In the Matter of the Complaint Against

COMPLIMENTARY VACATION CLUB
18345 Ventura Boulevard
at Tarzana, CA 91356

and

COMPLIMENTARY TRAVEL CLUB
18345 Ventura Boulevard
at Tarzana, CA 91356

P.S. Docket No. 10/175;

03/09/82

Cohen, James A.

APPEARANCE FOR COMPLAINANT:
Sandra C. J C L U WMcFeeley, Esq.
James A. Harbin, Esq.
Consumer Protection Division
Law Department
U.S. Postal Service
Washington, DC 20260

APPEARANCE FOR RESPONDENT:
M 1 N H R 4 L artin Radoff, Esq.
2155 Riverside Drive North
Hollywood, CA 91607
Larry Reid, Esq.
Reid and Alverson
28 South 4th Street
Las Vegas, NV 89101

POSTAL SERVICE DECISION

Complimentary Vacation Club has appealed from an Initial Decision of an Administrative Law Judge which holds that with regard to the sale of Las Vegas vacation certificates the captioned Respondents are engaged in a scheme for obtaining money through the mail by means of materially false representations in violation of 39 U.S.C. § 3005. With its appeal Complimentary filed a Motion for Rehearing. Both the appeal and the Motion for Rehearing will be addressed in this Decision.

BACKGROUND

On March 24, 1981, the Consumer Protection Division, Law Department, United States Postal Service, filed a Complaint against Complimentary Vacation Club. The Complaint was amended at the hearing on Complainant's motion to include Complimentary Travel Club as a Respondent. The Complaint alleges that Respondent ^*/ falsely represents that:

"1. The reservation room deposit is refundable in vouchers which can be fully redeemed in cash nickels over the 3-day vacation period without undue inconvenience to the user.

2. Some casinos whose vouchers are used for refund of the customer's reservation will make that refund in nickels paid all at one time.

3. Respondent will secure lodging for its patrons at the hotel, motel or condominium of their choice.

4. Respondent will secure loding for purchasers of its vacation certificates at safe, reasonably sanitary establishments that meet the ordinary standards of overnight accommodations for families on a vacation in a resort area.

5. The purchaser of Respondent's vacation certificates will receive free lodging for his 2 or 3-day vacation period.

6. The gambling benefits furnished with Respondent's vacation package are fully and conveniently usable by each customer over the 3-day vacation period.

7. Respondent's customer will receive and be able reasonably to use benefits within a 3-day vacation totaling over $700.00."

In the answer to the Complaint, Respondent denied that it makes false representations in violation of 39 U.S.C. § 3005.

At a hearing held before the Administrative Law Judge to take evidence on the allegations in the Complaint, both sides presented testimony and documentary evidence. On the basis of the evidence presented, the Administrative Law Judge found that Respondent makes the representations alleged, that those representations are material and that they are false. Accordingly, he concluded that Respondent is engaged in activities which are in violation of 39 U.S.C. § 3005.

MOTION FOR REHEARING

Respondent's Motion for Rehearing alleges that the original hearing was tainted by the introduction of evidence against entities other than Respondent, thereby making it impossible to determine what charges were actually directed against Respondent. According to Respondent, over its objection, this case was tried in tandem with a case against Continental Vacations, Inc. and Continental travel and this was an inappropriate mixture of two cases which supports a rehearing to take evidence on issues involving Complimentary only.

Certain of Respondent's arguments in support of its motion are intertwined with its exceptions to the findings of fact and conclusions of law. These arguments are addressed in connection with each specific exception. However, upon review of the record it is concluded that no confusion results from the evidence presented which may involve other entities, and that no injustice results from the manner in which the hearing was conducted. Moreover, the evidence in the record establishes that transactions allegedly solicited by Complimentary Travel Club, which is one of the captioned Respondents in this proceeding, were made on behalf of Complimentary Vacation Club and resulted in direct payment to Complimentary Vacation Club (see Testimony of Yarton & Dahlquist and supporting exhibits). Respondent's argument and evidence to the contrary is not persuasive. Thus it was not improper to join Complimentary Travel Club as one of the captioned Respondents in this proceeding. Neither was it improper to consolidate the hearing in this case with the hearing in P.S. Docket No. 11/2. Accordingly, Respondent's Motion for a Rehearing is denied.

RESPONDENT'S EXCEPTIONS

Respondent has stated exceptions to Findings of Fact 7 through 17, and all conclusions of law based thereon. The exceptions are addressed below.

