In the Matter of the Complaint Against

STANDARD RESEARCH LABS
P. O. Box 5009
at Pompano Beach, FL 33064

and P. O. Box 852 P. O. Box 10129
at Pompano Beach, FL 33061

and P. O. Box 9547 P. O. Box 9667
at Ft. Lauderdale, FL 33310

P.S. Docket No. 9/63;

Cohen, James A.

APPEARANCE FOR COMPLAINANT:
ThomasA. Ziebarth, Esq.
Consumer Protection Division
U. S. Postal Service
475 L'Enfant Plaza West, S.W.
Washington, DC 20260-1100

APPEARANCE FOR RESPONDENT:
Jack Paller, Esq.
John M. Creger, Esq.
Katz, Paller & Land
470 E. Paces Ferry Road
Suite 2000 Atlanta, GA 30363

POSTAL SERVICE DECISION

Respondent has appealed from the Initial Decision of an Administrative Law Judge which holds that, with regard to the sale of the products "Procaine Vitamin" and "Procaine Creme," 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 September 9, 1980, the Consumer Protection Division, Law Department, United States Postal Service, filed two Complaints which were docketed as P.S. Docket Nos. 9/63 and 9/64. In P.S. Docket No. 9/63 the Complaint in paragraph 3 alleges that Respondent, by means of advertisements calculated to induce readers to remit money through the mail, falsely represents that:

"3. . . .

(a) PROCAINE VITAMIN will increase the supply of oxygen in the user's body and thereby counteracting sic cell breakdown;

(b) The methionine contained in PROCAINE VITAMINS and CREME enhances procaine's effectiveness and acts to lower serum cholesterol levels;

(c) The ingestion of PROCAINE VITAMIN is the equivalent of a procaine injection;

(d) The PROCAINE VITAMIN will increase energy levels and impart a greater sense of well-being;

(e) The methionine contained in the PROCAINE VITAMIN will lower serum cholesterol levels, and increase the number of red blood cells;

(f) The methionine and PABA contained in the PROCAINE VITAMIN will neutralize foreign bodies in the blood stream thereby increasing serum oxygen levels and retarding the breakdown of the body cells;

(g) The PROCAINE VITAMIN will retard or reverse the aging process; and

(h) The PROCAINE VITAMIN will improve memory retention."

"3. . . .

(a) PROCAINE CREME, unlike ordinary moisturizers, will promote healthier skin because of the presence of procaine and the addition of PABA, Vitamins A and D and RNA; and

(b) The methionine contained in PROCAINE VITAMINS and CREME enhances the effectiveness of the procaine and acts to lower the user's serum cholesterol levels."

The two cases were consolidated for hearing before an Administrative Law Judge at which Complainant presented the testimony of Postal Inspector Michael P. Flynn and Karl Jules Kramer, M.D. Respondent presented the testimony of Richard Tyson, M.D. Both parties introduced evidence and participated in the examination and cross-examination of the witnesses. On the basis of the testimony presented and the exhibits in the record, the Administrative Law Judge concluded that with the exception of representation 3(e) in Docket No. 9/63 and part of representation 3(a) in Docket No. 9/64, Respondent makes the representations alleged in the Complaints, that these representations are material and that they are false. 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 stated six exceptions to the Initial Decision, each of which is addressed below.

Exception I

"The Administrative Law Judge erred in denying Appellant's Motion to Dismiss."

Subsequent to the hearing but prior to issuance of the Initial Decision, Respondent filed a Motion to Dismiss both proceedings alleging that they were moot and barred by the doctrine of res judicata because of findings set forth in an order of the United States District Court for the Southern District of Florida denying Complainant's request for a preliminary injunction under 39 U.S.C. § 3007. Respondent's Motion to Dismiss was denied by the Administrative Law Judge in the Initial Decision (I.D. at p. 3). The Administrative Law Judge concluded that 39 U.S.C. § 3007, when read with 39 U.S.C. § 3005, requires that an issue in a § 3005 proceeding must be decided initially by the Postal Service.

