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

The General Counsel of the United States Postal Service (Complainant) initiated this proceeding by filing a Complaint, which as amended (Complaint) alleged that Respondents Charles Smith, CS Enterprises, Inc., and AMCAN Enterprises, Inc.⁽¹⁾ (Respondents) are engaged in conducting a scheme or device for obtaining money or property through the mail by means of materially false representations in violation of 39 U.S.C. §3005. Specifically, Complainant alleged in Paragraphs 8 and 9 of the Complaint that Respondents distribute solicitations for listings in telephone yellow page directories which falsely represent:

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

(d) the area of distribution of Respondents' directory will encompass all telephone subscribers in the 'region';

(e) publication and distribution of Respondents' directory will take place in accordance with time frames customary to authorized 'yellow pages' industry publication and distribution standards;

(f) Respondents also provide a free white-page listing;

(g) a directory has a wide distribution that covers thousands of businesses;

(h) a directory has thousands of headings of products and services;

(i) Respondents' directory has been 'accepted' as having the most inclusive state-wide business to business directory;

(j) the cost of a listing in Respondents' directory is economical and significantly less than other directories;

(k) being included in Respondents' directory will expand the market potential of a business and be an asset to the growth of the business;

(l) being included in Respondents' directory will have an immediate impact on reaching businesses' customers and on potential customers;

(m) that Respondents' directory has a wide distribution that reaches the general public;

(n) Respondents' directory is distributed to government agencies, chambers of commerce, hotels, schools, and libraries;

(o) Respondents' directories reach over 500,000 businesses in 34 states.

Complainant further alleged in Paragraphs 10 and 11 of the Complaint that Respondents distribute solicitations in the guise of bills, invoices or statements of account due which are nonmailable under 39 U.S.C. §3001(d) and constitute a false representation scheme in violation of 39 U.S.C. §3005.

Respondents filed an Answer in which they denied making the representations alleged in the Complaint. Respondents further denied that their solicitations are nonmailable under 39 U.S.C. §3001(d) or that they constitute a false representation scheme under 39 U.S.C. §3005. As affirmative defenses, Respondents asserted that the Postal Service had no jurisdiction to initiate this proceeding and that the action is barred by the doctrine of collateral estoppel and/or res judicata.

At a hearing before an Administrative Law Judge, both parties presented witness testimony and introduced documentary evidence. Following the hearing and the parties' submission 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 Paragraphs 8(a), (c), (d), (f) - (h), & (j) - (n) of the Complaint and that those representations are materially false. However, the Administrative Law Judge also concluded that Respondents' promotional materials are not solicitations in the guise of bills, invoices or statements of account due in violation of 39 U.S.C. §3001(d); Respondents do not make the representation alleged in Paragraph 8(b) of the Complaint; and although Respondents make the representations alleged in Paragraphs 8(e), (i) & (o), Complainant did not prove that those representations are materially false. Based on his conclusions that Respondents make the materially false representations alleged in Paragraphs 8(a), (c), (d), (g) - (h), &

(j) - (n) of the Complaint, the Administrative Law Judge determined that Respondents are engaged in a scheme or device for obtaining money through the mail in violation of 39 U.S.C. §3005.

Respondents filed a timely appeal from the Administrative Law Judge's findings and conclusions. Complainant opposes the appeal and requests that the Initial Decision be affirmed.

In their appeal, Respondents include a "Statement of Facts" which is almost identical to their proposed findings of fact presented to the Administrative Law Judge and subsequently adopted or rejected in the Initial Decision (I.D. p.5). Respondents' "Statement of Facts" does not address any specific finding of fact, nor show that the Administrative Law Judge's findings are erroneous. The findings of the Administrative Law Judge have been reviewed and except for the findings regarding Paragraphs 8(f), (g), (k), & (l) of the Complaint are fully supported by the record. To the extent Respondents are taking exception to additional findings, Respondents' exceptions are denied.⁽²⁾

In addition to their "Statement of Facts", Respondents present a variety of arguments under a heading "Argument and Citation of Authority". The arguments presented, which are discussed below, do not establish that the Administrative Law Judge erred in concluding that Respondents are in violation of 39 U.S.C. §3005.

Respondents contend that the doctrine of collateral estoppel precludes Complainant from bringing this action or introducing evidence⁽³⁾ which could have been presented in a prior case⁽⁴⁾ involving the same parties and similar issues. According to Respondents, the doctrine of collateral estoppel should apply to preclude this proceeding since at the time this proceeding was initiated there had already been a final administrative decision on the merits involving the same parties and issues.⁽⁵⁾ In support of this position, Respondents argue that Complainant was aware of the additional addresses used by Respondents which are the subject of this proceeding, but failed to include those addresses in the previous case and therefore, cannot now bring a separate cause of action with respect to those addresses.

Complainant is not precluded from bringing this action against Respondents or from presenting evidence to show that Respondents make the representations alleged in the Complaint. Contrary to Respondents' assertion, at the time this proceeding was filed no final agency ruling had been issued in P.S. Docket No. 36/129. Rather, the proceeding was pending on appeal before the Judicial Officer who by statute and regulation is the Postal Service Official responsible for issuing the final agency decision. Moreover, the solicitation package involved in this proceeding differs from the promotional materials which were the subject of the prior proceeding and contains additional representations which may be considered in this case.⁽⁶⁾ Further, each new mailing seeking remittances to a different address is a new cause of action which may be separately litigated under 39 C.F.R. §952.5. Finally, even if this proceeding had not been initiated, Respondents would still be prohibited from making the representations alleged in Paragraphs 8(a), (c) & (d) of the Complaint, since those representations are identical to the representations found to be materially false in P.S. Docket No. 36/129 and prohibited by the terms of Cease and Desist Order No. CD 3712.⁽⁷⁾

Since the initiation of this proceeding was not precluded by the doctrine of collateral estoppel, Complainant was not precluded from presenting evidence regarding the representations alleged in this case. Therefore, the Administrative Law Judge did not err in rejecting Respondents' collateral estoppel arguments and their motion in limine.

