In the Matter of the Charges that ) April 30, 1968 ) MARK EDEN ) ) at ) ) San Francisco, California ) P.O.D. Docket No. 2/204 ) (hereinafter called the Respondent) ) is engaged in conducting a scheme ) for obtaining money through the ) mails in violation of the Affidavit ) of Discontinuance executed by the ) Respondent on January 30, 1967. ) APPEARANCES: William F. Lawrence, Esq. Associate General Counsel Arthur S. Cahn, Esq. Abraham Levine, Esq. Office of the General Counsel Post Office Department, for the Complainant Nathan G. Gray, Esq. American Trust Building Berkeley, California John Wells, Esq. Jack Banker, Esq. Stark, Simon & Sparrowe Financial Center Building Oakland, California, for the RespondentChristensen, Johanna C.
This proceeding has three distinct facets, as follows: (1) the first relates to the procedural steps followed; 1/; (2) the second involves the doctrine of estoppel; and (3) the other relates to the merits of the allegation by the Complainant, the General Counsel of the Post Office Department, that the Respondent, Mark Eden, violated the provisions of a certain Affidavit (hereinafter sometimes referred to as the Affidavit) which will later be discussed in more detail. 2/
The crux of this decision is that, pursuant to procedures agreed upon by the parties, 3/ it has been determined that the Post Office Department is not estopped from bringing this proceeding and that, for reasons and in the manner herein shown, the Respondent has violated one provision of the Affidavit in question.
The History and Background of the
This proceeding has been intermittently active and dormant over a three year period. The following statements do not purport to detail every procedural event that has transpired but they do indicate the salient facts in the history of this case.
The Complaint was filed April 22, 1965, in which it was alleged, in substance, that the Respondent was engaged in the sale through the mail of a device for the enlargement of the female bust or breasts and that these sales were being solicited by means of false and fraudulent pretenses, representations and promises.
The hearing was held in San Francisco, California, on May 20, 21, 24 and 25, 1965.
On March 22, 1966, the Hearing Examiner issued an initial decision in which he found, among other things, that while "several of the Respondent's representations tend to raise doubt concerning the complete good faith of the Respondent corporation and those in control, the essential requirements for a fraud order * * * have not been adequately proven and the remedy sought should be denied" (Initial Decision, p. 21). Although the Hearing Examiner made a finding that there was no adequate proof of fraud in regard to the Respondent, the Hearing Examiner listed a substantial number of changes which should be made in the advertising literature if Mark Eden was "a Respondent who wants to do what is right." (Initial Decision, p. 24)
The Complainant appealed this initial decision and on November 4, 1966, after receiving briefs and hearing oral argument by the parties, the Judicial Officer reversed the initial decision. The Judicial Officer (1) found that the Respondent was in fact engaged in a fraud scheme and (2) issued a fraud order.
Shortly after the issuance of this fraud order (Order No. 66-212, dated November 4, 1966), the Respondent sought and obtained in the U. S. District Court for the Northern District of California, Southern Division an order which would restrain the postmaster in San Francisco from impounding 4/ Respondent's mail and the order would also require the release to the Respondent of all mail previously impounded by the San Francisco postmaster.
On February 2, 1967, there was filed with the Docket Clerk of the Post Office Department an Affidavit of Discontinuance which had been executed on January 30, 1967, in which the Respondent, through its proprietors, agreed: to discontinue the use of the advertising matter which had been the subject of the original complaint; to refuse to fill orders for the device and the exercise program that were based on the advertisement agreed to be discontinued; agreed, insofar as it is pertinent to the instant proceeding, that it would not employ certain advertising representations. The Complainant, citing the Affidavit, by motion requested, and the Judicial Officer issued, an Order (No. 67-14, dated February 2, 1967) revoking Fraud Order No. 66-212 and indefinitely suspending further proceedings in the Mark Eden case conditioned upon compliance with the terms of the Affidavit by the Respondent.
The Motion which is the initial pleading of this proceeding was filed December 12, 1967.
It is now time to compare the procedural steps that were followed, with the procedural steps that are provided in the Affidavit. Because of its importance to this phase of this proceeding and because of its language, Paragraph 5 of the Respondent's Affidavit will be carefully analyzed.