Respondent contends that the Administrative Law Judge erred in denying its Motion to Dismiss. Respondent correctly alleges that the Federal District Court, in denying the preliminary injunction, had before it all of the evidence presented in the administrative proceeding plus an additional affidavit, and still found there was no probable cause to believe that any violation of 39 U.S.C. § 3005 had taken place. According to Respondent, the ruling of the Court is dispositive and under the doctrines of res judicata, collateral estoppel and the "law of the case" the Administrative Law Judge's denial of the Motion to Dismiss should be reversed. Respondent argues that under the doctrine of res judicata a valid judgment rendered on the merits is an absolute bar to a subsequent action between the same parties upon the same claim or demand whereas, under the doctrine of collateral estoppel, a valid judgment constitutes an estoppel between the same parties as to matters which were necessarily litigated and determined even though the claim or demand in the subsequent action is different. By the "law of the case" doctrine, Respondent argues a lower court must apply a rule of law declared applicable by a higher court for such case in any subsequent proceeding. Respondent contends that the criteria for applying these doctrines have been met in these proceedings because they involve the same parties, issues, and evidence, and the District Court which denied the Motion for Preliminary Injunction is a higher tribunal than the Postal Service administrative proceeding.

Although the general statements of the various doctrines are not in dispute, the parties disagree on their application to these cases. A review of the authorities cited by the parties establishes that Respondent's application of the doctrines to these cases is not in accord with statute or case law.

The statute applicable to this proceeding, 39 U.S.C. § 3005(a), authorizes issuance of Mail Stop Orders

" u pon 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, 39 U.S.C. § 3007, which establishes the jurisdiction and basis upon which a United States District Court may issue a temporary restraining order and preliminary injunction during the pendency of an action under 39 U.S.C. § 3005, states in part:

"An action taken by a court hereunder does not affect or determine any fact at issue in the statutory 39 U.S.C. ??3005, 3006 proceedings."

Respondent contends that the language of § 3007 limiting the effect of a determination thereunder must be interpreted as applying only when an injunction is granted because that is the only "action" which a court is entitled to take. It also argues that its interpretation is necessary to preserve its due process rights to permit application of the doctrines of res judicata, collateral estoppel and the "law of the case." There is no merit to these arguments. The word "action" embraces judicial denials of relief as well as affirmative grants of relief. The language in § 3007 unambiguously states that court actions do not affect or determine facts at issue in a § 3005 proceeding. Thus, whether a court grants or denies an injunction under 39 U.S.C. § 3007, its action does not have an effect on a proceeding under 39 U.S.C. § 3005.

In view of the statutory language, and also because of the lack of finality of a preliminary injunction proceeding, the doctrines of res judicata and collateral estoppel as well as the "law of the case" are not applicable. See Berrigan v. Sigler, 499 F.2d 514, 518 (D.C. Cir. 1974); Industrial Bank of Washington v. Tobriner, 405 F.2d 1321, 1323 (D.C. Cir. 1968); Wyrough & Loser, Inc. v. Pelmor Laboratories, Inc., 376 F.2d 543, 548 (3rd Cir. 1967); Imperial Chemical Industries, Ltd., v. National Distillers & Chemical Corp., 354 F.2d 459, 463 (2nd Cir. 1965); Hunter v. Atchison T. & S.F. Ry. Co., 188 F.2d 294, 298 (7th Cir. 1951), cert. denied, 342 U.S. 819, reh. denied, 342 U.S. 889; and Benson Hotel Corp. v. Woods, 168 F.2d 694, 697 (8th Cir. 1948). Therefore those doctrines cannot be invoked to preclude a decision on the merits in a § 3005 proceeding even though a preliminary injunction has been denied in a § 3007 proceeding. See Eden Valley Nursery Sales, P.S. Docket No. 7/23 (P.S.D. Feb. 15, 1980).

This result is not altered because most of the evidence presented to the Court consisted of the transcript of the proceedings before the Administrative Law Judge. Cf., Berrigan v. Sigler, supra. The Court did not have an opportunity to observe the witnesses as did the Administrative Law Judge. Furthermore, the Court was only concerned with determining the probable success of the proceedings on the merits before granting a preliminary injunction. The Administrative Law Judge, however, had to weigh and evaluate the evidence to decide the merits of these cases.

Under § 3005 the final determination is to be made on "evidence satisfactory to the Postal Service." As the Administrative Law Judge held, this statutory scheme requires that the determination on the merits of allegations of violation of § 3005 be made initially by the Postal Service. See Eden Valley Nursery Sales, supra. Any other result would permit the substitution of a court's tentative determination of probable cause for the statutorily mandated administrative decision on the merits.

Respondent's first exception is without merit.

Exception II

"The Administrative Law Judge erred in finding that Complainant established a prima facie case of the falsity of the representations made by Respondent and in finding that Respondent had not produced evidence of a scientific quality adequate to overcome Dr. Kramer's opinions and the consensus of medical opinion as expressed by Dr. Kramer."

