In the Matter of the Complaint Against

GREAT LAKES YELLOW PAGES, INC.,
a Wisconsin corporation,

and MARC NELSON,
individually and as agent of the corporation,
6815 W. Fond du Lac
Milwaukee, WI 53218-3918

and at 6759 W. Medford
Milwaukee, WI 53218-4842

P.S. Docket No. 25/79

Cohen, James A. Judicial Officer

APPEARANCES FOR COMPLAINANT:
H. Richard Hefner, Esq.
Thomas P. Kuczwara, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1112

APPEARANCE FOR RESPONDENTS:
Thomas R. Fahl, Esq.
Flanagan, Sendik & Fahl
11707 West North Avenue
Milwaukee, WI 53226-2198

POSTAL SERVICE DECISION

Respondents have filed an appeal from an Initial Decision of an Administrative Law Judge which holds that Respondents distribute solicitations in the guise of a bill, invoice or statement of account due in violation of 39 U.S.C. 3001(d) and are engaged in a scheme to obtain money or property through the mail by means of materially false representations in violation of 39 U.S.C. 3005.

BACKGROUND

This proceeding was initiated by the filing of a Complaint alleging that Respondents, by means of unsolicited mailings for

business listings which are in the form of a bill, invoice or statement of account due falsely represent that:

"6. . . .

(a) The addressee has previously authorized a business listing in Respondents' telephone directory;

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

(c) Respondents are a part of or affiliated with the telephone company servicing the recipient's area;

(d) Respondents are the publishers of the business to business phone directory or "yellow pages" customarily supplied to business telephone subscribers in the recipient's area;

(e) The area of distribution of Respondent's directory will encompass all business telephone subscribers in the "region";

(f) Publication and distribution of Respondent's directory will take place in accordance with time frames customary to the authorized "yellow pages" industry publication and distribution standards."

The Complaint also alleged that the mailing failed to contain the notice required by 39 U.S.C. 3001(d) and Domestic Mail Manual (DMM) 123.4; that the mailings are nonmailable under 3001(d); and that they constitute prima facie evidence that Respondents are engaged in conducting a scheme or device for obtaining money or property through the mail by means of materially false representa- tions in violation of 39 U.S.C. 3005. In a timely filed Answer, Respondents denied that their solicitations are nonmailable under 39 U.S.C. 300l(d) or that they are engaged in a scheme or device to obtain money through the mail by means of false representations in violation of 39 U.S.C. 3005.

A hearing was held before an Administrative Law Judge at which Complainant presented the testimony of Paul Scipione, Ph.D., an expert in direct marketing, consumer perception, and consumer psychology; Willie C. Reynolds, a Postal Service employee; Lynda L. Price, a representative of the Greater Milwaukee Better Business Bureau; and two consumer witnesses, Josephine Kasprzak and Ronald E. Keller. Respondents presented the testimony of Lee Alan Roloff, an advertising expert who serviced Respondents' account for the mailing pieces in question, and Respondent Marc Charles Nelson. The testimony at the hearing primarily concerned one solicitation, CX-1(a), together with its business reply envelope, CX-1(b), and covering envelope, CX-1(c) (hereafter collectively referred to as CX-1(a)). Subsequent to the hearing, Respondents mailed a revised solicitation which was later received in evidence as CX-9.

After the filing of proposed findings of fact and conclusions of law and reply briefs, the Administrative Law Judge issued an Initial Decision in which he concluded that Respondents' solicitation CX-1(a) is in the form of and reasonably could be construed as a bill, invoice or statement of account due, that it lacks the requisite statutory or regulatory disclaimer, and that it is nonmailable under 39 U.S.C. 3001(d) (I.D. pp. 3-8). He also found that the solicitation makes the representations alleged in paragraphs 6(a)-(f) of the Complaint, that the representations alleged in paragraphs 6(a)-(e) are materially false, but that Complainant failed to prove the falsity of the representation alleged in paragraph 6(f) (I.D. pp. 8-13, 16-17). The Administrative Law Judge made no findings with respect to the revised solicitation, CX-9.

RESPONDENTS' EXCEPTIONS

Respondents filed six exceptions to the Initial Decision, all of which have been considered. None have been found to have merit. Respondents' arguments in support of their exceptions have been combined under three headings and are discussed below.

