The Decision Denying QAI's Motion To Dismiss and the Settlement Agreement with QAI
On April 17, 2000, QAI requested and received the first of several extensions of time for filing comments on the March 16 settlement agreement. On June 8, 2000, while one of these extensions was in effect, the Commission issued D.00-06-037, which denied QAI's January 19 motion to dismiss it as a respondent from the proceeding. In D.00-06-037, the Commission concluded that the facts set forth in the OII (and in the CSD declarations that resulted in issuance of the OII) were sufficient to require a hearing on the question of whether CEI had been the agent of QAI at the time of the alleged slamming and cramming. D.00-06-037 also concluded that a hearing was necessary on the question of whether QAI and CEI had been engaged in a joint venture to offer telecommunications services in California. The decision concluded that because a hearing was necessary on these issues, there had been good cause to name QAI as a respondent in the proceeding.
On July 13, 2000, QAI and CSD filed a joint motion seeking approval of a settlement agreement between them.7 The full text of the QAI-CSD settlement agreement, which is dated June 30, 2000, is attached to this decision as Appendix B.8 The agreement provides that in addition to contributing $200,000 toward restitution for CEI's customers,9 QAI will pay $25,850 for the purpose of hiring Gilardi & Co. LLC (Gilardi), an independent legal claims administrator that will handle claims processing for, and restitution payments to, the CEI customers who were slammed or crammed. (App. B, ¶¶ 4-5.)
Under the June 30 settlement agreement, QAI has also agreed to modify a number of its business practices that were called into question by the OII. First, because of issues about the allegedly misleading verification services it provided,10 QAI has agreed to require all third-party verifiers working on its behalf to ask consumers a stand-alone question whether the consumer is authorizing QAI to be the consumer's long distance (or local toll) service provider. (Id. ¶ 11.) Second, because the OII questioned QAI's practice of marketing its long distance product by emphasizing that the customer would receive a consolidated bill for both local and long distance service, QAI has agreed to cease emphasizing this feature and to market its products based on price or services other than combined billing service. (Id. ¶ 12.)
The June 30 settlement agreement also provides that to the extent feasible, QAI will restructure its existing and future contracts with resellers to address prospectively the concerns raised by the OII about the degree of control exerted by QAI over CEI. Specifically, QAI has agreed to modify its reseller agreements to (1) specify that the reseller is QAI's customer and not a marketer, and that the reseller is the service provider with respect to end-users, (2) make clear that QAI is merely a service provider to the resellers, with no relationship to the end-users, (3) require the reseller to be solely responsible for end-user solicitation, third-party verification, service requests and customer service, (4) require the reseller to be solely liable for amounts it cannot collect from end-users and billing adjustments it grants to end-users, (5) eliminate QAI's "ownership" of end-users solicited by the reseller (except for security interests in receivables owed to the resellers), (6) permit resellers to change the underlying carrier used to provision the end-user's service, and (7) require resellers to obtain proper authorization for all end-user Automatic Number Identifiers submitted to QAI for activation. (Id. ¶ 10.)
Like the March 16 settlement agreement with CEI and Daniel Coleman, the agreement between QAI and CSD provides for a suspended fine. The amount of this fine is $300,000, and it would be suspended for a period of three years. If, at the end of that time, CSD has not moved to lift the suspension and impose the fine for non-performance of the settlement agreement's terms, the fine would be vacated. (Id. ¶¶ 15-16.)
7 As part of the QAI-CSD settlement agreement, QAI waived its right to file comments on the March 16 motion and settlement agreement. In the joint motion to approve its settlement with CSD, QAI states that while it does not oppose paragraphs 1-28 of the March 16 settlement agreement, it does not agree with the factual representations made by CEI in that agreement. (QAI-CSD Joint Motion, p. 2.) 8 As in the March 16 agreement, the parties' undertakings are set forth in numbered paragraphs that follow the recitals, and the references in this decision are to those numbered paragraphs. 9 Paragraph 6 of Appendix B requires QAI to pay the $200,000 intended for restitution "within seven calendar days of signing this Agreement." 10 As to the verification practices put at issue by the OII, see D.00-06-037, mimeo. at 16-18.