The first sentence of Paragraph 5 of the Affidavit provides as follows:
"That in the event the Post Office Department receives evidence showing a breach of this Affidavit, the Postmaster General or the Deputy Postmaster General or the Judicial Officer for the Post Office Department may issue an order against the name or names employed in the violative practice, provided that such order may be issued only upon written application therefor by the General Counsel of the Post Office Department, or his authorized deputy, in accordance with the procedures hereinafter provided."
Moving now to the 11th sentence of this Affidavit, there is this provision:
"Pending a hearing on the matter of breach, the Judicial Officer of the Department may order the mail of the Respondent to be impounded and afforded the undersigned the opportunity to inspect all such mail and to receive mail unrelated to the alleged breach; provided, however, that any mail related to the alleged breach which is so impounded shall upon the request of Respondent be ordered released to Respondent upon condition that Respondent deposit all cash, checks, postal orders or other remittances therein contained, in trust, with a responsible trustee."
The second sentence of the Affidavit requires that the Complainant's application for the order be filed with the Docket Clerk and that it set forth the nature of the alleged breach with sufficient specificity to apprise the Respondent of the objectionable aspects of the advertising involved in the alleged breach.
The Respondent has nowhere asserted that it is not aware of the nature of the charges made against it. Certified Mail receipts and the absence of objection by Respondent's Counsel are among the factors that indicate that proper service was had on the Respondent, and that the Respondent was aware of the nature of the charges in the Motion.
On December 15, 1967, the Judicial Officer acted affirmatively on Complainant's Motion of December 12, 1967, and issued an order, the last paragraph of which reads as follows:
"Based on Section 5 of the Affidavit of Discontinuance all mail addressed to the Respondent is hereby impounded. The Respondent has the right pending a determination and/or hearing on the Motion for the issuance of a fraud order in the above matter to inspect such mail and receive all mail not related to the alleged breach; and any mail related to the alleged breach which is so impounded shall upon request of the Respondent, be ordered released to Respondent upon condition the Respondent deposit all cash, checks, postal orders or other remittances therein contained, in trust, with a responsible trustee as set out in the Motion of Counsel for the Post Office Department."
It would be difficult to compose an order which would come closer to expressing the agreement of the parties in regard to impounding Respondent's mail since this Order incorporates, verbatim, a large part of the language used by the parties in the eleventh sentence of the Affidavit.
On December 18, 1967, the Complainant filed a motion requesting that the Motion of December 12, 1967, and the Order of December 15, 1967, be temporarily suspended on the ground that it appeared that the parties might be able to negotiate a settlement of the matters then in dispute. The Complainant stated that such negotiation would commence on or about January 15, 1968, and that if the negotiations were unsuccessful the Judicial Officer would be asked to reconsider the December 12, 1967, Motion.
On December 19, 1967, by Order No. 67-114, the Judicial Officer temporarily suspended the impounding of Respondent's mail.
One month later, on January 19, 1968, the Complainant filed a motion indicating that a meeting or meetings had been held with Respondent's Counsel. These meetings were apparently unsuccessful since Complainant requested (1) that the case be restored to the active docket and (2) that Respondent be given notice of the hearing date and a date for filing the answer to the December 12, 1967, Motion. Complainant also requested the revocation of Order No. 67-114, by which the impounding of Respondent's mail had been temporarily suspended.
Based on this request and on a review of the proceedings had to that time, the undersigned, as Acting Judicial Officer, on January 24, 1968, (1) issued Order No. 68-12 which had the effect of re-instituting the impounding of the Respondent's mail upon the same terms and conditions as had been set forth both in the 11th sentence of Paragraph 5 of the Affidavit and in the Judicial Officer's Order of December 15, 1967; and (2) issued a separate
order (a) advising the parties of the action taken in (1) above, and (b) allowing Respondent time within which to file its Answer to Complainant's Motion of December 12, 1967. Also, on January 24, 1968, the Docket Clerk notified the parties that the case was set down for hearing on February 29, 1968, in Washington, D. C. 5/ The 7th sentence of Paragraph 5 of the Affidavit provides that "The place of said hearing shall be Washington, D. C., provided that the hearing officer may specify a different place upon consent of both parties."
