P.S. Docket No. 10/175


September 21, 1981 


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;

Grant, Quentin E.

APPEARANCES FOR COMPLAINANT
Sand ra C. McFeeley, Esq.
Consumer Protection Division
Law Department
U.S. Postal Service
Washington, DC 20260
James Harbin, Esq.
Office of the Regional Chief Inspector
Western Region
U. S. Postal Service
850 Cherry Avenue
San Bruno, CA 94098

APPEARANCE FOR RESPONDENT:
Martin Radoff, Esq.
12155 Riverside Drive
North Hollywood, CA 91607
(for Complimentary Vacation
Club only. No appearance
for Complimentary Travel
Club)

INITIAL DECISION

Complainant alleges in a Complaint filed on March 24, 1981, that Respondent, Complimentary Vacation Club, is engaged in a scheme to obtain money or property through the mails in violation of 39 U.S.C. § 3005 by means of false representations concerning Las Vegas vacation offers.

The Complaint was amended at the hearing on Complainant's motion to include as a named Respondent Complimentary Travel Club.

A hearing was held in Los Angeles, California, on July 8, 9, and 10. The evidence of both parties was received. Complainant has filed proposed findings of fact, conclusions of law and written argument. Respondent has not done so but through its counsel made extensive oral argument on the record at the hearing. To the extent indicated, the proposed findings and conclusions have been adopted. Otherwise, they have been rejected as irrelevant, immaterial, or contrary to the evidence.

Witnesses for Complainant were Postal Inspectors Charles M. Yarton and Christine Macho, and Antoinette Rich, Martin Dahlquist, and Yvette Anderson.

Testifying for Respondent were Abe Korian, Bob Griffiths, Sheila Waters, Mary Stuart, Patty Gillette and Billy D. Kegley.

FINDINGS OF FACT

1. Respondents Complimentary Vacation Club and Complimentary Travel Club do business at 18345 Ventura Boulevard, Tarzana, CA 91356 (A-1, A-7)(a)).

2. Complimentary Vacation Club is a trade name used by Complimentary Dinner Club, Inc., a corporation owned and operated by Billy D. Kegley (Tr. 678).

3. Complimentary Travel Club is another business name used by Complimentary Dinner Club, Inc. and/or Billy D. Kegley. In his testimony, Mr. Kegley did not deny this (Tr. 579, 580, 678, 736, 737, 775, 776).

4. Both names set forth in the caption of this matter are used by Respondent in the conduct of restaurant and hotel promotion plans offering three-day and two-night vacations in Las Vegas, Nevada, and other locations (Tr. 679).

5. With respect to the issues in this proceeding I find that Complimentary Vacation Club and Complimentary Travel Club are a single entity.

___________

DISCUSSION

The Complaint alleges that by means of false representations made in postcards containing a solicitation headed by the words "IMPORTANT NOTICE," and telephonic presentations to persons responding to the postcard solicitation, Respondent obtains money or property through the mail in violation of 39 U.S.C. § 3005. The several alleged false representations are quoted and discussed in the Findings of Fact below.

Following are the standards of interpretation of advertising applicable in this kind of proceeding:

The meaning of advertising representations is to be judged from a consideration of an advertisement in its totality and the impression it would most probably create in ordinary minds. Donaldson v. Read Magazine, 333 U.S. 178 (1948); Vibra-Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y., 1957); Borg-Johnson Electronic v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1959). Express representations are not required. It is the net impression which the advertisement is likely to make upon purchasers to whom it is directed which is important, and even if an advertisement is so worded as not to make an express representation, if it is artfully designed to mislead those responding to it the mail fraud statutes are applicable. G.J. Howard v. Cassidy, 162 F. Supp. 568. See also Virginia State Board of Pharmacy v. Virginia Citizens Council, 425 U.S. 748

These rules have been applied in this case to Respondent's solicitations for remittances of money through the mails.

___________

FURTHER FINDINGS OF FACT

6. The "IMPORTANT NOTICE" postcard under the name Complimentary Travel Club informs the recipient that his entry has been selected to receive an "exciting 3-day and 2 night vacation" in Las Vegas for 2 adults and solicits a telephone call to (213) 345-8501 (a Los Angeles commercial number) for complete information (A-1).

