3. Preliminary Matters

3.1 November 19, 1993 Motion to Dismiss

On November 19, 1993, AMI filed a motion to dismiss the complaint on the grounds that the complaint failed to allege that AMI was engaged in conduct subject to regulation. AMI also urged dismissal on the grounds that the complaint failed to comply with that portion of Rule 10 which provides that "a complaint which does not allege that the matter has first been brought to the staff for informal resolution may be referred to the staff to attempt to resolve the matter informally." In addition, AMI requested denial of CVC's request for relief in the form of a temporary restraining order or preliminary injunction. Finally, AMI requested dismissal of CVC's claim for reparations, noting that the complaint did not allege that AMI had charged CVC anything within the meaning of Section 734, which governs reparations.5

The ALJ issued a ruling on October 25, 1994 that deferred consideration of AMI's motion to dismiss the complaint pending hearings. The ruling also: (1) determined that CVC had failed to demonstrate that it would likely prevail on the merits of the case, and on that basis denied CVC's request for preliminary relief; (2) denied AMI's motion to refer the dispute to the staff for informal resolution under Rule 10; (3) excluded CVC's request for reparations from the scope of hearings; and (4) resolved other procedural and ministerial matters.

We affirm the ALJ's ruling. With respect to the ruling's deferral of the motion to dismiss the complaint, we note that the Commission has declined to summarily dismiss a complaint even though, as here, it was inartfully drawn. (Dolphin Tours v. Pacifico Creative Service, Inc. et al. (1979), D.91084, 2 CPUC2d 565, 568-569). The Commission has also stated a preference for taking up motions to dismiss along with the underlying matter in a single decision after hearing. (TTT Inc. v. Pyramid Commodities, Inc., et al. (1988), D.88-08-031, mimeo., p. 5, 28 CPUC2d 610). As the Commission stated in Creighton J. Jones v. PT&T Co., (1977) 82 CPUC 90, complaint allegations that merely suggest or imply the violation of a Commission order can be sufficient for maintaining a complaint action in lieu of dismissal. Where it determined that a complainant had "raised some issues against certain defendants that merit more investigation instead of outright dismissal," the Commission proceeded to hear a complaint even though it had expressed reservations about the potential for abuse of the complaint process, and had recognized the severe negative impact of complaint proceedings on litigants' as well as on its own resources. (Westcom Long Distance, Inc. v. Pacific Bell, et al. (1994) D.94-04-082, 54 CPUC2d 244, 253 (Westcom).)

We make this affirmation while recognizing that there will be the occasional case where we eventually determine that it would have been preferable to dismiss the complaint upon motion made at the outset of the proceeding. In general, we seek to maintain a complaint process that is accessible to the public not only for customer complaints, but also for disputes among competitors. This generally means that we will continue to liberally construe complaints that present a plausible cause of action.⁶ Among other things, we will be open to considering credible allegations that a person or corporation is providing jurisdictional public utility services without first having obtained the requisite authority to do so.

There is of course a downside to this policy. Parties with an overzealous willingness to pursue their own interests with indifference to broad consumer and public interests may find added encouragement to take undue advantage of our process by filing harassing or otherwise unwarranted actions. We are aware that such actions can impose significant costs on defendants and the Commission itself, while the complainant who initiates such an action may incur relatively little cost or risk. Fortunately, instances of outright abuse of process occur infrequently in our experience. Our preferred course is not to retreat from our policy of maintaining an accessible process, but instead to maintain a vigilant watch for actions of those who would abuse our process, and to impose sanctions when instances of such abuse have been found.

We take up the substance of AMI's motion to dismiss in addressing the merits of the case. However, there is no basis for considering CVC's request for reparations. As we stated in Westcom, supra, "Section 734 makes clear that any reparations that may be due is between the serving public utility and its customer." (54 CPUC2d 244, 252.) CVC has neither alleged nor proven that it is an AMI customer, or that AMI has overcharged it for its services. We grant AMI's motion to dismiss CVC's request for reparations. Also, we will not consider CVC's request that we require Com Systems to locate, identify, and disconnect services used to transport AMI traffic, since Com Systems is not a party to this proceeding.