Respondents argue that the walking fingers logo and the words "yellow pages" are generic terms which should not be considered in determining whether Respondents make the false representations alleged in the Complaint. While the walking fingers logo may be a commonly used generic symbol and the words "yellow pages" a commonly used generic term, they nevertheless may tend to mislead ordinary consumers when included in a solicitation for a listing in a yellow page telephone directory. Since the issue in a 39 U.S.C. §3005 proceeding is whether Respondents' solicitations make materially false representations, not whether Respondents have a right to use any particular words or logo,⁽⁸⁾ both the walking fingers logo and the words "yellow pages" may be considered in determining whether a statutory violation has occurred.⁽⁹⁾

Respondents contend that federal statutes require the appointment of a different judge to rule on their recusal motion,⁽¹⁰⁾ or alternatively, that the Administrative Law Judge should have voluntarily recused himself from participation in this proceeding. Respondents base their recusal motion on conclusory allegations of personal bias and prejudice evidenced solely by the Administrative Law Judge's unfavorable ruling in the previous case.

Respondents' allegations unsupported by any facts other than the prior ruling are insufficient to justify recusal.⁽¹¹⁾ Further, the appointment of another judge to review a recusal motion is required only if the affidavit supporting the motion would, if true, establish legally sufficient grounds to support recusal.⁽¹²⁾ Since Respondents' unsupported allegations of bias, do not establish legally sufficient grounds to support recusal of the presiding Administrative Law Judge, the appointment of a second judge to review the motion for recusal would not have been required even if the statutes cited by Respondents were controlling in this proceeding. Therefore, the Administrative Law Judge did not err in denying Respondents' motion.

Respondents contend that the Administrative Law Judge improperly considered the testimony of a Postal Inspector who investigated Respondents' promotion (Tr.159-334) and incorrectly admitted into evidence memoranda of interviews the Inspector prepared during the course of his investigation

(CX-18 - 25). Respondents argue that the memoranda, which are summaries of interviews with recipients of Respondents' promotional materials should have been excluded under the Federal Rules of Evidence and the Rules of Practice in Proceedings Relative to False Representations and Lottery Orders,⁽¹³⁾ since they are hearsay, constitute lay testimony on the efficacy of a product, and were prepared by the Inspector in preparation for litigation against Respondents, not as part of a general investigation. Respondents additionally argue that the testimony of the Postal Inspector lacked credibility because he was an interested party who in his dual role as Postal Service Inspector/Attorney, assisted Complainant in litigating the previous case against Respondents, helped draft the Complaint in this proceeding, and participated in a 39 U.S.C. §3007 action in Federal District Court against Respondents.

Under the Federal Rules of Evidence, hearsay evidence may be admissible if it possesses sufficient circumstantial guarantees of trustworthiness to warrant its admission. Fed. R. of Evid. 803(24)(C). The memoranda in issue in this proceeding were prepared by the Postal Inspector in his capacity as a public official while conducting an investigation into Respondents' promotion and contain statements made by consumers who received Respondents' solicitations (CX-18 - 25).⁽¹⁴⁾ Despite Respondents' contention, nothing in the record establishes that the Inspector's knowledge of the impending filing of a Complaint and subsequent hearing affected his objectivity or resulted in unreliable or biased interviews with these consumers. Moreover, the consumers reviewed and verified the accuracy of the information contained in the memoranda (CX-22(a), 23(a), 24(a), 25; Tr. 202-03, 225, 242-43, 258-59, 264, 273-74, 276-78), which is consistent with the testimony presented at the hearing (Tr. 77-159) and not rebutted by any persuasive contrary evidence.⁽¹⁵⁾ Therefore, the memoranda possess sufficient circumstantial guarantees of trustworthiness to support their admission into evidence under Federal Rule 803(24)(C). Additionally, even if the memoranda would not have been admissible under the Federal Rules of Evidence, the Postal Service Rules of Practice, 39 C.F.R. §952.18(a), and court and agency precedent allow the Presiding Officer to relax the Federal Rules as he deems proper to insure a fair hearing. As the purpose of a §3005 proceeding is to protect the public, it would have been appropriate for the Presiding Officer to relax the rules and admit the memoranda into evidence even if he had found them inadmissible under the Federal Rules.⁽¹⁶⁾ Finally, contrary to Respondents' contention, the memoranda were not admitted for the purpose of establishing the efficacy of Respondents' product, but as additional support for the Administrative Law Judge's conclusion that Respondents' make the representations alleged in the Complaint. For these reasons, the Administrative Law Judge did not err in admitting the memoranda into evidence in this proceeding.

Respondents' contention that the Postal Inspector's involvement in previous proceedings involving Respondents required his disqualification as a witness is also not persuasive. Nothing in the record supports Respondents' allegations that the Inspector failed to act independently and impartially in conducting his investigation, that his testimony was not credible, or that the Administrative Law Judge's reliance on his testimony was otherwise improper.⁽¹⁷⁾ Thus, it was not improper to allow the Postal Inspector to testify in this proceeding.

