In the Matter of the Complaint Against

OPPORTUNITY RESEARCH CORPORATION

and

MICHAEL KOUGH,
RD 1, Box 503 at
Imler, PA 16655-9721

P.S. Docket No. 24/131

James A. Cohen Judicial Officer

APPEARANCES FOR COMPLAINANT:
Sandra C. McFeeley, Esq.
W. Gary Claytor, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1112

APPEARANCE FOR RESPONDENT:
Joseph M. Devecka, Esq.
Devecka & Rayman
111 Sowers Street, Suite 600
State College, PA 16801-5614

POSTAL SERVICE DECISION

Respondent has filed an appeal from the Initial Decision of an Administrative Law Judge holding that Respondent is engaged in the conduct of (l) a lottery or scheme for the distribution of money by chance and (2) a scheme to obtain money through the mail by means of a materially false representation, both in violation of 39 U.S.C. 3005.

Background

This proceeding was initiated by the filing of a Complaint by the Consumer Protection Division, Law Department, United States Postal Service, alleging that Respondent's Financial Hot Line program contains the elements of prize, chance and consideration and therefore is a lottery within the meaning of 39 U.S.C. 3005. The Complaint further alleged that Respondent falsely represents that the program is legal.

In a timely filed Answer, Respondent denied that the program includes the element of chance and that it constitutes a lottery within the meaning of 39 U.S.C. 3005. Respondent also denied that it falsely represents that the program is legal. Following a hearing and submission of proposed findings of fact and conclusions of law, the Administrative Law Judge issued the Initial Decision from which Respondent has appealed.

Respondent's Exceptions & Discussion

While Respondent has filed several separately numbered exceptions to the Initial Decision, its principal contention running throughout its exceptions is that the Administrative Law Judge erred in finding that the Financial Hot Line program includes the element of chance and therefore is a lottery in violation of 39 U.S.C. 3005. Respondent also takes issue with certain of the findings in the Initial Decision and the terms of the Orders recommended by the Administrative Law Judge.

All of Respondent's exceptions have been considered, but none have been found to support a reversal of the Initial Decision. The Administrative Law Judge's findings and conclusions regarding the element of chance in Respondent's promotion are correct as a matter of fact^*/ and law. The Administrative Law Judge found that because of the lack of control over downline participants after the first level "chance is still the dominant element determining the number of money orders, if any, one will receive" (I.D. p. 5). The Administrative Law Judge's finding regarding the lack of control over downline participants is supported by the record. The authorities cited by the Administrative Law Judge, as well as other Postal Service Decisions, establish that such lack of control constitutes the element of chance. See Middle-Class American, Inc., P.S. Docket No. 16/65 (P.S.D. March 26, 1984); N.E.S.T. Inc., P.S. Docket No. 14/89 (P.S.D. Aug. 7, 1984). Contrary to Respondent's contentions, neither the lack of expert testimony nor the alleged differences between Respondent's Financial Hot Line program and certain programs considered in the cases relied on by the Administrative Law Judge detract from this result. Expert testimony is not required in order to establish a violation of 39 U.S.C. 3005, and the differences which Respondent relies on, particularly with respect to Collegedale Diversified Enterprises, Inc. , P.S. Docket No. 14/29 (P.S.D. Oct. 25, 1983), are not legally meaningful.

Respondent does not seriously contest the existence of the remaining elements of a lottery, i.e., prize and consideration, and both are established by the solicitations themselves. Thus, the Administrative Law Judge properly concluded that Respondent was in violation of the lottery provision of 39 U.S.C. 3005. Con- sequently, Respondent's representation that the program is legal is materially false. Therefore, as found by the Administrative Law Judge, Respondent is also in violation of the false representation provision of 39 U.S.C. 3005.

Respondent objects to the scope of the Cease and Desist Order and the False Representation Order recommended by the Administra- tive Law Judge, arguing that they are overbroad. Specifically, Respondent objects to the fact that these Orders would prohibit the conduct of other business ventures or marketing plans which are not related to the multi-level program which is the subject of this proceeding. Respondent is correct that the recommended Cease and Desist Order is overbroad. Accordingly, the Cease and Desist Order has been modified so that it relates to the conduct which is the subject of this proceeding. No change to the False Representation Order is required since it is not overbroad.

Conclusion

Respondent's exceptions to the Initial Decision have been considered. Respondent's Exception l requesting modification of Finding of Fact 6 is granted. Respondent's Exception 8 relating to the terms of the Orders to be issued is granted in part with regard to the Cease and Desist Order. In all other respects, Respondent's exceptions are denied and the Initial Decision is affirmed. The Orders authorized by 39 U.S.C. 3005 are issued herewith.

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*/ In Exception l Respondent argues that Finding of Fact 6 is incomplete and proposes additional language to make it more factually correct. Respondent's addition to the finding is supported by the record, but does not serve as a basis for altering the conclusions reached in the Initial Decision.