3.2 Supplemental Motion to Dismiss

On October 20, 1994 AMI filed a supplemental motion to dismiss in light of the Commission's October 12, 1994 order in Michael Murray et al. v. Communications Services, Stanford University and Pacific Bell (1994) D.94-10-032, 56 CPUC2d 583 (Murray v. Stanford). We address the significance of Murray v. Stanford for this proceeding in the discussion of the merits of the complaint.

3.3 Motion to Disqualify CVC's Representative

By motion filed on February 16, 1995, AMI asks that the Commission require CVC to participate in discovery and appear in hearings through a California-licensed attorney. Basically, AMI asks the Commission to disqualify CVC's representative J. Michael Sunde, who is not licensed to practice law in California, from representing CVC. In making this request, AMI relies on the grounds that, notwithstanding established Commission practice that allows participation by nonattorney representatives, Section 1706 requires that parties be represented by licensed attorneys.7

CVC finds nothing in the language of Section 1706 that would restrict Sunde's representation of CVC, and finds support for such representation from other sources. Among other things, CVC notes that the Commission's former Rule 4 required pleadings to be signed by either the attorney or representative of a party. Also, CVC observes that in Consumers Lobby Against Monopolies v. Public Utilities Commission (1979) 25 Cal.3d 891, 914 (Consumers Lobby), the Supreme Court took note of the fact that this Commission regularly allows participation by nonattorneys in a representative capacity.

The California Attorney General considered this issue in the August 5, 1997 Opinion of Daniel E. Lungren, Attorney General, No. 97-049 (AG Opinion). The AG Opinion, issued in response to a request by State Senator Charles M. Calderon, considered the following question:

"May an individual who is not a member of the State Bar of California represent a party, including the preparation of pleadings and the making of appearances, with respect to a formal proceeding before the California Public Utilities Commission?" (Id., p. 1.)

The AG Opinion answered this question in the affirmative after considering the central question of whether the language of Section 1706 means that a party may be heard in a formal hearing only in person or by attorney. The AG Opinion finds that taken literally, Section 1706 neither entitles nor prohibits representation by a nonattorney. It also recognizes that an expansive interpretation allowing representation by an unlicensed person would arguably violate the interpretive rule that the specification of particulars implies the exclusion of others. The AG Opinion nevertheless rejected the argument that nonattorneys cannot represent parties in Commission hearings for the following reasons:

1. Commission Powers. Pursuant to its "plenary power . . . to confer additional authority and jurisdiction upon the commission . . . " (Cal. Const., art. XII, Section 5), the Legislature has conferred on the Commission authority to "do all things, whether specifically designated in [the Public Utilities Act] or in addition thereto, which are necessary and convenient" in the supervision and regulation of every public utility. (Section 701, italics added.) Further, the Commission's powers have been liberally construed. (Consumers Lobby, supra, 25 Cal.3d 891, 905.) The AG Opinion concludes that "such considerations suggest that any legislative intent to restrict the power of the PUC would be expressly stated and not left to mere implication. Accordingly, while the PUC is constitutionally authorized `[s]ubject to statute and due process . . . [t]o establish its own procedures . . . ' (Cal. Const., art. XII, Section 2), we perceive nothing in Section 1706 that would negate the PUC's power to authorize representation at a formal proceeding by a nonattorney." (AG Opinion, p. 3.)