Respondents contend that any consumer confusion concerning the solicitations is caused by the failure of the recipients to carefully read the entire solicitation package (which included the solicitation, terms on the back of the solicitation, and the Advertiser's Information Bulletin) not by any misrepresen-tation by Respondents. In addition, Respondents argue that the ordinary reader standard should not apply since recipients of their solicitations are business people who are more sophisticated and knowledgeable than the ordinary reader.⁽¹⁸⁾

The ordinary reader is the class of readers to whom the solicitations are addressed.⁽¹⁹⁾ In this case, the recipients are owners or employees of both large and small businesses and include the gullible, naive and less critical readers, as well as the more sophisticated and knowledgeable businessperson. While some recipients of Respondents' solicitations may be able to ascertain the true nature of Respondents' identity and product, the evidence presented indicates that others were misled or confused by the language used by Respondents (CX-18 25; Tr. 94, 133).

The false representation statute is intended to protect all readers and its protection cannot be limited to sophisticated business recipients at the expense of the more naive or gullible business recipient.⁽²⁰⁾ Consumers, whether careful or careless, have no obligation to critically scrutinize the fine print contained on a solicitation. Rather, it is the net impression which the solicitation is likely to make that is determinative of whether a false representation has been made.⁽²¹⁾ The overall impression created by Respondents' solicitations is that they make most of the representations alleged in the Complaint. Even if Respondents' solicitations do not make any express misrepresentations, the words used, the organization, coloring, and format, are artfully designed to mislead the ordinary recipient.⁽²²⁾ Under such circumstances, the solicitations fall within the coverage of the Postal false representation statute.⁽²³⁾

Respondents claim that the word "region" as used in the Complaint means the multi-state area into which Postal field operations were previously divided. However, the Postal Service division of field operations has no relation to the charges brought in this proceeding. The entire context of the representations alleged in the Complaint is based on the telephone subscriber's or solicitation recipient's area or region.⁽²⁴⁾ Thus, there is no basis to conclude that the word "region" should be defined as a multi-state area based on an unrelated division of Postal operations.

Respondents' primary contention on appeal is that the record lacks substantial evidence⁽²⁵⁾ to support the Administrative Law Judge's conclusion that Respondents make the representations alleged in the Complaint. According to Respondents, the witness testimony which was presented was either not credible or did not support Complainant's position and therefore, the Administrative Law Judge improperly relied on Respondents' solicitations to conclude that the representations are in fact made.

Contrary to Respondents' assertion, the Administrative Law Judge and the Judicial Officer, as the finders-of-fact, may determine from the solicitations themselves whether the representations alleged in the Complaint are made, their effect on the ordinary mind, and their materiality.⁽²⁶⁾ Indeed, the solicitations themselves are the most persuasive evidence of whether the alleged representations are actually made.⁽²⁷⁾ Thus, the Administrative Law Judge did not err in relying on the solicitations introduced into evidence in determining whether Respondents make the representations alleged in the Complaint.

Although neither lay nor expert testimony is required to prove the existence of representations, both types of testimony were presented and properly considered in conjunction with Respondents' solicitations to determine whether Respondents make the representations alleged in the Complaint. Nothing in the evidentiary record or Respondents' brief on appeal establishes that the testimony lacked credibility or that the Administrative Law Judge's reliance on that testimony was otherwise improper.⁽²⁸⁾

The expert's lack of detailed knowledge about all facets of the yellow page directory industry does not detract from her testimony about aspects of the industry with which she was familiar. Moreover, the fact that one consumer witness was able to correctly determine the true nature of Respondents' solicitation⁽²⁹⁾ does not undermine his testimony as to the initial confusion generated by Respondents' solicitation. Further, the admission by a second consumer witness that he did not read the entire solicitation or take additional steps to ascertain Respondents' true identity and affiliation does not detract from his testimony that the solicitation was misleading. There is no burden on consumers to suspect the honesty of those with whom they transact business.⁽³⁰⁾ As previously stated, the protection afforded by §3005 is not limited to readers who critically scrutinize every word of a product solicitation.

Thus, the Administrative Law Judge did not err in relying on Respondents' solicitations and the testimony presented to support his conclusion that Respondents make the representations alleged in the Complaint. Accordingly, except as otherwise found in this decision, there is no merit to

Respondents' contentions that the Administrative Law Judge's findings are not supported by the evidence presented.

The representations alleged in Paragraphs 8(a) - (e) of the Complaint are identical to the representations alleged in Paragraphs 7(a) - (e) of the Complaint filed in P.S. Docket No. 36/129. Similarly, Respondents' arguments and exceptions regarding the Administrative Law Judge's findings and conclusions that Respondents make the representations alleged in 8(a), (c), (d), & (e)⁽³¹⁾ of the Complaint are the same as those Respondents presented in their appeal from the Initial Decision in P.S. Docket No. 36/129.⁽³²⁾

As in the previous case, the use of the walking fingers logo and the words, "yellow pages" printed on a yellow solicitation with a reference number, a reference to a white page listing, a request for corrections to the listing, and a reference to a forthcoming edition all contribute to the impression created in the mind of the ordinary recipient that Respondents' solicitations make the representations alleged in Paragraphs 8(a), (c), (d), & (e) of the Complaint. At the very least, Respondents' solicitations are ambiguous and could be understood by the ordinary reader to make these representations.⁽³³⁾

The ambiguity⁽³⁴⁾ created by Respondents' solicitations would most likely cause many recipients to believe the solicitations were advertisements to renew their listing in the local telephone company's yellow page directory, and that they had previously authorized a business listing in Respondents' directory (Complaint 8(a)). In addition to the walking fingers logo and the use of the words "yellow pages", the yellow paper format, the listed reference number, and the reference to what appears to be a current yellow page business listing which includes the recipient's business name, address, telephone number, and classification number, all contribute to the impression that "the addressee has previously authorized a business listing in Respondents' directory". The solicitation's reference to a "Forthcoming Edition" and the request that the recipient make any necessary changes to what appears to be a current listing, reinforces the impression that the addressee has an existing account with Respondents and is renewing a previously authorized yellow page telephone directory listing.

