In the Matter of the Complaint Against

SCOTT WILCOX
d/b/a TELCO DIRECTORIES, INC.
160l East Main Street at
Plainfield, IN 46168-1811

P.S. Docket No. 18/147;

10/16/85

Dicus, Carroll C. Jr.

APPEARANCES FOR COMPLAINANT:
Thomas A. Ziebarth, Esq.
Steven B. Caver, Esq.
Timothy Kruthaupt, Esq.
Law Department
U.S. Postal Service
Washington, DC 20260-1112

APPEARANCES FOR RESPONDENT:
Frank J. Shannon, III, Esq.
Randy Scott Slater, Esq.
Henritze & Shannon Suite 808,
Chandler Bldg.
127 Peachtree Street, NE
Atlanta, GA 30303-1810

POSTAL SERVICE DECISION

Respondent has appealed from the Initial Decision of an Administrative Law Judge which holds that his direct mail solicitations for directory listings are in violation of 39 U.S.C. ?? 3001(d) and 3005.

Background

The Consumer Protection Division, Law Department, United States Postal Service (Complainant), initiated this proceeding by filing a Complaint which alleges that Respondent, by means of unsolicited direct mailings in the form of invoices or statements of account, makes the following materially false representations:

"4. . . . (a) The addressee has previously authorized a business listing in Respondent's classified directory;

(b) The amount set forth on the face of the solicitation is due and owed to Respondent;

(c) Telco Directories, Inc. is a part of or affiliated with the telephone company serving the recipient's area; and

(d) Telco Directories, Inc. is the publisher of the classified directory or 'yellow pages' normally supplied to all telephone subscribers in the recipient's area." The Complaint also alleged that the mailings failed to contain the notice required by 39 U.S.C. § 3001(d) and regulations promulgated thereunder; that the mailings are non-mailable matter under § 3001(d); and that they constitute prima facie evidence the mailer is engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations in violation of 39 U.S.C. § 3005.

In its Answer Respondent generally denied the allegations in the Complaint. While conceding that unsolicited direct mailings in the form of invoices are used to market the directory, Respondent contends they are in full compliance with the regulations promulgated in the Domestic Mail Manual (D.M.M.). He denied that exhibits one and two attached to the Complaint are typical, and alleged that instead exhibits one and two attached to the Answer are typical solicitations used by Respondent.

At a hearing before an Administrative Law Judge both parties were given the opportunity to present evidence. Complainant presented exhibits and the testimony of Postal Inspector Fred Sturdevant; Paul Scipione, Ph.D., an expert in consumer psychology and market research surveys; and five lay witnesses: Sandra Katz, Spencer Davis, Ruth Pouch, S. Scott Perkins, and Cindy Ledley Perkins. Respondent did not offer any evidence.

Following the hearing and after the filing of proposed findings of fact and conclusions of law (and a memoranda in support of Respondent's position by United Commercial Services who is a Respondent in another case involving similar issues), the Administrative Law Judge issued his Initial Decision in which he concluded that the solicitations are in the form of and reasonably could be interpreted as bills, invoices or statements of accounts due; that the disclaimers on the solicitations do not comply with the pertinent regulations; that the solicitations make the representations as alleged in paragraphs 4(c) and (d) of the Complaint; and that the representations are false.

Based on his findings and conclusions that Respondent is in violation of 39 U.S.C. ?? 3001(d) and 3005, the Administrative Law Judge recommended the issuance of a False Representation Order against Respondent. Thereafter, by Order of October 25, 1984, the Administrative Law Judge also recommended that a Cease and Desist Order be issued as also requested by the Complainant. Over Respondent's objection, by Order dated December 14, 1984, the Initial Decision was considered to be modified to include the recommendation for issuance of a Cease and Desist Order.