On February 9, 1968, Respondent filed (1) a motion for a continuance of the hearing to March 12, 1968, and (2) a request that the hearing be held in San Francisco.
Respondent's Answer to Complainant's Motion of December 12, 1967, was filed on February 12, 1968.
On February 14, 1968, Respondent's request for a continuance was granted, and Respondent's request that the hearing be transferred to San Francisco was denied.
Later the hearing was set down for March 20, 1968, but it actually began on March 19, 1968, at the request of the Respondent and after the completion, on March 18, 1968, of the pre-hearing conference.
The portions of Paragraph 5 of the Affidavit that are to be considered next are the 8th and 9th sentences, which provide, respectively, as follows:
8th. 6/ "The undersigned may at any time prior to the hearing revise its advertising matter consonant with the charges of alleged breach in the aforesaid application and furnish a copy of such revised advertising matter to the General Counsel's office no later than 5 days prior to the scheduled hearing.
9th. "Such revision shall be deemed to have been done upon the giving of notice of the said revisions by the undersigned to all publications carrying said advertising matter, and upon service of copies of the said notices to the General Counsel, with proof of service thereof."
The Respondent, on or about March 7, 1968, by mail, served revised advertising copy upon the Complainant, and on or about that same day mailed revised advertising copy to various publishers. One must assume, in view of later developments, that the Complainant was of the view that the revised advertising did not cure the alleged defects of the former advertising.
Finally, the remaining portions of Paragraph 5 of the Affidavit that are here pertinent are the 10th and 12th sentences which read as follows:
10th. "The hearing authority presiding at the hearing on the aforesaid application shall determine first, whether this affidavit has been breached in the manner alleged and second, whether the revisions, if any, of the challenged advertising have cured the alleged breach." ***
12th. "Upon a hearing and determination of the question of breach, the hearing examiner shall order appropriate distribution of the funds so deposited in trust."
It has been suggested that great significance should be assigned to the assertion that a hearing on an alleged breach of an affidavit is a rarity. The one fact alone, is not important. If the parties to this agreement decided to incorporate provisions calling for a hearing in the event of an alleged breach, to do so was well within their authority and the fact that they did so should concern no one else, except, as we here try to assure that their agreement is given effect. The fact is that there have been other instances in which hearings have been held in situations involving alleged breach of affidavits of discontinuance, 7/ but, had there been no such hearings - or had there been a thousand of them - either of these circumstances would not necessarily affect this proceeding.
I find, and the record discloses that the parties agree, that it is most difficult to determine from the language used in Paragraph 5 (1) just what kind of hearing was contemplated by the parties and (2) who was to issue an order relative to the disposition of the Respondent's funds being held in trust. Since
there is this ambiguity in the document, itself, resort must be had, in determining its reasonable import, to extrinsic matters. By this method, the resolution of the question becomes much easier and more precise.
The parties made it perfectly clear at the pre-hearing conference that what they contemplated was a two-stage hearing, that is, an original hearing before a hearing examiner with the right of appeal to the Judicial Officer for a final Agency determination. These excerpts from statements by counsel at the pre-hearing conference so affirm:
Complainant's Counsel, referring to a telephone conversation had with Respondent's Counsel, said:
"Mr. Cahn: I asked him (Mr. Wells) if he wanted the Judicial Officer of this Department to hear the case, and there would be no further appeal, he would decide it. And he said, no, that he wanted a Hearing Examiner with an appeal to the Judicial Officer." (Tr., p. 15)
Respondent's Counsel, referring to the same telephone discussion of this subject, said:
"Mr. Wells: ***And he (Mr. Cahn) asked me whether I had any understanding at the point where we agreed upon the affidavit of discontinuance in that regard. And I said I recalled no understanding on it one way or the other other than what might be in the affidavit. And I think in reading the affidavit, one can see references to the Judicial Officer and the Hearing Examiner. And my comment was that it seemed to me that the matter ought to be heard in the first instance by a Hearing Examiner. ***" (Tr., p. 19)
Similarly, Counsel for both parties made it unmistakably clear at the pre-hearing conference that it was their view and their desire that the hearing should be conducted in accordance with the provisions of the Administrative Procedure Act. For example, in response to a question as to whether he took the position that the Administrative Procedure Act did apply to the proceeding, Mr. Cahn replied, "Yes, sir." (Tr., p. 14.) On this point, Respondent's Counsel had the following to say:
"Mr. Wells: We will agree that the hearing may be governed by the Administrative Procedure Act, whether or not the law requires that, we would like it that way. So we would be happy to enter into a stipulation at this time as to that." (Tr., p. 49.)
