In the Matter of the Complaint                                 )
Against                                                                   )
                                                                               )
GREAT AMERICAN GIVEAWAY, et al.                   )
8180 Country Club Place                                        )
                                                                               )
at                                                                            )
                                                                               )
Indianapolis, IN 46214-2328, etc.                           ) P. S. Docket No. 36/102

APPEARANCES FOR COMPLAINANT:                    Wendy A. Hocking, Esq.
Thomas P. Kuczwara, Esq.
G. Scott Morrell, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1144

APPEARANCE FOR RESPONDENTS:                       Frank J. Shannon, III, Esq.
422 Candler Building
127 Peachtree Street, N.E.
Atlanta, GA 30303-1810

POSTAL SERVICE DECISION

Respondents have filed an appeal from an Initial Decision of an Administrative Law Judge in which it was concluded that Respondents are engaged in a lottery enterprise in violation of 39 U.S.C. § 3005. Complainant opposes Respondents' appeal.

Background

The General Counsel of the United States Postal Service (Complainant) initiated this proceeding by filing a Complaint, subsequently amended, alleging that Respondents are engaged in conducting a lottery or scheme for the distribution of money or property by chance in violation of 39 U.S.C. § 3005.^1/ Respondents filed an answer denying the allegations of the Complaint.^2/

Following a hearing at which the parties presented witness testimony and documentary evidence, the Administrative Law Judge issued an Initial Decision in which he concluded that Respondents are conducting a lottery or scheme for the distribution of property by chance in violation of 39 U.S.C. § 3005 (I.D., Conclusions of Law (COL) ¶ 16). Respondents have filed a timely appeal in which they take issue with certain procedural determinations of the Administrative Law Judge and his findings and conclusions that they are engaged in the conduct of a lottery in violation of 39 U.S.C. § 3005. Respondents' contentions on appeal are considered hereafter.

Exceptions and Discussion

In their appeal, Respondents include a "Statement of Facts" which is similar to their proposed findings of fact presented to the Administrative Law Judge and subsequently adopted or rejected in the Initial Decision (I.D., p. 8). Respondents' "Statement of Facts" does not identify any specific exceptions to the findings of fact nor show that the Administrative Law Judge erred in making those findings. The findings of the Administrative Law Judge have been reviewed and are supported by the record. To the extent Respondents are taking exception to those findings, Respondents' exceptions are denied. See Finderhood, Inc., P.S. Docket No. 34/102 at 4 (P.S.D. Mar. 20, 1992), aff'd, (P.S.D. July 24, 1992); Northeast Enterprises, P.S. Docket No. 7/4 at 3 (P.S.D. April 13, 1979).

I. Lottery Promotion

Respondents' primary contention on appeal is that the Administrative Law Judge erred in concluding that their promotion constitutes a lottery in violation of 39 U.S.C. § 3005. While Respondents concede that the elements of a lottery are prize, chance and consideration, they contend Complainant has failed to sustain its burden of showing their promotion contains the elements of chance and consideration.^3/ According to Respondents, the element of chance is not present in their promotion because recipients can contact Respondents to determine which prize they have been awarded. Respondents argue that no consideration is required to receive a prize since a free entry option is offered to recipients of their postcards. Respondents also contend that the expenditure of time and effort to call for and/or pickup the prize does not constitute consideration for participation in their promotion.

Respondents have not established on appeal that the Administrative Law Judge's decision on the lottery issue is in error or that any other basis exists for reversing the Initial Decision. Rather, the Administrative Law Judge's findings and conclusions that the elements of prize, chance and consideration are present in Respondents' promotion and that the promotion constitutes a lottery in violation of 39 U.S.C. § 3005 are supported by the record (I.D., Findings of Fact (FOF) ¶ ¶ 10-29 & COL ¶ ¶ 4-12).

