In the Matter of the Complaint Against

RAYMOND MILO d/b/a DIRECTORY PUBLISHING DIVISION
9000 Sunset Boulevard at
Los Angeles, CA 90069

P.S. Docket No. 12/168;

Cohen, James A.

APPEARANCE FOR COMPLAINANT:
ThomasA. Ziebarth, Esq.
James A. Harbin, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260

APPEARANCE FOR RESPONDENT:
Jerry L. Newton, Esq.
William E. Johnson, Esq.
433 North Camden Drive
Suite 1200
Beverly Hills, CA 90210

POSTAL SERVICE DECISION ON

BREACH OF CONSENT AGREEMENT

On November 20, 1981, Complainant, the United States Postal Service, filed a "Petition for Orders Based on Breach of Consent Agreement" in which it alleges that Respondent, Raymond Milo, sole owner of Directory Processing Center, Inc., has breached the terms of a Consent Agreement executed by Mr. Milo on January 21, 1976. Complainant contends that Respondent, using the names TELEX & twx DIRECTORY CENTER and TELEX & twx DIRECTORY at P. O. Box 4054, Beverly Hills, CA 90213, has resumed the activities which Mr. Milo in the Consent Agreement agreed to discontinue. Specifically,

Complainant alleges that by the use of the above names Respondent has resumed representing that it is associated or affiliated with Western Union.

In its Petition, Complainant sought the issuance of a temporary detention order against mail addressed to Respondent at the above address. On the basis of the information attached to the Petition, a temporary detention order was issued on November 23, 1981. The Order authorizing the temporary detention of Respondent's mail granted Respondent a period of 10 days in which to file a reply to Complainant's Petition. On December 7, 1981, Respondent filed a timely reply to the Petition. Accompanying the reply was a motion for a hearing on an expedited basis in Los Angeles and a motion to vacate the temporary detention order.

The motion to vacate the temporary detention order was denied on December 10, 1981. The motion for an expedited hearing in Los Angeles was granted and the hearing was held on December 15, 1981. A renewal of the motion to vacate was again denied at the hearing (Tr. 196-97). However, it was suggested to the parties that they should attempt to reach an agreement which would allow Respondent to receive its mail during the pendency of the proceedings (Tr. 197-99). The parties have not been able to reach such an agreement.

At the hearing Complainant called as witnesses Frances Poff of Western Union; Postal Inspectors Wayne Collier, Bill Burgess and Larry Johnson; and employees of prospective subscribers, J. M. Jordan, Kelly Husted, and Maxine Taylor. Respondent called as witnesses Charles Abbot, President of Wayne Systems, Inc., and Mr. Milo. Both parties introduced exhibits into the record.

During the hearing Respondent made a continuing hearsay objection to certain of the testimony presented and exhibits introduced by Complainant. Although the evidence was admitted into the record, the parties were advised that Respondent's objection would be considered in connection with the evaluation of the evidence. Respondent's continuing objection has been considered in connection with the weight attached to the evidence to which objection was taken.

The parties requested and were given an opportunity to file proposed findings of fact and conclusions of law. Respondent's proposed findings and conclusions were received on December 21, 1981, and Complainant's proposed findings and conclusions were received on December 22, 1981. The findings of fact and conclusions of law proposed by the parties have been fully considered and, to the extent indicated, have been adopted. Otherwise, they have been rejected as unsupported, contrary to the evidence, irrelevant or immaterial.

FINDINGS OF FACT

The Consent Agreement

1. In the spring of 1975, Respondent, under the name Directory Publishing Division at 9000 Sunset Boulevard, Los Angeles, CA 90069, solicited listings and subscribers to a new telex directory. (Milo Declaration ^1/ p. 20). The solicitation package, in addition to including a letter on stationery of Directory Publishing Division, contained the words "TELEX/TWX" and after the trademark symbol at the bottom of the solicitation stated "Registered trademark of Western Union Telegraph Company" (Tr. 72; Milo Dec. Exhs. 1-4). As the result of complaints received concerning this solicitation the Postal Service began an investigation which led to the execution of a Consent Agreement by Mr. Milo as sole proprietor of Directory Publishing Division, 9000 Sunset Boulevard, Los Angeles, CA 90069, on January 21, 1976.

2. The Consent Agreement provides in paragraph 4:

"4. In future promotions for Directory Publishing Division, or any other publication or listing, the undersigned agrees that no express or implicit representation shall be made that the publication or directory is associated or affiliated with any telecommunications firm, when in fact there is no association or affiliation."