Respondent's Exceptions

a. Evidentiary Objections to a Survey

By exceptions 1, 2, 4 and 5, Respondent contends the Administrative Law Judge erred in admitting and relying on a survey submitted by Complainant at the hearing. The survey was used in support of the opinions of Complainant's expert witness on whether persons receiving Respondent's solicitations would perceive them as solicitations, or bills, invoices, or statements of accounts receivable, or would otherwise be misled by them.

While the presiding officer may determine if a solicitation is misleading from review of the solicitation alone, additional evidence may be considered. TELEX & twx Directory, P.S. Docket No. 13/6 (P.S.D. April 1, 1983). Relevant surveys on public perception are generally admissible as hearsay exceptions, with evidence of technical unreliability going to the weight accorded the survey. Ralph J. Galliano, P.S. Docket No. 19/15 (P.S.D. May 2, 1985).

In exceptions 1 and 5 and his "Conclusion", Respondent contends the survey was not based on valid probability sampling, as allegedly required by Pittsburgh Press Club v. United States, 579 F.2d 751, 758 (3d Cir. 1978), because there was not a randomly drawn sampling from the entire universe which should have been sampled. Respondent also contends the survey did not meet textbook standards for stratified quota samples. As the texts which it cites were not in evidence or used for cross-examination, there is no basis for reliance on them at this stage of this proceeding. In Pittsburgh Press Club the court held the following factors should be used in determining whether a poll meets generally accepted survey principles for evidentiary purposes (id.):

"A proper universe must be examined and a representative sample must be chosen; the persons conducting the survey must be experts; the data must be properly gathered and accurately reported. It is essential that the sample design, the questionnaires and the manner of interviewing meet the standards of objective surveying and statistical techniques. Just as important, the survey must be conducted independently of the attorneys involved in the litigation. The interviewers or sample designers should, of course, be trained, and ideally should be unaware of the purposes of the survey or the litigation."

These factors were applied in concluding that another survey conducted by the same company and presented through the same expert witness was reliable and probative in Ralph J. Galliano, supra at 11-13. They are likewise considered in this case to determine if there is any merit to Respondent's exceptions concerning use of the survey in this case.

Respondent contends there was not a proper universe selected for the sampling because the survey was limited to four cities and was directed to a "particular group of people in a particular occupation" which would "pre-suppose" them to think the solicitation was in fact an invoice (Resp. Brief at 8). The expert's opinion that those four cities are highly reflective of national distribution of businesses (Tr. 154) was unrefuted. There is no basis for overturning the Administrative Law Judge's finding that the areas were representative for businesses throughout the country (I.D. at 5). Likewise, there is no merit to Respondent's contentions concerning the group that was sampled. These were bookkeepers and accountants for firms listed in a data base of a Dunn & Bradstreet subsidiary, which Complainant's expert characterized as "exhaustive" and the most widely used source for business sampling (Tr. 138). There was no evidence presented to rebut the survey's use of the group as representative of businesses and personnel thereof which might receive such solicitations (CX 33 at 3; Tr. 189-90). Therefore, the Administrative Law Judge correctly concluded that accountants and bookkeepers were appropriate for use in the survey (I.D. at 5, 6). The universe was not too narrow for a valid random sampling. The facts are far different in this respect from a case relied upon by Respondent, Brooks Shoe Mfg. Co., Inc. v. Suave Shoe Corp., 533 F. Supp. 75 (S.D. Fla. 1981), aff'd, 716 F.2d 854, 861 (11th Cir. 1983).

In exception 2 Respondent contends the survey was biased "because it was developed for trial use with the aid of the Postal Service attorneys" (Resp. Brief at 7). Respondent relies on three documents which were not part of the evidentiary record, but which Complainant notes were attached to the amicus memorandum filed by United Commercial Insurance Services which was before another Administrative law Judge. The documents have been considered only for the limited purpose to determine if they warrant reopening the evidentiary record. They do not, as no bias is shown and the involvement of Complainant's counsel was addressed at the hearing (e.g. Tr. 155-56). Cf. Brown v. Schwartz, 164 F.2d 151 (5th Cir. 1947).

