In the Matter of the Complaint Against

PEORIA SCALE SERVICE BOB'S SCALE SERVICE
P. O. Box 156
at Washington, IL 61571-0156

P.S. Docket No. 14/31;

12/27/83

Cohen, James A.

APPEARANCES FOR COMPLAINANT:
Thomas A. Ziebarth, Esq.
Steven B. Caver, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1112

APPEARANCE FOR RESPONDENT:
Bradley W. Swearingen, Esq.
Moehle, Smith & Day, Ltd.
118 Peoria Street
Washington, IL 61571-2585

POSTAL SERVICE DECISION

Complainant has appealed from the Initial Decision of an Administrative Law Judge which holds that Complainant failed to prove by a preponderance of the credible evidence that Respondent violated 39 U.S.C. § 3005 with respect to the sale and installation of commercial scales.

Background

On August 5, 1982, the Consumer Protection Division of the Law Department, United States Postal Service (Complainant) filed a Complaint alleging that Respondent, through advertisements for the sale and installation of commercial scales appearing in specialized publications, falsely represents:

"(a) Respondent has the requisite training, knowledge and experience to make competent installations of commercial scales;

(b) Respondent will make delivery and competent installation of new or reconditioned commercial scales within a specific or reasonable time of his receipt of partial payment;

(c) The agreed upon total purchase price is for the complete, competent installation of a properly functioning and legally certifiable commercial scale without the purchaser incurring any additional installation costs; and

(d) The completed scales when installed will weight accurately and will otherwise conform to the appropriate regulatory agencies' standards in order to be certified for commercial use."

Complainant subsequently filed a response to the Administrative Law Judge's Order granting Respondent's motion for a more definite statement. The response attached a list of 46 "victims" from whom Respondent allegedly received money as a result of the misrepresentations set forth in the Complaint, and alleged that 14 of these "victims" sent money to Respondent through the mail. Respondent filed an Answer which denied all of the allegations of the Complaint except to admit that it placed advertisements similar to the exhibits attached to the Complaint.

A hearing was held before an Administrative Law Judge at which both parties presented testimony with respect to the Complaint's allegations. The Administrative Law Judge subsequently issued an Initial Decision which concluded that, in connection with most of his sales, Respondent probably made express or implied representations similar to those alleged, but that " t he evidence is insufficient for a finding that such representations were made falsely" (I.D. 10, F.O.F. 18).

Specifically, he concluded that, at most, the record shows:

"a small businessman who, over many years, has failed to one degree or another, to live up to the terms of a number of contracts, small relative to the total number he has performed. The evidence does not support a finding that in making any contract Respondent misrepresented his ability to perform or his intentions, at the time, about delivery of the scales, the quality thereof, or the workmanship of installation" (I.D. 11).

The Administrative Law Judge further found the evidence to indicate that most payments to Respondent are hand-delivered or sent by telegram rather than made through the mails (id.). Accordingly, he denied Complainant's request for a False Representation Order and dismissed the Compliant.

Complainant's Exceptions to the Initial Decision

Complainant has filed four exceptions to the Initial Decision, which have been combined where appropriate and are discussed below.

Exception 1

"Exception is taken to the finding of fact that Complainant failed to establish that Respondent was engaged in obtaining remittances of money to be sent through the mails."

Although the Administrative Law Judge found that Respondent has received payment through the mail in connection with some of his sales (I.D. 4, F.O.F. 3), he also found that " t he evidence does not support a finding that Respondent routinely, or even frequently, asks that payment be sent by mail" (id.). Routine or frequent use of the mail need not be shown in order to support a charge that a violation of 39 U.S.C. § 3005 has occurred. All the statute requires is that remittances be sought through the mail in connection with the prohibited scheme or device. See 39 U.S.C. § 3005; Spectron Ind., P.S. Docket No. 2/8 (Order on Appl. for Mod. of Stop Order, Oct. 5, 1973). The advertisements at issue in the present case invited inquiries to Respondent's post office box address (see, e.g., CX 6 & 15-B). At the hearing, three witnesses testified that, either directly or indirectly, they learned of Respondent's business through such advertisements and remitted money to Respondent through the mail for the purchase and installation of commercial scales (Tr. 107, 109, 124, 127, 143, and 147). This evidence reflects a sufficient use of the mail to support a proceeding under § 3005 and the Administrative Law Judge's findings are modified insofar as they might imply to the contrary.

Exceptions 2 and 4

"Exception is taken to the finding of fact that Respondent did not employ false representations."

"Exception is taken to the conclusion of law that Complainant had failed to meet its burden of proof by establishing through a preponderance of credible evidence that Respondent was engaged in the conduct of a scheme proscribed by 39 U.S.C. § 3005."