2. Supreme Court Approval of Commission Practice. In Consumers Lobby, supra, 25 Cal.3d 891, the question before the court was whether the Commission was authorized to award fees and costs to a nonattorney appearing in a representative capacity in a reparations proceeding. The court observed that in Commission proceedings, in contrast to judicial proceedings, it is common for nonattorneys to make appearances on behalf of others; further observed that a brief perusal of the Commission Reports demonstrates that appearances by nonattorneys comprise a substantial and important part of the practice before that body; and inferred that the Commission believes that such persons are competent to participate in its proceedings in a representative capacity. (Id., pp. 913-914.) The AG Opinion rejects the suggestion that the court's observations are merely dicta lacking precedential significance. The AG Opinion recognizes that dicta consisting of general observations of law which go beyond the facts of a case are not authoritative, and that cases are not authority for propositions not decided. However, the AG Opinion finds that the court's discussion in question was not extraneous, and constituted a point actually decided by the court: "The authority of the PUC to award fees to a representative must clearly be founded in the first instance upon the authority of the representative to perform that service. Accordingly, we consider the court's discourse to be relevant, considered, and decided." (AG Opinion, p. 4.)

3. Legislative Approval. Legislation providing for the award of fees for parties' representatives in formal Commission proceedings, enacted after the Consumers Lobby case (Sections 1801, et seq.) uses the term "advocate's fees" in lieu of "attorneys fees." This indicates "that the Legislature was cognizant of and approved the participation of nonattorneys in such proceedings." (AG Opinion, p. 4.)

4. State Court Approval of Nonattorney Practice before Administrative Agencies. While an appearance for and preparation of pleadings on behalf of another is an inherent aspect of the practice of law, even if conducted before an administrative agency, and "[n]otwithstanding the absence of any specific judicial decision respecting the practice of law by nonattorneys before administrative tribunals where such practice is authorized by statute [citations omitted.], the fact is that such practice has been long recognized by the courts of this state. [Citations omitted.]" (AG Opinion, pp. 4-5.)

The foregoing analysis in the AG Opinion is persuasive, and we hereby adopt it as our own. AMI's motion to disqualify CVC's representative on the grounds that he is not licensed to practice law in California is denied.

3.4 AMI's Motion for Sanctions

On March 9, 1995, AMI filed a motion for the imposition of sanctions on CVC. This request arises in response to CVC's assertedly "malicious accusation that AMI is engaged in criminal conduct." (Motion for Sanctions, p. 1, emphasis in original.) AMI seeks sanctions in the form of reimbursement for its cost of preparing the motion for sanctions and related correspondence, and dismissal of the complaint. According to AMI,

"Sanctions are the appropriate responses to the disrespect CVC has displayed for this Commission's forum as well as CVC's tacit announcement of its intent to pursue this proceeding in an as bombastic and vitriolic a fashion as possible." (Id., p. 1.)

AMI refers to a February 24, 1995 letter from CVC representative J. Michael Sunde, addressed to the ALJ and copied to the assigned Commissioner and the Commission's General Counsel, in which Sunde stated the following:

"Furthermore, defendants admit that they collected taxes from their customers [footnote omitted], money they have retain (sic) for their own benefit in violation of Commission rules. Such an admission is tantamount to admitting to have committed unlawful and likely criminal acts." (Letter from J. Michael Sunde, representative for complainant, February 24, 1995, emphasis in original.)

* * *

"Having not been lawfully certificated, AMI has not paid these same taxes into the appropriate taxing authority, but has rather chosen to abscond with the money." (Id, emphasis in original.)

AMI notes that collecting and retaining tax revenues for one's own benefit and absconding with tax revenues would be felonies under state and federal tax laws. AMI maintains that neither CVC nor Sunde had any basis for making such accusations when Sunde sent the February 24 letter. AMI points out that it has maintained throughout this proceeding that its billing of 1 plus traffic, including taxes, has been on a pass-through basis, and that any applicable taxes rebilled by AMI were paid to the interexchange carrier that handled the traffic. According to AMI, the fact that CVC does not believe AMI in this regard does not permit CVC to accuse AMI of actions representing felonies.

CVC responds that it was justified in making the accusations. CVC claims that AMI is a "switchless reseller," and notes that in D.92-06-069, the Commission held that a switchless reseller can be a public utility even though its does not own or physically operate a switch.

