In the Matter of the Petition by

RALPH PETILLO
Publisher, Las Vegas Panorama,
2450 Industrial Road,
Las Vegas, Nevada 89103

Proposed Annulment of Second-Class Mail Privileges for "LAS VEGAS PANORAMA"

P.S. Docket No. 3/132

March 19, 1975

William A. Duvall Chief Administrative Law Judge

Charles L. Garner, Esq.,
132 South Fourth Street,
Las Vegas, Nevada, for Petitioner

Arpad de Kovacsy, Esq. ,
Law Department,
U.S. Postal Service, Washington, D. C., for Respondent

INITIAL DECISION^1/

On October 3, 1974, the Manager of the Mail Classification Division, Finance Department, United States Postal Service, advised Mr. Ralph Angelo Petillo that the second-class mail privileges previously in effect for the publication "Las Vegas Panorama" would be annulled within 15 days from the receipt by Mr. Petillo of the notice, unless within that time he filed at the Post Office where the publication has second-class mail entry a written statement showing compliance or how he intended to comply with the Postal laws and regulations regarding second-class mail privileges. Alternatively, Mr. Petillo was given the option of contesting the ruling by filing a petition within 15 days from Mr. Petillo's receipt of the notice, which petition would be for the purpose of appealing the proposed revocation of second-class mail privileges for the publication Las Vegas Panorama.

Mr. Petillo chose the first alternative, apparently, based on correspondence in the file, and started to correspond with the Division of Mail Classification in an effort to persuade that organization that his publication was entitled to retain its second-class mail privileges.

However, on January 2, 1975, the Director of the Division of Mail Classification, hereinafter referred to as the Director, advised Mr. Petillo that the data that had been submitted by Mr. Petillo did not have the effect of causing a change of view in the Division of Mail Classification. And, again, Mr. Petillo was advised of his right to contest this ruling by filing a timely petition appealing the proposed revocation, which action was taken in a timely manner by the Petitioner, Mr. Petillo.

Mr. Petillo's petition was received and docketed in the Office of the Docket Clerk on January 27, 1975. On January 28, 1975, there was issued a notice of hearing in which the publisher was advised that the hearing would be held today in this place. This notice of hearing, together with a copy of the Rules of Practice, was sent to Charles L. Garner, Esq., 132 South Fourth Street, Las Vegas, Nevada, 89101, on January 28, 1975, and he received it on January 30, 1975. Mr. Garner is the attorney representing the publisher in this proceeding. It is Mr. Garner whose name appears on the petition, which was filed in this proceeding contesting the proposed annulment action.

There is with the file a receipt for certified mail indicating that the notice of hearing and Rules of Practice were received by Mr. Garner on January 30, 1975.

This matter came on for hearing as indicated on February 27, 1975, and at the hearing there was no one present to enter an appearance on behalf of the publisher. At the direction of the Presiding Officer, the Respondent's counsel proceeded with the presentation of the evidence in this matter. The evidence will now be briefly discussed.

The correspondence leading up to the filing of the petition which has previously been discussed were introduced and in addition there were introduced as Respondent's Exhibits 4, 5, 6 and 7, the following items:

Exhibit R-4, the Las Vegas Panorama, which bears in the upper right hand corner of the first page a circle and the figures 25 cents. This issue is for the period November 8-14, 1974, and is designated Volume 8, No. 19.

Exhibit R-5 is the Las Vegas Panorama, which bears in the upper right hand corner of page one, the legend "Free Take One, Casino Copy." This issue is for the period, also, of November 8-14, 1974, and it is also designated as Volume 8, No. 19.

Exhibit R-6 is an issue of the Las Vegas Panorama in the upper right hand corner of which are the figures 25 cents, and this issue covers the period January 31-February 6, 1975, and it is designated Volume 8, No. 31.

Exhibit R-7 is an issue of the Las Vegas Panorama, which bears in the upper right hand corner the legend, "Free Take One, Casino Copy," and it, too, is for the period January 31-February 6, 1975, and is designated, also, as Volume 8, No. 31.

Respondent's counsel called as a witness Mr. Joseph Shebby who is a Senior Mail Classification Specialist in the Mail Classifica- tion Division, under the supervision of the Manager. Mr. Shebby testified that this matter came to his attention by means of a letter from the Postmaster at Las Vegas in which it was indicated that although second-class mail privileges had only recently been issued for the Las Vegas Panorama, it had come to the attention of the postal employees in Las Vegas that by far the greater number of the copies of this publication that are printed are being distributed free.