Other paragraphs of the Consent Agreement relevant to the Petition are paragraphs 7 and 9 which provide:

"7. A breach of this agreement by the undersigned or any party in privity with the undersigned will warrant the issuance of an order pursuant to § 3005, supra, by the Judicial Officer of the U. S. Postal Service, against the name(s) and address appearing in the caption hereof, or any other name(s) and address(es) then in use, provided that the undersigned or his attorney of record is first served with a copy of the petition for such order. The undersigned further agrees that in the event a petition alleging breach of this agreement is filed, the Judicial Officer shall be authorized to issue an ex parte order directing the appropriate postmaster(s) to detain mail addressed to the name(s) and address(es) then being employed, pending final resolution of the issue concerning the alleged breach of this agreement. The foregoing provision shall be subject to the right of the undersigned or his designated representative to inspect such mail at reasonable times in the presence of a designated employee of the Postal Service and the undersigned shall have the right to immediate possession of such mail as is clearly not related to the alleged breach of this agreement."

"9. No officer, employee, or agent of the U. S. Postal Service has expressly or impliedly, directly or indirectly, accepted or approved any revised advertising matter or activities presently employed or contemplated for future use by the undersigned."

Respondent's Solicitations

3. Following the signing of the Consent Agreement, no solicitations were distributed by Respondent until September 1976 (Tr. 163). The September 1976 solicitation was on letterhead of TELEX/twx DIRECTORY CENTER and the words "TELEX/twx" and "TELEX/twx DIRECTORY" appear prominently and frequently in the solicitation package (Milo Dec. p. 22, Exhs. 6-8). In this and subsequent solicitations there were no references to Western Union and no inclusion of the trademark symbol.

4. In May 1977, Respondent sent out additional solicitations under the letterhead TELEX & twx DIRECTORY CENTER. The solicitation sought listings for the "all-new & independent U.S. TELEX & twx DIRECTORY, '77-'78 issue." The words "TELEX & twx" and "TELEX & twx DIRECTORY CENTER" are used throughout the solicitation package (Milo Dec. Exhs. 9-11).

5. In September 1977, Directory Processing Center, Inc., was incorporated as a California corporation. The President of this corporation and its sole shareholder was and is the same Raymond Milo who signed the Consent Agreement (Milo Dec. pp. 19-22). After incorporation, Directory Processing Center, Inc., filed a fictitious business name statement in the name of "Telex and twx Directory Center." (Tr. 144, 187-88; Milo Dec. p. 22). That same month the "'77-'78 TELEX & twx Directory --Independent U.S. Edition" was published (Milo Dec. p. 23; RX-H).

6. New mail solicitations were sent out for the next edition of the directory in November 1977 (Milo Dec. Exhs. 13-15). These solicitations stated they were for "the next issue of the TELEX & twx Directory --Independent U.S. Edition." The TELEX & twx DIRECTORY CENTER letterhead was used and the words "TELEX & twx" appeared throughout. A similar mail solicitation was distributed in February 1978 (Milo Dec. Exhs. 16-19). The later solicitation contained a warning about unsolicited invoices requesting payment for listings in international directories (Milo Dec. p. 17).

7. From March 1978 through January 1979, no mail solicitations were distributed by Respondent and no directory was published because criminal charges were brought against Mr. Milo. These charges were never presented to a grand jury and were dismissed in April 1979 (Tr. 163; Milo Dec. pp. 23(a)-(b)).

8. In January 1979, a new mail solicitation was sent to prospective subscribers for the next edition of the directory (Milo Dec. Exhs. 20-23). This solicitation stated it was for the "TELEX & twx Directory - Independent U.S. Edition." Like previous solicitations, the words "TELEX & twx" & "TELEX & twx DIRECTORY CENTER" were prominently used throughout the solicitation package. In this solicitation it was stated that the directory ". . . is published annually as a convenient guide to more than 120,000 subscribers to all major teletype networks in the U.S., though the publisher is not affiliated with any of these networks" (Milo Dec. Exh. 20). Since the original of this solicitation was not offered in evidence, no finding on the placement of this statement in the solicitation package can be made.

9. During the spring of 1980, the 1980 edition of the "TELEX & twx Directory --Independent U.S. Edition" was published (RX-M; Milo Dec. p. 23(b)).