CVC's switchless reseller claim goes to the central issue of AMI's asserted public utility status, and has little bearing on its accusation that AMI feloniously absconded with or withheld tax revenues. We find that when CVC sent the February 24, 1995 letter, it had no reasonable basis for making accusations that AMI had unlawfully or criminally absconded with or kept tax revenue for its own benefit. ⁸ At best, the accusations were based on incomplete information.

More likely, they were based on sheer speculation. Moreover, even if there had been sufficient factual basis for the accusations, leveling them against defendants

informally, in a letter to Commission decisionmakers, was not a proper procedure for making any relevant information available to the Commission. ⁹ CVC's February 24 letter can best be seen as an attempt to influence decisionmakers through prejudicial, off-the-record statements consisting largely of innuendo. In short, although pleadings abound in this matter with gratuitous statements reflecting the rancor between the parties, and we are prepared to ignore such statements, CVC's letter crossed the line of propriety. We are not prepared to ignore the statements therein.

The Commission's Rule 1 governs in such situations. Among other things, Rule 1 imposes upon litigants and others conducting business with the Commission an affirmative obligation to "maintain the respect due to the Commission, members of the Commission and its Administrative Law Judges." We find that the above-described action of CVC and its representative constitutes disrespect for the Commission's processes in contravention of Rule 1. Such actions poison the atmosphere of already-difficult litigation conditions, and divert attention and limited resources from the resolution of legitimate disputes. Accordingly, an order for sanctions against CVC is both within the Commission's discretion and warranted under the circumstances.

AMI's requested sanctions are, in part, appropriate. We will order CVC to pay AMI the direct cost of the preparation of the motion for sanctions, up to a maximum of $2,000. We deny AMI's request for including the cost of associated correspondence in sanctions, as such correspondence does not add materially to our decisionmaking processes. We also deny AMI's request to include dismissal of the complaint as a sanction, since such a remedy is disproportionate to the offense in this case.

To give effect to this order, we direct AMI to file, within 10 days of the effective date of this order, a statement of the direct costs incurred by its attorney in preparing the motion for sanctions. AMI may also include reasonable costs of preparing the cost statement. Within 20 days thereafter, CVC shall pay such costs to AMI.

3.5 CVC's Request for Sanctions

In a pleading filed on November 3, 1994, CVC responded to AMI's October 20, 1994 supplemental motion to dismiss, filed by AMI on the basis of the Commission's decision in Murray v. Stanford, and requested sanctions against defendants. (Complainant's Response to Supplemental Motion of AMI to Dismiss Complaint and Request for Sanctions.) In this section, we consider CVC's request for sanctions against AMI.

As grounds for the requested sanctions, CVC argues that AMI's repeated filing of motions to dismiss with citation to Section 234 was "frivolous and tend[ed] to delay these proceedings by tieing (sic) up valuable time to answer the motion, time that might otherwise be spent on discovery." (Response, p. 13.) According to CVC, AMI's filing of motions in reliance on Section 234 was abusive. CVC further complains that,

"Defendants will have this Commission believe that defendants' counsel believes PUC Section 234 really applies to the case at bar, when any first year law student would realize that 234 is not applicable." (Id.)

We find this request to be without any merit. CVC may be entitled to argue its position on the applicability of Section 234 to this proceeding in light of Murray v. Stanford, but it has failed to show that AMI's contrary view is so self-evidently wrong that to adopt it and advocate it before the Commission warrants sanctions against the adopting party. The request is denied.

3.6 Compensation Request

In reliance on former Article 18.7 of the Rules, CVC filed a notice of intention to claim compensation on October 14, 1994. AMI filed a response on November 14, 1994. Article 18.7 was repealed by Decision 93-05-040 dated May 19, 1993. The October 14 filing will not be given further consideration.

CVC filed an "Amended Request for Findings of Eligibility for Compensation (Notice of Intent to Claim Compensation)" on February 16, 1995. CVC believes that it may be eligible for compensation from one of three possible sources: a common fund of reparations or other funds, the Advocates Trust Fund, or Article 18.8 of the Rules and Sections 1801-1812. AMI filed a response to the amended request on March 15, 1995.

