In the Matter of the Complaint Against

CONSUMER RESEARCH, INC.
a/k/a C.R.I. P. O. Box 45
at Stuart, FL 33495-0045

and
P. O. Box 3149
at Stuart, FL 33495-0000

and
2317 NE Dixie Highway
at Jensen Beach, FL 33457-5956

and
P. O. Box 9014
at Stuart, FL 33495-0000

and
2313 NE Dixie Highway
at Jensen Beach, FL 33457-5956

P.S. Docket No. 18/33;

Cohen, James A.

APPEARANCES FOR COMPLAINANT:
H. Richard Hefner, Esq.
G. Scott Morrell, Esq.

Consumer Protection Division
Law Department
U.S. Postal Service
Washington, DC 20260-1112

APPEARANCE FOR RESPONDENT:
Robert L. Beals, Esq.
Price, Kaczmarek & Beals
900 North Federal Highway
Suite 310
Boca Raton, FL 33432-2794

POSTAL SERVICE DECISION

Respondent has appealed from an Initial Decision of an Administrative Law Judge which holds that Respondent's envelope stuffing program is a scheme or device for obtaining money or property through the mail by means of materially false representations in violation of 39 U.S.C. § 3005.

BACKGROUND

The Consumer Protection Division, Law Department, United States Postal Service (Complainant), initiated this proceeding by filing a Complaint which in Count I, paragraph 5 and Count II, paragraph 8 alleges that Respondent falsely represents, directly or indirectly, in substance and effect, whether by affirmative statements, omissions or implications that:

Count I, Paragraph 5

"(a) Amounts of earnings will be primarily determined by whatever time participants devote to the routine, mechanical tasks of placing sales circulars into envelopes and otherwise preparing these envelopes for mailing to sales prospects.

(b) Envelopes to be processed will be furnished to participants by Respondent.

(c) Payment of the initial fee will allow immediate participation without further substantial financial investment by the homeworker.

(d) Respondent offers paid employment for routine processing of mail.

(e) Many participants will make sizable earnings --some as much as '$600.00 per week or more.'"

Count II, Paragraph 8

"(a) Payment of the requested fee will result in a participant being 'flooded with' up to 500 mailings within a period of two or three weeks.

(b) Mailings received will primarily consist of work-at-home employment offers."

Respondent filed a timely Answer to the Complaint in which it admitted that readers responding to its classified advertisements are mailed a circular which solicits the remittance of money or property through the mail. However, Respondent denied other allegations of the Complaint. Respondent affirmatively asserted that the Postal Service was estopped from claiming a violation of 39 U.S.C. § 3005 because it approved the use of substantially the same advertising materials in a prior case. It also asserted that the Complaint was moot because it no longer used certain of the materials on which the charges of the Complaint were based.

At a hearing before an Administrative Law Judge, Mrs. Phyllis Tyre and Postal Inspector Judith Groome testified for Complainant. Respondent presented no witnesses. Both parties submitted documentary evidence. At the hearing, Respondent admitted that it makes the representation alleged in paragraph 5(e) of the Complaint and agreed to discontinue making the representation that one may "earn up to $600.00 per week or more" or any similar representation specifying a sum certain per week or per month which would not be verifiable (Tr. 3). Following the filing of proposed findings of fact and conclusions of law, the Administrative Law Judge issued an Initial Decision in which he found that Respondent makes the representations alleged in paragraphs 5(a) through (d) and 8(a) and (b) of the Complaint, and that those representations are materially false. Respondent appealed the Initial Decision to the Judicial Officer. Both parties have filed written briefs.

RESPONDENT'S EXCEPTIONS TO THE INITIAL DECISION

"I. THE ADMINISTRATIVE LAW JUDGE ERRED IN THE FINDINGS
OF FACT AS TO A MISREPRESENTATION IN THE EXHIBITS CX-A,
CX-C-3, 4 AND CX-I."

By this exception Respondent takes issue with those portions of the Initial Decision which find that it makes the representations alleged in the Complaint. Respondent argues generally that the Administrative Law Judge improperly relied on classified advertising which does not seek remittances of money or property and that his findings are based on unwarranted inferences which ignore specific disclaimers included in its advertising materials. Respondent presents specific arguments with respect to the findings and conclusions relating to the allegations in Count I, paragraphs 5(a)-(d) of the Complaint. ^1/

The Administrative Law Judge's reliance on Respondent's classified advertisements as making in whole or in part certain of the representations alleged in the Complaint was not improper. Respondent's classified advertisements instruct readers to send self-addressed envelopes to obtain further details and are an integral part of the scheme or device which ultimately results in Respondent obtaining money or property through the mail. Therefore, the classified advertisements were properly considered with the remainder of Respondent's promotional materials to determine whether Respondent makes the representations alleged in the Complaint.

