In the Matter of the Complaint Against

RUSH INDUSTRIES, INC.
300 Park Avenue, South at
New York, NY 10010

P.S. Docket No. 7/50;

Cohen, James A.

APPEARANCE FOR COMPLAINANT:
DanielS. Greenberg, Esq.
Consumer Protection Division
Law Department
U. S. Postal Service Washington, D.C. 20260

APPEARANCE FOR RESPONDENT:
Robert Ullman, Esq.
Bass, Ullman & Lustigman
747 Third Avenue
New York, NY 10017

POSTAL SERVICE DECISION

Respondent has appealed from the Initial Decision of Administrative Law Judge Quentin E. Grant which holds that, with regard to the sale of its product "Hair Plus," Respondent is engaged in a scheme for obtaining money through the mail by means of false representations in violation of 39 U.S.C. § 3005.

BACKGROUND

On April 12, 1979, the Consumer Protection Division, Law Department, United States Postal Service, filed a complaint alleging that Respondent is engaged in conducting a scheme for obtaining money through the mail in violation of 39 U.S.C. § 3005. Specifically, the complaint alleges that Respondent's advertising represents:

"....directly or indirectly, by means of affirmative statement, implication, or omission, in substance and effect, that ingestion of Respondent's 'HAIR-PLUS' will, for most people, provide a significant benefit, over and above the user's daily diet, in:

(a) preventing thinning hair;

(b) preventing baldness;

(c) causing the growth of healthy, beautiful hair;

(d) preventing dandruff;

(e) eliminating greying;

(f) treating eczema;"

The complaint further alleges that these representations are materially false.

At the hearing held on the complaint the only witness presented on behalf of either party was Dr. Gloria Troendle, a medical doctor called by the Postal Service. Respondent was represented by counsel who cross-examined Dr. Troendle and offered exhibits in support of Respondent's position.

In addition to its defense against the allegations set forth in the complaint, Respondent moved to have this action dismissed on the basis of a prior action taken by the Postal Service in connection with a Consent Agreement entered into with another party concerning a similar product. Respondent has indicated that it is willing to accept the same restraints as those applicable to the other product, and that the Postal Service's refusal to agree to such terms constitutes discriminatory and unfair enforcement of the law.

Judge Grant concluded that Respondent makes the representations alleged, that such representations are material and that they are false. He also concluded that there is no merit to Respondent's affirmative defense of discriminatory and unfair enforcement of the statute.

Accordingly, he concluded that Respondent is engaged in activities which are in violation of 39 U.S.C. § 3005.

RESPONDENT'S EXCEPTIONS TO THE INITIAL DECISION

Respondent has taken five exceptions to the Initial Decision. Each of these exceptions is addressed below:

Respondent's first exception is:

"1. Respondent excepts to the Administrative Law Judge's reliance upon the testimony of Dr. Troendle as substantial evidence in the absence of rebuttal testimony on the part of Respondent (I.D. p. 7, Finding No. 4; I.D. p. 11, Conclusion No. 3)."

Respondent argues that Complainant does not automatically meet its burden of proof by reliance on the testimony of one medical doctor. Respondent claims that Dr. Troendle's background, training and experience are inadequate to constitute substantial evidence relevant to the subject matter of the complaint. Respondent further argues that a decision in favor of Complainant must be based on substantial affirmative evidence presented by Complainant and not on a want of affirmative evidence on the part of Respondent.

Substantial evidence is generally defined as "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion ... and it must be enough to justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion sought to be drawn from it is one of fact for the jury." NLRB v. Columbian Enameling & Stamping Co., 306 U.S. 292, 299 (1939) and cases cited therein; See also Richardson v. Perales, 402 U.S. 389 (1971); U. S. Health Club, Inc. v. Major, 182 F. Supp. 759 (D. N.J. 1960); rev. on other grounds 292 F.2d 665 (3d Cir. 1961) cert. den. 368 U.S. 896 (1961). It is more than a mere scintilla of evidence but less than a preponderance of the evidence Marker v. Finch, 322 F. Supp. 905 (D. Del. 1971); Coleman v. Gardner, 264 F. Supp. 714 (S.D. W.Va. 1967); Steward v. Gardner, 270 F. Supp. 92 (S.D. W.Va. 1966) aff'd 379 F.2d 554 (4th Cir. 1967). In administrative proceedings it is, in effect, equivalent to that quantum of evidence necessary to establish a prima facie case and to shift the burden of going forward to the opposing party. See Otis & Company v. SEC., 176 F.2d 34 (D.C. Cir. 1949); Soberin Aids Company, P.S. Docket No. 2/36 (P.S.D. 1973).

