In the Matter of the Complaint Against

MICHIGAN BULB COMPANY
1950 Waldorf at
Grand Rapids, MI 49550

P.S. Docket No. 7/43;

10/30/79

Cohen, James A.

APPEARANCE FOR COMPLAINANT:
Sandra C.McFeeley, Esq.

Consumer Protection Division
Law Department
U.S. Postal Service
Washington, D. C. 20260

APPEARANCE FOR RESPONDENT:
Wallson G. Knack, Esq.
Warner, Norcross & Judd
900 Old Kent Building
One Vandenberg Center
Grand Rapids, MI 49503

POSTAL SERVICE DECISION

Complainant has appealed from the Initial Decision of Chief Administrative Law Judge William A. Duvall granting Respondent's motion to dismiss the complaint on the grounds that Complainant failed to establish a prima facie case. The motion was granted at the hearing during cross examination of Complainant's expert witness.

BACKGROUND

On April 2, 1979, Complainant, the U. S. Postal Service, through the Consumer Protection Division, Law Department, filed a Complaint alleging that the Respondent, Michigan Bulb Company, by means of advertisements calculated to induce readers to remit money through the mail, represented that its strawberry plants were:

1. Naturally climbing plants;

2. Would grow to a height of 4 to 5 feet and produce an abundance of berries; and

3. Ifcompelled to grow vertically along a fence

or trellis, would produce significantly larger crops of berries in successive years.

At a hearing on this matter Respondent stipulated that it had placed the advertisements in question in several magazines (Tr. 5). Respondent also stipulated to the qualifications of Complainant's witness, Dr. G. J. Galletta, as an expert in horticulture with a speciality in small fruit breeding and genetics (Tr. 6; CX 2).

Dr. Galletta testified that in his opinion there were no strawberry plants which:

1. Were natural climbing;

2. Grew 4 to 5 feet in height and produced an abundance of berries; and

3. If compelled to grow vertically along a fence or trellis or other support would produce significantly larger crops of berries in successive years (Tr. 27).

Dr. Galletta had not observed or tested Respondent's strawberry plants and did not know what variety Respondent was selling (Tr. 31).

While he believed that it was improbable that a new plant which would perform as advertised by Respondent could be developed without his knowledge, he acknowledged that it was not impossible for such a development to occur (Tr. 32-34).

In response to a motion by Respondent, the presiding Chief Administrative Law Judge dismissed the complaint. In pertinent part, his rationale for dismissing the complaint was:

"It's a varieties of strawberries can be developed without their being submitted to the Department of Agriculture station at Beltsville. And Dr. Galletta, while he is thoroughly capable of identifying anything he has seen, is not certain that he has seen this particular strawberry that is depicted in this advertisement. He can't say, therefore, that this particular variety of strawberry that is being sold by Michigan Bulb would behave in any certain manner, since the possibility exists that it's a completely novel variety of strawberry.

"It appears to me, therefore, that on the basis of this understanding of the evidence that has been introduced, there is not sufficient proof of the charges that are set forth in the complaint to establish a prima facie case.

* * *

"There exists the possibility, which is acknowledged by the expert, that a variety of strawberries has been originated which he has not seen and about which he has not read. I agree that that possibility is unlikely based on the expertise of this witness, and the experience and the training that he has had, but that is not a matter that addresses itself to the witness. that addresses itself to the complaint.

"My impression, my conviction at this point is that the burden of proof has not been sustained; and, on that basis, I grant the motion to dismiss." (Tr. 35, 39).

COMPLAINANT'S EXCEPTIONS

Complainant alleges that in dismissing the complaint the Administrative Law Judge erred by:

1. Imposing a standard of proof inappropriate to a proceeding under 39 U.S.C. § 3005;

2. Holding that in order to establish a prima facie case it was necessary for Complainant to procure and analyze a sample of Respondent's product.

These exceptions are addressed below.

STANDARD OF PROOF

Complainant argues that the presiding officer applied a standard of proof under which the existence of a mere possibility that Respondent has not violated § 3005 is sufficient to preclude the establishment of a prima facie case. According to Complainant the imposition of such a heavy evidentiary burden constitutes reversal error. The proper standard of proof, as Complainant see it, is the preponderance of evidence standard, i.e., the more reasonable of probabilities. See 4 S. Gard, Jones on Evidence § 30.4 (6th ed. 1972). Respondent argues that the appropriate standard of proof to be applied in this proceeding is the clear and convincing standard, but if the preponderance of evidence standard is appropriate, the ruling of the presiding officer should be upheld because it is not clearly inconsistent with that standard.

The statute under which this proceeding arises, section 3005 of 39 U.S.C., authorizes remedial action:

"Upon evidence satisfactory to the Postal Service that any person is engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations..."