MAILABILITY AND 39 U.S.C. 3001(d)

Respondents contend that the evidence does not support, and the Initial Decision does not find, that their solicitation, CX-1(a), is in the form of a bill, invoice or statement of account due. Contrary to Respondents' contention, the Administrative Law Judge clearly held that CX-1(a) was a solicitation in the form of, and reasonably could be construed as, a bill, invoice or statement of account due (I.D. at pp. 5, 7, 8), and since it did not contain either the statutory or regulatory disclaimer, it was nonmailable under 39 U.S.C. 3001(d).

In concluding that CX-1(a) was in the form of and reasonably could be construed as a bill, invoice or statement of account due, the Administrative Law Judge relied, in part, on the testimony of Dr. Scipione^1/ and two consumer witnesses who received the solicitation (I.D. pp. 6-8). This testimony fully supports the Administrative Law Judge's conclusion. Moreover, a review of the

solicitation itself leads to the same conclusion.^2/ Respondents' solicitation, CX-1(a), viewed as a whole and for the reasons outlined by Dr. Scipione (Tr. 73-76, 79, 83-85), is in the form of, and reasonably could be construed as, a bill, invoice or statement of account due. Since the solicitation does not contain either the statutory or regulatory disclaimer, it is nonmailable under 39 U.S.C. 3001(d).

Although the Administrative Law Judge did not consider whether the solicitation which was mailed after the hearing but later received in evidence as CX-9 was a bill or invoice in violation of 39 U.S.C. 3001(d), this issue has been considered on appeal.^3/ While Respondents contend there is no evidence in the record pertaining to this solicitation, the solicitation itself is in the record and is the best evidence of its contents. See cases cited in footnote 2. Respondents' revised solicitation, CX-9, is very similar to the earlier solicitation, CX-1(a), and contains the

wording, format and organization which indicate that it, too, is in the form of, and reasonably could be construed as, a bill, invoice or statement of account due. The top half of the solicitation contains some additional "sell" by including "Greater Exposure for Your Company" and "A Valuable Resource Handbook For Your Business." However, this language does not alter the overall impression of the mailing that it is a bill, invoice or statement of account due.

The most important difference between the two solicitations lies in the disclaimer appearing at the bottom of CX-9 which states: "This is a special offer. This is not a bill, you are under no obligation." This disclaimer, however, does not comply with the requirements of 39 U.S.C. 3001(d) or DMM 123.41. The disclaimer (1) fails to include the language required by either the statute or regulation; (2) does not appear in conspicuous bold face capital letters at least as large as any other print on the page (DMM 123.41a); (3) is not displayed conspicuously immediately below the monetary amount for which payment is requested (DMM 123.41b); and (4) is not included on the upper half of the solicitation which could reasonably be construed as a bill, invoice or statement of account due (DMM 123.41d).

Since neither of the solicitations conforms to the requirements of 39 U.S.C. 3001(d) or DMM 123.41, they are nonmailable. In view of this conclusion, the fact that Respondents mailed these solicitations constitutes prima facie evidence that they are 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.

FALSE REPRESENTATIONS

Respondents contend that there is no evidence to support the Administrative Law Judge's findings that the representations alleged in paragraphs 6(a), (b) and (e) of the Complaint are made in their solicitation CX-1(a). Respondents have not contested the findings of the Administrative Law Judge that CX-1(a) makes the representations alleged in paragraphs 6(c) and (d) of the Complaint. Nonetheless, the Administrative Law Judge's findings regarding paragraphs 6(c) and (d) have been reviewed and found to be fully supported by the terms of the solicitation and the testimony presented at the hearing (Tr. 26-27, 37-40, 47-49, 54, 76-81, 91-92, 99-100).

Respondents argue there is no proof that representations 6(a), (b) and (e) are made since there is no expert testimony specifically addressing them. The Administrative Law Judge correctly determined that CX-1(a) makes the representations alleged in paragraphs 6(a), (b) and (e) of the Complaint. This conclusion flows from the determination that the solicitation is in the form of, and reasonably could be construed or interpreted as, a bill, invoice or statement of account due and that Respondents are affiliated with the telephone company serving the area and are the publishers of the Yellow Page Directory customarily supplied to subscribers. Moreover, the record contains ample testimony supporting the conclusion that an ordinary recipient of the solicitation would consider these representations to have been made (e.g., Tr. 73-76, 79, 83-84, 95-96).

As previously concluded, CX-9 also violates 39 U.S.C. 3001(d) because it is in the form of, and reasonably could be construed as, a bill, invoice or statement of account due. Accordingly, it too makes the representations alleged in paragraphs 6(a) and (b) of the Complaint since those representations flow from the fact that the solicitation is in the form of and reasonably could be construed as a bill or invoice.