For these same reasons, ordinary readers would be likely to believe that Respondents "are the publishers of the telephone directory or 'yellow pages' customarily supplied to business telephone subscribers in the recipients' area," (Complaint 8(c)). Again, at the very least, the language, format, and yellow color of the solicitation, along with the words "yellow pages" and the walking fingers logo, create an uncertainty as to Respondents' identity and contribute to the overall impression that Respondents are the publishers of the directory customarily supplied to business and telephone subscribers in the recipient's area.⁽³⁵⁾

Since Respondents' solicitations create the impression that they are for the renewal of the listing the addressee has previously authorized in the telephone directory customarily supplied in the area, it follows that the ordinary reader would also believe that the area of distribution of the directory would encompass all telephone subscribers in the region (Complaint 8(d)). The ordinary recipient would also believe that because he was dealing with the publishers of the telephone directory customarily supplied in the area, the directory would be published and distributed within the "time frames customary to authorized 'yellow pages' industry publication and distribution standards" (Complaint 8(e)).⁽³⁶⁾ Accordingly, the Administrative Law Judge did not err in concluding that Respondents make the representations alleged in Paragraphs 8(a) - (e) of the Complaint.

Although Respondents contend that the representations alleged in the Complaint are not made in their solicitations, a review of their solicitations along with the flyers included in the solicitation packages establishes that Respondents do make the representations alleged in Paragraphs 8(g), (h) & (j) - (o) of the Complaint. The flyers specifically state that the directory is widely distributed, "covers thousands of businesses", and "will reach thousands of people each and every day" as alleged in Paragraph 8(g) of the Complaint.⁽³⁷⁾ The flyer also specifically states that Respondents' directory contains "over 4,000 headings of products and services" as alleged in Paragraph 8(h) of the Complaint.⁽³⁸⁾ The reference in the flyer to an "economical way to keep growing businesses growing", the statement that the directory is "economically priced - at pennies per day", and " . . . [will] reach thousands of people" coupled with the statement that "for significantly less money . . . [it will allow] you to reach more potential customers who are ready to buy" would lead the ordinary recipient of the solicitation and flyer to believe that "the cost of listing in Respondents' directory is economical and significantly less than other directories" as alleged in Paragraph 8(j) of the Complaint. Additionally, the representation alleged in Paragraph 8(k) of the Complaint⁽³⁹⁾ is made by the statements in bold print "Expand your market potential" and "keep growing businesses growing".

The flyer also states the directory will have an immediate impact "from your customers and others who are ready to buy" thereby making the representation alleged in Paragraph 8(l)⁽⁴⁰⁾ of the Complaint. The flyer further states that Respondents' directory has a wide distribution that "covers thousands of businesses, government agencies, chambers of commerce, hotels, schools, [and] libraries" as alleged in Complaint Paragraph 8(n).⁽⁴¹⁾ The representation alleged in Paragraph 8(m) of the Complaint⁽⁴²⁾ is made by the statement that the directory "will reach thousands of people each and every day" and also from the recipient's belief that Respondents' directory is the directory in which they currently have a yellow page advertisement which is distributed to all telephone subscribers in the area. Although Respondents contend that the representation alleged in Paragraph 8(o)⁽⁴³⁾ is not made, the flyer explicitly states that [Respondents'] "directories reach over 500,000 businesses in 34 states".

Accordingly, the Administrative Law Judge's conclusion that Respondents make the representations alleged in Paragraphs 8(g), (h) & (j) - (o) of the Complaint is fully supported by the language of Respondents' solicitation package. Respondents arguments to the contrary have no merit.

Respondents contend that the Administrative Law Judge incorrectly found that Respondents falsely represent that they provide a free white page listing as alleged in Paragraph 8(f) of the Complaint. According to Respondents, no evidence was presented to support the Administrative Law Judge's conclusion.

In Paragraph 8(f), Complainant alleges that Respondents falsely represent that they provide "a free white page listing." Complainant contends that the white page listing is not free because it is only given to a purchaser of a listing in Respondents' yellow page directory. Respondents' solicitations, however, explicitly state that the free white page listing "Will Be Included With Each Yellow Page Listing of ($98.00 or $118.00)." Respondents, therefore, do not represent that they provide a free white page listing, without a yellow page listing, as alleged by Complainant. Accordingly, Respondents' exception to the Administrative Law Judge's conclusion regarding the representation alleged in Paragraph 8(f) of the Complaint is sustained.

Respondents contend that the Administrative Law Judge erroneously relied on the solicitation package, without additional supporting evidence, to determine that the recipients would not notice or understand the disclaimers included in their promotional materials. Additionally, Respondents argue it was improper to rely on the language included in the flyer that the Administrative Law Judge admitted recipients might not read (I.D. FOF 33, 38, 39) to find that the alleged representations are made, but then refuse to find that the same or similar language would serve as an adequate disclaimer to the alleged representations.