The statute does not address itself to the standard of proof required to establish "evidence satisfactory to the Postal Service."

In prior proceedings under section 3005 the preponderance of evidence standard has been applied. See Wilmont Products, P.S. Docket No. 6/46 (P.S. Dec. 1979) and authorities cited therein. This is consistent with the traditional standard of proof in both civil actions and administrative proceedings. See Collins Securities Corp. v. SEC, 562 F.2d 820, 823 (D.C. Cir. 1977); 9 Wigmore, Evidence department § 2498 (3d ed. 1940); 4 S. Gard, Jones on Evidence, § 30.4 (6th ed. 1972). However, in proceedings in which the sanction imposed is a drastic deprivation the stricter clear and convincing evidence standard of proof has been held to be applicable. Woodby v. Immigration & Naturalization Service, 385 U.S. 276 (1966); Collins Securities Corp. v. SEC, supra at pp. 823-826. Typical of this latter type of proceeding are those which could result in deportation, disbarment of an attorney or the loss of a license to deal in securities. See Woodby v. Immigration & Naturalization Service, supra; Collins Securities Corp. v. SEC, supra, and cases cited therein. However, the fact that the resulting action may place a substantial burden on a respondent is not sufficient to invoke application of the higher standard of proof. See SEC v. National Student Marketing, 457 F.Supp. 682, 701 (D. D.C. 1978).

A proceeding under section 3005 does not, by its nature and result warrant the higher standard of clear and convincing evidence. A remedial order under the statute does not result in a drastic deprivation. The purpose of a section 3005 proceeding, and the remedial order issued thereunder, is to prevent a party from obtaining money or property through the mail by means of materially false representations. Thus a party found to be in violation of the statute is only required to cease and illegal activity. It is not prohibited from selling its product nor is it deprived of its use of the mail for any other purpose. See Wilmont Products, P.S. Docket No. 6/46, (P.S. Dec. 1979) and cases cited therein.

The issuance of a remedial order may result in some burden to Respondent. However, such a burden is not of a nature or result which would justify imposing the higher standard of proof. See SEC v. National Student Marketing, supra.

It is concluded that the appropriate standard of proof to be applied in judging the merits of complaints filed under 39 U.S.C. § 3005 is the preponderance of evidence standard. By dismissing the complaint because he concluded there was an unlikely possibility Respondent's strawberry plants were of a variety unknown to Complainant's expert, the presiding officer applied a higher standard than even the clear and convincing standard. The presiding officer erred in not applying the preponderance of evidence standard and in holding Complainant to a higher standard of proof.

NECESSITY OF PROCURING AND
ANALYZING RESPONDENT'S PRODUCT

Complainant argues that expert opinion need not be based upon tests of the particular product in issue to constitute evidence of false representations. Respondent argues that Complainant's expert must at least exhibit knowledge of the characteristics of Respondent's product in order for his testimony to constitute a prima facie case under 39 USC § 3005.

Expert opinion testimony need not be based on personal knowledge of a specific product and a prima facie case may be established on the basis of an expert's overall knowledge and his opinion as to the probability of something occurring or existing. Reilly v. Pinkus, 338 U.S. 269, 274 (1949); J 8 of e. Todd, Inc. v. FTC, 145 F.2d 858 (D.C. Cir., 1944); Charles of the Ritz Dist. Corp. v. FTC, 143 F.2d 676, 678 (2nd Cir., 1944); 2 K. Davis, Administrative Law Treatise, § 14.13 (1958). With regard to the truthfulness of representations made about a specific product, such opinion evidence may be readily rebutted by the reputable dealer through the presentation of studies, tests, contrary opinion or other data upon which the representations it makes for its product are based.

In the matter presently at issue, the qualifications of Complainant's witness were stipulated. There is no basis for assuming that the witness was not well versed and fully capable of testifying as to the recognized state of development and characteristics of strawberry plants. By testifying to the characteristics of the varieties of strawberry plants known to him, and the improbability of the existence of a variety of strawberry plants possessing the qualities claimed by Respondent, the witness exhibited sufficient knowledge of the probable characteristics of Respondent's plants to establish a prima facie case which would withstand a motion to dismiss. Thus the presiding officer erred when he held that the testimony of Complainant's expert was not sufficient to establish a prime facie case.

CONCLUSIONS

The presiding officer erred in 1) requiring a standard of proof higher than a "preponderance of the evidence", and 2) holding that the testimony of Complainant's expert witness was not sufficient to establish a prima facie case. The matter is remanded to the Administrative Law Judges for completion of the evidentiary proceeding and issuance of an initial decision.