VACATED FOLLOWING SETTLEMENT

In the Matter of the Complaint Against

UNITED COMMERCIAL INSURANCE SERVICES,
a corporation d/b/a CHECKWRITER INSURANCE,
CHECKWRITER INSURANCE AGENCY,
CHECKWRITER SECURITY AGENCY,
BURTON RAYDEN

and

JEFFREY RAYDEN
15250 Ventura Boulevard at
Sherman Oaks, CA 91403-3201

P.S. Docket No. 19/18;

Cohen, James A.

APPEARANCES FOR COMPLAINANT:
ThomasA. Ziebarth, Esq.
James A. Harbin, Esq.
Ben A. Kilgrow, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, D.C. 20260-1112

APPEARANCES FOR RESPONDENTS:
John W. Vardaman, Jr., Esq.
F. Lane Heard, III, Esq.
Williams & Connolly
839 17th Street, Northwest
Washington, D.C. 20006-3942

POSTAL SERVICE DECISION

The Consumer Protection Division, Law Department, United States Postal Service (Complainant) has appealed from an Initial Decision of an Administrative Law Judge which holds that Complainant failed to prove that Respondents seek the remittance of money through the mail by means of solicitations in the guise of invoices in violation of 39 U.S.C. ?? 3001(d) and 3005. The solicitations in the guise of invoices which are the subject of this proceeding relate to the sale of forgery and check altera tion insurance and a mechanical service contract for checkwriter machines.

Background

Complainant initiated these proceedings by filing a Complaint alleging that Respondents are engaged in conducting a scheme or device to obtain money through the mail by means of materially false representations contained in their solicita tions. Specifically, the Complaint alleges that:

"7. By means of solicitations such as those attached to the Complaint , and others similar thereto, Respondents represent directly or indirectly, in substance and effect, whether by affirmative statements, implication or omission that:

a. the amount set forth on the face of the solicitation is owing and due to Respondents;

b. the recipients of Respondents' solicitations previously purchased products or services from Respondents or have otherwise established a business relationship with Respondents; and

c. the recipients of Respondents' solicitations have agreed to purchase the products or services described therein prior to receipt of the solicitations.

8. The representations in subparagraphs 7(a) through (c) are materially false as a matter of fact." In addition, the Complaint alleges that the solicitations in issue are nonmailable under 39 U.S.C. § 3001(d) and fail to contain a notice in the form prescribed by that section or by Domestic Mail Manual § 123.41.

In a timely filed Answer, Respondents denied that their solicitations are in the form of and reasonably could be construed as bills, invoices, or statements of account due and that they make the representations alleged in paragraph 7 of the Complaint. In addition, Respondents generally denied any violation of 39 U.S.C. ?? 3001(d) and 3005.

A hearing was held before an Administrative Law Judge at which both parties presented testimony with respect to the allegations of the Complaint. Complainant presented the testimony of Dr. Paul Scipione, an expert in surveys and consumer psychology, Postal Inspector Larry Johnson, and ten "victim" witnesses. Respondents presented the testimony of Dr. John Parkington, an expert in direct mail marketing and survey research, and Respondent Jeffrey Rayden. Both parties presented documentary evidence. The parties filed proposed findings of fact and conclusions of law and other post-hearing briefs. Thereafter, the Administrative Law Judge issued an Initial Decision in which he concluded that the survey offered in evidence by Complainant was inadmissible and that Complainant had failed to sustain its burden of proving that Respondents' solicitations are in the form of and reasonably could be interpreted or construed as bills or invoices or that they make the false representations alleged in the Complaint.

Complainant has filed exceptions to the Initial Decision in which it generally contends that the Administrative Law Judge improperly refused to admit the survey into evidence and erroneously reached the conclusion that Complainant had failed to prove its case by a preponderance of the evidence.