By the statements of Counsel on the record at the pre-hearing conference, it was made clear beyond cavil that they agreed (1) that this matter would be heard originally by a Hearing Examiner;
(2) that the hearing would be conducted pursuant to the Rules of Practice applicable to proceedings brought under 39 U. S. Code 4005 and in conformity with the Administrative Procedure Act; (3) that an initial decision would be rendered by the Hearing Examiner and (4) that either party might take an appeal from the initial decision to the Judicial Officer for a final Agency determination. Thus, the references to the conversations at pages 421-422 and 433-436 of the transcript were but reiterations of the conversations, the substance and result of which had been stated by Counsel at the pre-hearing conference.
It is true that Respondent's Counsel urged that an order as to the disposition of the funds held in trust by issued by the Hearing Examiner immediately upon the close of the hearing (See, also Respondent's Appeal Brief, p. 22), but Counsel should not be, and was not permitted to have two such differing interpretations of the Affidavit effectuated at so nearly the same time. If appeal from the initial decision was to be allowed, the order as to the disposition of the funds held in trust must await the outcome of the appeal -- otherwise the appeal would be a mere meaningless ritual.
Finally, and as it was pointed out at the supplementary proceeding on March 22, 1968, because it was agreed between the parties that the Administrative Procedure Act should govern the hearing on the alleged breach of the Affidavit, the Agency, only, could issue a valid final decision unless there had been a special delegation of this authority to the Hearing Examiner pursuant to 39 U. S. Code 308a. There having been no such special delegation of authority, the only officials who could issue a valid final decision and order herein are the Postmaster General, the Deputy Postmaster General and the Judicial Officer.
It has been shown that in the Motion of December 12, 1967, the General Counsel asserted to the Judicial Officer that he (General Counsel) had evidence that the Respondent was violating certain provisions of the Affidavit of January 30, 1967. On the basis of the application of the General Counsel, the Judicial Officer issued an order impounding the Respondent's mail but permitting the Respondent to remove from his mail all remittances and place the funds so obtained in trust. All of this was done in conformity with the provisions of the 1st, 2nd and 11th sentences of Paragraph 5 of the Affidavit. The Respondent submitted revised advertising as provided by the 8th and 9th sentences of Paragraph 5 of the Affidavit. A hearing on the agreed issues was held before a hearing examiner, whose initial decision has been appealed as provided in the 10th and 12th sentences of Paragraph 5 of the Affidavit. The matters in other parts of Paragraph 5 either have been complied with or they are of minimal significance in the total picture of this proceeding, or the variances from the provisions of the Affidavit had the effect, desired by the Respondent, of expediting the proceeding.
Much time has been devoted to showing at great length (1) how closely the procedures followed herein have conformed to the exact provisions of the Affidavit which is the subject of this proceeding or (2) how closely the procedures followed herein have conformed to the wishes, intentions and interpretations of the parties as expressed by Counsel at the pre-hearing conference.
Based upon all of the foregoing considerations, I find that:
1. The procedures followed were those which had been devised and agreed upon by the parties; (U. S. Bio-Genics Corp. v. Christenberry, supra, fn. 3.)
2. The procedures followed have been proper in all respects;
3. The Respondent was not prejudiced by the fact that the hearing was held in Washington, D. C., and
4. Because of the absence of the "consent of both parties" (See document filed by Complainant on February 13, 1968), the holding of the hearing in Washington, D. C. was in conformity with the agreement of the parties as expressed in the Affidavit of January 30, 1967.
