In the Matter of the Complaint Against The Respondent:

CANADIAN EXPRESS SERVICES,
P. O. Box 6576, Station A,
Toronto, Canada M5W 1X4
and
C.E.C., P. O. Box 6002 Stn. A,
at
Toronto, Canada M5W 1P4

P.S. Docket No. 28/149

Cohen, James A., Judicial Officer

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

APPEARANCE FOR RESPONDENTS: Elizabeth St. Clair, Esq.,
Rabinowitz, Boudin, Standard, Krinsky & Lieberman, P.C.,
740 Broadway at Astor Place, New York, NY 10003-9518

POSTAL SERVICE DECISION ON MOTION FOR RECONSIDERATION

Respondents have filed a Motion for Reconsideration of the Postal Service Decision which made Tentative Decision and Order No. 87-122 the final decision and order of the Postal Service. Respondents also request that they be permitted to supplement the record in connection with their Motion for Reconsideration. Complainant opposes Respondents' Motion for Reconsideration and their request to supplement the record. For the reasons set forth below, Respondents' Motion and request are denied.

I. Request to Supplement the Record

In support of their request for reconsideration, Respondents have submitted for evidentiary consideration a Declaration of Professor Herman B. Leonard and a portion of the transcript of Professor Leonard's testimony in P.S. Docket No. 28/52. Respondents contend that the record in this proceeding should be reopened because they were previously given an insufficient opportunity to present evidence in opposition to the issuance of the final order. Complainant opposes the admission of these documents into evidence on the grounds that they are irrelevant and that their submission is untimely. Complainant also argues that Respondents have been given ample opportunity to develop the record.

While the receipt of new evidence is within the discretion of the presiding judge, a record will not generally be reopened and new evidence received on reconsideration unless it has been shown that the evidence is likely to affect the outcome of the proceeding, that it was not reasonably possible to present such evidence initially or that the refusal to receive such evidence would result in a miscarriage of justice. See Joel Robinson a/b/a National Fuelsaver Corp., P.S. Docket No. 10/1 (P.S.D. Aug. 13, 1981); Midwest Health Research, P.S. Docket No. 6/80 (P.S.D. Nov. 21, 1978). Respondents in the present proceeding were given ample opportunity to develop the record and have failed to show why the evidence they now attempt to introduce could not have been introduced prior to the issuance of the Postal Service Decision. Moreover, even if considered, the declaration submitted by Respondents on reconsideration would not serve as a basis for altering the Postal Service Decision. Accordingly, Respondents' request to supplement the record is denied and arguments based on the supplementary documents will not be considered.

II. Motion for Reconsideration

In the Postal Service Decision, it was concluded that the arguments made by Respondents in their Motion to Dismiss the Complaint were without merit. On reconsideration, Respondents contend that three of their arguments were erroneously rejected. Each of Respondents' arguments on reconsideration has been considered and is addressed below. None have been found to have merit.

A. Due Process

Respondents first contend that the Postal Service Decision erred in concluding that Respondents, because of their status as nonresident aliens, are not entitled to due process of law. Respondents argue that they are entitled to the same due process protections as American citizens because: (1) they have a liberty and property interest in the use of the United States mail as well as a property interest in the conduct of their business; and (2) they are defending an action in an American tribunal. Complainant contends that Respondents have been accorded sufficient due process. Contrary to Respondents' contention, the Postal Service Decision did not hold that nonresident aliens are not entitled to due process of law. Rather, it determined that Respondents had been accorded due process under the Rules of Practice which require a prima facie showing in order for Respondents' mail to be detained and provide Respondents with notice of the initiation of the proceeding, an opportunity to present a defense, an opportunity to survey detained mail, and the right to a hearing on a showing of good cause. See P.S.D. pp. 8-9 citing 39 C.F.R. § 952.7(b).