Respondent, in contending that Complainant has not met its burden of proof, questions the qualifications, credibility and the weight which was given to the testimony of Complainant's witness, Dr. Kramer. Respondent also contends the testimony of its expert witness, Dr. Tyson, should be given greater weight than that of Dr. Kramer because it was supported by actual clinical experience with patients whereas Dr. Kramer's testimony was not. Respondent further contends that Dr. Kramer's opinions are merely conclusory and entitled to little weight. It argues that Dr. Kramer is not an expert on any of the matters in issue and under court standards for evaluating the testimony of expert witnesses in § 3005 proceedings only Dr. tyson's testimony is credible because of his actual clinical experience. In support of its position Respondent cites Baslee Products v. United States Postal Service, 356 F.Supp. 841, 850 (D. N.J. 1973); N. Van Dyne Advertising Agency v. United States Postal Service, 371 F.Supp. 1973 (D. N.Y. 1974); and Original Cosmetic Products, Inc. v. Strachan, 459 F. Supp. 496 (D. N.Y. 1978), aff'd, 603 F.2d 214 (1979).

Conclusory opinions by experts are admissible under § 704 of the Federal Rules of Evidence. The evaluation of such opinions as well as all of the experts' testimony is for the trier of fact. The cases cited by Respondent reflect important factors in evaluating expert testimony, including the education, experience and other credentials of the witnesses and the scientific or medical sources used as the basis for their opinions. The cases do not support Respondent's criticism of the Administrative Law Judge's evaluation of the expert evidence.

Respondent's contention that Dr. Kramer is not qualified is unfounded. He received a bachelor's degree in chemistry from Cornell University in 1964 and his medical degree from Johns Hopkins University Medical School in 1969. Following a residency in internal medicine Dr. Kramer served as a clinical associate in the Metabolism Branch of the Clinical Physiology Section of the Gerontology Research Center, which, at that time, was part of the National Institutes of Child Health and Human Development. In 1973 he became board certified in internal medicine. Following a residency in dermatology, he became board certified in that specialty, which he now practices. Respondent criticizes Dr. Kramer's testimony that he had reviewed the medical and scientific literature on procaine and PABA contending that he was not a medical librarian or other researcher. A medical expert is qualified to testify concerning medical literature. See U. S. Health Club, Inc. v. Major, 292 F.2d 665 (3rd Cir. 1961), cert. denied, 368 U.S. 896. This criticism is unfounded.

Respondent also contends that Dr. Kramer's qualifications and credibility are suspect because of statements he made under cross-examination concerning the protocol or lack thereof of the "Olson, Jarvick Study" (CX 39), which is titled "Gerovital - H3; a Clinical Trial as an Antidepressant," published in Vol. 33, No. 4, Journal of Gerontology. Dr. Kramer's entire testimony demonstrates his knowledge of protocols for studies, and the scientific criteria for evaluating studies. Respondent has not shown a reasonable basis for questioning Dr. Kramer's reliance on this study or his credibility with respect to the remainder of his testimony.

Respondent also attacks an article referred to as the Ostfield paper (CX 38). This paper, titled, "The Systemic Use of Procaine in the Treatment of the Elderly, a Review," published January 1977 in the Journal of the American Geriatrics Society, reviewed and evaluated world literature on the use of procaine on the aging process. Respondent has not shown that the evaluations of the authors of that article do not reflect the consensus of informed scientific and medical opinion. In any event, Dr. Kramer's uncontradicted testimony of the consensus of such opinion was sufficient. See U. S. Health Club, Inc. v. Major, supra.

Respondent's expert, Dr. Tyson, testified that his use of PABA in practice is outside the "mainstream" of medical thinking (Tr. 132-34, 140, 141). He also indicated that studies by Dr. Anna Aslan of Rumania using procaine, which are relied on by Respondent, do not conform to standards of controlled scientific experimentation in the United States (Tr. 103, 104). Thus his testimony supports that of Dr. Kramer concerning the consensus of medical and scientific thinking concerning PABA and procaine. His clinical experience of prescribing PABA, along with multi-vitamins, and describing the progress of 5 or 6 of the patients, falls far short of being adequate medical or scientific evidence to outweigh the consensus of medical opinion reported by Dr. Kramer. Dr. Kramer's testimony adequately constituted a prima facie case for the Postal Service which was not overcome by a preponderance of reliable and probative evidence. Thus, this exception is without merit.

