V. Pacific's Motion to Dismiss

A. Position of the Parties

Pacific's motion to dismiss was filed because of Pacific's belief that the filing of the fifth amended complaint on March 17, 1995 raised additional grounds for dismissal. Pacific's first ground as to why the complaint should be dismissed is because of the complainants' alleged abuse of process. Pacific argues that the Commission has the power to prevent abuse of process. Pacific contends that Westcom, in disregard of its obligation as a regulated public utility and of the privacy interests of the calling parties, abused the Commission's complaint process by intercepting calls and interrogating unsuspecting callers. Pacific also contends that the complainants have repeatedly filed amended complaints without an evidentiary basis for doing so, and that such filings were done only for the purpose of increasing their chances of receiving compensation.

Pacific's second argument is that the complainants lack standing to pursue the complaint because the Fifth Amended Complaint does not seek to remedy injuries to Westcom or to Sunde. Pacific also contends that the complainants cannot bring this action as a representative of customers because they have not been authorized to do so.

The third ground upon which Pacific urges dismissal is that neither Sunde nor Westcom are eligible for compensation pursuant to Pub. Util. Code § 1800 et seq. In addition, Pacific contends that the complainants do not qualify for compensation under the Advocates Trust Fund or a common fund because the complainants are motivated by their own economic interests to bring this action.

Pacific's fourth ground for dismissal is that the implementation rate design price structure adopted in D.94-09-065 eliminated any financial incentive for carriers to use exchange lines to terminate interexchange calls. During an IEC's peak periods, Pacific contends that it now costs more for an IEC to use a measured business line or a Centrex line for access than it does to use switched access.

The complainants' response to Pacific's motion to dismiss repeats many of the same arguments that were included by the complainants in their responses to the IECs' motions to dismiss, which need not be repeated here. Several new arguments were made as well.

One new argument that the complainants make is that they have not engaged in any abuse of process. Unlike the Victor v. Southern California Gas Company decision, D.88-03-080, which Pacific cited, the complainants argue they have only filed a single complaint, rather than a series of frivolous complaints. The complainants argue that the filing of amended complaints is an entirely proper procedure as authorized by former Rule 8.²³

Regarding Pacific's standing argument, the complainants contend that Westcom had been a customer of Pacific until 1993, and that Westcom is a customer of California services from other carriers. The complainants' response also states that it still provides some long distance service in California, and that the complainants have been authorized to bring this complaint by another long distance company that is interested in the prosecution of this case.²⁴

With respect to Pacific's argument that the complaint should be dismissed because the complainants are not eligible for compensation, the complainants contend that the complaint cannot be dismissed on such grounds. The complainants also assert that the citations of Pacific are not on point because of recent changes to the intervenor compensation program.

As for Pacific's argument that any financial incentive to use exchange lines to terminate interexchange calls has been eliminated, the complainants argue that there are still incentives to use business lines to originate and terminate interexchange carrier traffic.

Call America's response supports Pacific's motion to dismiss. Call America contends that the complainants' fourth and fifth amended complaints amount to an abuse of process because the complainants are only trying to posture their complaint in order to qualify for intervenor's fees, and the amended complaints do not contain any new allegations or information. Call America asserts that Pacific's argument that the complainants are ineligible for compensation demonstrates that the complainants lack standing to pursue the complaint.

Call America also reiterates that Pacific's motion to dismiss should be granted because the complainants' intercepted and invaded the privacy of third parties, and because both Westcom and Sunde lack standing to bring the complaint.

Execuline et al.'s response also supports Pacific's motion to dismiss. Their response argues that the complainants' filing of numerous amended complaints was without sufficient justification and amounts to an abuse of process which warrants dismissal of the complaint.

B. Discussion

Several of the IECs filed a motion on July 31, 1995 denominated: "Motion Of Interexchange Carriers To Supplement The Record With Newly Discovered Information, In Support Of Pacific Bell's Motion To Dismiss For Abuse Of The Commission's Processes." The additional information that was attached to the IECs' motion was a July 26, 1995 Press Release from the United States Attorney for the Eastern District of California announcing that Sunde had been charged in a federal criminal complaint with "mail fraud and blackmail in connection with an attempt to extort money from the owner of a small California telephone company." In addition, the motion included the arrest warrant, the criminal complaint, and the affidavit in support of the complaint. The IECs contend that the statements in the affidavit demonstrate that Sunde is flagrantly abusing the Commission's processes for private gain.²⁵ No opposition to this motion was filed.