The Administrative Law Judge, as the trier-of-fact, can rely on the words of a solicitation to determine the effect a disclaimer would have on ordinary readers.⁽⁴⁴⁾ Based on the Administrative Law Judge's review of the solicitations and the accompanying flyers, he properly determined that although the disclaimers might tend to distinguish Respondents' directory from a local telephone directory, many readers would not notice or appreciate the significance of the disclaimers (I.D., FOF 20). Respondents have not shown that the Administrative Law Judge's conclusion is erroneous.

While the Administrative Law Judge conceded that some of the language on which the representations are based might not be noticed by all recipients, he correctly found that a sufficient number of recipients would notice the language and be misled. Although it is equally true that the disclaimers might also be noticed by some recipients, others would still be misled by Respondents' solicitations.(45) Further, while some of the language the Administrative Law Judge relied on in determining that the alleged representations were made is similar to the disclaimers, other language on which he based his findings is printed in bold type, underlined, in capital letters, or emphasized in some other manner. On the other hand, the disclaimers that might tend to clarify the nature of Respondents' directory and its distribution is often in regular or smaller type, mixed in the middle or end of a paragraph or sentence, or on the back of the solicitations making it less likely to be noticed.⁽⁽⁴⁶⁾

Thus, it is not likely that the disclaimers would be noticed, or even if noticed, would detract from the ordinary recipients' overall impression that Respondents' solicitations make representations alleged in the Complaint. At best, the disclaimers merely confuse the ordinary recipient as to the true nature of Respondents' identity and product.⁽⁴⁷⁾ Therefore, the Administrative Law Judge did not err in concluding that the disclaimers are not sufficiently conspicuous to dispel the overall impression created by the solicitations.

Respondents contend that the Administrative Law Judge improperly determined the falsity of the representations based on the solicitations and flyers without additional supporting evidence. While the solicitations themselves may establish the falsity of the representations alleged in the Complaint,⁽⁴⁸⁾ contrary to Respondents' reading of the Initial Decision, the Administrative Law Judge based his determination of falsity on both the solicitations admitted into evidence and the witness testimony presented by both parties.

The record supports the Administrative Law Judge's conclusion that representations 8(a), (c), (d), (h), (j), (m) & (n) are false. The representation alleged in paragraph 8(a) of the Complaint, that "the addressee has previously authorized a business listing in Respondents' telephone directory", is false because many of the recipients had not previously authorized a listing in Respondents' directory (CX-22; Tr. 132-33). The disclaimer at the bottom of Respondents' solicitations stating that, "North American Directories is not affiliated with AT&T or any local telephone company", establishes the falsity of the representation that "Respondents are the publishers of the telephone directory or 'yellow pages' customarily supplied to telephone subscribers in the recipient's area" as alleged in Paragraph 8(c) of the Complaint. Respondent Smith testified that the directory was not distributed to all telephone subscribers or the general public (Tr. 371, 405), therefore, the representations that "the area of distribution of Respondents' directory will encompass all telephone subscribers in the region" and that "Respondents' directory has a wide distribution that reaches the general public" as alleged in Paragraphs 8(d) and (m) of the Complaint are false.

Respondent Smith also testified that each directory did not include over 4,000 headings (Tr. 381-82), therefore, the representation that "[Respondents'] directory has thousands of headings" as alleged in Paragraph 8(h) of the Complaint is false. Additionally, since a listing in Respondents' directory costs $98.00/$118.00 and a listing in the local telephone company yellow page directory is free (CX-26; Tr. 67, 89, 141), the representation that "the cost of listing in Respondents' directory is economical and significantly less than other directories" as alleged in Paragraph 8(j) of the Complaint is also false.

While conflicting testimony was presented with respect to the distribution of Respondents' directories, the Administrative Law Judge found that Complainant's evidence was credible and Respondents' was not. There is no basis in the record for rejecting the Administrative Law Judge's credibility determination or otherwise finding that Respondents' "directory was distributed to government agencies, chambers of commerce, hotels, schools, and libraries" as alleged in Paragraph 8(n) of the Complaint. Accordingly, this representation is also false.

The Administrative Law Judge determined that Respondents falsely represent that their directory has a wide distribution as alleged in Paragraph 8(g) of the Complaint. However, Respondent Smith testified that Respondents' have distributed over one million of their directories in 34 states (Tr. 372-73, 382-83) and Complainant presented no contradictory evidence or, indeed, any evidence which establishes that Respondents' directory is not widely distributed. Therefore, the Administrative Law Judge's finding with regard to the falsity of Paragraph 8(g) is reversed. Additionally, Complainant failed to present any persuasive evidence to establish that Respondents falsely represent that being included in Respondents' directory will expand the market potential of a business and be an asset to the growth of the business as alleged in Paragraph 8(k) of the Complaint. Complainant also failed to present evidence which would establish that Respondents falsely represent that being included in their directory will have an immediate impact on reaching existing and potential customers as alleged in Paragraph 8(l) of the Complaint. In the absence of evidence concerning the falsity of these representations no violation of 39 U.S.C. §3005 can be found with respect to these allegations. Accordingly, Respondents' exceptions to the Administrative Law Judge's findings of falsity with respect to the representations alleged in Paragraphs 8(g), (k) & (l) of the Complaint are sustained.

The false representations found to be made by Respondents (Complaint 8(a), (c), (d), (h), (j), (m) & (n)) either alone or together, are likely to induce a recipient to order a business listing in Respondents' yellow page directory.⁽⁴⁹⁾ Therefore, these representations are materially false in violation of 39 U.S.C. §3005(a).

