BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Investigation on the Commission's own motion into the operations, practices, and conduct of Coleman Enterprises, Inc. ("Coleman") U-5891-C, doing business as Local Long Distance; Daniel Coleman, an individual, President, Chief Executive Officer and Director of Coleman; and QAI, Inc. U-5606-C, to determine whether they have violated the laws, rules, and regulations governing the manner in which California consumers are switched from one long distance carrier to another.

Investigation 99-12-001 (Filed December 2, 1999)

ADMINISTRATIVE LAW JUDGE'S RULING DEFERRING CONSIDERATION OF DANIEL COLEMAN'S MOTION TO QUASH PERSONAL SERVICE WHILE THE COMMISSION IS CONSIDERING A SETTLEMENT PROPOSAL

This ruling is issued in response to a motion filed on January 26, 2000 jointly by the Commission's Consumer Services Division (CSD), respondents Coleman Enterprises, Inc. (CEI) and Daniel Coleman (Coleman), and interested parties American Cyber Corporation and Small Business Billing, Inc. (collectively, the "moving parties"). In the Joint Motion, the moving parties request that Coleman's pending motion to quash personal service upon him be taken off calendar while the Commission decides whether to approve a partial settlement of this proceeding that the moving parties have agreed to in principle. The Joint Motion also asks for a ruling stating that Coleman's participation in the settlement approval process will not be deemed to constitute a general appearance, or a waiver of the objections to in personam jurisdiction set forth in his January 11, 2000 motion to quash service, in the event the Commission fails to approve the proposed settlement. ¹ The Joint Motion states that if the Commission approves the partial settlement, then "Coleman will accede to the Commission's jurisdiction."

Respondent QAI, Inc. (QAI) is not a party to the settlement that has been reached in principle, and it opposes the Joint Motion. QAI argues that by negotiating with counsel for CSD and CEI about a settlement and then by participating in the filing of the Joint Motion, Coleman has made a general appearance in this action and has waived his objections to the Commission's exercise of personal jurisdiction over him.

For the reasons set forth below, I have concluded that the Joint Motion should be granted, that Coleman has not made a general appearance in this proceeding, that he can participate in the settlement process without waiving his objections to in personam jurisdiction, and that in the event the Commission rejects the proposed settlement, then Coleman may renew his objections to personal jurisdiction.

Background

As the moving parties have pointed out, two circumstances make this proceeding and the instant motion unusual. First, the moving parties have been strongly encouraged by both the Assigned Commissioner and the undersigned to explore a prompt settlement of this case. At the time the OII was issued in December 1999, enforcement proceedings had been brought against CEI in several states, and the FCC had issued a ruling proposing to fine CEI $1.12 million because of slamming and cramming tactics nearly identical to those alleged in the OII.² Thus, as the undersigned noted at the prehearing conference (PHC) held on January 12, 2000, this is a proceeding in which the case for liability appears strong. On the other hand, the large number of prior enforcement proceedings (and the costs of defending them) make it likely that the amount available from CEI for restitution of California customers is smaller than it otherwise would be. (PHC Transcript, pp. 9-10.)

The second circumstance making this case unusual is, of course, that Daniel Coleman has strongly objected to the Commission's exercise of personal jurisdiction over him. Mr. Coleman's counsel made it clear in a January 6, 2000 letter that he intended to raise the personal jurisdiction issue, and he filed a motion to quash service on January 11. At the PHC held on January 12, Coleman's attorney clearly stated that he was entering a special appearance -- as authorized by Rule 45(c)(2) of the Rules of Practice and Procedure -- solely for the purpose of contesting the Commission's exercise of personal jurisdiction over Mr. Coleman. The undersigned ruled that the special appearance had been properly made.