Admissibility and Weight of the Response Analysis Survey

Complainant's first exception, and its principal contention on appeal, concerns the admissibility and weight of a survey performed by Response Analysis which was conducted under the supervision of Complainant's expert witness, Dr. Scipione (CX-10, 11 and 12). The survey concluded that 32% (plus or minus an 11% margin of error) of the persons interviewed thought that the solicitations in issue were definitely or probably a bill.

Surveys measuring public perception of advertisements are generally admissible under various exceptions to the hearsay rule, with evidence of technical unreliability going to the weight accorded the survey. Scott Wilcox d/b/a Telco Directories, Inc., P.S. Docket No. 18/147 (P.S.D. Oct. 16, 1985); Ralph J. Galliano, P.S. Docket No. 19/15 (P.S.D. May 2, 1985), aff'd Ralph J. Galliano v. United States Postal Service, Civil Action No. 85-2515 (D.D.C. Oct. 21, 1986). In Scott Wilcox, supra, the survey sought to be admitted into evidence in that case was held to be admissible under the principles established in Pittsburgh Press Club v. United States, 579 F.2d 751, 758 (3rd Cir. 1978). ^1/ These same principles have been considered in this case to determine whether the Administrative Law Judge's ruling on admissibility was proper. After consider ation of the arguments of both parties in light of the evidence presented, it is concluded that although the survey is not without its shortcomings and its exclusion is not outcome determinative, it should have been admitted into evidence. ^2/ This conclusion is based on the following:

a. The survey was designed in accordance with scientific principles (Tr. 170) by Dr. Paul Scipione, a highly qualified expert in survey measurement of consumer perception. The survey was conducted by interviewers experienced in advertisement testing (Tr. 171).

b. The survey examined the appropriate universe of bookkeeper/accountants responsible for accounts payable (CX-10, p. 5). The fact that these employees may not have been responsible for purchasing decisions is of no consequence.

c. The survey used a regional probability sample of five major categories of organizations in four geographical areas (Tr. 160, 171, 180; CX-10, p. 3).

d. The survey respondents understood the term "bill" in accordance with its ordinary meaning (Tr. 515). Respondents' contention that a few may have used the term to encompass situations where no pre-existing obligation existed is unsup ported by the evidence.

e. Respondents note that about half of the survey respondents who originally categorized the solicitations as definitely/probably a bill, when given an opportunity to inspect the solicitations more closely and give reasons for their choice, realized they were actually solicitations. However, it is a survey respondent's first categorization that is the most crucial in determining how he will treat the mail piece in question (Tr. 520-21).

f. The survey was conducted independently of the attorneys involved in the litigation (Tr. 171).

While admissible, there are weaknesses in the survey design and technique which affect the weight it will be accorded in this proceeding. In this regard, the format of the questionnaire used did not give survey respondents the option of identifying the solicitations as advertisements. In addition, the fact that the interviewers were told the purpose of the survey diminishes to some extent its reliability under the criteria of Pittsburgh Press Club v. United States, supra, even though the interviewers were experienced in advertisement testing (Tr. 171) and were instructed not to reveal the sponsor of the study until after completion of the interview (RX-24, p. 1). In view of these weaknesses, the survey's statistical projections are not accepted, but its conclusions are considered as supportive of the more persuasive evidence discussed hereafter.

Applicability of 39 U.S.C. § 3001(d)

Respondents contend that the solicitations in issue are not in the form of a bill and reasonably could not be interpreted or construed as a bill, invoice, or statement of account due. The Administrative Law Judge agreed with Respondent, and Complainant takes issue with this conclusion.

