In the Matter of the Complaint Against:

CREDIT CARD AUTHORIZATIONS CTR. (C.C.A.C), etc.,
P.O. Box 627 at Springfield, VA 22150-0627, et. al.

P.S. Docket No. 30/77

Cohen, James A., Judicial Officer

APPEARANCES FOR COMPLAINANT:
Thomas A. Ziebarth, Esq.,
Timothy J. Mahoney, Esq.,
Consumer Protection Division,
Law Department,
United States Postal Service,
Washington, DC 20260-1144

APPEARANCE FOR RESPONDENT:
Alan B. Niedermayer, Esq.,
206 E. 25th Street,
Baltimore, MD 21218-5216

POSTAL SERVICE DECISION

Respondents have filed an appeal from an Initial Decision of an Administrative Law Judge which holds that Respondents are engaged in the conduct of a scheme for obtaining money or property through the mail by means of materially false representations in violation of 39 U.S.C. § 3005.

BACKGROUND

The General Counsel of the United States Postal Service (Complainant) initiated this proceeding by filing a Complaint alleging that, by means of direct mail solicitations seeking remittances for credit cards through the mail, Respondents falsely represent:

"(a) the sender of such an advertisement is affiliated with or acting in concert with or on behalf of a financial institution or other entity which issues national credit cards such as VISA or MasterCard;

(b) credit up to a certain amount for the recipient of such an advertisement has already been approved by the issuer of more than one national credit card such as VISA or MasterCard; and

(c) a recipient of such an advertisement who mails a completed form with payment to the sender as directed will within a few days receive national credit cards such as VISA or MasterCard with a total credit limit in an amount specified in the advertisement."

In their Answer Respondents denied making the representations alleged in the Complaint and contested the inclusion of certain named Respondents as parties to the proceeding. Without objection, the Complaint was subsequently amended to identify the parties now included as Respondents.

At a hearing before an Administrative Law Judge, Complainant presented the testimony of three witnesses and Respondents presented the testimony of one witness. Both parties introduced documentary evidence. Following the filing of proposed findings of fact and conclusions of law, the Administrative Law Judge issued an Initial Decision in which he concluded that Respondents make the representations alleged in the Complaint and that those representations are materially false in violation of 39 U.S.C. § 3005. Respondents have filed a timely appeal from the Initial Decision.

EXCEPTIONS AND DISCUSSION

Respondents contend that the Administrative Law Judge erred in finding that their advertisements make the representations alleged in the Complaint and that those representations are materially false. Complainant responds that the Administrative Law Judge's decision is correct and that Respondents' appeal should be denied.

Respondents first argue that the Administrative Law Judge failed to consider and apply recent clarifications of the ordinary reader standard established in Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948). Citing M.K.S. Enterprises, Inc. v. United States Postal Service, 459 F. Supp. 1180 (D.D.C. 1978); Unique Ideas, Inc. v. United States Postal Service, 416 F. Supp. 1142 (D.D.C. 1976); and American Image Corp. v. United States Postal Service, 370 F. Supp. 964, 966 (S.D.N.Y.), aff'd, 503 F.2d 1397 (2d Cir. 1974), Respondents contend that the Administrative Law Judge viewed their solicitations with a "lawyer's eye to fine spun distinctions" rather than assessing the overall impression on the ordinary reader.

A review of the Initial Decision and the record on which it is based does not reveal any error in the statement or application of the ordinary reader standard in this proceeding. While the Initial Decision does not refer to the cases cited by Respondents, the statement of the standard and its application is consistent with those decisions. Respondents' initial solicitations (CX-1 to 3 & 5) viewed in their entirety and without a "lawyer's eye to fine spun distinctions," would most probably lead the ordinary reader to believe that Respondents were acting on behalf of organizations issuing national credit cards, and that the recipient of the solicitation had been approved for credit and would receive a national credit card on payment of the required fee.

While Respondents' revised advertisement (CX-6) ^1/ might be less likely to lead the ordinary reader to believe that a major credit card would be issued on payment of the required fee, it nonetheless would most probably continue to be interpreted by the ordinary reader as making this representation. In addition, it continues to convey the impression that Respondents are acting in concert with, or on behalf of, issuers of major credit cards and that the recipient has been approved for credit.

Respondents also take issue with the Administrative Law Judge's findings and conclusions relating to the interpretation of Respondents' advertisements by Complainant's consumer witness. A review of the testimony of this witness establishes that she interpreted the advertisement she received as promising two major credit cards on payment of the required service charge (Tr. 22-25, 27, 32-33). Also, based on the name "Credit Card Authorizations Center" (CCAC) in the advertisement, and the representation that Respondent CCAC handles thousands of transactions a year with companies such as VISA, MasterCard, and American Express, she interpreted the advertisement to show a connection between those major credit card companies and CCAC (id.). The Administrative Law Judge's reliance on this testimony and his finding that the name Credit Card Authorizations Center "clearly conveys the impression that Respondents are engaged in the business of issuing, or arranging for the issuance, of credit cards" was not in error. ^2/

Respondents next argue that Complainant's consumer witness was not an average reader, but rather a person desperate for credit who was well aware that she would not obtain a major credit card through her reply to Respondents' advertisement. Additionally, Respondents argue that average readers would not be misled by their solicitations and would not be induced to remit the required fee. According to Respondents, ordinary readers would most likely make further inquiry concerning the terms of the offer before sending money through the mail.