Since the statements contained in the affidavit have a bearing on Pacific's abuse of process argument, we will grant the IECs' motion of July 31, 1995 to supplement the record. As discussed later in this decision, we also take official notice of Sunde's plea of guilty in this federal criminal case.

Many of the issues raised by Pacific's abuse of process argument have already been addressed in the earlier discussion regarding the IECs' motions to dismiss. We incorporate that discussion in this section by reference. There are also several other arguments that the defendants and the complainants have raised which need to be addressed.

One issue is whether the filing of numerous amendments by the complainants amounts to an abuse of process.

The complainants' argument that amendments are permitted by former Rule 8 overlooks the fact that amendments submitted after the scheduled hearing date may only be filed and served as permitted or directed by the ALJ. Although no evidentiary hearings were scheduled in this proceeding, Westcom and Sunde filed one amendment and six amended complaints.

The effect of an amended complaint is that it supersedes a previously filed complaint. (Rule 2.6 (a); Witkin, California Procedure, 4th Ed., Pleading § 1119, p. 575.) However, if amended pleadings are allowed to automatically supersede a prior pleading, disruptions to the management of a proceeding can easily result. It should be left up to the Commission or the ALJ to decide whether the addition and then subsequent deletion of a complainant or defendant should be permitted, or if an amendment containing new allegations should be allowed. (See 6 CPUC2d 299, 308; 72 CPUC 90, 92.)²⁶

The complainants' frequent use of amended pleadings is of concern to us. That process has led to the naming of Sunde as a complainant in the fourth and fifth amended complaints.²⁷ Numerous pleadings and correspondence regarding Sunde's status and his eligibility for compensation have been filed in this proceeding and at the California Supreme Court. (See March 24, 1995 ALJ Ruling, pp. 3-6; 54 CPUC2d at 260-261.) However, in Westcom's sixth amended complaint, Westcom seeks to remove Sunde as one of the named complainants.

The Commission and other parties have spent considerable time and resources on the issues of whether Sunde is a proper party to this proceeding, and whether he should be able to claim intervenor compensation. Yet, Sunde has decided after the Commission and other parties have spent significant resources addressing these issues at the Commission and at the California Supreme Court, that he should no longer be named as a complainant.²⁸

We shall permit the filing of the sixth amended complaint removing Sunde as a named complainant pursuant to Rule 8(a)(1). We also conclude that Westcom and Sunde are abusing the processes of this Commission, and possibly those of the California Supreme Court, given the inclusion and subsequent removal of Sunde's name both in Westcom's Amended Complaint and in its notices of intent to claim intervenor compensation. Westcom's gaming of Sunde's status for the purpose of seeking relief at the Supreme Court, and for intervenor compensation, are disruptive and interfere with the orderly administration of the Commission's processes.

As for Pacific's argument that the complainants are not eligible for compensation under Pub. Util. Code § 1800 et seq., the Advocates Trust Fund, or a common fund, those issues are discussed later in this decision. Whether or not the complainants are eligible for compensation, however, is not a ground for dismissal of the complaint. As discussed above, the complainants' repeated amendments and posturing at both the Commission and at the Supreme Court over the complainants' eligibility for compensation constitutes an abuse of process.

The next issue is Sunde's federal criminal prosecution. We take official notice that Sunde pled guilty on July 1, 1996 in the United States District Court for the Eastern District of California in a criminal proceeding, Case Number MAG 95-277. According to the Press Release issued on July 1, 1996 by the United States Attorney's office for the Eastern District:²⁹

"SUNDE ... pleaded guilty in federal court in Sacramento today to one felony count of mailing a threatening communication with intent to extort money from the owner of a small California telephone company."

According to the September 27, 1996 Press Release of the United States Attorney's office:

"SUNDE ... was sentenced today in Sacramento by U.S. District Court Judge Edward J. Garcia to five months in prison, to be followed by a one year term of supervised release including five months in a halfway house, and a $10,000 fine, in connection with SUNDE's effort to extort money from the owner of a small California telephone company."

The underlying criminal complaint alleged that on or about June 7 and June 24, 1995, Sunde :

"...devised a scheme and artifice to defraud and to obtain money by false pretenses, knowingly caused mail matter to be delivered through the United States mail for the purpose of executing the scheme; and

"On or about July 5, 1995 in Placer County in the Eastern District of California, defendant did demand money in consideration for not informing against a violation of United States law.

"In violation of Title 18 United States Code, Section(s) 1341 and 873."

The information contained in the affidavit supporting the criminal complaint in federal court against Sunde, and his subsequent guilty plea, establishes a willingness on the part of Sunde to engage in protracted litigation before the Commission as a means of obtaining private gain through a threat of litigation. His conviction only reinforces our conclusion that the Commission's processes have been abused by the complainants.