Respondents' solicitation, CX-9, also makes the representations alleged in paragraphs 6(c) and (d) of the Complaint. The Administrative Law Judge summarized the testimony and portions of CX-1(a) which led him to conclude that the ordinary reader would read the solicitations as making these representations (I.D., pp. 9-11). With some minor exceptions, CX-9 contains similar language which would lead the ordinary reader to the same conclusion. Contrary to Respondents' contention, the fact that CX-9 refers to the Great Lakes Regional Yellow Pages as "New" does not alter this impression. To many ordinary readers, this would merely refer to the latest annual version of the directory previously published by the telephone company. Moreover, 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., Inc. v. F.T.C., 208 F.2d 382, 387 (7th Cir. 1953), modified on other grounds, 348 U.S. 940 (1954). It is therefore concluded that CX-9 makes the representations alleged in paragraphs 6(c) and (d) of the Complaint.

The representation alleged in paragraph 6(e) of the Complaint flows from the finding that the representations alleged in the other paragraphs of the Complaint are made. As a result, it is concluded that this representation is also made in CX-9.

Accordingly, it is concluded that both of Respondents' solicitations make the representations set forth in paragraphs 6(a)-(e) of the Complaint. There is no dispute that these representations are materially false.

APPLICABILITY OF RES JUDICATA

After the hearing before the Administrative Law Judge, Complainant sought a preliminary injunction against Respondents in the United States District Court under 39 U.S.C. 3007. It appears that Complainant was seeking the detention of incoming mail which was in response to the CX-9 mailing. After a hearing, the Court issued an order denying the request for injunctive relief.

Respondents argue that the order of the District Court is binding in this administrative proceeding under the doctrine of res judicata. This argument has no merit. Section 3007 clearly states that court actions under that section do "not affect or determine any fact at issue" in a 3005 proceeding. In view of this statutory language, and due to the lack of finality of a preliminary injunction proceeding, the doctrine of res judicata is not applicable. Telco Directories, Inc., P.S. Docket No. 22/111 (P.S.D. Feb. 25, 1987); Standard Research Labs, P.S. Docket Nos. 9/63 and 9/64 (P.S.D. Aug. 31, 1981); see also, Berrigan v. Sigler, 499 F.2d 514, 518 (D.C. Cir. 1974); Industrial Bank of Washington v. Tobriner, 405 F.2d 1321 (D.C. Cir. 1968).

CONCLUSION

After consideration of the entire record and Respondents' exceptions, it is concluded that Respondents distribute solicitations in the guise of bills, invoices or statements of account due in violation of 39 U.S.C. 3001(d) and are engaged in a scheme or device for obtaining money through the mail by means of materially false representations in violation of 39 U.S.C. 3005. Accordingly, the Initial Decision is modified to the extent indicated herein and otherwise affirmed, Respondents' appeal is denied, and the orders authorized by 39 U.S.C. 3005 are issued with this decision.

___________________

1/ The fact that Dr. Scipione would not personally have been deceived by the solicitation is irrelevant. The relevant inquiry is whether an ordinary recipient would have construed the solicitation as a bill, not whether a well-trained expert in consumer psychology would have done so (Tr. 90-91).

2/The most compelling evidence of whether the solicitation reasonably could be interpreted or construed as a bill, invoice or statement of account due is the solicitation itself. 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); Telex & twx Directory, P.S. Docket No. 13/6 (P.S.D. April 1, 1983); Telco Directories, Inc., P.S. Docket No. 22/111 (P.S.D. Feb. 25, 1987).

3/ An agency reviewing an Administrative Law Judge's decision under the Administrative Procedure Act is authorized to decide all issues de novo. See, FCC v. Allentown Broadcasting Corp., 349 U.S. 358 (1955); Containerfreight Transp. Co. v. ICC, 651 F.2d 668 (9th Cir. 1981); Hamlin Testing Labs, Inc. v. AEC, 357 F.2d 632 (6th Cir. 1966). Under 39 C.F.R. 952.26, in determining appeals from an Initial Decision, the entire official record will be considered before a final agency decision is rendered. The Judicial Officer is the "agency" under the Administrative Procedure Act for the purpose of making a final Postal Service decision under 39 U.S.C. 3001 and 3005. See 39 U.S.C. 204; 39 C.F.R. 226.2(d)(1)(ii).