Respondents' advertisements appear to be designed for, and directed to, persons such as Complainant's consumer witness who, because of credit problems, had previously been unable to obtain a major credit card. While the consumer witness may have had some doubts about Respondents' offer, based on the representations of the advertisement she nevertheless had a legitimate expectation of receiving a major credit card. Although more sophisticated readers might have understood that they would not receive a major credit card, the postal false representation statute, 39 U.S.C. § 3005, is intended to protect the gullible, naive and less critical reader as well as the more sophisticated and wary reader. Fields v. Hannegan, 162 F.2d 17, 18 (D.C. Cir.), 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); Gottlieb v. Schaffer, 141 F. Supp. 7, 16 (S.D.N.Y. 1956); Leo Daboub, P.S. Docket No. 19/185 at 9 (P.S.D. July 10, 1986).

Even without the the testimony of Complainant's consumer witness the same result would be reached. It is well established that the Administrative Law Judges and the Judicial Officer as finders of fact may, on the basis of the advertisements themselves, determine whether the representations are made, their effect on the ordinary mind, and their materiality. 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); American Mint, P.S. Docket No. 23/110 (P.S.D. June 16, 1987); Beatrice Bayley, Inc., P.S. Docket No. 22/113 (P.S.D. Sept. 16, 1986). A review of the advertisements in evidence in this proceeding supports the Administrative Law Judge's conclusion that the ordinary reader would most probably understand those advertisements to make the representations alleged in the Complaint.

Respondents' contention that the representations in their solicitations would not induce the ordinary reader to remit money to Respondents is also without merit. Respondents' evidence that the ordinary reader would refuse the cards or request more information is outweighed by the impression created by the terms of the solicitations and the testimony of Complainant's consumer witness who was induced to remit money to Respondents. Thus, the Administrative Law Judge correctly held that the representations alleged in the solicitations were material. Lynch v. Blount, 330 F. Supp. 689, 693 (S.D.N.Y 1971), aff'd, 404 U.S. 1007 (1972); Richard W. Verrett, P.S. Docket No. 20/18 at 5-6 (P.S.D. Dec. 31, 1986).

Respondents take exception to the Administrative Law Judge's finding that the representations found in their advertisements (CX-1 to 3 & 5) are false. It has previously been concluded that Respondents' solicitations make the representations alleged in the Complaint. Moreover, it is not genuinely disputed that those representations are false. Accordingly, there is no merit to this contention.

Respondents' final contention relates to the standard applied by the Administrative Law Judge in recommending the issuance of a cease and desist order. Respondents claim that the Administrative Law Judge was unable to cite substantial evidence ^3/ in support of his recommended order. This exception must likewise be rejected. The evidence relied on by the Administrative Law Judge establishes, by a preponderance of the evidence, that Respondents are in violation of 39 U.S.C. § 3005. Based on this determination it was proper for the Administrative Law Judge to recommend the issuance of the cease and desist order attached to the Initial Decision.

CONCLUSION

The record supports the Administrative Law Judge's conclusion that Respondents are engaged in a scheme to obtain money through the mail by means of materially false representations. Accordingly, Respondents' appeal is denied and the Orders authorized by 39 U.S.C. § 3005 are issued herewith.

1/ Contrary to Respondents' assertion, the revised advertisement does not comply with the terms of the parties' interim agreement as reflected by CX-24. The revised advertisements do not explain the promotion, offer a refund in the event of a misunderstanding of the promotion, state that Respondents would refer the application to an issuer of a major credit card, or specify the qualifying requirements for a major credit card.

2/ Relying on the testimony of this witness, Finding of Fact No. 8 incorrectly recites that the Choice card was mentioned in Respondents' solicitation. This error in the finding represents a minor variance from the facts and does not affect the result reached. Moreover, it was reasonable for the witness to conclude, on the basis of the language of the advertisement, that the credit cards mentioned were not all inclusive.

3/ As stated in prior Postal Service decisions "the preponderance of the evidence test, not the substantial evidence test, is employed by Administrative Law Judges in reaching Initial Decisions and by the Judicial Officer in issuing final agency decisions" under 39 U.S.C. § 3005. Stannis Research Int'l, P.S. Docket No. 17/60 at 3 (P.S.D. July 30, 1984); Telex & twx Directory, P.S. Docket No. 13/6 at 5-6 (P.S.D. April 1, 1983); see also Steadman v. S.E.C., 450 U.S. 91, 96-102 (1981); Danlon Health Systems, P.S. Docket No. 17/108 at 6 n.3 (P.S.D. March 4, 1985).