P.S. Docket No. 37/69
June 28, 2002
In the Matter of the Complaint
Against
AMERICAN ADVERTISING CORPORATION, et al.
1717 No. Highland Avenue, Suite 405
at
Los Angeles, CA 90028-4499, etc.
P.S. Docket No. 37/69
APPEARANCE FOR COMPLAINANT:
Catherine A. Green, Esq.
United States Postal Service
Corporate Law
475 L’Enfant Plaza, SW, Room 6112
Washington, DC 20260-1135
APPEARANCE FOR RESPONDENT:
Norman Anthony King
90394012, N-200
P.O. Box 3001-0001
California City, CA 93504-3001
POSTAL SERVICE DECISION
Respondent Norman Anthony King has filed a Petition for an Order to Set-Aside, Vacate or Correct Administrative Decision and to Dismiss the Complaint, asserting that the United States Postal Service filed the Complaint and subsequent petitions for breach of consent agreement in this proceeding in order to circumvent the provisions of an automatic bankruptcy stay issued under the provisions of 11 U.S.C. §362 of the United States Bankruptcy Code. He therefore requests that the Judicial Officer reconsider the propriety of the original Complaint, the resulting cease and desist order, the subsequent breach petitions, and the later Postal Service Decisions insofar as they pertain to him. Complainant, the General Counsel of the United States Postal Service, opposes the Petition.
FINDINGS OF FACT
1. Prior to the initiation of this proceeding, Complainant filed two other Complaints against Respondent King and various other named respondents, which were docketed as Norman Anthony King and Cynthia Pauline King, et al., P.S. Docket No. 34/112 (hereinafter PS 34/112)[1] and Norman Anthony King and McKinley, Richards and Wright, P.S. Docket No. 35/16 (hereinafter PS 35/16).[2] Because Respondent King did not file an Answer to the Complaint in PS 34/112 he was found to be default and the cease and desist and false representation orders sought in the Complaint were issued against him on July 12, 1989.[3] The Cease and Desist Order (CD-2623) directed Respondent King to cease and desist from falsely representing directly or indirectly, in substance and effect, whether by affirmative statements, implications or omissions that:
a. Respondents are a part of or associated with the American Heart Association;
b. Respondents are part of or affiliated with a religious organization;
c. Respondents represent a charitable organization or have been authorized by a charitable organization to solicit funds on their behalf;
d. Recipients of Respondents’ post cards have won a prize which is more valuable than the required remittance;
e. Recipients of the post card are eligible to win a cash prize of $25,000 or $50,000.[4]
2. Respondent King filed an Answer to the Complaint in PS 35/16,[5] but while the matter was pending he notified the presiding officer that he had filed a voluntary petition for Chapter 11 bankruptcy relief on August 11, 1989 and that under the automatic stay provisions of the bankruptcy code further action in the pending administrative proceeding should be suspended.[6]
3. By Order dated July 20, 1990, the presiding officer noted that consumer protection proceedings by a governmental unit are excepted from the automatic stay provision of the bankruptcy code[7] and ordered the parties to file briefs addressing the applicability of the stay to the pending proceeding.[8]
4. On August 20, 1990, the parties filed a Joint Motion for Withdrawal of Complaint in which they stipulated to the withdrawal of the Complaint and requested dismissal of the proceeding “with no determination of facts or law.”[9] By Order dated August 23, 1990, the presiding Administrative Law Judge dismissed the Complaint in PS 35/16.[10]