After consideration of the entire record and the exceptions to the Initial Decision, it is concluded that Respondents make the representations alleged in Paragraphs 8(a), (c), (d), (h), (j), (m) & (n) of the Complaint and that those representations are materially false. Respondents do not make the representation alleged in Paragraph 8(f). Although Respondents make the representations alleged in Paragraphs 8(e), (g), (k), (l) & (o) of the Complaint, those representation have not been proven to be false.

Accordingly, Respondents appeal is sustained with respect to Complainant's allegations in Paragraphs 8(e), (f), (g), (k), (l) & (o) of the Complaint, but is otherwise denied. The Initial Decision is reversed to the extent indicated and otherwise affirmed. The Orders authorized by 39 U.S.C. §3005 are issued with this decision.

James A. Cohen
Judicial Officer

1. ¹The Complaint alleges that Respondents are doing business under the name North American Directories, The (state or region) Yellow Pages, and N.E. -U.S. Directories.

2. See Great American Giveaway, P.S. Docket No. 36/102 at 2-3 (P.S.D. Feb. 5, 1993); Finderhood, Inc., P.S. Docket No. 34/102 at 4 (P.S.D. March 20, 1992), aff'd, (July 24, 1992); Northeast Enterprises, P.S. Docket No. 7/4 at 3 (P.S.D. April 13, 1979).

3. Respondents filed a motion in limine with the Administrative Law Judge seeking to limit the evidence which could be introduced on the grounds that such evidence was precluded by the collateral estoppel doctrine. On appeal, Respondents claim the Administrative Law Judge erroneously denied their motion. Since Respondents' collateral estoppel contentions and their arguments pertaining to the motion are interrelated, they have been considered together on appeal.

4. Charles Smith, P.S. Docket No. 36/129 (P.S.D. Dec. 9, 1993).

5. Charles Smith, P.S. Docket No. 36/129 (I.D. Mar. 27, 1991).

6. See Montana v. United States, 440 U.S. 147, 159 (1979); Sea-Land Services, Inc., v. Gaudet, 414 U.S. 573, 593 (1974); Nutrition Headquarters, Inc., P.S. Docket No. 12/156 at 4-5 (P.S.D. Aug. 5, 1983).

7. See Charles Smith, P.S. Docket No. 36/129 (P.S.D. Dec. 9, 1993).

8. See Scott David Wilcox, P.S. Docket Nos. 18/147 & 22/111 at 4 (P.S.D. Aug. 31, 1989); Scott David Wilcox, P.S. Docket No. 18/147 at 8 (P.S.D. April 20, 1988); Telco Directories, Inc., P.S. Docket No. 22/111 at 9-10 (P.S.D. Feb. 25, 1987).

9. Charles Smith, P.S. Docket No. 36/129 at 9 (P.S.D. Dec. 9, 1993).

10. Respondents rely on 28 U.S.C. §§144 & 455, neither of which applies to the recusal of an Administrative Law Judge. Section 144 by its terms applies only to Federal District Court Judges, and case law has established that the standards of §455 are not applicable to Administrative Law Judges. Greenberg v. Board of Gov. of Federal Reserve System, 968 F.2d 164 (2nd Cir. 1992).

11. See United States v. Grinnell Corp., 384 U.S. 563, 583 (1966); United States v. Phillips, 664 F.2d 971, 1002-03 (5th Cir. 1981); NLRB v. Anthony Co., 557 F.2d 692, 695-96 (9th Cir. 1977); Barkan v. United States, 362 F.2d 158, 160 (7th Cir.), cert. denied, 385 U.S. 882 (1966); G.H.P. Laboratories, Inc., P.S. Docket No.10/149 at 21-22 (P.S.D. Nov. 30, 1981).

12. See United States v. Olander, 584 F.2d 876, 888 (9th Cir. 1978); United States v. Partin, 312 F. Supp. 1355, 1358-59 (E.D. La. 1970).

13. To support their position, Respondents cite 39 C.F.R §952.18(f) which prohibits lay testimony on the efficacy of any product; §952.18(g) which requires the in person testimony of witnesses whose signed statements are introduced into evidence; and Fed. R. of Evid. 803(8)(A), (B), & (C) which allow public reports as an exception to the hearsay rule.

14. The Administrative Law Judge admitted CX-22 & 22(a) into the record with the exception of the double hearsay statements contained therein (Tr. 254-56).

15. Respondents complain they had no opportunity to "attack" the trustworthiness of the memoranda, but the record indicates they had notice of the memoranda at least one month prior to the hearing (Tr. 28, 202-03).

16. See Richardson v. Perales, 402 U.S. 389, 400 (1971); Brousseau v. United States, 640 F.2d 1235, 1241-42 (Ct. Cl. 1981); Reil v. United States, 456 F.2d 777, 780 (Ct. Cl. 1972); Jacobowitz v. United States, 424 F.2d 555, 559 (Ct. Cl. 1970); Scott David Wilcox, P.S. Docket No. 18/147 at 5 (P.S.D. Oct. 27, 1988); Project Prayer, P.S. Docket No. 8/68 at 6 (P.S.D. May 29, 1981).

17. See Hanratty v. DOT, 819 F.2d 286, 288 (Fed. Cir. 1987); Carosella v. USPS, 816 F.2d 638, 641-42 (Fed. Cir. 1987); Sergio & Spiegel Television for Oncor, Inc., P.S. Docket No. 37/105 at 18 (P.S.D. March 12, 1993); Equisystems California, Inc., P.S. Docket No. 33/115 at 6 (P.S.D. July 10, 1991).