On June 15, 1995, pursuant to Section 1804(b)(1), the ALJ issued a ruling addressing the third potential source of compensation identified in CVC's request. The ALJ determined CVC is not a "customer" within the meaning of Division 1, Part 1, Chapter 9, Article 5 (beginning with Section 1801), and that CVC had not shown that participation in the proceeding would pose a significant financial hardship. CVC was ruled ineligible to claim compensation under Article 18.8 of the Rules and Sections 1801-1812.

We affirm the ALJ's ruling. Even though CVC claims that it only prosecutes this case for the benefit of all California ratepayers and to enforce compliance with various Commission rules and California laws and statutes, the plain facts are otherwise. CVC has made allegations to the effect that it is a competitor of the defendants, and that it has been harmed by defendants' alleged actions. CVC's principal witness testified that the complaint was filed to prevent AMI from taking CVC's customers. (Tr. 17.) There is no basis for finding that CVC is a customer for purposes of the statutory program of intervenor compensation.

For CVC to be eligible for compensation from a common fund, the Commission would have to find that CVC is an advocate of the public interest. However, as a reading of the amended complaint and the evidentiary record clearly shows, CVC is seeking to address its own narrow business interests in this case. At best, CVC only incidentally seeks to vindicate any consumer or public interest. Moreover, "the common fund doctrine is tailored so that attorneys fees are awarded in only the most meritorious cases." (Consumers Lobby, 25 Cal.3d 891, 908.) Even if CVC were to prevail on one or more of the substantive claims that it has brought before the Commission, there is no basis for finding that CVC has presented a "most meritorious" case. CVC's request under the common fund theory therefore fails.

In Consumers Lobby Against Monopolies v. PT&T Co., (1981) 6 CPUC2d 374, the Commission discussed the criteria that it would apply when making awards of compensation from the Advocates Trust Fund. The Commission adopted a suggestion to deny awards:

"[W]here a party's own economic interest is sufficient to motivate participation. This test would exclude substantial customers of utility services or parties seeking to preserve or obtain some competitive position." (Id., p. 379.)

As noted above, CVC represents itself as a competitor of AMI that has been harmed by AMI's actions. CVC fails the economic interest test, and is not eligible for compensation from the Advocates Trust Fund.

3.7 Motion for Adoption of Stipulations

On May 30, 1995 CVC and AMI filed a joint motion for adoption of proposed stipulations of certain facts. The moving parties represent that the stipulations were reached at the urging of the Law and Motion ALJ, and that acceptance of the stipulations would expedite litigation.

In accordance with Rule 51.6(c), the proposed stipulations were subsequently offered and received in evidence as Exhibit 3. Therefore, no action on the motion is required.

5 All statutory references herein are to the Public Utilities Code.

7 Section 1706 provides in relevant part that, in any formal hearing, "the parties shall be entitled to be heard in person or by attorney." Section 1706 was amended effective January 1, 1999 (Stats. 1998, Ch. 886), but that amendment did not affect the cited language. Initially, AMI also contended that disqualification of Sunde was desirable as a matter of public policy and would help to prevent the unauthorized practice of law. However, in its March 9, 1995 reply to CVC's opposition, AMI stated that "the narrow issue framed by AMI's Motion is whether Section 1706 requires Complainant, a corporation, to be represented by an attorney." (Reply of AMI, p. 2.) With respect to AMI's motion, we focus here on the legal arguments on the meaning of Section 1706, not the broader policy issues.

8 We recognize that in the amended complaint, CVC raised the allegation that AMI had not paid applicable taxes on the telecommunications services it purportedly provided. However, we find a clear distinction between that claim and the inflammatory accusations raised by CVC in the February 24 letter.

9 At the time, Article 1.5 of the Rules permitted ex parte communications in enforcement proceedings up to the date of submission. Article 2.5, now prohibits ex parte communications in any adjudicatory proceeding inititated after January 1, 1998.