Examples of some of the figures are as follows:

For the issue dated July 11, 1974, 4,175 copies were mailed and 65,000 copies were distributed free.

With respect to the August 1, 1974, issue, 4230 copies were mailed and 71,000 copies were distributed without charge.

Mr. Shebby testified that he requested that additional copies of the publication be sent to him and, in response to that request, he received, among others, the copies of the publications which have been received in evidence as Respondent's Exhibits 4, 5, 6 and 7.

A thorough review of these publications by Mr. Shebby and a less thorough examination of the publications by myself, discloses that the copies of the publication which are issued on the same date, specifically Exhibits 4 and 5, which are for the period November 8 through November 14, 1974, on the one hand, and Exhibits 6 and 7, which are for the period January 31 to February 6, 1975, on the other hand, are identical except for an insert which appears in the copy of each publication which is intended for free distribution. That insert in Exhibit R-5 is given the pagination of "Adult One," "Adult Two," et cetera, through page eight. This issue of the publication (Exhibit R-5) consists, otherwise, of 48 pages. The eight pages comprising the insert in Exhibit R-5, are made up of advertisements of various business houses, theaters, and other enterprises.

The distinction between Exhibits R-4 and R-5, holds true with respect to Exhibits R-6 and R-7, except that in the latter case the advertising insert consists of 12 pages, and the other portions of the publication contain 40 pages.

It appears to be the position of the publisher that by including the advertising inserts in certain copies printed for a particular issue, that those copies to which the inserts are added thereby become a different publication.

In a somewhat similar situation a ruling to the contrary has been issued by the Postal Service. The ruling referred to was made in a case involving the Wall Street Journal publication published by Dow Jones and Company, Incorporated, and the ruling was made in the case designated as P.S. Docket No. 1/11. In that case, in an initial decision dated June 26, 1973, the Administrative law Judge held as follows:

"Petitioner's contention that the three regional editions here at issue are separate publications is based primarily on differences in the content of the various editions, both in advertising and in news content. As previously found, the principal difference between the regional editions is in advertising content. Such difference consists entirely in regional advertising, which accounts for approximately 12 1/2% to 30% of the total content of each of the various editions. While this may be regarded as constituting a not insignificant difference in content as between each of the editions, it does not justify treating each of the editions as a separate periodical publication for purposes of the mail classification statute and regulations. The qualification of a publication for second-class entry as a 'newspaper' or 'other periodical publication' derives from its news and editorial content, not is advertising. The latter is a disqualifying, rather than a positive factor, in a newspaper's entitlement to second-class entry. Thus, where a publication has more than 75% advertising in more than one-half of its issues during any 12 month period, its permit may be revoked under Section 4352(c) of 39 U.S. Code, and where it is designed primarily for advertising it is not entitled to be admitted as second-class mail under Section 4354(c) of 39 U.S. Code. Consequently, a difference in advertising content between various editions of a publication (even though their total advertising content may not be sufficient to disqualify them from second-class entry) is not properly a factor to be considered in determining whether such editions may be regarded as separate publications for purposes of qualifying for separate second-class original-entry permits."

This finding by the Administrative Law Judge was sustained in the Department by the then Judicial Officer.

In the case of Dow Jones and Company v. United States Postal Service , reported at 379 Fed. Supp. 1167, 1173 (1974), Chief Judge Latchum of the United States District Court for the District of Delaware had the following to say:

"Thus, the Administrative Law Judge's decision to disregard differences in advertising in determining whether the Journal's regional editions were separate publications was correct."

In the case of the Wall Street Journal, there was present a difference in a position of the editorial material, as well as a difference in the advertising matter. In the instant case there is no difference in the publications except as it appears in the advertising insert accompanying the issues which are distributed free.

Upon the basis of the testimony of the witness in this proceeding, together with the exhibits which have been received in evidence, it is concluded that there is no difference between the issues of the publications which appear on the same date, except as to the advertising insert previously discussed. This difference is insufficient to warrant that the various copies be treated as separate publications from the standpoint of eligibility for second-class mail privileges.

Based upon the figures as to the number of copies mailed to subscribers and the number of copies distributed free, which data were supplied to the Postal Service by the publisher, it is concluded that the publication Las Vegas Panorama is designed primarily for free circulation, contrary to the appropriate provisions of Section 4352 of Title 39 United States Code.

