Background

Procedural Background

We issued this Order Instituting Investigation (OII) to determine whether Starving Students and its major shareholder, Ethan Margalith, have 1) knowingly and willfully filed false reports that understate revenues; and 2) violated Commission rules and regulations by operating during periods of suspension; improperly denying claims; losing, stealing, or damaging goods; engaging in unprofessional conduct; and failing to comply with provisions of Maximum Rate Tariff 4 (Max Tariff 4) that govern carriers' interactions with consumers in providing services. CPSD investigated. The OII set hearings for two phases to permit CPSD to continue to investigate the operations of Respondents.

Shortly after this investigation issued, three named respondents, Abigail Margalith, Elizabeth Margalith, and Sanford Margalith, filed a motion to dismiss this investigation as to them and requested an expedited hearing. CPSD filed a response in support of the motion to dismiss after entering into stipulations with the moving respondents. CPSD resolved all issues with those respondents in the stipulations. In Decision (D.) 02-04-046, we dismissed Abigail Margalith, Elizabeth Margalith, and Sanford Margalith as respondents to this proceeding.

After narrowing the number of respondents to this proceeding, a prehearing conference (PHC) was held on April 19, 2002, and Phase I hearings were held on May 1, 2002. Opening and reply briefs were filed on May 23 and June 6, 2002, respectively. After Starving Students, Inc. filed a motion to strike CPSD's Phase I reply brief, a July 24, 2002 Administrative Law Judge (ALJ) ruling denied the motion to strike but accepted the motion and responsive pleading as supplemental briefing and deemed Phase I submitted on June 28, 2002. By an October 10, 2002 ALJ ruling, CPSD was ordered to file a Phase I Revised Summary of Audit Findings and supporting work papers by October 17, 2002. CPSD filed the Revised Summary of Audit Findings on January 24, 2003. On January 24, 2003, Starving Students sent a letter attaching a January 3, 2003 letter from the Internal Revenue Service (IRS) for the Commission's consideration.

A Phase II PHC was held on May 2, 2002, at the conclusion of Phase I hearings. Phase II hearings were held on September 16, 17, 18, 19, 20, and 23, 2002. Phase II opening and reply briefs were filed on November 1 and 18, 2002, respectively.

Factual Background

Starving Students is a licensed, statewide household goods carrier headquartered in Los Angeles, with 19 branch offices throughout the state. The Commission granted operating authority to Starving Students in January 1976. Starving Students is incorporated in California and operates nationwide. Starving Students has approximately 900 full-time employees nationwide and approximately 500 employees in California.

In 1992, the Commission issued Investigation (I.) 92-11-029 to investigate allegations of unlawful business practices by Starving Students, including failure to provide scheduled moving services, failure to provide competent and trained movers, and failure to respond to loss and damage claims. I.92-11-029 also alleged that Starving Students provided unlawful verbal estimates, misrepresented transportation and insurance charges, operated unsafe trucks, and unlawfully denied loss and damage claims because the customer did not note the damages at the time of delivery. In D.93-02-020, the Commission adopted a settlement agreement between Starving Students and staff that ordered a fine, a 30-day suspension, a two-year probation, settlement of pending loss and damage claims, a program of vehicle repair and maintenance, following an operational plan, not allowing unlicensed drivers and enrolling in the Department of Motor Vehicle's Pull Notice Program.

Allegations

CPSD alleges that Starving Students provided poor customer service in violation of Max Tariff 4, General Orders (GO) 100-M, 139-B, 142, and Pub. Util. Code §§ 5161, 5164, and 5241 in the following areas: failing to timely acknowledge and process consumers' claims for lost, stolen or damaged goods; improperly denying consumers' claims for failure to note lost or damaged goods at the time of delivery; failing to properly supervise and train its employees resulting in untrained and unqualified workers; failing to properly supervise and manage its employees and facilities resulting in items being stolen while in the custody of Starving Students and/or its agents and employees; providing illegal verbal estimates; charging more than the provided estimate without the customer-initiated Change Order for Services; failing to provide the required "Not to Exceed Price" on shipping documents; failing to issue the "Important Information for Persons Moving Household Goods" booklet; arriving hours late or failing to provide scheduled moving services at all; failing to honor selected valuation options; and soliciting tips through extortion or intimidation. CPSD contends that Starving Students failed to have proof of liability and workers' compensation insurance on file on three occasions. CPSD further contends that Starving Students underpaid license fees in 1998, 1999, and 2000, because Starving Students' quarterly statements for those years are false.