The Question Involving the
In the Affidavit of January 30, 1967, the Respondent, through its owners, agreed not to employ advertising literature which would contain representations that --
"(a) Every female user of the 'Mark Eden' device and exercise program is assured some degree of development or enlargement of the female breasts;
* * * * * *
"(c) The use of aforesaid product will assure the female user of results in breast development or enlargement to the extent of specifically stated proportions or measurements;
"(d) The use of aforesaid product will assure the female user of results in the development or enlargement of her breasts equivalent to that depicted by any illustration, model, or other demonstration;"
And the Respondent further agreed --
"4. That in the event a refund guarantee is employed in the advertising matter, the language describing or representing such
guarantee will not be uncertain, vague, illusory or ambiguous, or otherwise lend itself to misconstruction by the readers;"
Complainant alleges in the application or motion for the issuance of a fraud order that the Respondent breached the affidavit in four particulars, as follows:
"a) Respondent by the use of pictures of various women taken both before and several weeks after using the Mark Eden Course together with the women's bust size both before and after using Respondent's product is in effect advertising that every female user of the Mark Eden device and exercise program is assured some degree of development or enlargement of the female breasts. This is a violation of section 3a of the Affidavit of Discontinuance.
"b) In violation of section 3c of the Affidavit, Respondent in his advertisements (Exhibits B and C) uses specific bust measurements of women both before they have participated in the Mark Eden Course and afterwards (i.e. Bust: 34A before, Bust: 36C after). 'THROUGHOUT AMERICA WOMEN ARE REPORTING AMAZING GAINS ON THEIR BUSTLINES by using the Fabulous MARK EDEN DEVELOPER...I HAVE GAINED OVER 3 INCHES ON MY BUSTLINE AND HAVE GONE FROM A 34A TO A FULL 36C IN JUST 8 WEEKS', followed by before and after pictures accentuating development of the breasts. In effect, the Respondent is advertising that the use of his product will assure the female user of results in breast development or enlargement to the extent of specifically stated proportions in violation of section 3c of the Agreement.
"c) The net impression of Respondent's advertisements with its before and after pictures and before and after bust sizes is to assure the female user of the Mark Eden Course that she can attain development or enlargement of her breasts equivalent to that depicted by the illustrations and before and after bust sizes noted under each picture in violation of section 3d.
"d) In violation of section 4 of said agreement wherein Respondent agreed that in the event a refund guarantee is employed in his advertising matter, the language describing or representing such guarantee will not be uncertain, vague, illusory or ambiguous, or otherwise lend itself to misconception by the readers. Respondent as illustrated in Exhibits 'B and C' uses the following language, 'Please send me my Mark Eden Developer and Guaranteed Bustline Contouring Course...', thereby representing to potential remitters that enlargement of the breast, bust, or bustline is assured (certain), when the true meaning is that there is a money back guarantee."
The Respondent vigorously denies that it breached the Affidavit as alleged. The Respondent adds that, even if the language of its advertising on which Complainant's Motion was based could be held to be in breach of the Affidavit, (1) Respondent was led by Complainant's representative to believe that the advertising material had been approved; (2) Respondent relied upon such assurances; and (3) Complainant is now estopped from bringing the charges set forth in the Motion.
It is appropriate first to discuss the question of estoppel, since, if the Respondent prevails in its position on this point, that puts an end to this proceeding.
As pointed out by Complainant's Counsel, the long-established and general rule is that estoppel is rarely invoked against the Government (Double Eagle Lubricants, Inc. v. Federal Trade Commission, 360 F.2d 268 (CA 10, 1965.) Above and beyond this rule, however, is the consideration that in a matter of this kind, in which the public interest in the form of consumer protection is so importantly involved, it would not be appropriate to have the Government rendered powerless to act because of an unauthorized statement made by one of its agents. Furthermore, "***those dealing with an agent of the United States must be held to have had notice of the limitation of his authority." Wilber National Bank v. United States, 294 U.S. 120, 123-4 (1934), citing Utah Power & Light Co. v. United States, 243 U.S. 389, 409 (1917) and Sutton v. United States, 256 U.S. 575, 579 (1921). The same idea was expressed in a slightly different way in Federal Crop Insurance Corporation v. Merrill, 332 U.S. 380, 384 (1947) wherein Mr. Justice Frankfurter, speaking for the majority, said:
"Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority." (See also, Government Contracts, by McBride & Wachtel, ?? 4.100 and 5.30)
Respondent does not claim that he was not aware of the Post Office Department's policy not to review and give advance approval for advertising matter. Indeed, in the memorandum prepared by Respondent's witness John F. Banker, Esq., concerning the telephone call of January 19, 1967, between himself and Abraham Levine, Esq., of the Complainant's staff, it is shown that Mr. Levine "stated that he was required to follow the Department policy against approving specific ads and that he could not vary that policy in our case." (Ex. C-6)
In the letter of December 7, 1966, to Respondent's Counsel signed by Mr. Levine, there are the following statements:
"As I explained on December 6, 1966, we are not authorized to review proposed advertising copy for an express or implied approval. I would be willing, however, to examine such proposed copy and advise you if any portion thereof presents a problem. I would undertake this with the stipulation that any comments submitted would not bind the General Counsel's office in any future action taken with respect to such proposed advertising. In the final analysis, the matter of revised advertising copy remains the responsibility of the advertiser ***."