Mention was made by Respondent's counsel of the absence of a legitimate list of subscribers for this publication. In reviewing the pleadings in this matter, I do not find where that question was raised in the pleadings, and, perforce, Petitioner had no notice that this matter would be urged as a basis for the revocation.

There are many instances in which decisions have been overturned because the decisions were based upon matters not pleaded or tried. The reason why such decisions are set aside is, or course, that the losing party is deprived of due process since he had no notice that the determinative issue in the decision was to be tried and he, therefore, had no opportunity to prepare on that issue. There are numerous instances in which such decisions have been set aside. An order was denied enforcement because it was based on an argument in the post-hearing brief of the General Counsel in regard to a point neither alleged in the pleadings nor developed at the hearing. Boyle's Famous Corned Beef v. N.L.R.B. , 400 F.2d 154 (8th Cir., 1967) An order was set aside because the theory of the complaint and the hearing was not the theory on which the Commission decided. ( Rodale Press v. F.T.C. , 407 F.2d 1252 (U.S. App. D.C., 1968)) An order based on a violation not alleged was denied enforcement because "the time for giving notice ... is prior to the hearing, not in what the Board calls 'General Counsel's post-complaint theory of the case' unveiled in a post-hearing brief." N.L.R.B. v. Majestic Weaving Co. , 335 F.2d 854, 861 (2nd Cir., 1966) To the same effect see N.L.R.B. v. Fletcher , 298 F.2d 594 (1st Cir., 1962); N.L.R.B. v. Johnson , 322 F.2d 216 (6th Cir., 1963); and N.L.R.B. v. Tennsco , 339 F.2d 396 (6th Cir., 1964).

It is of further interest to read the comments set forth in the Attorney General's Manual on the administrative Procedure Act (1947) on the subjects of (1) notice under section 5(a) of the Administrative Procedure Act, as enacted (now 5 U.S. Code 554(b)); (2) the "exclusive record for decision" prescribed in section 7(d) of the original Act (now 5 U.S. Code 556(e)); and (3) the notice required to be given before a license can be suspended or revoked, as specified in section 9(b) of the original Act (now 5 U.S. Code 558(c)). Finally, Professor Davis discusses this subject in 8.04 and 8.05 of his Administrative Law Treatise , and the SUpplement thereto. While, as would be expected, most of the cases and the discussions center around private parties who have been disadvantaged by decisions based on factors neither pleaded nor tried, there is every reason why the Government, in its capacity as a party and, indeed, as the representative of all of the people, should be entitled to no more - but, certainly, no less - notice of the matters forming the basis for a decision and the opportunity to prepare and be heard on its position with respect to such matters.

In any event, in the instant case there is no showing that those persons to whom copies were mailed in response to their payment, or their promise to pay, for the publication do not comprise a legitimate list of subscribers. It is quite clearly established that those persons constitute the small minority of the persons to whom the publication is distributed.

It is, therefore, clear that the publication is not distributed in conformity with Section 132.227 of the Postal Service Manual.

Based upon the full consideration of the entire record, it follows that the ruling of the Manager was correct, and that his proposal to annul the second-class mail privileges for the publication Las Vegas Panorama should be, and is, sustained.

Alternatively, if this matter is to be resolved without reaching a consideration of the merits, it is pointed out in response to a motion made by Respondent's counsel, that Section 954.9 of the Rules of Practice, a copy of which was served upon Petitioner's counsel with the notice of hearing and which are published as Part 954 of Title 39, Code of Federal Regulations, provides:

"If a publisher fails to appear at the hearing, the presiding officer may: (a) Dismiss the petition; (b) order the petitioner to show cause within 30 days from the date of the order why an order of dismissal should not be entered, and thereafter enter such order as the presiding officer deems to be appropriate. If the petition is dismissed by order of an Administra- tive Law Judge, the dismissal may be appealed to the Judicial Officer within 15 days from the date of the order."

As an alternative to sustaining the proposed revocation issued by the Director, the petition in this proceeding may be regarded as dismissed for want of prosecution, pursuant to the provision of the section of the rules quoted above.

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1/ Transcribed from oral decision as rendered at close of hearing held February 27, 1975. Minor language changes have been made, but the substance of the decision is unchanged. The comments about notice and opportunity to prepare, appearing on pages 9-11, were added.