Respondents' contention that they are entitled to the same rights as American citizens was addressed and rejected in the Postal Service Decision. Respondents have failed to make a showing on reconsideration that the holding in the Postal Service Decision is in error. In their Motion for Reconsideration, as in their Motion to Dismiss the Complaint, Respondents are unable to substantiate their assertion that nonresident aliens have a constitutionally protected liberty or property interest in the use of the United States mail. The cases cited by Respondents are distinguishable because they involve resident aliens or nonresident aliens with property in the United States. Although Respondents claim they have a property interest in the conduct of their business, unlike the cases on which they rely they do not assert that they have assets in the United States or that they have any tangible connection with the United States, other than the use of the mails, that would entitle them to the full panopoly of constitutional rights enjoyed by citizens of this country.n1 See P.S.D. at pp. 7-8.

n1 In support of their position that nonresident aliens with property interests in the United States are entitled to the same due process rights as American citizens, Respondents cite Sardino v. Federal Reserve Bank of New York, 361 F.2d 106 (2d Cir.), cert. denied, 385 U.S. 898 (1966). However, the property interests at issue in Sardino differ from the property interests Respondents allege in the present proceeding. In Sardino, the nonresident alien plaintiff owned a res (a bank account) in the United States which was the subject of that proceeding.

Respondents' argument on reconsideration that they are entitled to the same rights as American citizens because they are being forced to defend themselves in an American tribunal is also without merit. The principal case cited by Respondents to substantiate this position, United States v. Toscanino, 500 F.2d 267 (2d Cir. 1974), involves a criminal prosecution based on events which can in no way be considered analogous to the events giving rise to this administrative proceeding. Moreover, the due process demands of a criminal trial differ significantly from those applicable to an administrative proceeding. See United States v. Raddatz, 447 U.S. 667, 680 (1980). Accordingly, the holding in the Postal Service Decision that Respondents have been afforded substantial due process protection under the procedures provided in 39 C.F.R. § 952.7(b) is affirmed.

B. Conduct of a Lottery

Respondents next argue that the Postal Service Decision erred in holding that they are engaged in conducting a lottery within the meaning of 39 U.S.C. § 3005. According to Respondents, their activities do not involve the lottery elements of chance, prize and consideration, but rather constitute what they term as accessorial or derivative conduct which is not prohibited by $S3005. Respondents also argue that the holding in Universal Life Church, Inc., P.S. Docket No. 7/62 (P.S.D. Feb. 14, 1980, aff'g I.D. Aug. 31, 1979), has no precedential value and, in the alternative that their activities differ from the activities found to be a lottery in that case. Lastly, Respondents contend that the ordinary reader test should be applied to determine whether their solicitations convey the impression that they are conducting a lottery.

Complainant argues that the holding in Universal Life Church has precedential value and is applicable to this proceeding. Complainant also argues that the "ordinary reader" standard set forth in Donaldson Read v. Magazine, Inc., 333 U.S. 178 (1947), is inapplicable to a lottery proceeding.

Respondents' contention that their activities as purchasing and pooling agent do not contain the three elements of a lottery is a reiteration of the argument previously made in their Motion to Dismiss the Complaint. This argument was rejected in the Postal Service Decision, and it is rejected again for the reasons stated in that decision. See P.S.D. at pp. 4-5.

Respondents' argument that 39 U.S.C. § 3005 does not prohibit accessorial conduct is also without merit. In support of this argument, Respondents compare the language of § 3005 to the language of several criminal statutes in which accessorial conduct is specifically prohibited and conclude that when the drafters of legislation intend to prohibit accessorial conduct they do so through explicit language. Respondents' conclusion is unconvincing, however, since criminal statutes are more strictly construed than civil statutes n2 and the interpretation Respondents advocate would render § 3005 almost totally ineffective in dealing with foreign lotteries. Such a result could not have been intended by the drafters of the statute.

n2 Clark v. Universal Builders, Inc., 501 F.2d 324, 333 (7th Cir. 1974); cert. denied, 419 U.S. 1070 (1974); United States v. Sixty (60) Acres in Etowah County, Ala., 727 F. Supp. 1414, 1419, dismissed on other grounds, 736 F. Supp. 1579 (N.D. Ala. 1990).

Respondents' argument that Universal Life Church should have no precedential value is also rejected. Although the arguments made in the present case were not made in Universal Life Church, the promotions were sufficiently similar so that it was proper to rely on the holding in that case in arriving at the determination that Respondents in this case are engaged in the conduct of a lottery. However, assuming that Universal Life Church has no precedential value and that the present proceeding is one of first impression, the conclusion reached in the Postal Service Decision would remain the same.