7. Persons calling the designated telephone number are told substantially the following:

"You and a guest may receive a three-day, two-night vacation in fabulous Las Vegas, Nevada. You will stay at either the Landmark Hotel and Casino, the Ambassador Inn, the Lotus Inn, Durango Vegas and a brand new gorgeous motel that just opened up called the Tropicanna Travel Lodge. This mini vacation can be taken any time between now and December 31, 1981. You may check in any time Sunday through Friday to begin your fun vacation. Our job is, as you must realize, to get you into the casinos. Therefore, in addition to your accomodations, you will receive eighteen free meals, some souvenirs and the finest gaming package available. This gaming package consists of the following:

"Fifty-five dollars in match play to be used in Craps or Twenty-One. Four hundred and eighty slot machine tokens. The machines pay off in cash and you keep what you win. Thirty-six dollars in free drinks. This is besides the drinks you get while gambling. A free main show. Four 2-for-1 main shows, this means you pay for one and the other person is free. Seventy-five dollars in Lucky Buck Roulette Bix six. Bingo discounts, Keno discounts. One free lounge show. You will actually receive over $700.00 in benefits." (A-2, 3).

8. Purchasers are required to pay to Respondent by credit card, or check or money order, sent by mail, a service fee of approximately $45 covering Respondent's "cost of processing, mailing, phone calls, written confirmation to you and general handling of your reservation." (A-2, 3, 5)

9. Purchasers are also required to mail a deposit of $60 (or more for weekends) guaranteeing their arrival. Respondent's telephone solicitors advise inquirers that this deposit will be refunded in vouchers redeemable in cash tickets over the 3-day vacation period, at some casinos on an hourly basis, at some casinos all at one time (A-2, 3, 9(a)).

(In Findings of Fact Nos. 10 through 18, below, the underscored initial sentence is a representation alleged in paragraph IV of the Complaint to be made by Respondent in soliciting remittances for the vacation packages described above).

10. 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.

This representation as to refundability of the deposit is explicit in the telephone solicitation (A-2, 3, 4) and the vacation certificates sent to purchasers under the name Complimentary Vacation Club (A-76, B-1, C-4, F-2, G-2, A-70.) I find implicit in the exhibits cited the representation that the redemption of the vouchers for the deposit amount or more can be accomplished without undue inconvenience. Several purchasers of the package testified that this was their expectation based on Respondent's telephonic solicitations and literature (Tr. 216, Dahlquist; 295, Anderson; 381, Rich).

I find the representation to be false. It is clear from the testimony of several witnesses that redemption of the vouchers could be accomplished only with the greatest difficulty in terms of having to travel to several casinos, often widely separated and distant from their hotels, and having to spend a large number of hours waiting for the redemption times of the various vouchers to arrive (Tr. 307, 393, 397, 493, 495; E-41). Although there was some disclosure in the vacation certificates that redemption would not occur in a single location immediately on arrival, they failed to convey anything approaching the inconvenience, almost impossibility, which redemption actually entailed.

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

This representation is made in Respondent's telephone solicitation (A-3, at 3). It is also implied in the vacation certificate where, in the section headed "Privileges and provisions" (? 4), it is stated that purchasers will receive "$60.00 IN NICKELS" followed in parenthesis by the advice that "some" casinos require a purchase of nickels and that some redeem coupons only on an hourly basis. The implication derived from the parenthetical advice is that some, if not most, casinos will refund the room deposit, in the form of nickels, att at one time. This was the reasonable expectation of many purchasers of the certificate (Tr. 284, 295, 381, 474).

This representation is false. The only method by which purchasers of the vacation certificate can obtain refund of their room deposit in the form of nickels is to redeem $1.00 coupons on a periodic basis during the three-day stay (A-10d, E-41).

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

This representation is made to prospective purchasers in the telephone solicitation made by Respondent (A-3, at 4; CX-A-4, at 6; Tr. 218).

After a purchaser has paid Respondent's fee and received the vacation certificate (A-7b) he finds that he may not select his hotel or motel beforehand. He may only indicate a preference for type of accomodations (hotel/condominium or motel). Respondent makes the actual selection. Some purchasers do not receive the type of accomodations they have chosen (Tr. 387).

This representation is false.

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

Respondent's Answer admits the making of this representation (? V, 4). The representation is also made in Respondent's telephone solicitation (A-3, at 3, 4). It is also made in the vacation certificate ("One of the top quality hotels, condominiums or motels is looking forward to your being a guest at their facilities." (A-7b)

This representation is false. Some purchasers are placed by Respondent in substandard, unclean, unsafe accommodations, without eating facilities, and frequented by prostitutes (Tr. 233, 234, 236, 419, 738-743; B-27).

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

This representation is implied in Respondent's solicitation postcard in the advice that the recipient is entitled to receive an exciting 3-DAY and 2-NIGHT vacation offer (A-11), coupled with that part of the telephonic solicitation (A-3) which says that "you and a guest may receive a three-day two-night vacation" and that "in addition to your accomodations you will receive eighteen free meals etc" (underscoring supplied).