In the Initial Decision the Administrative Law Judge quoted language from Respondent's advertisements which he found "forms part, but not necessarily all, of the basis for the particular" allegations of the Complaint (I.D. p. 7). The language quoted by the Administrative Law Judge, considered in the context of the totality of the advertising materials and the effect they would most probably have on the ordinary reader, supports his conclusion that Respondent makes the representations alleged in the Complaint.

With regard to the representation alleged in paragraph 5(a) of the Complaint, the Administrative Law Judge, quoting the language of one of Respondent's classified advertisements, stated:

"If persons of no experience can start immediately to earn the sum of $75.00 per hundred by processing mail at their leisure and in the comfort of their own home, the work must be easy and of a routine nature." (I.D. at p. 7)

Respondent argues that such a conclusion is a non-sequitur since there is nothing about work done in one's home which makes it easy or routine.

Although Respondent is correct in asserting that the fact that work is done at home does not per se, make it easy or routine, the Administrative Law Judge also emphasized that the advertisement represents that persons of no experience can start work immediately. The Administrative Law Judge was correct in concluding that the ordinary reader would most probably understand that if persons of no experience can immediately obtain earnings by performing work in their home at their leisure, the work must be easy and of a routine nature.

Respondent also argues that the Administrative Law Judge's finding that Respondent's advertising makes the representation alleged in paragraph 5(a) of the Compliant ignored the following bold face print at the top of Respondent's circular (CX-C-1):

"NOW. As a HOME INDEPENDENT-MAILER you may earn MONEY and RESPECT in your own advertising-mailing business substantially consisting of securing mailers through classified ad insertion and simple pleasant profitable assembling mailers at home.

While this language may give hints to the sophisticated or skeptical reader as to the real nature of the program, ^2/ it is inadequate to alert ordinary readers that they will be required to place classified advertisements in newspapers and be dependent on obtaining envelopes from other prospective participants in order to realize earnings. See Moneymakers, P.S. Docket No. 16/1 (P.S.D. June 20, 1984). At best, the reference to "classified ad insertions" is ambiguous in notifying a homeworker of what will be required. Advertisements which are capable of two meanings, one of which is false, are misleading. See, Rhodes Pharmacal Co., Inc. v.F.T.C., 208 F.2d 382, 387 (7th Cir. 1953); Walter Head, P.S. Docket No. 15/123 (P.S.D. Oct. 10, 1984). Accordingly, despite the reference to "classified ad insertions" the language cited by the Administrative Law Judge, considered in the context of the entire wording of Respondent's advertisements, supports the finding that the impression conveyed to the ordinary reader is as alleged in paragraph 5(a) of the Complaint.

Respondent argues in connection with the allegation of paragraph 5(b) of the Complaint, that specific language in its advertisements notifies readers that Respondent will not furnish participants with the envelopes they will be required to process. The language relied on by Respondent states:

"By following our instructions you will receive pre-addressed envelopes with postage stamps already affixed. As you can see, the biggest part of your work will be in securing envelopes, assembling them with circulars and sending them to us for payment." (CX-C-1 & C-3)

In the context of the other language in Respondent's classified advertisements and circulars, this language does not dispel the impression created in the mind of an ordinary reader that " e envelopes to be processed will be furnished to participants by Respondent" (Complaint paragraph 5(b)). The phrases "receive pre-addressed envelopes" and "securing envelopes" do not place the ordinary reader on notice that the envelopes will not be furnished by Respondent. Rather, the overall impression created by the totality of Respondent's advertising materials is that the envelopes will be furnished by Respondent (I.D. at p. 12). At best, Respondent's advertisements are susceptible to more than one interpretation regarding the furnishing of envelopes and since one of those interpretations is false, the advertisements are misleading. See Rhodes Pharmacal Co., Inc. v. F.T.C., supra; Walter Head, supra.

The Administrative Law Judge also correctly found that Respondent's classified advertisements and circulars make the representation alleged in paragraph 5(c) of the Complaint. The words "one-time payment" and " t here is nothing else to every buy in order to get started and keep going for years" (CX-C-1, Column 2) support the allegation that " p payment of the initial fee will allow immediate participation without further subsequent investment by the homeworker" (Complaint paragraph 5(c)).