FINDING OF FACT 7

Respondent alleges that the Administrative Law Judge erred in Finding of Fact 7 by quoting only a portion of Respondent's telephone solicitation. Respondent alleges that the text of the finding is a two paragraph summary or condensation of the conversation, and that an examination of the entire conversation is necessary to obtain the proper view of the solicitation. Citing Donaldson v. Read Magazine, 333 U.S. 178 (1948), and Lynch v. Blount, 330 F.Supp. 689 (S.D.N.Y. 1971) aff'd 404 U.S. 1007 (1972), Respondent argues that the totality of an advertisement and its material representations must be considered in determining its effect on an ordinary mind. Respondent then goes through an analysis of the portions of the solicitation not included in Finding of Fact 7, in an effort to demonstrate that the representations therein are not false.

Although Respondent's recitation of the standard for interpreting advertising is correct, its contention that the Administrative Law Judge did not apply such standard is not well taken. The Administrative Law Judge quoted verbatim the first two paragraphs of the solicitation conversation as presented in both a transcript and a tape of a conversation between Inspector Yarton and an employee of Respondent (Exhs. A-2 & 3). The Administrative Law Judge's recitation of that portion of the solicitation in Finding of Fact 7 does not distort the contents of the solicitation. Furthermore, other relevant portions of the solicitation are addressed in subsequent findings of fact and it is clear from the Initial Decision that the Administrative Law Judge considered such other relevant portions of the solicitation in concluding that Respondent is in violation of 39 U.S.C. § 3005 (I.D. pp. 4-5). Accordingly, Respondent's exception is without merit.

FINDING OF FACT 8

In Finding of Fact 8 the Administrative Law Judge found that purchasers are required to pay to Respondent by credit card, check or money order through the mail a service fee of approximately $45.00. Quoting directly from the taped telephone conversation and citing Exhibits A-2, 3 & 5, the Administrative Law Judge found that the service fee covered the "cost of processing, mailing, phone calls, written confirmation to you and general handling of your reservation." (I.D. p. 5)

In connection with this exception Respondent refers to its previous exception. The only possible error which is perceived in Finding of Fact 8 is that the service fee is approximated as $45.00 whereas it is specifically stated to be $46.50 in the quoted solicitation conversation. The difference between the approximation and the actual figure does not serve as a basis for concluding that the finding is in error. Accordingly, Respondent's exception is without merit.

FINDING OF FACT 9

In Finding of Fact 9, the Administrative Law Judge found that purchasers were required to mail a deposit of $60.00 or more to Respondent to guarantee their arrival. The Administrative Law Judge further found that Respondent's telephone solicitors represented that this deposit would be refunded to purchasers in vouchers redeemable in cash tickets over the three-day vacation period, at some casinos on an hourly basis, and at some casinos all at one time. Respondent argues that the Administrative Law Judge's statement that the solicitors represented that the room deposit would be refundable in vouchers redeemable in cash only is contrary to the evidence. According to Respondent its solicitors represented that the room deposit would be refunded in cash nickels as well as other casino benefits. In support of its position Respondent refers to the telephone conversations between Inspector Yarton and its solicitors (Exhs. A-2, 3 & 4).

A review of the telephone conversations supports the findings of the Administrative Law Judge. For example in the conversation which took place on December 2, 1980, it was stated:

"Joanne....Your deposit is returned to the former sic vouchers, which are redeemable by participating casinos over your three-day stay. The casinos will give you cash nickels in place of these vouchers. Some casinos give it on an hourly basis and some give it to you at once. You will receive over $100.00 in cash nickels..." (Exh. A-3, p. 3)

* * * *

"Yarton - Well now, when you say I'd get back my money, I don't get back the $46.00?

JoAnne - No, that you'll never see.

Yarton - Okay, but what about the $60.00?

JoAnne - Okay, when you redeem your vouchers over your three-day stay.

Yarton - Uh huh.

Joanne - You'll get back over $100.00 in cash nickels and they give it to you in nickels because obviously they want to throw it back in, so that right there is the question of will power." (Exh. A-3, p. 4)

* * * *

"Yarton - And the $60.00 is for our room.

Joanne - The $60.00 is for your room, ah, but you will see this...

Yarton - Oh, that's sic all comes in the pack...

Joanne - In fact you'll get $118.00 in cash..."

(Exh. A-3, p. 10)

In a conversation which took place on December 1, 1980, similar representations were made:

"CMY: When I get there, to one of those places, I get three days for $60.00?

CTC: Right and you get it back too in nickels, remember I explained that you would get it back in cash nickels. You can get $100.00 in cash nickels back.

CMY: Oh I don't get the $60.00 back?

"CTC: You get it in cash nickels."