The Administrative Law Judge found that Respondent expressly or impliedly made representations in connection with most of his sales similar to those alleged in the Complaint. However, he found that Complainant had not established the falsity of the representations or that Respondent was engaged in a scheme or device. According to the Administrative Law Judge, Respondent's performance failures resulted from the serious financial difficulties he was having, which culminated in involuntary bankruptcy. The Administrative Law Judge found " t here is no evidence of complaints about the quality of the work he has done or any failures to deliver scales he has been paid for since the bankruptcy proceeding in 1981" (I.D. 11). The involuntary bankruptcy petition was in fact filed on February 4, 1982 (Resp. Reply Brief at 4).

The evidence establishes the falsity of the representations alleged in the Complaint. Complainant established that in March 1981, the State of Illinois revoked Respondent's registration to install commercial scales (I.D. 4, F.O.F. 4). Moreover, Respondent conceded it is "impossible" for him to meet the Illinois installation requirements (Tr. 274) and that installation is an integral part of his business (Tr. 272-73). Nonetheless, Respondent continued to advertise the sale and installation of scales in Illinois (Tr. 124, 259-60; CX-5 & 8).

Respondent's problems with installation were not confined to Illinois or to the Illinois licensing regulations. The record reflects that, in general, performance by Respondent's employees was not satisfactory (Tr. 117-18, 129-33, 199-200, 207-09 & 237). In this regard, Respondent has conceded that for two or three years he had found it "impossible" to get competent service people because he is unable to offer sufficient pay (Tr. 250).

His testimony indicates that he still has this problem (id.), but he continues to advertise installation and is prepared to install scales outside of Illinois (Tr. 263, 276, 281). Without competent service employees, Respondent could not provide competent installation, either in Illinois or anywhere else.

Because of Respondent's financial difficulties and his business practices (Tr. 252-53), scales contracted for were4e not delivered and refunds were not made (see testimony of Bruce Steinacker, Richard Van Cloostere and Wilbur Davis; see also Tr. 252-53). Respondent continues to have financial difficulties and his business practices are unchanged (Tr. 264-65). Nonetheless, Respondent continues to represent that he can provide and install scales (Tr. 259-60, 263, 281; CX 5-7, 10).

A preponderance of the evidence establishes that Respondent did not have the capacity to install commercial scales at the time that the advertisements in issue were published and that Respondent has not shown that it has acquired this capacity since bankruptcy. Further, the evidence establishes that, at the time the advertisements in issue were placed, Respondent did not provide delivery and installation of scales as promised and has not shown that, at the time of hearing, it could install scales on any unrestricted basis. While isolated instances of contract breaches will not support the issuance of an order under 39 U.S.C. § 3005, a violation of the statute will be found where, as here, an advertiser represents that he will supply goods or services even though he lacks the capacity to do so.

Accordingly, it is concluded that Respondent makes the representations alleged in the Complaint and that those representations are false. Complainant's exceptions are sustained and the Administrative Law Judge's findings and conclusions to the contrary are reversed.

Exception 3

"Exception is taken to the Finding of Fact that Respondent was not engaged in a scheme."

Advertising which involves misrepresentations, even though innocent, constitutes a "scheme" within the meaning of 39 U.S.C. § 3005. Athena Prods., Ltd., P.S. Docket No. 7/99 (P.S.D. June 26, 1981 at 36); Nat'l. Mktg. Co., P.S. Docket No. 7/46 (P.S.D. May 23, 1980 at 4). In view of the evidence cited supra, it is concluded that Respondent's advertisements constitute a "scheme" within the meaning of the statute. Accordingly, Complainant's exception is sustained and the Administrative Law Judge's conclusion to the contrary (I.D. 10) is reversed.

Finally, Respondent argues that, on appeal to the Judicial Officer, "If the evidence, viewed in the light most favorable to the Respondent, is sufficient to support the findings of fact, and the conclusions of law, then the decision of the Administrative Law Judge must be affirmed" (Resp. Brief at 2). The Judicial Officer's role in reviewing Initial Decisions by Administrative Law Judges in false representation proceedings, however, is much broader. Under applicable statutes and regulations, the Judicial Officer conducts a de novo review of the record under a "preponderance of the evidence" standard. Atlas Publishing Co., et al., d/b/a The World-wide Telex Directory, No. 82-1904-7CIV-SMA (S.D. Fla., Aug. 30, 1983); Telex & twx Directory, et al., P.S. Docket No. 13/6 (P.S.D. April 1, 1983). The present record has been reviewed under this standard.

Conclusion

After consideration of the entire record it is concluded that Respondent is engaged in a scheme to obtain money through the mail by means of materially false representations. Accordingly, Complainant's appeal is sustained and the Initial Decision issued on December 17, 1982, is reversed. A remedial order under 39 U.S.C. § 3005 is issued with this decision.