Respondents' argument that their agency role differs from the conduct of the Respondent in Universal Life Church is equally unconvincing. Respondents attempt to distinguish the scheme in Universal Life Church on the grounds that Respondent Universal Life Church purchased lottery tickets and resold them to purchasers, whereas Respondents in the present proceeding act as agents for purchasers and never acquire an ownership interest in the lottery tickets. A careful reading of the Universal Life Church decisions, however, does not support Respondents' interpretation. The Initial Decision states that the Church "invites recipients to purchase lottery tickets or shares in lottery pools from various state and foreign lotteries." Universal Life Church, P.S. Docket No. 7/62 at p. 4 (I.D. Aug. 31, 1979). Nothing in either the Initial or Postal Service Decision in Universal Life Church distinguishes the Churches' interest from the interest of Respondents in the promotion which is the subject of this proceeding.

Moreover, even if the agency roles in the two cases were distinguishable, these distinctions would not be legally meaningful. Under the plain meaning of 39 U.S.C. § 3005, an agent who distributes solicitations through the mail inviting individuals to purchase lottery tickets or shares in a lottery pool is engaged in the conduct of a lottery in violation of the statute. The three elements of a lottery are present in the agent's conduct regardless of whether the agent acquires an ownership interest in the tickets before selling them to the purchasers. As stated previously, a narrower interpretation of $S3005 would render the statute meaningless.

Respondents argue that it is necessary to interpret their solicitations under the "ordinary reader" standard to determine whether they are conducting a lottery. While lottery solicitations are interpreted in accordance with the impression they would convey to the "ordinary reader", see American Testing Institute v. United States Postal Service, 579 F. Supp. 1345 (D.D.C. 1984), the interpretation of Respondents' solicitation was not previously contested. However, Respondents' solicitation considered in its entirely would be understood by ordinary readers to solicit remittances for the purchase of Canadian lottery tickets and shares in a lottery pool. As previously stated, Respondents' solicitation of remittances for these purposes constitutes the conduct of a scheme for the distribution of money by lottery, chance or drawing of any kind in violation of 39 U.S.C. § 3005. Accordingly, the holding of the Postal Service Decision that Respondents are conducting a lottery is affirmed.

C. Exemption from 39 U.S.C. § 3005 Respondents argue on reconsideration that the Postal Service Decision erred in holding that 18 U.S.C. § 1307 does not authorize the solicitation of remittances through the United States mail in connection with schemes involving foreign lotteries. Respondents contend that because Postal Service advisory opinions have interpreted § 1307(b)(1) as authorizing an individual to send remittances through the mail in conjunction with a state lottery, $S1307(b)(2), a parallel provision dealing with foreign lotteries, similarly permits individuals to mail entries to foreign lotteries. Respondents also argue that because their activity is allegedly exempt under § 1307 from the coverage of 39 U.S.C. $S3005, their solicitations constitute protected commercial speech under the First Amendment.

Contrary to Respondents' assertion, the advisory opinions cited by Respondents do not interpret 18 U.S.C. § 1307(b)(1) as permitting the solicitation of remittances for lotteries to an addressee outside the jurisdiction of the entity conducting the lottery. These opinions do no more than quote the language of the statute which permits the mailing of "equipment, tickets, or material." Since Respondents have failed to make a showing that $S1307(b)(1) permits remittances to be sent through the mail for the out-of-state purchase of lottery tickets, their argument that $S1307(b)(2) should be interpreted to permit remittances to be sent through the mail for the purchase of foreign lottery tickets is rejected. Moreover, the legislative history of § 1307(b)(2) clearly states that this provision was enacted, not for the purpose of permitting prospective participants in a foreign lottery to send remittances through the mail, but rather to allow American manufacturers and vendors of foreign tickets or other lottery paraphernalia to ship their products to foreign purchasers. H.R. Rep. No. 96-45, 96th Cong., 1st Sess. 2, reprinted in 1979 U.S. Code Cong. & Ad. News 1645-46. Accordingly, the holding in the Postal Service Decision that $S1307 does not authorize the solicitation of money through the United States mail in connection with schemes involving foreign lotteries is affirmed.

Since Respondents' promotion is not exempt under § 1307 from the coverage of 39 U.S.C. § 3005, their argument that their solicitations are protected commercial speech because of such exemption is also without merit. Accordingly, the holding in the Postal Service Decision that Respondents' mailings are not protected commercial speech is likewise affirmed.

Conclusion

Upon consideration of all of Respondents' arguments in support of their Motion for Reconsideration, it is concluded that no error of fact or law has been shown. Accordingly, the Postal Service Decision is affirmed and Respondents' Motion for Reconsideration is denied.