Respondent argues that the Administrative Law Judge's finding that Complainant's expert was not instructed to conduct the survey for this litigation or any other specific court action "is very close to being a false statement" (Resp. Brief at 8). There is no merit to this argument. It is clear from the other findings (I.D. at 6, 7), from the surveys themselves and testimony of Complainant's expert (CX 33, 33a; Tr. 155-57), that although there was some attorney participation in advising about the objectives of the survey, the attorneys neither designed nor conducted the survey. The firm which conducted the survey, whose interviewers were extensively trained (Tr. 137), was given no information about particular court or administrative cases although it was advised the survey might be used in connection with future litigation generally (Tr. 144-45). The factor stated in Pittsburgh Press Club, supra, that the survey "must be conducted independently of the attorneys involved in the litigation" was met in this case. Nothing in another case cited by Respondent, Zenith Radio Corp. v. Matsushita Electric Industrial Co., 505 F. Supp. 1313, 1333 (E.D. Pa. 1980), warrants any different conclusion. In any event, many of that court's evidentiary rulings were overturned on appeal, sub nom., In re Japanese Electronic Products, 723 F.2d 238, 259-303 (3d Cir. 1983). The evidentiary rulings on appeal in that case support the admissibility and probative value of the survey in this case and of the opinion of Complainant's expert. It is concluded that the factors mentioned in Pittsburgh Press Club were met here.

In exception 4 Respondent contends the Administrative Law Judge used incorrect percentages in analyzing the survey. Those percentages pertained to item G of the survey which was a solicitation quite similar to those used by Respondent (compare CX 57 with CX 51 and 54; see Tr. 135, 140, 142-43). Respondent argues that instead of using the 18% and 8% figures reflecting the responses of persons who thought item G was a bill or was probably a bill (I.D. at 12), the Administrative Law Judge should have used the 11% margin of error factor in the survey acknowledged by Complainant's expert. This would result in only 7% of the people deceived in the one group and none in the other. This argument is faulty in two respects. First, the Administrative Law Judge added the two groups together to reach a figure of 26% of the recipients who would probably be deceived. This was proper because the 18% group were persons who definitely thought the solicitation was a bill and the 8% were persons who thought it was probably a bill. Applying the 11% error margin downward from that total leaves 15% of the recipients likely to be deceived. This is a significant number of persons for wide-spread mailings. Second, the margin of error percentage also reflects a possible upward, as well as downward, adjustment (see Tr. 185-89). Thus, the percentage of those who could be deceived by item G is as high as 37% of the recipients. The Administrative Law Judge's use of the base figures without the error adjustment was proper and fairly represents the survey results.

All of Respondent's arguments concerning the evidentiary value to be given to the survey have been considered and are rejected. The fact, as Respondent points out (Resp. Brief at 5), that Respondent's solicitations were no used in the survey goes to the weight to be given to the survey and the expert opinion based on it by comparing Respondent's solicitations with the similar item G solicitation used in the survey. That opinion is reinforced by examination of the two solicitations in this review of the record. Respondent has not persuasively shown that improper weight was given to the survey and to the opinion of Complainant's expert concerning Respondent's solicitations.

b. Compliance with the Domestic Mail Manual

In exception 3 Respondent states: "The Administrative Law Judge's order as to the nature of the solicitation and the reasons why it failed to comply with D.M.M. 123.41 are in the nature of a jury argument . . ." (Resp. Brief at 8). In this exception ad at p. 4 of its brief, Respondent appears to be challenging the Administrative Law Judge's Finding 4 and Conclusions of Law 6 and 7, which hold that the disclaimer requirements of D.M.M. 123.41 were not met by Respondent's solicitations. Respondent contends that because its solicitations contained a notice of disclaimer any violation of the D.M.M. is not material or substantial.