As the Administrative Law Judge properly concluded, chance does exist in Respondents' promotion since verification is either impractical or recipients are unable to ascertain which prize they have won without first incurring some cost (I.D., COL ¶ 9). See Paul, Marbin & Co., Inc., Civ. A. No. 87-7394, slip op. at 5-6 (E.D. Pa. Dec. 10, 1987); Conte & Co., Inc., P.S. Docket No. 29/131 at 5 (P.S.D. Sept. 29, 1988). Certain of Respondents' postcards contain instructions for obtaining written verification of the prize to be awarded, but recipients are precluded from actually obtaining such verification since it is unlikely a response to a written inquiry would be received within the seven to ten day redemption period provided in the solicitation (I.D., FOF ¶ ¶ 12, 15, 19 & 26 & COL ¶ 9). See Paul, Marbin & Co., slip op. at 6. Although Respondents' other postcards advise recipients they can obtain verification by "communicating," "contacting," or "writing" "the organizer" (I.D., COL ¶ 9; Exhs. CX 1-2, 5-6, 34-35 & 39), these postcards either do not provide a telephone number for recipients to call, or the number provided requires out-of-the area recipients to bear the expense of the long distance charges (I.D., COL ¶ ¶ 9-10). Moreover, on all of the postcards, the notice that verification is available is on the address side of the postcard in extremely small print buried in other disclaimers which would be unlikely to be noticed by many ordinary readers^4/ (I.D., COL ¶ ¶ 9-10; Exhs. CX 1-6, 34-35 & 39). Under these circumstances, the Administrative Law Judge properly concluded that Respondents' promotion contains the lottery element of chance (I.D., COL ¶ 12).

Despite Respondents' claim that their free entry option eliminates the element of consideration, the Administrative Law Judge properly concluded that no free entry in fact exists and that the fee requested in Respondents' postcards and the expenditure of time and money to claim a prize in person constitutes consideration as that term is used in connection with a lottery enterprise (I.D., COL ¶ ¶ 4-8). Although Respondents' postcards state that a prize will be awarded at no charge, the requirement that a fee be paid for "promotional costs, plus packaging, shipping, delivery and handling" or similar costs, constitutes consideration for the chance to receive the prize (Exhs. CX 1-6, 34-35 & 39). Conte & Co., at 5 (P.S.D. Sept. 29, 1988).

In addition, recipients who do not send in the requested remittance and seek to claim the prize in person are prevented from picking up their prize since Respondents' keep the front door at their address locked or recipients are told the prize is not available at the time pickup is requested. Therefore, there is no free entry option for these recipients (I.D. COL ¶ ¶ 5-8). Moreover, even if the prize were available to those willing to pick it up in person, the expenditure of time and money to travel to Respondents' place of business to claim the prize constitutes consideration for the purposes of finding the existence of a lottery promotion. See N.E.S.T., Inc., P.S. Docket No. 14/89 at 9-12 (P.S.D. Aug. 7, 1984). Cf. F.C.C. v. American Broadcasting Co., Inc, 347 U.S. 284, 293-95 & n. 15 (1954); Brooklyn Daily Eagle v. Voorhies, 181 F. 579, 581 (C.C.E.D.N.Y. 1910).

Finally, contrary to Respondents' assertions, evidence that many recipients of their postcards have not filed complaints does not establish that they are not engaged in the conduct of a lottery. The absence of consumer complaints is not a defense to the allegation of a lottery under 39 U.S.C. § 3005. See Farley v. Heininger, 105 F.2d 79, 84 (D.C. Cir.), cert. denied, 308 U.S. 587 (1939); Ron Cooper, P.S. Docket No. 35/112 at 5 (P.S.D. Feb. 7, 1992). Further, even if as Respondents contend some recipients are able to verify the identity of their prize or obtain their prize without paying a fee, Respondents' promotion is still a lottery for those who cannot verify the prize awarded and/or are unable to obtain their prize without either paying a fee or picking up their prize in person (I.D., COL ¶ ¶ 5-7 & 11).

Under the circumstances presented, the Administrative Law Judge properly concluded that Respondents' promotion contains the lottery elements of prize, chance and consideration within the meaning of 39 U.S.C. § 3005. Accordingly, Respondents' exceptions to the Administrative Law Judge's conclusions relating to the existence of a lottery are denied.

II. Due Process

Respondents Pitcock-Wilcox (Pitcock), Adco Performance, Inc. (Adco) and Direct Response, Inc. (DRI) contend that they were denied due process of law because they were not properly served with any documents or pleadings prior to the hearing. As a result, these Respondents contend they were not given notice of the charges against them or a meaningful opportunity to prepare their defense.^5/

Specifically, Respondents Pitcock, DRI and Adco claim that service of the amended complaint on their attorney does not comply with the Rules of Practice, the Federal Rules of Civil Procedure, or the Due Process Clause of the United States Constitution. These Respondents further contend that they have never waived their right to proper service and that the post hearing addition of Respondents Pitcock and Adco as parties to this proceeding was not authorized by the Rules of Practice or in accordance with the requirements of due process.