Exception III

"The Administrative Law Judge Erred in its finding that the words '...PROCAINE...improves the oxygen capacity of the blood' (CX-26) represents that PROCAINE VITAMIN will increase the supply of oxygen in the user's body and thereby counteract cell breakdown."

Paragraph 3(a) of the Complaint in P.S. Docket No. 9/63 alleges that Respondent falsely represents that:

"Procaine Vitamin will increase the supply of oxygen in the user's body and thereby counteract cell breakdown."

In the Initial Decision the Administrative Law Judge, relying on CX-1, CX-11, CX-20, CX-26 and CX-36, found this representation to be made in Respondent's advertising (I.D., FF 2). Respondent contends that the finding of the Administrative Law Judge is in error.

Respondent admits that its advertising states that "PROCAINE improves the oxygen capacity of the blood." (CX-26). It contends, however, that this does not imply that "PROCAINE VITAMIN will increase the supply of oxygen in the user's body and, thereby, counteract cell breakdown." Respondent asserts that the first statement deals with oxygen supply. It contends that capacity and supply are two different issues and there is no evidence in the record to support the Administrative Law Judge's erroneous finding which equates one statement with the other.

Although CX-26 refers to improving the oxygen capacity of the blood and not to increasing the blood supply, the Administrative Law Judge relied on additional exhibits to support his finding. Three of those exhibits, CX-11, 20 and 36, which are advertisements describing the two products, state in pertinent part:

"Each of these find products contains para-amino-benzoic acid. . . the same active ingredient in procaine. Para-amino-benzoic acid increases the supply of oxygen in the body. This is particularly helpful in counteracting cell breakdown, a leading cause of degenerative aging. . . ."

Clearly implied from this representation is that because the products contain para-amino-benzoic acid (PABA), the supply of oxygen will be increased in the body and cell breakdown will be counteracted. Therefore, there is support for the Administrative Law Judge's finding even if it was concluded that CX-26 does not make the representation. However, an ordinary reader would very likely conclude that if the capacity of the blood is improved, the blood supply is increased. Thus, the ordinary reader would understand CX-26 to make the representations alleged in the Complaint. There is no merit to Respondent's exception.

Exception IV

"The Administrative Law Judge Erred in Concluding that the statement '...PABA. It induces the formation of red blood cells, the body's oxygen carriers...' (CX-5) is a representation that the methionine and PABA contained in PROCAINE VITAMIN will neutralize foreign bodies in the blood stream, thereby increasing serum oxygen levels and retarding the breakdown of body cells." Paragraph 3(f) of the Complaint in P.S. Docket No. 9/63 alleges that Respondent falsely represents:

(f) The methionine and PABA contained in the PROCAINE VITAMIN will neutralize foreign bodies in the blood stream thereby increasing serum oxygen levels and retarding the breakdown of the body cells...."

The Administrative Law Judge, relying on CX-2 and CX-5, found that Respondent makes this representation (I.D. FF 2). Respondent contends that the Initial Decision does not explain the connection made between the statement contained in Appellant's advertising (CX-5) and the representation Complainant alleges to be false. It contends that the record contains no evidence which would equate the formation of red blood cells with serum oxygen levels, the formation of red blood cells with the neutralization of foreign bodies in the blood stream, or the formation of red blood cells with the retardation of the breakdown of body cells.

Again, Respondent refers to only one of the exhibits cited by the Administrative Law Judge as support for his finding. The other exhibit, which is another of Respondent's advertisements, CX-2, makes a similar statement that PABA induces the formation of red blood cells, "the body's oxygen carriers," and then adds, "As their number is increased, more oxygen is carried to the body's cells...." The advertisement goes on to state:

"Both PABA and methionine function as scavengers within the blood stream. They neutralize toxic foreign bodies that would otherwise compete for the oxygen supply. These same substances, if left untended, can lead to cell breakdown, the precursor of premature aging." (CX-2)

The increase in the body's oxygen carriers and the neutralization of toxic foreign bodies that would otherwise compete for the oxygen supply strongly implies the serum oxygen levels will be increased. Thus, there is support for the finding made by the Administrative Law Judge in the Initial Decision. Even if the ordinary reader would not have understood Respondent's advertising to relate to serum oxygen levels, nonetheless, the remainder of the representations in CX-2 support the rest of the finding. The exception affords no basis for overturning the Initial Decision.

