In the Matter of the Complaint Against:

THOMAS W. GIEL d/b/a FLORIDA LOTTO PLAYERS,
P.O. Box 79072
at Tampa, FL 33619-0072

P.S. Docket No. 34/178

Mason, Randolph D., Administrative Law Judge

APPEARANCE FOR COMPLAINANT: Jerry Belenker, Esq., Consumer
Protection Division, Law Department, United States Postal Service,
Washington, DC 20260-1144

APPEARANCE FOR RESPONDENT: Thomas W. Giel, pro se, P.O. Box
79072, Tampa, FL 33619-0072

INITIAL DECISION

This proceeding was initiated on August 10, 1989, when the Postal Service filed a Complaint alleging that Respondent Thomas W. Giel d/b/a Florida Lotto Players is engaged in conducting a lottery or scheme for the distribution of money or property by chance in violation of 39 U.S.C. § 3005. Specifically, the Complaint alleges that Respondent's scheme contains the necessary elements of prize, consideration, and chance.

In his Answer entitled "Respondent's Brief to Complaint," Respondent denies that he is conducting a lottery or that he is otherwise violating the statute.

Thereafter, Complainant filed a Motion for Judgment on the Pleadings. Respondent agrees that a decision by the Administrative Law Judge may be based upon the pleadings. The parties were given an opportunity to file proposed findings of fact and conclusions of law. On October 2, 1989, Respondent filed a Motion to Dismiss which disputes various allegations and conclusions drawn by Complainant, and contains proposed findings and conclusions. On October 12, 1989, Complainant filed a Reply to Respondent's Motion to Dismiss. The record is now closed and all arguments have been duly considered.

To the extent indicated below, proposed findings and conclusions contained in all documents filed have been adopted; otherwise, they have been rejected as irrelevant or contrary to the evidence. Based on the entire record herein, I make the following findings of fact and conclusions of law:

FINDINGS OF FACT

1. Respondent Thomas W. Giel d/b/a Florida Lotto Players seeks money through the mail to the address set forth in the caption from customers who are not residents of Florida who wish to play the Florida lottery.

2. Respondent's solicitation states that Respondent is not affiliated with the Florida lottery, that he does not sell lottery tickets, but that he obtains tickets from authorized Florida retailers on behalf of customers and then mails them to the customers. If the customer has a winning ticket, it is the customer's responsibility to collect the prize. The solicitation explains how to claim prizes.

3. The solicitation contains an order form on which a customer may order up to 20 tickets (more than one order form may be submitted). For each ticket ordered, he must send Respondent $1 plus a "service charge." The service charge for one ticket is $1, but this charge gradually decreases to $.25 per ticket as more tickets are ordered.

4. Customers are instructed on page one that if they wish to play the Florida lottery they must choose six numbers from one to 49 for each ticket ordered and send Respondent cash or a money order. As an additional incentive to place an order, Respondent also offers the "FLP Secret Weekly Number Game," which is explained at the bottom of the order form. If the customer guesses the correct weekly number, which is a number from one to 49, he wins five "free" lottery tickets with no service charge. Immediately under the box in which the customer guesses the secret number, Respondent thanks the customer for his order. There is no indication that a customer need not place an order to play the FLP secret number game. On the contrary, an ordinary reader would get the impression that it is necessary to place an order and remit money before the latter game may be played.

5. Respondent's enterprise constitutes a lottery because it contains the elements of prize, consideration, and chance.

CONCLUSIONS OF LAW

1. The primary issue for consideration is whether Respondent is conducting a lottery within the meaning of 39 U.S.C. § 3005, which provides, in part, for the issuance of orders in the following circumstances:

(a) Upon evidence satisfactory to the Postal Service that any person is engaged in conducting . . . a lottery, gift enterprise, or scheme for the distribution of money or of real or personal property, by lottery, chance, or drawing of any kind. . . .

2. The necessary elements of a "lottery" are the furnishing of consideration, the offering of a prize, and the distribution of the prize by chance. Brooklyn Daily Eagle v. Voorhier, 181 F. 579, 581 (1910); Tenpen Sales Corporation, P.O.D. Docket No. 2/35 (DD, May 10, 1961); Paul W. Schuette, P.S. Docket No. 29/117 (P.S.D. March 16, 1989).