10. Commencing in the fall of 1980, efforts were undertaken by Respondents to solicit subscribers to the 1981 directory. In July and September 1980, renewal notices were mailed to past subscribers. In November 1980, solicitations were mailed directly to persons who had previously been solicited, but who had not purchased a copy of the directory (Milo Dec. p. 23(c), Exhs. 25-28). These solicitations, on letterhead of TELEX & twx DIRECTORY CENTER addressed "Attention: Controller," stated:

"THE 1981 EDITION WILL PROVIDE LISTINGS FOR MORE THAN 140,000 SUBSCRIBERS TO MAJOR TELETYPE NETWORKS IN THE U.S., INCLUDING WESTERN UNION, W.U.I., R.C.A., I.T.T., AND T.R.T. THE TELEX & TWX DIRECTORY CENTER IS NOT AFFILIATED WITH NETWORK AND EQUIPMENT SUPPLIERS . . . OUR ONLY PRODUCT IS THE DIRECTORY ITSELF, AND WE BELIEVE YOU WILL FIND IT EXTREMELY USEFUL." ^2/ (Milo Dec. Exh. 25).

In January 1981, follow-up solicitations were mailed with respect to the 1981 directory (Milo Dec. Exhs. 29-31). The disclaimer was contained in these mail solicitations (Milo Dec. Exh. 29). A similar mailer was distributed in March 1981, which contained the same disclaimer (Milo Dec. Exhs. 32-35). Again, because only copies of the solicitations were introduced into evidence, the prominence of the placement of the disclaimer cannot be ascertained.

11. In May 1981, the 1981 directory was published and sent to subscribers (Milo Dec. p. 23(c)).

12. In June 1981, Respondent distributed a solicitation package for its 1982 directory (Tr. 6). The package consists of the envelope in which it was mailed (CX 1(d)), a "TELEX & twx DIRECTORY ORDER FORM" (CX 1(a)), a warning to accounts payable (CX 1(b)), and a business reply envelope (CX 1(c)). The words "TELEX & twx," "TELEX & twx DIRECTORY," and "TELEX & twx DIRECTORY CENTER," appear prominently throughout the solicitation package. The disclaimer is included in the solicitation package on the back of the warning to accounts payable (CX 1(b)).

13. A follow-up solicitation package was distributed by Respondent in August 1981 (Tr. 7). The words "TELEX & twx," "TELEX & twx DIRECTORY," and "TELEX & twx DIRECTORY CENTER," were again prominently displayed in the solicitation package (CX 4(a)-(c)). The order form, which appears to be the principal solicitation document, contains a blue border with the words "TELEX - twx DIRECTORY." (CX 4(a)). The disclaimer was included on the back of the order form (CX 4(a)).

14. A "reminder" solicitation was sent out in September 1981. The language of this solicitation was similar to the August solicitation but contained no disclaimer (CX 2 (a)-(c)).

15. A further solicitation was sent out by Respondent in October 1981 (CX 3(a)-(c)). The language used in this solicitation was similar to that used in the August and September solicitations, but like the September solicitation, no disclaimer was included.

Western Union

16. From 1970 to 1980 Western Union published a Telex/TWX directory (Tr. 14). The Western Union directories were entitled "Telex/TWX Directory and Buyers Guide" (CX 6(a)-(c)). Beginning in 1981, Western Union abandoned the use of the word "TWX" in connection with its directory, and substituted the word "TELEX II" when referring to twx equipment.

17. This action was taken because of Respondent's publication of its TELEX & twx DIRECTORY" (Tr. 14, 64). The 1981 Western Union Directory, published in April of 1981, is entitled "Western Union's

Telex Network 1981 Directory & Buyer's Guide" (Tr. 64; CX 6(a)). The directory bears the following inscription on its cover:

"TO OUR SUBSCRIBERS:

WITH THE PUBLICATION OF THIS DIRECTORY, WESTERN UNION TAKES AN IMPORTANT STEP THAT PUTS US IN TUNE WITH THE FUTURE. HENCEFORTH, WE WILL NO LONGER DIFFERENTIATE TELEX AND TWX . ONLY THE NAME 'TELEX' WILL BE USED (WHEN NECESSARY, THE TELEX SYSTEM WILL BE REFERRED TO AS TELEX 1; THE TWX SYSTEM AS TELEX II.) WORLDWIDE, THERE ARE 1,300,000 TELEX SUBSCRIBERS. SO OUR CHANGE REFLECTS THE SIMPLE FACT THAT THAT WORD 'TELEX' HAS BECOME THE UNIVERSAL EXPRESSION FOR WRITTEN BUSINESS TELECOMMUNICATIONS.