Exception V

The Administrative Law Judge erred in concluding that the fact that the placebo effect may occur in the case of some users does not support the efficacy of the product or the truthfulness of Respondent's representations."

Respondent again contends that the doctrine of res judicata should be applied specifically to the statement made by the District Court in the § 3007 action that

"The court cannot completely discount these findings merely on the basis of the alleged placebo effect."

The res judicata argument has been considered and found to be without merit under Exception 1. Thus, the statement by the District Court has no binding effect in this proceeding.

Respondent contends that if a represented effect occurs the representations made in its advertising can be found to be true regardless of whether the effect results from the efficacy of the product or its placebo effect. According to Respondent, the efficacy of its product has been established by the testimony of Dr. Tyson relating his clinical experience. Respondent also contends that the Postal Service cannot inquire into highly technical distinctions between drug efficacy and placebo effect as it has no jurisdiction to determine product efficacy.

There is no merit to Respondent's contentions. The Postal Service may look into the efficacy of products and in so doing distinguish between product performance and the placebo effect. The placebo effect of a product does not vitiate the falseness of representations. Original Cosmetics Products, Inc. v. Strachan, 459 F.Supp. 496, 506 (S.D. N.Y., 1978), affirmed, 603 F.2d 214 (2d Cir. 1979), cert. denied, 444 U.S. 915 (1979); Wilmont Products, P.S. Docket No. 6/46 (P.S.D. July 19, 1979). False advertising is not protected even if the result of the deceit is to create a useful psychological attitude. See Stauffer Laboratories v. F.T.C., 343 F.2d 75, 83 (9th Cir. 1965).

For the above reasons there is no merit to this contention.

Exception VI

"The Administrative Law Judge erred in finding that Appellant's representations are materially false in fact."

Respondent refers to a finding by the District Court which states "The Court does not find that the use of the term procaine in the advertisements is a materially false representation...." There was no allegation in the Complaints regarding the use of the term "procaine" nor was such a finding made by the Administrative Law Judge. Therefore, Respondent's argument has no application to this proceeding. To the extent Respondent implies the Court's finding binds the Postal Service in a § 3005 proceeding in any direct or analogous respect, its position must be rejected for the reasons stated under Exception 1.

Respondent contends that in the Initial Decision the Administrative Law Judge gave no reasons or justification for the conclusion that the representations are materially false in fact.

Respondent also contends that Complainant failed to present any evidence establishing the materiality of the representations and that the quality and quantity of the evidence presented is insufficient to satisfy its burden of proof. Respondent cites decisions applying section 43(A) of the Lanham Act, 15 U.S.C. § 1125(a), which deals with false descriptions or representations on goods or services or containers. In the cited decisions the Courts, having no administrative decision to rely on, required evidence of consumer reaction to show that particular representations have in fact misled consumers. American Home Products Corp. v. Johnson and Johnson, 436 F.Supp. 785 (D. N.Y. 1977), aff'd, 577 F.2d 160 (2d Cir. 1978); and American Brands, Inc. v. R. J. Reynolds Tobacco Co., 413 F.Supp. 1352 (D.C. N.Y. 1976).

Similar arguments and these particular decisions have been considered and discussed in a prior decision affecting Respondent, Standard Research Labs, P.S. Docket No. 7/78 (P.S.D. Oct. 27, 1980). That decision and cases cited therein concluded that the type of proof necessary in the Lanham Act cases, namely, evidence of consumer reaction, was not necessary in proceedings under 39 U.S.C. § 3005. As explained therein, the Administrative Law Judges and the Judicial Officer of the Postal Service are fully capable of determining whether representations have been made, their effect on the ordinary mind, and their materiality.

The Administrative Law Judge set forth in great detail in the Initial Decision his findings of fact and his evaluation of the evidence giving his reasons for concluding that the representations alleged in the Complaint are false. Although the Administrative Law Judge did not state his rationale for finding the representations material, it is sufficient if his conclusions and findings are supported by a preponderance of the evidence in the record, which they are. The false representations are material because their natural effect is to induce purchasers to buy the products. Cf., F.T.C. v. Colgate-Palmolive, Co., 380 U.S. 374, 386-92 (1965); Athena Products, Ltd., P.S. Docket No. 7/99 (P.S.D. June 26, 1981).

Accordingly, there is no merit to this Exception.

CONCLUSION

After consideration of the entire record and Respondent's exceptions, it is concluded that Respondent is engaged in a scheme or device 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.