5. On December 5, 1990, Complainant simultaneously filed a Complaint and Motion to Suspend Proceedings against Respondents Wynn Scott Foster and American Advertising Corporation (“AAC”) d/b/a $25,000 Win A Fortune Contest, $25,000 Trivia Quiz and Fabulous Vacations which was docketed as the captioned proceeding, P.S. Docket No. 37/69 (hereinafter PS 37/69).[11] The Motion to Suspend was based on the execution of an Agreement Containing Consent Order to Cease and Desist (“Agreement”), signed on November 20, 1990, by Respondent Foster, “as president of American Advertising Corporation and in his individual capacity.”[12]
6. The Agreement provided, among other things, for the issuance of a cease and desist order in the form attached to the Complaint,[13] which was issued by the Judicial Officer on December 12, 1990 and designated as Cease and Desist Order No. CD-3061.[14] Under the Cease and Desist Order, Respondents AAC and Wynn Scott Foster and anyone who would be bound by an injunction issued against either of them pursuant to Federal Rule of Civil Procedure 65[15] were ordered to cease and desist immediately from falsely representing that:
1. Consumers are winners of any type of contest, including a sweepstakes;
2. Consumers will receive a free prize of any kind;
3. A nominal fee or cost is anything other than the cost of a prize;
4. The primary purpose of Respondents’ program is to inform consumers that they are winners and not to collect funds from them.[16]
7. The Agreement also provided that a breach of the Agreement by Respondents Foster or AAC or anyone in privity with either of them would warrant the issuance of a false representation order and a supplemental cease and desist order.[17]
8. On January 16, 1992, Complainant filed a Petition for Orders Based Upon Breach of Consent Agreement (“First Petition”) in which it sought a false representation order and supplemental cease and desist order against Respondents Norman Anthony King and Cynthia Pauline King d/b/a Win a Fortune Contest at a Blaine, WA address.[18] Complainant represented that it had not named the Kings as respondents in the original Complaint because it had not previously been aware of the Kings’ involvement in the AAC promotion. Nevertheless, Complainant argued that the Kings were bound by the terms of the Cease and Desist Order under Federal Rule of Civil Procedure 65 and could be found to be in breach of the Agreement because they were actively involved in the AAC promotion, were aware of the Agreement even though they were not named respondents, and were then currently conducting a similar promotion using a different name and address.[19]
9. In support of the First Petition, Complainant filed a declaration by Respondent Foster in which he stated that Respondents Norman Anthony and Cynthia Pauline King actively participated with him in the false representation scheme by providing money to cover start-up costs, unlimited technical support, and a list of mailing addresses to conduct the mail order promotion using the name AAC.[20]
10. The Kings filed a reply to the First Petition, arguing they were not legally bound by the terms of the Agreement or the Cease and Desist Order since they were not named in, nor signatories to, the Agreement and did not consent to any of its terms.[21]
11. While action on the First Petition was pending, Complainant filed a second breach petition (“Second Petition”), alleging that Respondent Norman Anthony King had again breached the terms of the Agreement by soliciting remittances to the $25,000 Win a Fortune Contest at a San Francisco, CA address.[22] Complainant made the same arguments concerning Respondent King’s involvement in the promotion and knowledge of the Agreement, as well as his violation of the terms of Cease and Desist Order No. CD-3061.[23] Respondent King did not file a reply to the Second Petition.