Regardless of what took place later, the foregoing language constitutes a very strong and clear caveat that Mr. Levine did not have the authority to preview and approve proposed advertising in advance of its use and thereby preclude the Government from taking action in the event the Affidavit was breached. I do not suggest that I give less than full credit to the sincerity of the testimony of Mr. Banker, but that fact does not vary the legal effect of the events that he related.
The effect of the Initial Decision would be to assign legal weight only to the statements said to have been made by Mr. Levine over the telephone, and to ignore completely the words written by Mr. Levine to explain at some length the basis on which he would look at material which Counsel were apparently urging upon him. In addition, and considerations of the parole evidence rule aside, these words reported to have been said by Mr. Levine over the telephone are given more weight than even the written word of the owners of the Respondent when they say in the Affidavit --
"*** It is further understood that approval by the General Counsel's office of this affidavit shall not be construed as approval of affiant's current advertising. *** (Affid., paragraph 7)
"Except as hereinabove provided it is understood that the acceptance of this affidavit by the General Counsel's office does not estop the said office or the Department from instituting proceedings against the Respondent pursuant to Title 39, U. S. Code, Section 4005, on the basis of any advertising matter employed by Respondent and/or undersigned, deemed to be in violation of the provisions of aforementioned statute; (Affid., paragraph 8)
"It is further understood that the General Counsel's office has not reviewed, screened or evaluated any advertising matter submitted or exhibits by the Respondent or its attorneys, nor has the General Counsel's office indicated or suggested any express or implied approval or acceptance of such advertising matter." (Affid., paragraph 9)
For all of the foregoing reasons, I find and conclude that the Government is not estopped from going forward with this proceeding.
The Merits of the Charges that the Respondent
The following issues must now be considered:
1. Was the Respondent's Affidavit breached in the manner alleged?
2. Did the revisions of the Respondent's advertising cure the alleged breach?
Copies of the advertising in use by Respondent at the time of the filing of Complainant's Motion of December 12, 1967, and as of February 7, 1968, are attached hereto as Appendices B, C, D and E. 8/
All of these advertisements have the following features in common:
1. The eye-catching statement at the top of the page that "Throughout America Women are reporting AMAZING GAINS ON THEIR BUSTLINES by using the FABULOUS Mark Eden Developer."
2. "Before" and "after" pictures of women with captions to suggest that the increases in their bust measurements are attributable to the fact that they followed the Mark Eden Course for 8 weeks.
3. A description of the Mark Eden Method as an exerciser.
4. A statement (1) that the price of Mark Eden Developer is $9.95, complete; (b) that a MONEY BACK GUARANTEE is included; and (c) that a course of instructions is included.
5. A statement purporting to explain the Mark Eden Exclusive Guarantee of Satisfaction. This statement reads as follows:
"The degree of effectiveness of the Mark Eden Developer turns in part upon physical factors which vary among individuals. If the Mark Eden Developer does not produce for you the results which have delighted so many of our customers, this guarantee is your protection: If after using the Mark Eden Bustline Developer and Course for only two weeks, you do not see a significant difference in your bustline development, simply return the developer and the course to Mark Eden and your money will be promptly refunded."
6. An order blank in a box in the lower right hand corner of the advertisement. The text of this box reads as follows:
"Mark Eden P.O. Box 7843, Dept. SI-31
San Francisco, Calif. 94119
Please send me my Mark Eden Developer and Guaranteed Bustline Contouring course illustrated by June Wilkinson. I understand that this course is complete and that there will be nothing else to buy, and that if I do not see satisfactory results in bustline development within two weeks, I can return everything to Mark Eden and receive my money back.