A solicitation is "nonmailable" if it "is in the form of, and reasonably could be interpreted or construed as, a bill, invoice, or statement of account due" unless it contains the disclaimer prescribed by the statute or the Domestic Mail Manual. ^3/ The determination of mailability is to be based on the totality of the solicitation and the impression created in the minds of those to whom it is directed. Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948); Borg-Johnson Electronics v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1959); 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). This does not mean that the trier of fact is limited to the interpretation which a majority of recipients would place on a solicitation. Rather, the trusting are to be protected as well as the wary. Donaldson v. Read Magazine, Inc., supra, at 189; Fields v. Hannegan, 162 F.2d 17 (D.C. Cir. 1947), cert. denied, 332 U.S. 773 (1947); M.K.S. Enterprises, Inc. v. United States Postal Service, 459 F. Supp. 1180, 1184 (E.D.N.Y. 1978); IHS Department of Unclaimed Funds and Benefits, P.S. Docket No. 22/155 (P.S.D. Sept. 22, 1986); Leo Daboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986).

The best evidence that a mailing appears to be an invoice is the mailing itself. Telex & twx Directory, P.S. Docket No. 13/6 (P.S.D. April 1, 1983). The solicitations which are the subject of this proceeding contain a number of characteristics which suggest that they are a bill or invoice (Tr. 148-49). First, the mailing is sent in a small, computer-printed envelope which instructs the recipient to tear off the stub at the end and peel off the cover (Tr. 149-150). The first page of the mailing contains a tear-off stub to be retained with the recipient's insurance records (Tr. 150). The mailing is small in size and drab in appearance (Tr. 150, 154). The first page of the mailing does not attempt to "sell" a product or service by creating consumer interest (Tr. 151-152). Instead, it contains the typed-in name of the addressee, the specific dollar "Amount" (which also appears on the tear-off stub), and what appears to be an account number or contract number. These characteristics strongly suggest and convey to the ordinary recipient the overall impression that the mailing is a bill, invoice, or statement of account due.

In view of the overall impression created by the solicita tions, many recipients would fail to notice or understand the import of the word "APPLICATION", which appears in bold type, or the "I accept your offer and hereby apply for ..." language appearing in small print at the bottom of the page. Likewise, many would be unlikely to focus on the back of the page or the details printed on the front and back of the second sheet of paper. Moreover, the use of the word "Application" on the face of the solicitations is not a satisfactory substitute for the statutory or regulatory language which is intended to clearly and unambiguously place the ordinary recipient on notice that a solicitation is not a bill, invoice, or statement of account due.

The conclusion that many recipients of Respondents' solici tations would construe them as a bill, invoice, or statement of account due is persuasively supported by an analysis of the numerous customer complaints included in the file (CX-15). These complaints reflect that many business persons believed the solicitations were in the form of and reasonably could be construed or interpreted as a bill, invoice or statement of account due. The parties' summaries of these complaints which appear to have been relied on by the Administrative Law Judge do not accurately portray the number or content of the complaints.

In addition to the solicitations themselves and the customer complaints, further evidence they are in the form of and reason ably could be construed or interpreted as a bill or invoice is found in the opinion testimony of Complainant's expert, Dr. Scipione (Tr. 576), the testimony of several "victim" witnesses (Tr. 68, 86-88, 225, 250), and to some extent the Response Analysis survey (CX-10-12).

Finally it should be noted that even if Respondents' mail ings are ambiguous and reasonably susceptible of being construed both as a solicitation and a bill or invoice, they are nonmail able under 39 U.S.C. § 3001(d) and constitute prima facie evidence that Respondents are engaged in a scheme or device to obtain money through the mail by means of false representations.

Where an advertisement is ambiguous or capable of more than one meaning, if one of those meanings is false, the advertisement will be held to be misleading. Rhodes Pharmacal Co. v. Federal Trade Commission, 208 F.2d 382, 387 (7th Cir. 1953); Intra-Medic Formulations, Inc., P.S. Docket No. 19/182 (P.S.D. Sept. 10, 1985); Ralph J. Galliano, P.S. Docket No. 19/15 (P.S.D. May 2, 1985); Bruce Roberts Co., P.O.D. Docket No. 3/78 (I.D. Aug. 16, 1971). The simple cure for an ambiguous solicitation in the guise of a bill or invoice is the inclusion of the statutory or regulatory disclaimer. Since the solicitations do not contain the requisite disclaimer, they constitute nonmailable matter under 39 U.S.C. § 3001(d).