"CMY: Oh, I see and where do I spend those nickels?"

"CTC: You don't have to but that's why they give them to you because they figure you'll spend it but you can exchange it for dollars and take it hom with you."

"CMY: So if I walked in there with all these nickels I could just get back my $60.00 in cash."

"CTC: Well, you're going to get your nickels over your three-day stay in the casinos."

CMY: Oh, I see, uh huh, but then I can cash them if I don't use them all. Whatever I don't use, I can cash in?"

"CTC: Or if you don't want to use any of them, you don't have to."

"CMY: So I could really get there and spend three days almost for free."

"CTC: Almost, yeah." (Exh. A-4, pp. 6-7)

Additional statements to the same effect can be found in both telephone solicitations. Moreover, other evidence also supports this finding (Tr. 216). Accordingly, the record amply supports the finding of the Administrative Law Judge. Therefore, Respondent's exception is without merit.

FINDING OF FACT 10

In Finding of Fact 10, the Administrative Law Judge found that Respondent falsely represents:

"The reservation room deposit is refundable in vouchers which can be fully redeemed in cash nickels over the three day vacation period without undue inconvenience to the user."

Respondent argues that there is no substantial evidence to support this finding. Respondent takes issue with the Administrative Law Judge's reliance on the testimony of Martin Dahlquist, who coordinated the purchase of several vacation packages as part of his recreational duties at a military base, asserting that Mr. Dahlquist's arrangements were made with Sid Charles Rothberg of Complimentary Travel, and not with Respondent. As to the other witnesses who gave testimony with respect to this representation, Respondent argues that the oral solicitations are memorized or "canned" presentations which do not vary from the recordings made by Inspector Yarton (Exhs. A-2, 3 & 4) and that such presentations would not lead to the interpretation to which those witnesses testified. Moreover, Respondent asserts that a letter it sends subsequent to the telephone solicitations (Exh. C-3) clarifies the offer made by Respondent so as to disabuse purchasers of any misinterpretations.

Respondent's argument with respect to the testimony of Mr. Dahlquist also relates to its Motion for Rehearing and the confusion which it alleges exists between Complimentary Vacation Club and other parties. The evidence establishes that the representations made by Mr. Rothberg to Mr. Dahlquist were made on behalf of

Complimentary and that Complimentary Vacation Club and Complimentary Travel Club are the same organization (Tr. 212-264, 732-738 & exhibits referred to and admitted in connection with this testimony as well as the testimony of Inspector Yarton). Mr. Dahlquist's testimony supports the finding that the room deposit would be refunded in vouchers redeemable in cash (Tr. 216). Furthermore, there is sufficient evidence in the form of the testimony of witnesses Anderson and Rich to support the Administrative Law Judge's findings (Tr. 295, 381). Respondent's attempt to discredit the testimony of these two witnesses on the basis that its "canned" solicitation presentation could not be interpreted as the witnesses testified is not persuasive. The excerpts from the solicitation presentation quoted in connection with the prior exception support the testimony of the two witnesses.

Respondent's reliance on the argument that the follow-up letter which it sends (Exh. C-3) serves to clarify what purchasers should expect is misplaced. That letter, quoted in total by Respondent in its brief, includes the following paragraph:

"And in place of your reservation deposit you will receive vouchers amounting to over $60.00 for cash nickels that will be redeemed by the participating casinos over your three-day period..."

The language of the letter, which is on letterhead of Complimentary Travel Club, clearly supports the finding of the Administrative Law Judge.

The only difference between the finding of the Administrative Law Judge and the explicit language of Respondent's letter is whether or not the refund can be redeemed without "undue inconvenience to the user." The language of the letter is unequivocal. It states the vouchers will be redeemed during the three-day vacation period. Further, a reading of the transcript of the telephone solicitations (Exhs. A-3, 4) supports the Administrative Law Judge's conclusion that prospective purchasers would reasonably expect that their deposit can be redeemed without undue inconvenience.

Respondent's arguments under this exception relate to the existence of the representation and not its falsity. Thus, the issue of falsity is not addressed in detail. However, the record amply supports the Administrative Law Judge's finding that this representation is false. Accordingly, Respondent's exception to Finding of Fact 10 is without merit.

FINDING OF FACT 11

The Administrative Law Judge found Respondent falsely represents that "Some casinos whose vouchers are used for refund of the customer's reservation will make that refund in nickels paid all at one time."