This pitch is loaded with words giving the impression that the hotel accomodations are part of the "give-away," to be had at no cost to the fortunate "selectees". The mention later in the solicitation of a required deposit to guarantee arrival is artfully phrased and positioned to convey the impression that it is but a temporary annoyance to the purchaser to be rectified promptly on his arrival in Las Vegas through conveniently redeemable vouchers.

This representation is false. The hotel accomodations are not free. The issuance of vouchers redeemable in casinos over the three-day period on an hourly basis does not constitute a return of the deposit so as to render the accomodations free.

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

Respondent's Answer to the Complaint admits the making of this representation (? V, 6 at 6). It is implicit in the telephone solicitation and the vacation certificate.

This representation is false. The record is replete with testimony and other evidence showing that for many, if not most, purchasers redemption of the gambling vouchers and coupons contained in the vacation package could be accomplished, if at all, only with great difficulty and inconvenience in terms of traveling considerable distances from hotel to casino, casino to casino, spending an inordinate number of hours because of time restrictions on the use of vouchers and coupons, and spending sizeable amounts of cash (Tr. 236-238; 306-314; 422-427; 495; 505; E-38).

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

Respondent's Answer (? V, 7) admits that it represents that couples purchasing a vacation certificate will receive and be able reasonably to use benefits totaling over $700 in the 3-day, 2-night vacation period. The vacation certificate itself states that a couple will receive over $1,000 in benefits (A-7b). This representation resembles that discussed in paragraph 15, supra. But I construe the emphasis in this representation to be upon the amount of $700, while the emphasis in paragraph 15 is on the use of all gambling benefits which total considerably more than $700 per couple.

At least $360 of the value of benefits per couple represented by Respondent are slot tokens. Respondent places a value of $1 on each token. This value, according to Mr. Kegley, is in accordance with Nevada law based on the lowest pay off of the machine (Tr. 712-714). Complainant's evidence as to the value of these tokens consisted of the opinion of certain witnesses that a token for a machine that pays off in quarters should not be valued at more than a quarter. Whatever the proper nominal value, the preponderance of the evidence is that the token machines pay off very infrequently. But using the valuation of $1 per token, the Ambassador Casino package provides $495 of benefits per couple over a three-day, two-night period. An additional $205 in benefits appears to be realizable only with great difficulty and inconvenience. For instance, the use of vouchers at the Castaways and the Silver Slipper for breakfast and other benefits on two separate days would provide a total value of only $25 according to Mr. Kegley's own figures (Tr. 719-724).

To realize significant additional benefits would have required being constantly on the move from hotel to numerous casinos and restaurants and museums. Certainly the realization of $700 or $1,000 in total benefits over the vacation period is not achievable with reasonable efforts, if at all.

This representation is false.

17. The representations found above are false because their natural tendency is to induce purchasers of the vacation package.

CONCLUSIONS OF LAW

1. Respondent, under the names and at the address contained in the caption hereof, is engaged in a scheme to obtain money or property through the mails by means of materially false representa- tions concerning its "3-day, 2-night vacation offer in Las Vegas, Nevada, for two adults."

2. Such representations are substantially as characterized in paragraph IV of the Complaint and would be so understood by persons of ordinary mind.

3. Respondent makes much of the fact that Complainant at the time of the hearing had received only 185 complaints concerning subject promotion. This argument does not help Respondent in view of the holding in Farley v. Heininger, 105 F.2d 79, 84 (D.C. Cir. 1939), where, no evidence of complaints from the public having been adduced, the Court said that the decisive factor is not whether anyone complains of fraud, or was in fact defrauded, but whether the mails are being used to project a scheme which may result in obtaining money from members of the public by means of false and fraudulent statements.

4. Disclaimers are ineffective to rebut misrepresentations. Gottlieb v. Schaffer, 141 F. Supp. 7 (1956); Cates v. Haderlein, 189 F.2d 369 (1951).

5. A money-back guarantee is no defense to this kind of proceeding. G. R. Paro, P.S. 6/111, P.S. Decision 1979.

6. Respondent advances as a defense to the complaint the assertion that everyone going to Las Vegas expects everything to be complimentary ("on the house"). Such expectations are encouraged by the misrepresentations made by Respondent in its solicitation and vacation certificate.

7. Respondent's scheme is in violation of 39 U.S.C. § 3005. Accordingly, a mail stop order in the form attached should be issued against Respondent.