3. Respondent argues that he was not conducting a lottery in the ordinary sense of the term since he was merely acting as an agent who purchased lottery tickets from the state on behalf of his customers. However, numerous variations of schemes have been held to be lotteries under § 3005. The determining factor is whether the scheme contains the elements of prize, consideration, and chance. Id. Those elements are present here: (1) In return for consideration in the form of "service charges," (2) Respondent provided customers with Florida lottery tickets constituting a chance to win a prize, and (3) the prizes were distributed based upon chance. The fact that the prize was distributed by the state lottery rather than by Respondent directly is irrelevant. A similar scheme was held to constitute a lottery within the meaning of § 3005 in Universal Life Church, Inc., P.S. Docket No. 7/62 (P.S.D. February 14, 1980, aff'g I.D., August 31, 1979). n1

n1 The conclusion that Respondent's "piggybacking" on a state lottery is violative of § 3005 is also consistent with the legislative history of the amendment for state lottery exceptions in § 3005(d). Congress took care to avoid "any change in the law which would have the effect of opening up the channels of commerce to individuals who would seize upon the existence of a State authorized lottery to 'commercialize the process.'" H. Rep. No. 1517, 93rd Cong., 2d Sess., reprinted in 1974 U. S. Code Cong. & Ad. News 7011.

4. Respondent also appears to be arguing that the opportunity to win a prize was based upon skill or effort by the ticket purchasers since they had to guess the correct numbers. A lottery will be found even in cases where some skill is exercised by the participants if chance is the dominant factor determining the distribution of the prizes. Public Clearing House v. Coyne, 194 U.S. 497 (1904); Cf. Nat. Football League v. Governor of State of Del., 435 F. Supp. 1372 (1977); Collegedale Diversified Enterprises, Inc., P.S. Docket No. 14/29 (P.S.D. Oct. 25, 1983). In the instant case, even if it is assumed for the sake of argument that some skill or effort was helpful in guessing the correct numbers, it is obvious that chance was the dominant factor in the distribution of the prizes.

5. Respondent also makes various other arguments which have no merit. For example, the fact that Respondent did not make a profit, that he operated on a small scale, made timely deliveries, and charged a reasonable price does not alter the conclusion that a lottery was conducted in violation of § 3005.

6. Complainant contends that the Respondent also conducted a lottery by operating the FLP Secret Weekly Number Game. Respondent argues that the latter game lacked the element of consideration since the chance to win five lottery tickets was "free." Whether consideration is required is determined by the impression made upon the ordinary reader of the solicitation. American Testing Institute, P.S. Docket No. 14/114 (P.S.D. July 6, 1983); United States Testing Authority, P.S. Docket No. 14/77 (I.D. Dec. 23, 1982). As set forth in the findings of fact, it is concluded that the ordinary reader of Respondent's solicitation would assume that it was necessary to place an order for lottery tickets and pay the service charge before he would be eligible to play the FLP Secret Weekly Number Game. The element of consideration is present if a purchaser receives merchandise (such as the lottery tickets which were purchased herein) in addition to his chance to receive a prize (five "free" lottery tickets). Horner v. United States, 147 U.S. 449 (1892); Tenpen Sales Corporation, supra. Accordingly, this aspect of Respondent's operation also contained the elements of prize, consideration, and chance, and constituted a lottery under § 3005.

7. Respondent alleges that he discontinued his business in July of 1989, which was before the Complaint was filed. However, voluntary cessation of a scheme does not deprive the Administrative Law Judge of power to hear and determine the case, i.e., does not make the case moot. Such a result would leave the Respondent "free to return to his old ways." United States v. W.T. Grant, Co., 345 U.S. 629, 632 (1953).

8. Respondent also contends that he has been selectively discriminated against by the Postal Service. However, the fact that others are conducting similar activities is not a defense in a § 3005 proceeding. The agency has discretion in deciding whether to initiate proceedings and is not required to take action against all violators. Unimax, Inc., P.S. Docket No. 28/77 (P.S.D. March 3, 1989) and cases cited therein.

9. It is concluded that Respondent conducted a lottery or scheme for the distribution of money or property by chance in violation of 39 U.S.C. § 3005. For all of the reasons set forth above, Complainant's Motion for Judgment on the Pleadings is granted and Respondent's Motion to Dismiss is denied.

10. The attached mail stop order and Cease and Desist Order should be issued.