12. On November 19, 1992, a Postal Service Decision on Breach of Consent Agreement was issued in which it was concluded that because no reply to the Second Petition had been filed within the time allowed, the allegations of the Second Petition were deemed admitted and the unchallenged allegations made a prima facie showing that Respondent Norman Anthony King had breached the terms of the Agreement in the manner alleged in the Second Petition.[24] The Postal Service Decision also concluded that the Kings had actively participated in the false representation scheme with Respondent Foster, had actual notice of the Agreement and the Cease and Desist Order, and therefore were bound by the terms of the Agreement and the Cease and Desist Order.[25] As a result, it was further determined that Respondents Norman Anthony and Cynthia Pauline King had breached the terms of the Agreement in the manner alleged in the First Petition, and the false representation orders requested in both Petitions were issued against Respondents at the Blaine, WA and San Francisco, CA addresses.[26]
13. On March 7, 1995, Complainant filed a third breach petition (“Third Petition”) alleging that Respondent Norman Anthony King was again violating the Agreement by conducting a substantially similar scheme using the name National Directory Service at a San Diego, CA address.[27] Respondent King did not file a reply to the Third Petition and therefore in a Postal Service Decision issued May 10, 1995, the allegations of the Third Petition were deemed admitted and the unchallenged allegations, supported by the attachments to the Petition, were found to make a prima facie showing that Respondent King had breached the terms of the Agreement in the manner alleged in the Third Petition.[28] As a result, the requested false representation order was issued against Respondent King at the San Diego, CA address.[29]
14. On August 8, 2001, Respondent Norman Anthony King filed his Petition for an Order to Set-Aside, Vacate or Correct Administrative Decision and to Dismiss the Complaint.[30]
DISCUSSION
Respondent King argues that the Postal Service improperly attempted to circumvent the bankruptcy stay by not naming him as a respondent in the December 5, 1990 Complaint docketed in this proceeding and then sought to bind him to the Agreement by naming him as the breaching party in the First and Second Petitions. Respondent King further argues that Complainant's decision not to name him as a respondent was a deliberate attempt to mislead the Judicial Officer and avoid the bankruptcy stay, and that Complainant acted improperly by not informing the Judicial Officer of the automatic stay during the breach proceedings. He therefore requests that the Complaint be dismissed and that Cease and Desist Order No. CD-3061, issued on December 12, 1990, either be set-aside, vacated or corrected to state it does not apply to him.
Respondent King has not shown that Complainant’s failure to originally name him as a respondent in this proceeding was improper. Complainant represented that it was unaware of Respondent King’s involvement in the AAC promotion when it filed the Complaint (FOF 8) and Respondent King made no showing to the contrary. Moreover, Respondent King had a full opportunity to show that he was not a participant in the AAC promotion and that he was not engaged in a false representation scheme (FOF 10-13). Respondent King did not make such a showing in response to the breach petitions and he has not made such a showing in his filings in support of his current motion.
Respondent King has also not shown that either the issuance of Cease and Desist Order No. CD-3061 or the false representation orders sought in the subsequent breach petitions were a violation of the automatic bankruptcy stay. As an independent establishment of the United States Government,[31] the Postal Service’s exercise of its consumer protection powers under 39 U.S.C. §3005 is exempt from the operation of the bankruptcy stay under 11 U.S.C. §362(b)(4).[32] Although Respondent King argues that the Complaint in PS 35/16 was dismissed because of the automatic stay, the record does not support his contention. The reason for the dismissal is not articulated in the parties’ stipulation of withdrawal or the presiding Administrative Law Judge’s Dismissal Order (FOF 4). Moreover, the parties were placed on notice that the Administrative Law Judge did not consider the automatic stay to be applicable to Postal Service consumer protection proceedings (FOF 3). Therefore, there is no reason to believe that the Complaint was dismissed as a result of the automatic stay.
Furthermore, Respondent King has not shown that the bankruptcy stay was still in effect at the time the Complaint or breach petitions were filed in this proceeding. The original bankruptcy petition was filed on August 11, 1989 (FOF 2). The Complaint in this proceeding was not filed until over a year later in December, 1990 (FOF 5) and the First Petition was not filed until over two years later in January, 1992 (FOF 8). Respondent King, who was represented by counsel during the first breach proceeding, was given a full opportunity to respond to that breach petition as well as the Second and Third Petitions and did not raise the issue of the automatic stay until he filed his current motion. His failure to raise the issue at that time suggests that either the automatic stay was no longer in effect or it did not preclude the filing of the Complaint and breach petitions. Moreover, since he did not raise the issue himself in the breach proceedings, he cannot seriously be heard to argue that the Postal Service acted improperly or otherwise attempted to mislead the Judicial Officer.