18. Respondents' reliance on United Commercial Insurance Services v. USPS, 650 F. Supp. 592 (D.D.C. 1986) to support their position is misplaced. That case was subsequently vacated by the court, United Commercial Insurance Services v. USPS, No. 87-5049 (D.C. Cir. filed Jan. 22, 1988) and is contrary to prior Postal Service and Court precedent holding that §3005 is intended to protect not only the sophisticated and wary, but also the gullible, naive and less critical reader. Fields v. Hannegan, 162 F.2d at 18; M.K.S. Enterprises, Inc. v. USPS, 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).

19. See The Washington Mint, Inc., P.S. Docket No. 30/42 at 11 (P.S.D. June 1, 1989); Health Care Products, Inc., P.S. Docket No. 28/90 at 17 (P.S.D. March 3, 1989); Scott David Wilcox, P.S. Docket No. 23/70 at 5 (P.S.D. June 29, 1987); International Trade Information, P.S. Docket No. 26/29 at 3 (P.S.D. Feb. 17, 1987); Telex Cable Service, Est., P.S. Docket No. 14/119 at 2 (P.S.D. Feb. 9, 1983); Thomas Laboratories, P.S. Docket No. 2/9 at 3 (P.S.D. Aug. 7, 1973).

20. See FTC v. Standard Education Society, 302 U.S. 112, 116 (1937); Fields v. Hannegan, 162 F.2d 17, 18 (D.C. Cir.), cert. denied, 333 U.S. 773 (1947); Gottlieb, 141 F. Supp. at 16.

21. See Donaldson v. Read Magazine, Inc., 333 U.S. 178, 185-89 (1948); Aronberg v. FTC, 132 F.2d 165, 167 (7th Cir. 1942); G.J. Howard Co. v. Cassidy, 162 F. Supp. 568, 572 (E.D.N.Y. 1958); Vibra Brush Corp. v. Schaffer, 152 F. Supp. 461, 468 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958); The National Gold Mint, P.S. Docket No. 22/165 at 16 (P.S.D. May 1, 1987); Mid-American Marketing, Inc., P.S. Docket No. 24/12 at 7 (P.S.D. Jan. 5, 1987), aff'd, (May 7, 1987); Richard W. Verret, P.S. Docket No. 20/18 at 4 (P.S.D. Dec. 31, 1986).

22. See Aronberg, 132 F.2d at 167; G.J. Howard Co., 162 F. Supp. at 572; The National Gold Mint, P.S. Docket No. 22/165 at 17 (P.S.D. May 1, 1987); IHS, P.S. Docket No. 22/155 at 26 (P.S.D. Sept. 22, 1986).

23. Id.

24. See Charles Smith, P.S. Docket No. 36/120 at 20 (P.S.D. Dec. 9, 1993).

25. While the substantial evidence test applies to court review of an administrative decision, the preponderance of the evidence standard applies in arriving at the administrative decision. See, e.g., A.C.L., P.S. Docket No. 36/90 at 12 (P.S.D. Dec. 28, 1990), aff'd, (May 15, 1991); Associated Telephone Directory Publishers, Inc., P.S. Docket No. 13/191 at 5 (P.S.D. Jan. 25, 1984), aff'd, (March 23, 1984); Athena Products, Ltd., P.S. Docket No. 12/136 at 10-11 (P.S.D. May 6, 1983); Telex twx Directory, P.S. Docket No. 13/6 at 5-7 (P.S.D. April 1, 1983).

26. This proposition is clearly supported by both Donaldson, 333 U.S. at 185-89, and Vibra Brush Corp., 152 F. Supp. at 468. See, e.g. A.C.L., P.S. Docket No. 36/90 at 12 (P.S.D. Dec. 28, 1990), aff'd, (May 15, 1991); National Scholastic Resources Admin., Inc., P.S. Docket No. 35/140 at 16 (P.S.D. Nov. 23, 1990); Heath Care Products, Inc., P.S. Docket No. 28/90 at 4-5 (P.S.D. June 27, 1990).

27. See, e.g. The Washington Mint Inc., P.S. Docket No. 30/42 at 7 (P.S.D. Nov. 27, 1992); Scott David Wilcox, P.S. Docket No. 18/147 at 6-7 (P.S.D. April 20, 1988); United States Testing Authority, P.S. Docket No. 14/114 at 15-16 (P.S.D. Oct. 2, 1985).

28. See Hanratty, 819 F.2d at 288; Carosella, 816 F.2d at 641; Sergio & Spiegel Television for Oncor, Inc., P.S. Docket No. 37/105 at 18 (P.S.D. March 12, 1993); Equisystems California, Inc., P.S. Docket No. 33/115 at 6 (P.S.D. July 10, 1991).

29. ²⁹In determining the effect of representations on ordinary readers, it is not necessary to find that all, or even a majority of readers would likely be deceived. It is sufficient to find that some ordinary readers, whether gullible or wary, would interpret the solicitation as making the alleged representation. See Oriental Nurseries, Inc., P.S. Docket No. 9/116 at 5 (P.S.D. May 19, 1981). See also Fields, 162 F.2d at 18; M.K.S. Enterprises, 459 F. Supp. at 1184; Gottlieb, 141 F. Supp. at 16.

30. Standard Education Society, 302 U.S. at 116.

31. Although the Administrative Law Judge found that the representation alleged in Paragraph 8(e) had not been proven false, Respondents appear to contend that the representation is not made in their solicitations.

32. Respondents' solicitations are identical in the two cases with the exception of the state or region name in the heading and a slicker or flyer titled "Advertiser's Information Bulletin" which was mailed with the solicitations involved in this proceeding.