In proceedings under 39 U.S.C. § 3005, Complainant has the initial burden of going forward with its evidence to establish a prima facie case. See Peak Laboratories Inc. v. United States Postal Service, 556 F.2d 1387, 1390 (5th Cir. 1970). Once Complainant has presented a prima facie case, the burden of going forward with rebuttal evidence shifts to Respondent. See Peak, supra. However, the ultimate burden of persuasion remains with Complainant and must be established by a preponderance of the evidence. See Michigan Bulb Company, P.S. Docket No. 7/43 (P.S.D. 1979); Wilmont Products, P.S. Docket No. 6/46 (P.S.D. 1979). Thus, the question presented is whether the testimony of Complainant's witness was sufficient to establish a prima facie case thereby shifting to Respondent the burden of going forward with rebuttal evidence.

Respondent's challenge of Dr. Troendle's qualifications with regard to the subject matter at issue is not without some merit. Doctor Troendle is a medical doctor, but not a specialist in dermatology or the treatment of hair conditions (Tr. 13, 115). In addition, since graduating from medical school in 1950, the doctor has at no time engaged in a practice or employment having a direct relationship to the treatment of hair conditions (Tr. 41-43, 46). The doctor had only one day to prepare for her testimony. She read some information in textbooks on dermatology and had discussions with three or four of her medical associates, one of whom had originally been scheduled to testify but was unable to do so because of illness, and the other who is a dermatologist (Tr. 56, 57).

Notwithstanding the foregoing, on both direct and cross-examination, the doctor's responses to counsels' questions demonstrated a substantial familiarity with the substances that make up Respondent's product and their effect on the body. The doctor's answers were straightforward, generally without qualification or reservation. The doctor did not hesitate to indicate a lack of knowledge or to respond to questions when such responses might appear to run counter to Complainant's position (e.g., Tr. 60, 104, 131). The doctor testified that if in fact it had been established that the results represented by Respondent could be achieved, she would know about it because of its importance to the medical community (Tr. 61). While subjected to extensive and probing corss-examination, the doctor testified without qualification that Respondent's product would not perform as represented (Tr. 36-39, 147, 148).

Dr. Troendle's testimony clearly establishes that her knowledge of the matters at issue is vastly superior to that of a layman. Although she does not possess a specialty in the field of medicine most closely related to the treatment of conditions for which Respondent's product is advertised, she is a medical doctor and does possess sufficient knowledge of the matters involved in this proceeding for her testimony to be admissible. See e.g., Carlson v. Jaurek, 526 F.2d 202 (8th Cir. 1975); Alvarado v. Weinberger, 511 F.2d 1046 (1st Cir. 1975); Harris v. Smith, 372 F.2d 806 (8th Cir. 1967); Baerman v. Reisinger, 363 F.2d 309 (D.C. Cir. 1966); Sher v. DeHaven, 199 F.2d 777 (D.C. Cir. 1952); Research Laboratories, Inc. v. United States, 167 F.2d 410 (9th Cir. 1948); Frost v. Mayo Clinic, 304 F. Supp. 285 (D. Minn. 1969). Moreover her testimony was credible and persuasive and, therefore, constituted "substantial evidence" which established a prima facie case which Respondent made no attempt to rebut.

Respondent did offer into evidence certain exhibits, but they pertain to Respondent's claim of discrimination, not to the efficacy of its product, and therefore they do not rebut Complainant's medical evidence. Accordingly, Respondent's first exception is found to be without merit.

Respondent's second exception is:

"2. Respondent excepts to the Administrative Law Judge's reliance upon the 'consensus' testimony of Dr. Troendle as the basis for finding material falsity in Respondent's advertising representations (I.D. p. 7)."

Dr. Troendle was specifically questioned as to what she would do to establish a consensus of medical opinion and what she did to determine if the views which she expressed were in accordance with such a consensus (Tr. 39, 56, 60, 76). The doctor's testimony establishes unequivocally that she did not check the various sources she considered to be necessary in order to determine what is the consensus of medical opinion. The doctor's testimony indicates that she is of the opinion that her testimony is in conformance with the consensus of medical opinion. However, she is not engaged in an active practice in dermatology nor did she conduct a thorough review of the medical literature on the subject which would provide a basis for concluding that her testimony was in fact in accord with the consensus of medical opinion. Accordingly, there is insufficient evidence in the record to determine whether the witness' testimony is or is not in accord with the consensus of medical opinion. Therefore, Respondent's second exception has merit.

Respondent's third exception is:

"3. Respondent excepts to the Administrative Law Judge's findings that Respondent's representation that the ingredients in its product cause the growth of healthy, beautiful hair (Complaint ?II(c)) is false and that Respondent's product plays no role in achieving any of the representations alleged in the complaint (I.D. p. 10)."