Respondent argues that the telephone presentations and the vacation certificate fully disclose that redemption is on an hourly basis and that it extends over a three day period. Respondent's certificates and telephone solicitation do not support its position. For example, one of Respondent's certificates states "Packages in Las Vegas will give you at least the following benefits: SIXTY DOLLARS IN NICKELS]]" This statement is followed by advice in parenthesis that "some" casinos require certain procedures to be followed, including purchasing $5.00 in nickels to receive $6.00 in nickels, or providing benefits on an hourly basis (Exh. A-7b). The use of the word "some" implies to the ordinary reader that not all casinos operate in the fashion described. The expectation of receiving a refund in the form of nickels all at one time was supported by the testimony of Ms. Anderson, Ms. Frake and Ms. Rich, all of whom had purchased the package (Tr. 284, 295, 381, 474). Further, the language of the telephone solicitation (Exh. A-3) and the follow-up letter (Exh. C-3) would also lead the ordinary purchaser to believe that some casinos will make the refund of cash nickels all at one time.

Respondent does not seriously contest the falsity of the representation. Furthermore, it is amply supported by the record (Tr. 307-314, 392-393, 425; Exhs. A-10d, E-41). Accordingly, Respondent's exception to Finding of Fact 11 is without merit.

FINDING OF FACT 12

The Administrative Law Judge found that Respondent represents that it "will secure lodging for its patrons at the hotel, motel or condominium of their choice." This representation was found to be false. Respondent argues that the vacation certificates and the telephone solicitations advise purchasers that they will be able to select the type of accommodation i.e., hotel, condominium or motel, they will receive, but not a specific place of lodging.

Respondent is correct that the vacation certificate clearly informs a purchaser that he may not select a specific place of lodging (Exh. A-7b). However, the transcript of the telephone solicitations leaves little doubt that purchasers are told they will have their choice of a specific place of lodging. In the telephone solicitation of December 2, 1980, Respondent's representative advised Inspector Yarton:

"Okay, now you have your choice of hotels I told you about and they are lovely." (Exh. A-3, p. 4)

Essentially the same statement was made in the December 1, 1980, telephone solicitation (Exh. A-4, pp. 5-6).

The telephone solicitation is one of the first contacts the purchaser has with Respondent. By the time the purchaser receives the vacation certificates, he or she has already paid the nonrefundable processing fee. The clarification in the vacation certificates is therefore too late to dispel the notion that purchasers will be able to choose a specific place of lodging. Accordingly, it is found that the representation is made. That it is false is implicit in Respondent's argument, and explicit in the vacation certificate (Exh. A-7b). Thus, Respondent's exception is without merit.

FINDING OF FACT 13

The Administrative Law Judge found that Respondent represents that it:

"will secure lodging for purchasers of its vacation certificates at safe, reasonably sanitary establishments that meet the ordinary standards of overnight accommodations for families on a vacation in a resort area."

(I.D. pp. 7-8)

Respondent conceded in its Answer to the Complaint that it makes this representation. The Administrative Law Judge found the representation to be false, stating that some purchasers were placed in "substandard, unclean, unsafe accommodations, without eating facilities, and frequented by prostitutes." (I.D. p. 8).

Respondent argues that in making this finding the Administrative Law Judge referred to purchasers who dealt with Continental Travel. It is further argued that there is no connection between Continental Travel and Respondent. To support its position, Respondent relies on the testimony of its owner, Billy D. Kegley, that he placed Mr. Dahlquist in the substandard accommodations, the Lotus Inn, at the request of Mr. Rothberg, who was the representative of Continental travel, "because Rothberg paid me for the rooms." This testimony is not in conformity with the record. Mr. Dahlquist's check for the room deposits was made to the order of Complimentary Vacation Club, and cashed by Complimentary Vacation Club (Exh. B-26). Moreover, by admission of counsel Mr. Rothberg represented Complimentary Travel Club which it has previously been concluded was the same as Complimentary Vacation Club. Thus, the connection is made between Respondent and the placement of Mr. Dahlquist and his group in the rooms at the Lotus Inn. That the rooms were substandard is amply demonstrated by the record (Tr. 233-236). Accordingly, Respondent's exception to Finding of Fact 13 is without merit.

FINDING OF FACT 14

The Administrative Law Judge found that Respondent represents that the purchaser of its "vacation certificates will receive free lodging for his two-or three-day vacation period." The Administrative Law Judge found that this representation was implied in Respondent's solicitation postcard coupled with its telephone solicitations which state "you and a guest may 'receive a three-day two-night vacation' and that 'in addition to your accommodations you will receive eighteen free meals etc.' (Underscoring supplied.)" The Administrative Law Judge also found the phrasing of the reference to the room deposit to be misleading and to convey to prospective customers the impression that their deposit would be refunded upon arrival.

