The Ruling on the Personal Jurisdiction Issues Raised By Daniel Coleman and the Settlement Agreement With CEI, Coleman and the Other Individual Respondents
On January 21, 2000, the attorneys for CSD, CEI and Daniel Coleman (but not QAI) informed the ALJ that they had reached a settlement in principle. In view of this situation, they agreed that Daniel Coleman's motion to quash service of process should be taken off calendar. They also sought assurances that by participating in the settlement process, Daniel Coleman (1) would not be deemed to have made a general appearance in the proceeding, and (2) would not be deemed to have waived his objections to Commission exercise of in personam jurisdiction in the event the partial settlement was rejected. On January 26, 2000, the attorneys filed a formal motion requesting such relief. On February 10, 2000, QAI filed a response to the January 26 motion, urging that it be denied on the ground that Mr. Coleman's limited participation in the proceeding amounted to a general appearance.
On February 15, 2000, the ALJ issued a ruling that granted the January 26 motion.3 Relying on the Commission's authority to fashion its own procedural rules, as well as on cases such as Ikerd v. Warren T. Merrill & Sons, 9 Cal.App. 4th 1833 (1992), the ALJ concluded that "it is an appropriate exercise of Commission authority to allow a respondent who is indispensable to a settlement (as a practical matter), and who has objected to the Commission's exercise of personal jurisdiction over him, to participate in settlement discussions without thereby waiving his jurisdictional objections." (February 15 Ruling, mimeo. at 8.)
On March 16, 2000, all parties except QAI filed a joint motion seeking Commission approval of a settlement agreement they had reached. The full text of the settlement agreement is attached to this decision as Appendix A. 4
The settlement agreement contains several key points. First, CEI, ACC and SBBI (collectively referred to hereinafter as "CEI and its affiliates") agree to relinquish their CPCNs to operate in California, and to cease doing business within the State for a period of five years. (App. A, ¶¶ 1-2.) 5 Second, CEI agrees
to pay $45,000, and Daniel Coleman up to one-half of the net proceeds on a $180,000 promissory note payable to him, for the purpose of making restitution to CEI customers who have been slammed or crammed.6 Third, CEI and Daniel Coleman agree to cooperate with CSD's continuing investigation of QAI, and Daniel Coleman agrees to make himself available for a deposition in Minnesota if CSD requests it. (Id., ¶¶ 10-11.) Finally, the agreement provides for a suspended fine of $500,000, which CSD can move to collect if there is a breach in carrying out any of the terms of the settlement within five years after the Commission's decision approving the settlement. If CSD does not move to collect the fine within that five-year period, then the fine is vacated. (Id., ¶¶ 12-13.)
3 See Administrative Law Judge's Ruling Deferring Consideration of Daniel Coleman's Motion To Quash Personal Service While the Commission Is Considering A Settlement Proposal, issued February 15, 2000 (February 15 Ruling). 4 The parties' undertakings in the March 16 settlement agreement are set forth in numbered paragraphs, which follow six pages of recitals. The references in this decision are to these numbered paragraphs. 5 With respect to CEI's agreement to relinquish its CPCN, it should be noted that the settlement agreement does allow CEI and its affiliates to continue serving California customers for up to 60 days after Commission approval of the settlement agreement. (App. A, ¶ 3.) The purpose of this grace period, which is referred to in the March 16 settlement agreement as the "Transition Period," is to allow time for CEI's customers to be notified that they must arrange for a new long-distance carrier. As part of the relinquishment of CPCNs, CEI and its affiliates, and Daniel Coleman and the other individual respondents, have agreed that if any one of these companies or any other company in which any of the individual respondents has a 10% or greater ownership interest, applies at the end of the five year period for new authority to do business in California, that applicant will have to disclose its involvement in this OII, and will have to demonstrate that "full restitution" has been made to CEI's California customers. (Id., ¶ 6.) The agreement provides that unless the Commission sets a lower sum, "full restitution" shall be defined as $213,150, or $25 for each of 8,526 customers slammed by CEI. (Id., ¶ 7.) 6 CEI paid its $45,000 share of the restitution fund "concurrent[ly] with signing this Agreement." (App. A, ¶ 8.) The proceeds from the promissory note that Daniel Coleman is obliged to contribute are due "within 20 days of the date of any such partial or full recovery" by Mr. Coleman. (Id., ¶ 9.) The March 16 settlement agreement provides that if the customer restitution process is complete by the time Daniel Coleman collects on the $180,000 promissory note, then the one-half share of the net proceeds he is obliged to contribute shall be paid into the General Fund. (Id.)