Respondent's argument overlooks the governing statutory provisions. By § 3005(a), the mailing of matter which is nonmailable under § 3001(d) "shall constitute prima facie evidence that such person is engaged in conducting a scheme or device for obtaining money or property through the mail by false representations." By § 3001(d), solicitations in the form of, and reasonably interpreted or construed as a bill, invoice, or statement of account due, are nonmailable unless the matter has on its face in conspicuous and legible type, in accordance with regulations prescribed by the Postal Service, a disclaimer, as provided by the statute or the regulations. Where, as here, it is demonstrated that disclaimers on such solicitations do not meet the requirements of § 3001(d) and the regulations, a prima facie violation of § 3005 has been established. Respondent has not refused that prima facie violation, and the argument that the failure of its disclaimer to conform to the regulations is not material or substantial is without merit.

Respondent, in its Statement of Facts, argues its solicitation complied with the D.M.M. The Administrative Law Judge concluded Respondent's solicitations failed to meet the requirements of the D.M.M. (I.D. at 9-11). Respondent admits that certain exhibits (of its earlier mailings) may have been in violation of the D.M.M. because the disclaimer notice would not reproduce on some copying machines. Respondent argues, however, that the disclaimer notice in CX 54, which the Postal Inspector was able to photocopy (Tr. 109), is in compliance. Respondent asserts that CX 54 is the only relevant document here because it was being mailed by Respondent at the time the complaint was filed and the time of hearing. Other than the pleadings, which are not evidence, there is no evidence to support this assertion. Also, there is no evidence that orders are not being filled from prior solicitations. See, e.g., New Body Boutique, P.S. Docket No. 11/95 (P.S.D. July 30, 1985), aff'd, New Body Boutique, Inc. v. United States, Civil Action No. 83-0197, slip op. at 2 (D.C.D. April 21, 1983). Thus, it may not be concluded that CX 54 is the only solicitation at issue.

Nevertheless, assuming arguendo that CX 54 is the relevant solicitation, the mere fact that it may meet the reproduction requirements of the D.M.M. does not prove compliance with the other requirements. The D.M.M. requires the disclaimer to be printed in a prominent contrasting color "at least as vivid as any other color on the face of the solicitation." (D.M.M. 123.41a, g; I.D. at 9, 10). The green disclaimer notice is not as vivid as the red colors and the heavier black colors on the solicitation. Also, as found by the Administrative Law Judge, the words "This Is Not A Bill" on the disclaimer are made less intelligible by being overprinted by the words "Each Business Listing Cost Per Year $87.00" (I.D. at 12). Although the latter phrase is in smaller letters, the black print is heavier and more legible than the green. Thus, the disclaimer cannot be considered to overprint the specification of the amount due as required by D.M.M. 123.41b. It is concluded that the disclaimer does not meet the requirements of D.M.M. 123.41a, b and g. Respondent's contrary arguments are not persuasive.

Conclusion

All arguments made by Respondent have been considered and are rejected. It is concluded that Respondent's solicitations (including CX 54) are non-mailable matter under § 3001(d). See Associated Telephone Directory Publishers, Inc., P.S. Docket No. 13/191 (P.S.D. Jan. 25, 1984); TELEX & Twx Directory, P.S. Docket No. 13/6 (P.S.D. April 1, 1983); Traders Industrial Trade Directory, P.S. Docket No. 15/153 (P.S.D. May 6, 1983). Furthermore, Respondent has not excepted to the Initial Decision's findings that the solicitations made materially false representations as alleged in Complaint paragraphs 4(c) and (d). Those findings are affirmed. Therefore, it is concluded that Respondent is engaged in a scheme to obtain money through the mail by means of false representations in violation of § 3005. Respondent, while objecting to the Cease and Desist Order in the Initial Decision as untimely, has not taken exception to the substance of that order. Accordingly, Respondent's appeal is denied and herewith the Cease and Desist and False Representation Orders under 39 U.S.C. § 3005 are issued.