Respondent contends that it does not represent, and that an ordinary purchaser would not conclude, that free lodging was a part of the vacation package. It also contends that the cash refunds referred to in its solicitation provide an opportunity to obtain benefits, but do not represent that the benefits will be conferred.

For the reasons stated in the Initial Decision (I.D., pp. 8-9) and applying the standards of interpretation quoted therein (I.D., pp. 3-4), it is concluded that Respondent's advertising would lead the ordinary reader to believe that he would receive free lodging. That lodging is not free is not contested by Respondent, and is amply supported by the record. Therefore, Respondent's exception is without merit.

FINDING OF FACT 15

The Administrative Law Judge found that Respondent represents that "The gambling benefits furnished with Respondents' vacation package are fully and conveniently usable by each customer over the three-day vacation period." The existence of this representation is admitted in Respondent's Answer. The Administrative Law Judge found the representation to be false.

Respondent argues, in effect, that the benefits are available as advertised and therefore the representation is not false. However, the record does not support this position. In order to redeem the benefits, purchasers had to go to considerable lengths, both in terms of time and distance, which made it difficult, if not impossible, for them to redeem their coupons (Tr. 236-238, 306-314, 422-427, 495, 505; Exh. E-38). Thus the record establishes that the vacation package was not "fully and conveniently usable" during the vacation period and that Respondent's representation in this regard is false. Accordingly, there is no merit to this exception.

FINDING OF FACT 15

The Administrative Law Judge found that Respondent represents that "The gambling benefits furnished with Respondents' vacation package are fully and conveniently usable by each customer over the three-day vacation period." The existence of this representation is admitted in Respondent's Answer. The Administrative Law Judge found the representation to be false.

Respondent argues, in effect, that the benefits are available as advertised and therefore the representation is not false. However, the record does not support this position. In order to redeem the benefits, purchasers had to go to considerable lengths, both in terms of time and distance, which made it difficult, if not impossible, for them to redeem their coupons (Tr. 236-238, 306-314, 422-427, 495, 505; Exh. E-38). Thus the record establishes that the vacation package was not "fully and conveniently usable" during the vacation period and that Respondent's representation in this regard is false. Accordingly, there is no merit to this exception.

FINDING OF FACT 16

The Administrative Law Judge found that Respondent represents that its customers "will receive and be able reasonably to use benefits within a three-day vacation totaling over $700." It is admitted in Respondent's Answer that the representation is made. The Administrative Law Judge found the representation to be false.

Respondent's exception to this finding relates to the valuation of the benefits conferred and the convenience with which they may be realized. Respondent's arguments are not persuasive that the Administrative Law Judge erred in concluding that the "realization of $700 or $1,000 in total benefits over the vacation period is not achieveable with reasonable efforts, if at all." (I.D. p. 11) It has previously been concluded that the vacation benefits cannot reasonably be used within the vacation period (See Exception to FOF 15). The valuation placed on the benefits by the Administrative Law Judge for the purpose of making this finding were, if anything most generous to Respondent, Neverada law notwithstanding. Thus, no error in the computation of the value of the benefits which would favor Respondent has been found. Accordingly, there is no merit to this exception.

FINDING OF FACT 17

In Finding of Fact 17 the Administrative Law Judge found that " t he representations found above are false because their natural tendency is to induce purchases of the vacation package."

Respondent concedes that the representations were intended to induce the purchase of the package. Presumably, however, Respondent is arguing that this does not establish the falsity of the representation. Respondent is correct in this regard but the materiality of the falsity of the representations is established by the finding of the intent to induce purchase. See Cosvetic Labs, P.S. Docket Nos. 9/118 - 9/143, 10/38 - 10/43 (P.S.D. Sept. 30, 1981). Since falsity was established in prior findings of the Administrative Law Judge, and materiality rather than falsity was established by this finding, there is no reversible error as the result of Finding of Fact 17.

CONCLUSIONS OF LAW

Respondent argues that the conclusions of law are in error because they are based on erroneous findings of fact. The findings of fact have not been found to be in error. Therefore, there is no basis to conclude that the conclusions of law are in error.

CONCLUSION

After consideration of the entire record and Respondent's exceptions, it is concluded that Respondent is engaged in a scheme to obtain money through the mail by means of materially false representations. Accordingly, Respondent's appeal is denied and a remedial order under 39 U.S.C. § 3005 is being issued contemporaneously with this Decision.

___________________

*/ Hereafter "Respondent refers to both Complimentary Vacation Club and Complimentary Travel Club.