In light of our conclusions about the complainants' abuse of process, there is no need to address the issue of the standing of the complainants to pursue this complaint. We note, however, that the complainants' argument that they have been authorized by Coachella to represent its interest in this proceeding is not a viable one. Although Exhibit 3 of the complainants' response to Pacific's motion to dismiss appears to authorize Sunde to represent Coachella's interest in this proceeding, no petition to intervene in this complaint proceeding was ever filed by Coachella as required by Rule 53.

The other issue is Pacific's argument that the complaint should be dismissed because there is no economic incentive for IECs to use exchange lines rather than switched access to carry interexchange traffic. This argument is more in the nature of a defense to the complaint rather than a basis as to why the complaint should be dismissed.

Based upon our earlier discussion regarding the granting of the IECs' motions to dismiss, and the abuse of process discussion raised by Pacific, we conclude that dismissal of the complaint with prejudice, as sought by Pacific's motion, should be granted.

²³ Former Rule 8 is now found in Rule 2.6 of the Commission's rules.

²⁴ In the complainants' response to Pacific's motion to dismiss, the complainants assert that Coachella Valley Communications, Inc. (Coachella) has authorized the complainants to pursue this action on Coachella's behalf as shown in Exhibit 3 of the complainants' response.

²⁵ The affidavit of Postal Inspector Pedro Colon in support of the criminal complaint includes several references to instances where Sunde allegedly threatened to file a complaint against telephone resellers at the Commission, with the courts, and with the Internal Revenue Service (IRS) unless he received "payoffs in exchange for not turning them into the IRS and not filing complaints against them in court and before the CPUC." (July 31, 1995 Motion, Affidavit, p. 5.)

²⁶ Our procedure regarding amendment of pleadings is very similar to the procedure provided for in Code of Civil Procedure § 473.

²⁷ It appears that Sunde may have been included as a complainant for the sole purpose of enabling Sunde, since Westcom was not represented by counsel, to file a Petition for a Writ of Mandamus (Petition) in pro per with the California Supreme Court in SO44421. Sunde was added as a complainant when the fourth amended complaint was filed on December 28, 1994. Sunde's Petition was filed with the Supreme Court on or about January 19, 1995. (ALJ Ruling, March 24, 1995, p. 4, fn. 4; See SO44421: Call America's "Memorandum of Points and Authorities In Opposition To Petition For Writ Of Mandamus," p. 1, fn. 1; "Verified Answer Of Express Tel, Execuline of Sacramento, Inc. and Pac-West Telecom, Inc. To The Verified Petition For A Writ Of Mandamus Of J. Michael Sunde," p. 2, fn. 1, p. 9, fn. 20, pp. 12-13, fn. 25; and CPUC's "Opposition Of Respondent To Petition For Writ Of Mandamus," pp. 1-2, 8.)

²⁸ As noted at page 5 of the March 24, 1995 ALJ Ruling, an amended request adding Sunde's name for a finding of eligibility for intervenor compensation was filed on or about February 16, 1995. However in Sunde's March 6, 1995 letter to the California Supreme Court, he suggested that the amended request of February 16, 1995 be withdrawn. On or about June 22, 1995, Westcom filed an "Amended Notice Of Intent To Claim Compensation." That amended notice deleted Sunde's name from the request for a finding of eligibility. Pacific moved to strike the amended notice on July 5, 1995, and Westcom opposed the motion in its response filed on July 12, 1995. On July 14, 1995, Call America filed a response in support of Pacific's motion. Pacific's motion should be granted because allegations have been made that Sunde should be considered the alter ego of Westcom for purposes of determining whether Westcom and Sunde are eligible for an award of compensation. Given the allegations contained in the amended complaints and in the other related pleadings regarding the eligibility of Westcom and Sunde for compensation, Pacific's motion to strike the June 22, 1995 Amended Notice Of Intent To Claim Compensation is granted. We note that this above-mentioned chronology is yet another example of Westcom's and Sunde's proclivity to change course while at the same time causing the Commission staff and other parties to incur substantial time and costs to sort out the position of the complainants.

²⁹ A copy of the July 1, 1996 press release was transmitted along with a cover letter to the ALJ by one of the defendants' counsel. A copy of the letter and the press release was also sent to Sunde. In a July 8, 1996 letter to the ALJ, Sunde responded that his conduct in the federal criminal case was "unrelated to this case, [and] provides no basis for dismissal."