33. Solicitations which are ambiguous or capable of more than one meaning are misleading if one of those meanings is false. Rhodes Pharmacal Co. Inc. v. FTC, 208 F.2d 382, 387 (7th Cir. 1953); Finderhood Inc., P.S. Docket No. 34/102 at 8-9 (P.S.D. March 20, 1992), aff'd, (July 24, 1992); The National Gold Mint, P.S. Docket No. 22/165 at 22 (P.S.D. May 1, 1987); Ralph J. Galliano, P.S. Docket No. 19/15 at 9 (P.S.D. May 2, 1985).

34. Since Respondents could easily have selected words that would not create these deceptive impressions, their failure to do so subjects them to the provisions of the Postal False Representation Statute, 39 U.S.C. §3005. See United States v. 95 Barrels of Vinegar, 265 U.S. 438, 443 (1924); Finderhood Inc., P.S. Docket No. 34/102 at 8 (P.S.D. March 20, 1992), aff'd, (July 24, 1992); Paul, Marbin & Co., Inc., P.S. Docket No. 28/190 at 13-14 (P.S.D. Oct. 20, 1989); Card Redemption Center, P.S. Docket No. 30/37 at 10 (P.S.D. July 27, 1989).

35. See Mid-American Marketing Inc., P.S. Docket No. 24/12 at 6-8 (P.S.D. Jan. 5, 1987), aff'd, (May 7, 1987); Scott David Wilcox, P.S. Docket Nos. 18/147 & 22/111 at 4-5 (P.S.D. Aug. 31, 1989); Telco Directories, Inc., P.S. Docket No. 22/111 at 9-10 (P.S.D. Feb. 25, 1987).

36. Reasonable beliefs that follow logically from express statements must also be considered in interpreting advertising claims. See Spiegel, Inc. v. FTC, 411 F.2d 481, 483 (7th Cir. 1969); N. Van Dyne Advertising Agency, Inc. v. USPS, 371 F. Supp. 1373, 1376 (S.D.N.Y. 1974); Baslee Products Corp. v. USPS, 356 F. Supp. 841, 846-47 (D.N.J. 1973); Vibra Brush, 152 F. Supp. at 465; Dennis Ward, P.S. Docket No. 37/118 at 6-7 (P.S.D. Oct. 16, 1991); American Advertising Corp., P.S. Docket No. 37/69 at 12-13 (P.S.D. Nov. 19, 1992); Associated Writers Guild of America, P.S. Docket No. 12/180 at 9 (P.S.D. June 6, 1990); Mid-American Marketing, Inc., P.S. Docket No. 24/12 at 9-10 (P.S.D. Jan. 5, 1987), aff'd, (May 7, 1987).

37. Complaint paragraph 8(g) alleges that Respondents falsely represent that "A directory has a wide distribution that covers thousands of businesses".

38. Complaint paragraph 8(h) alleges that Respondents falsely represent that "A directory has thousands of headings of products and services".

39. Complaint paragraph 8(k) alleges that Respondents falsely represent that "Being included in Respondents' directory will expand the market potential of a business and be an asset to the growth of the business".

40. Complaint paragraph 8(l) alleges that Respondents falsely represent that "Being included in Respondents' directory will have an immediate impact on reaching businesses' customers and on potential customers".

41. Complaint paragraph 8(n) alleges that Respondents falsely represent that "Respondents' directory is distributed to government agencies, chambers of commerce, hotels, schools, and libraries".

42. Complaint paragraph 8(m) alleges that Respondents falsely represent that "Respondents' directory has a wide distribution that reaches the general public".

43. Complaint paragraph 8(o) alleges that Respondents falsely represent that "Respondents' directories reach over 500,000 businesses in 34 states".

44. See Donaldson, 333 U.S. at 185-89; Vibra Brush, 152 F. Supp. at 465; New Generation, P.S. Docket No. 11/152 at 27 (P.S.D. May 13, 1983).

45. Under §3005 it is not necessary that all readers are deceived in order to find a violation of the statute. See DynaQuest Corp. et al. v. USPS, No. 92-5165, slip op. at 5 (D.C. Cir. Jan. 18, 1994). See also, ft. nt. 29 on page 18.

46. This is especially true of the disclaimers that appear on the back of the solicitation. The Administrative Law Judge properly found that most recipients would not read the fine print on the solicitation's back. On many of the solicitations the print on the back is in a light grey instead of black ink (See, e.g. Exh. R4d), and in at least one case is printed in pale grey ink on a white background (Exh. R4j) making it extremely difficult to read.

47. See National Scholastic Resources Admin., Inc., P.S. Docket No. 35/140 at 10-11 (P.S.D. Nov. 23, 1990); Leo Daboub, P.S. Docket No. 19/185 at 16 (P.S.D. July 10, 1986); New Generation, P.S. Docket No. 11/152 at 27-28 (P.S.D. May 13, 1983).

48. See DynaQuest Corp. et al. v. USPS, No. 92-5165, slip op. at 6-8 (D.C. Cir. Jan. 18, 1994).

49. See Chaachou v. American Central Insurance Co., 241 F.2d 889, 893 (5th Cir. 1957); Charles Smith, P.S. Docket 36/129 at 16 (P.S.D. Dec. 9, 1993); First National City Funding, Inc., P.S. Docket No. 17/61 at 34 (I.D. Dec. 9, 1983); Keystone Industries, et al., P.S. Docket Nos. 17/44-46 at 13 (I.D. Nov. 7, 1983).