For the above complete course and Bust Developer I enclose $9.95. / /Cash / /Check / /Money Order (No C.O.D.'s accepted)--Shipped in plain wrapper.
Name
Address
City State
Zip Code"
In interpreting the language of this advertisement, the usual rules of interpretation are followed.
Thus, in Donaldson v. Read Magazine, 333 U.S. 178 (1948), the Supreme Court said that advertisements should be considered to determine their effect upon persons of ordinary minds. It must also be kept in mind that, since Respondent's advertisements appear in a wide variety of types of publications, the readership of some of these advertisements includes "that vast multitude, which includes the ignorant, the unthinking and the credulous, who, in making purchases, do not stop to analyze, but are governed by appearances and general impressions." Florence Mfg. Co. v. J. C. Dowd & Co., 178 F. 73, 75 (CA 2, 1910). Or, as Mr. Justice Black, speaking for the Supreme Court, said in Federal Trade Commission v. Standard Education Society, 302 U.S. 112, 116 (1937): "Laws are made to protect the trusting as well as the
suspicious." We are not, of course, considering an alleged violation of law, but the same consideration as that expressed in the Standard Education Society case obtains in the situation here in which there has been alleged a violation of an agreed course of conduct involving the making of sales representations and obtaining money through the mails.
Directing attention again to Appendices B, C, D and E, it is noted that nowhere in any of these advertisements is there mentioned the likelihood or the possibility of failure to acquire larger bustlines. On the contrary, the emphasis is on the claimed achievement of past successes and the assurances of accomplishment of the desired results in the future. These results are reported and held out for women "Throughout America." Even the language which the Respondent relies on as a disclaimer -- "The degree of effectiveness *** turns in part upon physical factors which vary among individuals." -- strongly implies that all women will realize some breast growth, the degree of such growth being affected - only in part - by certain physical factors. The effect of these words is enhanced by the photographs of the women. These photographs present the women in such poses and in such manner of dress, particularly in the "after" shots, as to emphasize their breasts and to make their breasts appear to be obviously larger in the "after" pictures. Furthermore, the order blank describes part of the product being offered for sale as the "Guaranteed Bustline Contouring Course," from which one can only conclude that the Respondent guarantees that the contour of the bustline is going to be affected.
I find, therefore, that the Respondent, in the manner described in the foregoing paragraph and in the manner alleged in Complainant's Motion of December 12, 1967, did and does represent in Appendices B, C, D and E hereto that "every female user of the 'Mark Eden' device and exercise program is assured some degree of development or enlargement of the female breasts."
Because in the advertisements which are Appendices B, C, D and E hereto the Respondent refers to variations in results, in terms of breast development, that will be realized due to physical factors, I find that the Respondent did not promise or represent:
That the use of the Mark Eden device and exercise program will assure the female user of results in breast development or enlargement to the extent of specifically stated proportions or measurements; or
That the use of the aforesaid product will assure the female user of results in the development or enlargement of her breasts equivalent to that depicted by any illustration, model or other demonstration.
In regard to the refund guarantee, that language is pretty plain. It says, in effect, that if after 2 weeks of trial of the device, the user sees no significant difference in measurements or other desired results, the Respondent will, upon return of the device and the other materials, return the purchaser's money. It is true that Respondent does refer to the "Guaranteed Bustline Contouring course," but this phrase is related to the efficacy of the device and does not, as I see it, obfuscate the meaning of the refund offer.
I find that the Respondent did not and does not, in employing a refund guarantee in its advertising matter (Appendices B, C, D and E), use language describing or representing such guarantee that is uncertain, vague, illusory or ambiguous, or that would otherwise lend itself to misconstruction by the reader.
The next question to be determined is whether the revised advertising literature cures the breach heretofore found to have been made.