Respondents DRI, Adco, and Pitcock have failed to establish that the Administrative Law Judge erred in concluding that they were properly made parties to this proceeding. The interrelationship of the parties, their appearance through common counsel, their presence at the hearing, and the opportunity afforded them to present additional evidence coupled with the flexibility provided in the Rules of Practice for amending the pleadings supports the Administrative Law Judge's conclusion that Respondents DRI, Adco and Pitcock were properly notified of the proceeding and provided a full opportunity to present their defenses.

The Rules of Practice provide for service of complaints to be made on a party, but permit service of subsequent pleadings, including amended complaints, to be made on a party's attorney of record. See 39 C.F.R. § § 952.8 & 952.16. Respondents Adco and DRI were served in accordance with the Rules of Practice when their president and agent, Respondent Wilcox, received personal service of the original complaint and later received service of the amended complaints through his attorney of record (I.D., FOF ¶ 8, pp. 4-8). Moreover, it was not unreasonable to assume that service of the Second Amended Complaint following the hearing could be made on Respondents Adco and Pitcock through their attorney of record since he represented all Respondents, including Respondent Pitcock who attended the hearing and sat at counsel's table (I.D., p. 7).

Respondents Pitcock, DRI and Adco also had actual notice of the charges against them when the trade names under which they operate, or the corporations which they own or in which they have a significant controlling interest,^6/ were originally included as parties to the proceeding (I.D., pp. 4-8, FOF ¶ ¶ 4-6 & 9). See Health Guard, P.S. Docket No. 6/114 at 2-3 (P.S.D. June 27, 1979); Vitahair, P.S. Docket No. 6/76 at 2-3 (P.S.D. Jan. 16, 1979), aff'd, (P.S.D. Jan. 26, 1979), aff'd, Diet Lake, Inc. v. U.S.P.S., Case No. 78-6436-Civ-JE (S.D. Fla. May 3, 1979); The Doctor's Diet Plan, P.S. Docket No. 6/77 at 15-16 (P.S.D. April 18, 1979), aff'd, Diet Lake, Inc., v. U.S.P.S., Case No. 78-6417-Civ-JE (S.D. Fla. May 3, 1979), aff'd, Docket No. 79-2563 (5th Cir. July 18, 1980). Further, the interests of Respondents Adco, Pitcock and DRI are identical to those of the other Respondents, and after discovery of the parties relationship and common interests, those parties were properly joined so that common interests of all parties could be considered in one proceeding.^7/ See Desert Empire Bank v. Insurance Co.. of North Am., 623 F.2d 1371, 1375 (9th Cir. 1980); Lockett v. General Finance Loan Co., 623 F.2d 1128, 1131-32 (5th Cir. 1980); Staren v. American Nat'l Bank & Trust Co., 529 F.2d 1257, 1263 (7th Cir. 1976). Under such circumstances, Respondents DRI, Adco and Pitcock knew or should have known of the charges being asserted against them either individually, in their corporate capacities or through the trade styles they were using and therefore, they were not prejudiced or denied due process by later being named as parties to the proceeding and receiving service through their attorney. See McCurry v. Allen, 688 F.2d 581, 585 (8th Cir. 1982); Lockett, 623 F.2d at 1131; Staren, 529 F.2d at 1263.

Moreover, Respondents DRI, Adco and Pitcock were offered an opportunity to request a supplementary hearing, object to testimony or documents previously introduced into evidence, and to recall and cross-examine witnesses (I.D., pp. 3-8). Since these Respondents elected not to request a supplemental hearing or to otherwise take advantage of the procedures made available to them, they may not now assert that they were denied due process. Cf. Morgan v. United States, 304 U.S. 1, 18-19 (1938); Harlan Bell Coal Co. v. Lemar, 904 F.2d 1042, 1048-50 (6th Cir. 1990); Ralpho v. Bell, 569 F.2d 607, 628-29 (D.C. Cir. 1977); Mark Hunter, P.S. Docket No. 5/83 at 3-4 (P.S.D. Dec. 10, 1976).

Finally, Respondents Pitcock, Adco and DRI would be considered to be either "officers, agents, employees, representatives," or "in privity with" the other named Respondents, and having had actual notice of the cease and desist order, they would be covered by its terms. Thus, even if these Respondents had not been made parties to the proceeding, they would have been prohibited from conducting any lottery for the distribution of money or property by chance or drawing of any kind in which any use of the United States mail is involved or contemplated (see attached cease and desist order).