AND AS BUSINESS BECOMES MORE AND MORE INTERNATIONAL, THE WORD 'TELEX' PROMISES TO BECOME EVEN MORE IMPORTANT." (CX 6(a))

18. Western Union does not charge its customers for its directory (Tr. 14)

19. Bordered paper with the words "Telex/TWX Western Union" appearing on the border is used by Western Union customers to communicate with each other through teletype messages (Tr. 34-35; CX 12).

Complaints Against Respondent

20. Respondent's directory contains listings for subscribers to communications networks regardless of affiliation. All such subscribers are solicited by Respondent in the manner previously described (Tr. 144-145).

21. Commencing in 1976, Western Union began sending teletype messages to its subscribers stating that Respondent was not associated or affiliated with Western Union (RX-B).

22. At various times since 1976, through and including June 20, 1981, Western Union has sent teletype messages to its subscribers advising them that Respondent is not affiliated with Western Union (RX-B, RX-C, RX-D). These warnings have referred to a warning message contained no page 2 of the Western Union Directories.

23. The listings for the Western Union directory are handled by the Western Union Telegraph Co. Directory Center located in St. Louis, MO. The Center was previously called the Western Union Directory Center and is sometimes referred to by employees as the Telex/TWX Directory Center (Tr. 18, 37-39).

24. Since 1975, the Western Union Directory Center has received complaints from its subscribers concerning Respondent's solicitation materials (Tr. 22, 26-27, 30-31, 44). Western Union personnel receive on the average 60 calls a day inquiring whether mailings from Respondent are from Western Union (Tr. 26, 33-34, 49, 52, 56-58). Western Union also receives written inquiries to the same effect (CX 8-11).

25. Witnesses James Jordan and Maxine Taylor purchased a directory from Respondent for their respective employers (Tr. 100-102, 113-114). Both thought Respondent was affiliated with Western Union when they made the purchase (Tr. 101, 114-115). Had Mr. Jordan been aware of Respondent's disclaimer, he would not have approved the invoice for payment (Tr. 103-104). Had Mrs. Taylor seen the disclaimer she would not have been under the impression that Respondent was affiliated with Western Union (Tr. 116).

26. Kelly Husted testified she purchased a directory from Respondent believing it to be a Western Union Directory (Tr. 106-107). The bill which Ms. Husted believed came from Western Union had the disclaimer language on the reverse side (Tr. 106-107).

27. Since 1975, the United States Postal Service has received approximately 8,000 complaints from Western Union subscribers concerning Respondent's mail solicitations (Tr. 71, 77, 84-85). Of this number, 6,500 were from subscribers who complained that Respondent was passing itself off as Western Union (Tr. 71, 77).

28. Of the 8,000 complaints received by the Postal Service, 3,771 were received between January 1, 1981, and December 11, 1981. Eighty percent of the 3,771 complaints were from subscribers who believed that Respondent was associated or affiliated with Western Union (Tr. 82, 85, 117, 119, 124-125; RX-E; CX 17).

29. During the course of its business, Respondent has become aware of complaints about its directory (Tr. 151-152). Most of the complaints received by Respondent have attached the Western Union warnings published on page 2 of its directory (Tr. 154; CX 6(a)). Respondent has received thousands of these types of complaints (Tr. 158-159; 178-179). Respondent understood these complaints to accuse it of passing itself off as Western Union or as mailing fraudulent invoices or both (Tr. 164-165; 181-182; CX 18).

30. Webster's New Collegiate Dictionary, 1979 Edition, defines "telex" as "n teleprinter + exchange : a communication service involving teletypewriters connected by wire through automatic exchanges." "Twx" is defined as "abbr teletypewriter exchange."

31. The combination of "Telex/TWX" was registered as a trademark by Western Union in 1976 (CX 5).

Discussion & Conclusions

The issue to be decided in connection with a Petition for Breach of a Consent Agreement is whether the party signing the agreement has breached its terms by continuing to make the representations which it agreed to discontinue. The determination of the truth or falsity of the representations is not in issue. Mark Eden v. Lee, 433 F.2d 1077 (9th Cir. 1970); Nancy Pryor, Inc. v. United States Postal Service, Civil Action No. 80-1933 (D.D.C. 1981); American Consumer Inc. v. United States Postal Service, 427 F. Supp. 589 (E.D. Pa. 1977).