Finally, even if Respondent King’s current Petition was granted, he would continue to be bound by the prohibitions of Cease and Desist Order No. CD-2623, which was issued in PS 34/112 prior to the initiation of the bankruptcy proceeding. While the prohibitions of the two cease and desist orders are not identical, they preclude similar conduct. Therefore, dismissal of the Complaint in this proceeding or revocation of Cease and Desist Order No. CD-3061[33] would have little practical effect on Respondent King's ability to conduct mail order promotions similar to those alleged in the breach petitions.
CONCLUSION
Respondent King has not shown that the Complaint should be dismissed or that Cease and Desist Order No. CD-3061 should be vacated, corrected or set-aside. Accordingly, Respondent King’s Petition is denied.
James A. Cohen
Judicial Officer
[1] PS 34/112 Complaint (June 8, 1989).
[2] PS 35/16 Complaint (Sept. 18, 1989).
[3] PS 34/112 Order (July 12, 1989).
[5] PS 35/16 Answer to Complaint (Nov. 15, 1989).
[6] PS 35/16 Letter (July 13, 1990).
[7] See 11 U.S.C. §362(b)(4), providing that "the filing of a petition…does not operate as a stay…of the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power."
[8] PS 35/16 Order (July 20, 1990).
[9] PS 35/16 Joint Motion for Withdrawal of Complaint (signed Aug. 9, 1990 and Aug. 20, 1990).
[10] PS 35/16 Dismissal Order (Aug. 23, 1990).
[11] PS 37/69 Complaint and Motion to Suspend Proceedings (Dec. 5, 1990).
[12] PS 37/69 Agreement Containing Consent Order to Cease and Desist (“Agreement”) (signed Nov. 20, 1990).
[14] PS 37/69 Order (Dec. 12, 1990).
[15] Fed. R. Civ. Proc. 65 states in pertinent part that “[e]very order granting an injunction and every restraining order…is binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise.”
[16] PS 37/69 Order (Dec. 12, 1990).
[17] PS 37/69 Agreement at 4-6.
[18] PS 37/69 Petition for Orders Based Upon Breach of Consent Agreement (Jan. 16, 1992).
[20] Id. at Exhibit C, Attachment 3, ¶4.
[21] PS 37/69 Response and Objection to Petition for Orders Purportedly Based on Alleged Breach of Consent Agreement (March 2, 1992).
[22] PS 37/69 Second Petition for Orders Based Upon Breach of Consent Agreement (April 9, 1992).
[24] American Advertising Corporation, et al., P.S. Docket No. 37/69 (P.S.D. Nov. 19, 1992).
[27] PS 37/69 Petition for Order Based Upon Breach of Consent Agreement (March 7, 1995).
[28] American Advertising Corporation, et al., P.S. Docket No. 37/69 (P.S.D. May 10, 1995).
[30] PS 37/69 Petition for an Order to Set-Aside, Vacate or Correct Administrative Decision and to Dismiss the Complaint (Aug. 1, 2001).
[31] See 39 U.S.C. §201; 39 C.F.R. §1.1.
[32] S. Rep. No. 989, 95th Cong., 2d Sess. 52, reprinted in, 1978 U.S. Code Cong. & Admin. News 5787, 5838; H.R. Rep. No. 595, 95th Cong., 2d Sess. 343, reprinted in, 1978 U.S. Code Cong. & Admin. News 5963, 6299; see Midlantic Nat’l Bank v. New Jersey Dep’t of Envtl. Protection, 474 U.S. 494 (1986); In re Mickman, 144 B.R. 259 (E.D. Pa. 1992); see also Michael S. Ioane and Brick Funding, Inc., d/b/a Brick Processing Center and First Amendment Publishers, P.S. Docket No. FR 96-203 (P.S.D. Jan. 15, 1999).
[33] See, cf., Erwin Koltay, et al., P.S. Docket Nos. 26/101 & 30/82 (P.S.D. Sept. 29, 1989), and cases cited therein (finding that orders issued under 39 U.S.C. §3005 will only be set-aside or revoked if there is a showing that the representations previously found to be false have been discontinued, there is no possibility of recurrent activity and there is no risk of future harm to the public).