Through the testimony of Dr. Troendle, Complainant presented a prima facie case which Respondent did not rebut. Complainant's presentation of a prima facie case consisted of the introduction of substantial evidence which the presiding Judge found to be truthful and credible. A review of the testimony presented indicates that this was a proper conclusion. Notwithstanding the absence of extensive experience of the witness with regard to hair conditions, there is nothing in the record which refutes the accuracy of the witness' unequivocally expressed opinion that Respondent's product will not perform as represented.

As previously stated, the appropriate standard of proof to be applied in actions brought under 39 U.S.C. § 3005 is the "preponderance of evidence" standard. See Michigan Bulb Company, P.S. Docket No. 7/43 (P.S.D. 1979). The preponderance of evidence standard requires the submission of evidence establishing "the more reasonable of probabilities, 4 S. Gard, Jones on Evidence § 30.4 (6th Edition 1972) or "more likely so than not" Jones v. United States, 239 F.Supp. 474, 480 (E.D. La., 1965). The testimony of Dr. Troendle was the only evidence presented as to whether Respondent's product would perform as represented. If Respondent possessed contrary evidence which would rebut Complainant's evidence, it had a duty to present it. Michigan Bulb Company, supra; Standard Research Laboratories, P.S. Docket No. 7/48 (P.S.D. 1980) and the decisions cited therein. Respondent did not do so. Accordingly, as the only evidence, the doctor's testimony stands unrebutted and constitutes a preponderance of the evidence. Therefore, the result reached in the Initial Decision is supported by a preponderance of the evidence. Respondent's third exception is without merit.

Respondent's fourth exception is:

"4. Respondent excepts to the Administrative Law Judge's dismissal of its defense based on P.S. Docket No. 2/137 and the recommendation that an order be entered which would not allow the same representations permitted by the Consent Agreement executed by the Postal Service in P.S. Docket No. 2/137 (I.D. p. 10, pp. 12-13)."

Respondent argues that the Administrative Law Judge was incorrect in finding material and substantial differences between the advertising and product in issue in Cosvetic Laboratories, P.S. Docket No. 2/137 and the advertising and product in this case. It also argues that it is entitled to the same treatment received by the Respondent in the Cosvetic case. Respondent cites Mark Eden v. Lee, 433 F.2d 1077 (9th Cir. 1970). The Mark Eden case dealt with the rights of a Respondent under a Consent Agreement executed between it and the Postal Service and is clearly distinguishable from, and has no application to, the present dispute in which Respondent claims some right under a Consent Agreement entered into between the Postal Service and a third party.

Legal proceedings must be and are decided on the facts introduced in each particular case. The issue in this proceeding is whether Respondent makes the representations alleged in the Complaint and whether those representations are materially false. On the record presented the Administrative Law Judge properly concluded that the Respondent makes the representations alleged in the Complaint and that those representations are materially false. Therefore, the issuance of a false representation order is proper even though the Postal Service elected to enter into a Consent Agreement with another advertiser. The execution of the Consent Agreement in the Cosvetic case and the failure to reach agreement here does not constitute a case of discriminatory enforcement of 39 U.S.C. § 3005. See Sara Michaels, P.S. Docket No. 5/95 (I.D. 1977, P.S.D. 1978); Iso-Tensor Plan, P.S. Docket No. 3/30 (P.S.D. 1975); Beauti-Breast of Paris, P.S. Docket No. 1/140 (P.S.D. 1975). In the latter case it was stated:

"...For whatever reasons there may have been to proceed no further with that case it is not the function of this administrative proceeding to decide whether others may properly be made the subject of complaints under 39 U.S.C. § 3005 but rather, once a complaint has been filed by proper authority (in the Postal Service, the Postal Service General Counsel or his designated representative), to decide whether the evidence produced in the course of the administrative hearing relating to the particular complaint warrants the conclusion that a statutory violation exists on the facts of the case...."

Thus, Respondent's attempt to bring itself within the terms of a Consent Agreement entered into between the Postal Service and a third party is without merit. However, in view of the Respondent's expressed desire to enter into a Consent Agreement, the parties were directed to attempt to negotiate an acceptable resolution of this matter but they were unable to do so.

Respondent's final exception is:

"5. Respondent excepts to the conclusion of the Administrative Law Judge that an order, pursuant to 39 U.S.C. § 3005, should issue against Respondent (I.D. p. 13)."

Respondent has correctly pointed out that the presiding Judge erred when he concluded that the testimony provided by the Postal Service witness established that it was in accord with the consensus of medical opinion. However, in order to prevail Complainant is required to establish its position by a preponderance of the evidence. This it can and has done in this case without establishing the consensus of medical opinion. Therefore, the erroneous finding concerning the consensus of medical opinion does not alter the result reached in the Initial Decision.

CONCLUSION

After consideration of the Respondent's exceptions and the record as a whole, it is concluded that the Initial Decision correctly holds that Respondent is engaged in a scheme for obtaining 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.