The Representations

Complainant also contends on appeal that Respondents' solicitations make the false representations alleged in paragraph 7a-c of the Complaint in violation of 39 U.S.C. § 3005. Each representation is addressed below:

"a. The amount set forth on the face of the solicitation is owing and due to Respondents."

A preponderance of the credible evidence establishes that this representation is made in Respondents' solicitations. The finding that representation "a" is made necessarily follows from the finding that the solicitations are in the form of and reasonably could be interpreted or construed as a bill or invoice. In addition, "victim" witnesses testified and customer complaints reflect that the amount stated on the solicitations was paid under the mistaken belief that this amount was owed to Respondents (Tr. 68-72, 99-100, 224, 229-233, 250, 252-253; CX-15).

"b. The recipients of Respondents' solicitations previously purchased products or services from Respondents or have otherwise established a business relationship with Respondents."

This representation is automatically made in view of representation "a". However, this representation is also made even if the recipient does not perceive the solicitation to be an invoice. This is so because the solicitation contains what appears to be a typed-in policy number or contract number (Tr. 34; CX-7a; CX-1b). Recipients of the mailing perceived these numbers as a "service contract" number (Tr. 34), an "account" number (CX-7a) and a "policy" number (CX-1b). Moreover, the quotation of a precise dollar amount for an insurance policy and service contract likewise leads to the impression that Respondents have gained specific background information from a prior business relationship which would lead Respondents to evaluate the risk for that particular addressee. Many recipients would consider the solicitation to be a "renewal" form (CX-10, p. 31). The mistaken perception of coverage for prior years tends to induce the purchase or renewal of coverage for the next year.

"c. The recipients of Respondents' solicitations have agreed to purchase the products or services described therein prior to receipt of the solicitations."

This representation is also made. Since the mailing will be construed as an invoice by many people, it implies that there is an underlying agreement to purchase the goods or services described on the invoice.

All of the above representations are materially false. Respondents' mailing is admittedly a solicitation, not an invoice. It is also clear that Respondents send the mailings to businesses that have never ordered any product or service from Respondents and that have had no other previous business relationship with them (Tr. 11-12, 70-71, 90, 100, 210, 619-20; CX-15).

Conclusion

After consideration of the entire record, it is concluded that Respondents' solicitations are nonmailable and that Respondents are engaged in a scheme to obtain money through the mail by means of materially false representations. Accordingly, the Initial Decision of the Administrative Law Judge is reversed and the orders sought in the Complaint and authorized by 39 U.S.C. § 3005 are issued herewith.

1/ The Court considered the following factors in determining whether there was compliance with generally accepted survey principles for evidentiary purposes:

"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."

2/ Even if the survey were not admissible under the Federal Rules of Evidence, such rules should have been relaxed under 39 C.F.R. § 952.18. Under this rule the presiding officer may relax the rules of evidence to assure a fair hearing. On appeal the Judicial Officer considers the entire record before issuing the final agency decision (39 C.F.R. § 952.26) and has all the powers he would have originally had in making the initial decision. See 5 U.S.C. § 557(b).

3/ The statute requires the following prominent and conspicuous notice: "This is a solicitation for the order of goods or services, or both, and not a bill, invoice, or statement of account due. You are under no obligation to make any payments on account of this offer unless you accept this offer." 39 U.S.C. § 3001(d)(2)(A). The regulations provide the following alternative: "THIS IS NOT A BILL. THIS IS A SOLICITATION, YOU ARE UNDER NO OBLIGATION TO PAY UNLESS YOU ACCEPT THIS OFFER." Domestic Mail Manual § 123.41(a). Respondents' solicitations do not contain either notice.