Conclusion

On consideration of the entire record and Respondents' exceptions to the Initial Decision, it is concluded that Respondents are engaged in conducting a lottery for the distribution of property by chance in violation of 39 U.S.C. § 3005.

Accordingly, Respondents' appeal is denied and the Orders authorized by 39 U.S.C. § 3005 are hereby issued with this decision.

James A. Cohen
Judicial Officer

1/ The promotion which is the subject of this proceeding consists of unsolicited postcards notifying recipients they have been selected to receive one of several prizes and requesting the payment of a fee to cover promotional costs and packaging, shipping, delivery and handling charges (See Exhibits (Exhs.) CX 1-6, 18, 20A & B, 34-35 & 39).

2/ Although Respondents did not file an answer to the Second Amended Complaint, they nevertheless were deemed to have denied its allegations (I.D., p. 3; Order dated October 25, 1990).

3/ Respondents do not contest the Administrative Law Judge's finding that their promotion offers a prize to recipients of their promotional materials (I.D., COL ¶ ¶ 3 & 12).

4/ Contrary to Respondents' contentions on appeal, the standards for interpreting advertisements in false representation cases are equally applicable to solicitations for lottery promotions. Cf. Paul, Marbin & Co., Inc., P.S. Docket No. 28/190 at 12-14 (P.S.D. Oct. 20, 1989); N.E.S.T., Inc., P.S. Docket No. 14/89 at 7 (P.S.D. Aug. 7, 1984).

5/ DRI was named a Respondent in the Second Amended Complaint, and by post hearing Order dated October 5, 1990, granting Complainant's motion to conform this complaint with the evidence, Adco and Pitcock were named Respondents.

6/ Under 39 C.F.R. § 952.5, a person named in the Complaint "shall include any name, address, number or other designation under or by use of which the Respondent seeks remittance of money or property through the mail."

7/ Despite Respondents' contentions, the Administrative Law Judge did not improperly apply Eakins v. Reed, 701 F.2d 184 (4th Cir. 1983), in finding Respondents' interests were identical for the purpose of the post hearing addition (I.D., p. 7).

CEASE AND DESIST ORDER NO. CD-3584             February 5, 1993

RE: GREAT AMERICAN GIVEAWAY & ADCO INTERNATIONAL & FEDERATED
       PROMOTIONAL CENTER & ADCO PERFORMANCE, INC. & A.P.I & SCOTT D. WILCOX &
       LINDA S. PITCOCK-WILCOX & DIRECT RESPONSE, INC.

       P. S. Docket No. 36/102

1.Persons Covered:

This Order applies to Respondent Scott D. Wilcox, individually; Scott D. Wilcox doing business as Great American Giveaway, and ADCO International; Respondent Linda Wilcox individually; ADCO Performance, Inc., Direct Response, Inc., and Direct Response, Inc., doing business as Federated Promotional Center (hereinafter collectively known as Respondents), and any and all of Respondents' officers, agents, employees, representatives, successors in interest and all those in privity with any or all of the above-named Respondents, under any name or names, or through any corporate or other device (hereinafter referred to collectively as "Respondents").

2. Scope:

This Order is issued pursuant to 39 U.S.C. § 3005(a)(3), and extends to any solicitation in which any or all of those covered by paragraph one herein solicit money or property through the mail, under any name or names not limited to those listed in paragraph one.

3.Conduct Prohibited:

Those identified in paragraph one herein are ordered to cease and desist immediately from conducting any lottery for the distribution of money or property by chance or drawing of any kind in which any use of the Uniued States mail is involved or contemplated.

4. Definition:

As used in this Order, the term "any use of the United States mail" includes, but is not limited to, any of the following activities:

(a) mailing or causing to be mailed any postcard, letter, brochure, lottery ticket, number or advertising matter of any kind relating to any lottery or scheme for the distribution of money or property, by chance or drawing of any kind;

(b) seeking the direct remittance of money or property by mail for participation in any lottery or scheme for the distribution of money or property by lottery, chance or drawing of any kind;

(c) indirectly seeking the remittances of money or property by mail for participation in any lottery or scheme for the distribution of money or property by lottery, chance or drawing of any kind by participating in any arrangement involving the use of credit cards whereby a bank or other financial institution issuing the credit card mails bills to its cardholders and receives payment by mail.

James A. Cohen
Judicial Officer