in question, which occurred from 1996 to 1998. Ensuring the availability four years later in 2001 of these consumer witnesses and their supporting documents would have been challenging and time consuming." (Joint Motion, p. 4.)

On the issue of consistency with law, the joint motion notes that while Sections 2107 and 2108 provide for substantial fines (ranging from $500 to $20,000 per day in the case of continuing violations), the Commission has held that "settlement payments are made in compromise and in lieu of the penalty amounts specified in Sections 2107-2108." (Id. at p. 6.) Since the proposed penalty of $136,000 is substantial (representing 40 percent of the total amount respondents are paying), legal requirements are clearly met, according to the moving parties.

Finally, on the issue of the public interest, the moving parties contend that the settlement agreement satisfies the tests set forth in D.00-12-050, in which the Commission recently approved a settlement with Coleman Enterprises, Inc. (CEI) arising out of slamming practices very similar to those alleged here. According to the moving parties, D.00-12-050 holds that "the public interest in telecommunications enforcement proceedings is served when customer restitution is achieved, the alleged improper practices and operations cease, and the telecommunications market is free[d] from a source of unfair competition." (Id. at 5.) The joint motion argues that those tests are satisfied here because (1) each eligible consumer of the Gershenson Group companies will receive restitution of about $25.00, an amount "commensurate with other settlements" the Commission has approved, (2) the companies will be required to surrender their CPCNs, not do business in California for five years, and pay their customers' costs of switching to new service providers, and (3) the entire process will be overseen by Gilardi, a well-respected legal claims administrator that also handled the CEI settlement.