The Administrative Law Judge also properly found that Respondent's advertising materials represent that "Respondent offers paid employment for routine processing of mail" as alleged in paragraph 5(d) of the Complaint. While Respondent's advertisements do refer to the participant as an "independent mailer" and the program as "your own advertising-mailing business," the initial solicitations appear in "Help Wanted" columns which suggest an employment relationship. Moreover, the overall impression of Respondent's advertisements is that participants will be working for Respondent (Tr. 20).

"II. THE ADMINISTRATIVE LAW JUDGE ERRED IN THE FINDINGS
OF FACT AS TO A MISREPRESENTATION BASED ON THE TESTIMONY
OF PHYLLIS TYRE."

Respondent contends that the testimony of Complainant's witness Phyllis Tyre, should be given little weight because she "demonstrated a fundamental misunderstanding of the entire matter" and her "impression of the advertising is most incredible."

The findings of the Administrative Law Judge are based not only on the testimony of Mrs. Tyre, but also on the documents in the record and the testimony of Inspector Groome. A comparison of Respondent's advertising materials with its program establishes the falsity of the representations. Mrs. Tyre's testimony is supportive of this conclusion. Mrs. Tyre is a member of the general public who testified that she was misled by Respondent's advertising. Her testimony was credible, and although she did misunderstand Respondent's program, such misunderstanding was caused by the false representations included in Respondent's advertising materials. Mrs. Tyre's testimony, together with Respondent's materials, support a finding that the representations alleged in the Complaint are false.

"III. THE ADMINISTRATIVE LAW JUDGE ERRED IN THE FINDINGS
OF FACT IN DENYING THE RESPONDENT'S MOTION TO DISMISS AND
FIDING AS A CONCLUSION OF LAW THAT ESTOPPEL IS NOT APPLI-
CABLE TO THE POSTAL SERVICE IN THIS INSTANCE."

Prior to the hearing i this matter, Respondent filed a Motion to Dismiss in which it argued that the Postal Service was equitably estopped from bringing this proceeding because Respondent's advertising materials were substantially similar to those which a Postal Service attorney determined would not violate a Consent Agreement filed in a prior case against a different respondent (World Wide, P.S. Docket No. 11/71). The Administrative Law Judge denied the motion in a prehearing order and affirmed the denial in his Initial Decision.

On appeal Respondent continues to argue that the Postal Service should be estopped from bringing this proceeding because of the position taken by the Postal Service attorney in World Wide, supra. Respondent has attached its Motion to Dismiss to its appeal brief and relies on the arguments made in that motion to support this exception on appeal.

The doctrine of equitable estoppel will not ordinarily be applied against the United States when the interests of the public are at stake. See e.g. Heckler v. Community Health Services, 104 S. Ct. 2218 (1984); United States v. Lazy FC Ranch, 481 F.2d 985, 989 (9th Cir. 1973); United States v. An Article of Drug, 520 F.Supp. 467, 470 (S.D. Tex. 1981); Organized Fisherman v. Andrus, 488 F.Supp. 1351, 1356 (S.D. Fla. 1980); Pacific Shrimp Co., v. D.O.T., 375 F.Supp 1036 (W.D. Wash. 1974). The protection of the public is the principal purpose of 39 U.S.C. § 3005. See Donaldson v. Read, supra at p. 184; Commissioner v. Heininger, 320 U.S. 467, 474 (1943); James E. Smith, P.S. Docket No. 14/61 (P.S.D. Nov. 9, 1983). Therefore, the doctrine of estoppel will not be applied in this case to prevent the Postal Service from seeking enforcement of the protection afforded to the public by 39 U.S.C. § 3005. Accordingly, the denial of Respondent's Motion to Dismiss is affirmed.

CONCLUSION

After consideration of the entire record and Respondent's exceptions to the Initial Decision, it is concluded that Respondent is engaged in a scheme to obtain money through the mail by means of materially false representations. Accordingly, a false representation order under 39 U.S.C. § 3005 is being issued with this decision.

1/ Respondent does not specifically address the findings and conclusions relating to the allegations in Count II, paragraph 8 of the Complaint. Nonetheless, in reviewing the entire record these findings and conclusions have been considered, and it has been concluded that the representations and their falsity are supported by the evidence in the record.

2/ An advertisement may be misleading even though every sentence separately considered is literally true. Donaldson v. Read Magazine, 333 U.S. 178, 188 (1948); G. J. Howard v. Cassidy, 162 F.Supp. 568, 572 (E.D.N.Y. 1958).