The test to be applied in interpreting advertising representations is the probable impact of the advertisements, taken as a whole, upon ordinary minds. The advertisements may be deceptive because the statements contained therein are untrue or because statements which ought be contained are omitted. The impressions of advertisements may be false though each word considered individually may be true. In considering the interpretation which ought to be given to advertising claims, the reasonable implications arising therefrom are to be given weight as well as those which are expressly stated. Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948); Spiegel Inc. v. F.T.C., 411 F.2d 481 (7th Cir. 1969); Baslee Products Corp. v. U.S.P.S., 356 F. Supp 841 (D.N.J. 1973); Vibra Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957) (rev'd on other grounds, 256 F.2d 681 (2d Cir. 1958)). Applying these principles to Respondent's advertising materials, it is concluded that Respondent has resumed making the representations it agreed to discontinue.

The record establishes that prospective customers believe Respondent to be affiliated or associated with Western Union. While certain of the evidence of consumer reaction to Respondent's advertisements is heresay, nonetheless, there is a sufficient probability of reliability of such evidence, when combined with the nonhearsay evidence and the lack of persuasive contrary evidence to support this conclusion. Respondent has resumed representing that it is associated or affiliated with Western Union Telegraph Company by its use of the words "TELEX & twx", "TELEX & twx DIRECTORY and "TELEX & twx DIRECTORY CENTER" throughout its solicitations, which in combination with its use of bordered paper and warnings of fraudulent and unsolicited invoices, leads prospective customers to believe they are dealing with Western Union Telegraph Company.

Respondent argues that the words "telex" and "twx" are generic terms which are used even by firms not involved in the communications field. It therefore contends that it suse of the terms should not be interpreted as a breach of its Consent Agreement. Although the terms are used in various ways and by various firms, nonetheless, Respondent's use of the terms in combination and in the context of the remainder of its solicitation package leads prospective subscribers to believe that Respondent is associated or affiliated with Western Union. Thus, while the use of the terms in some context may not constitute a representation of association with Western Union, they do in Respondent's solicitations.

Respondent's disclaimer does not dispel this notion. The placement of the disclaimer in the solicitation package is not sufficiently prominent to place potential customers on notice of its existence. See Vibra Brush Corp. v. Schaffer, supra; Gottlieb v. Schaffer, 141 F. Supp. 7 (S.D.N.Y. 1956). Moreover, despite Respondent's testimony that all solicitations since 1979 contained a disclaimer, certain of Respondent's solicitations contain no disclaimer.

Through the testimony of Mr. Milo, Respondent has attempted to establish that the consumer complaints are generated, not by Respondent's advertising, but by the warnings included in Western Union's directory and those sent by Western Union teletype messages. This evidence is not persuasive. While some complaints may very well result from the issuance of warnings, it is more probable that the solicitations create suspicion in the minds of consumers and that the warnings serve to inform them of the place where complaints may be lodged.

Respondent has presented evidence establishing the differences between the current Western Union directory name and contents, and the name of its directory and the terms used to describe it in its solicitations. It has also presented evidence to show the difference between the name of the Western Union St. Louis office and its corporate and fictitious name. While differences do exist, prospective subscribers continue to believe Respondent is associated or affiliated with Western Union. The perception of prospective subscribers is determinative.

Finally, Respondent argues that contract principles should govern this proceeding and Complainant should be estopped from filing a breach petition because it has been well aware of Respondent's solicitations since the execution of the Consent Agreement. Although the Postal Service has been aware of Respondent's solicitations it is not estopped from enforcing the agreement where it has never approved Respondent's advertising and where the Consent Agreement, as it does here, specifically denies approval of future advertisements. Institute for Weight Control v. Klassan, 348 F. Supp. 1304 (D.N.J. 1972). Moreover, the fact that the Postal Service did not seek to enforce the Consent Agreement prior to November 1981, did not work to Respondent's detriment. Rather, Respondent was allowed to reap the benefits of its advertising for a period of time which it would not have been allowed to do had a Petition for Breach been filed earlier.

Finally, it should be pointed out that the terms of Respondent's solicitation package are totally within its own control. It could have easily eliminated any confusion with the Western Union directory if that had been its intention.

Since it has been concluded that Respondent has resumed making the representations it agreed to discontinue, Respondent has breached the terms of its Consent Agreement. Pursuant to paragraph 7 of the Consent Agreement, an order under 39 U.S.C. § 3005 is being issued contemporaneously with this Decision. By agreement of the parties, the return portion of the Mail Stop Order is being stayed in order to allow Respondent to seek judicial review of this decision. If the undersigned is not informed within 30 days from receipt of this Decision that judicial review has been initiated, the Mail Stop Order will be placed in full force and effect.

^1/ Referred to hereafter as Milo Dec.

^2/ During the hearing and hereafter in this Decision this statement will be referred to as the disclaimer.