Attached hereto as Appendices F and G are copies of revised advertising matter that Respondent will use beginning with the May issue of some of its advertising media and with the June issue of the remainder of its advertising vehicles. (See document filed by Respondent on March 11, 1968, transmitting copies of various Insertion Orders for Mark Eden ads.) Insofar as here pertinent, there are two principal modifications in the new advertising copy. They are (1) the portion relating to whether results are assured to all women and (2) the refund guarantee. The first of these items reads as follows:
The new language of the refund offer reads as follows:
"Please send me my Mark Eden Developer and Bustline Contouring course illustrated by June Wilkinson. I understand that this course is complete and that there will be nothing else to buy, and that if I do not see satisfactory results in bustline development within two weeks, I can return everything to Mark Eden and receive my money back."
In Donaldson v. Read Magazine, supra, the Court indicated that the content of the entire advertisement then in question should be considered. The Court, Mr. Justice Black speaking, said:
"In reviewing fraud findings of the Postmaster General, neither this Court nor any other is authorized to pick out parts of the advertisements on which respondents particularly rely, decide that these excerpts would have supported different findings, and set aside his order for that reason. We consider all the contents of the advertisements and letters, and all of the evidence ***."
By the same token, in determining the overall effect of an advertisement to see whether a particular representation has been made, it would not be proper to look only at the excerpts relied upon by the prosecution, but the advertisement in its entirety must be examined and its overall impact upon the reader assessed.
The disclaimer and the refund offer quoted above form parts of the whole of the advertising material to be used in May and June 1968 by the Respondent.
I find that when the new advertising material comes into use, the Respondent will have cured the violation of the Affidavit heretofore found. If I was in error in regard to the language of the former refund guarantee and there was, contrary to my finding, a violation of the Affidavit in that language, the revised advertising material submitted by the Respondent cures that breach.
Disposition to be Made of Funds
There remains one question to be resolved, namely: What disposition is to be made of the funds being accumulated and held in trust?
Here, we turn again, albeit with some reluctance, to the Affidavit of January 30, 1967. It has been seen that the twelfth sentence of Paragraph 5 of that document provides that "Upon a hearing and determination of the question of breach, the hearing examiner shall order appropriate distribution of the funds so deposited in trust." The language of Paragraph 2 of this Affidavit is as follows:
"That neither Respondent nor the undersigned will fill any orders for the Mark Eden device and exercise program which are based on the advertisement agreed herein to be discontinued; that any remittances hereafter received based on such advertisement will be promptly returned to the remitters with a statement to the effect that the advertisement in question has been discontinued, and that orders relating to the discontinued advertisements are no longer being filled; it being understood that remittances which cannot be identified as relating to the discontinued advertisement need not be returned to the senders;"
Because it has been determined that the Respondent breached the Affidavit in the manner heretofore found, and based on the agreement between the parties in regard to an earlier distribution of funds, it is hereby ordered that, to the extent that the Respondent, under the joint guidance of Counsel or other representatives of both parties to this proceeding, can identify the funds that have been and will in the future be derived from sales resulting from the advertising matter in use as of the time of the filing herein of Complainant's Motion of December 12, 1967, such funds shall be promptly returned to the remitters with a statement to the effect that the advertising material in question has been discontinued and that orders relating to the discontinued advertisements are no longer being filled. Since this disposition relates to all remittances received during the period of the use of, and all remittances based upon, the advertising material found to have been in breach of the Respondent's Affidavit, it is doubtful whether there have been any remittances which can be related to other sales promotion, but if there are any such remittances they need not be returned to the remitters.
The Respondent shall, not later than one year from the date of this decision, unless other substantial and competent factors intervene, submit a report to the Postmaster General setting forth the action taken pursuant to the preceding paragraph.
For the convenience of the parties the findings of fact heretofore made are summarized as follows:
1. The procedures followed were those devised and agreed upon by the parties;
2. The procedures followed have been proper in all respects;
3. The Respondent was not prejudiced by the fact that the hearing was held in Washington, D. C.;
4. Because of the absence of the "consent of both parties" (See document filed by Complainant on February 13, 1968), the holding of the hearing in Washington, D. C. was in conformity with the agreement of the parties as expressed in the Affidavit of January 30, 1967;
5. The Respondent, in current advertising matter related to the sale of the Mark Eden device and method, represents now and for some time has represented that "every female user of the 'Mark Eden' device and exercise program is assured some degree of development or enlargement of the female breasts";
6. The Respondent, in current advertising literature, does not represent that "the use of the aforesaid product will assure the female user of results in breast development or enlargement to the extent of specifically stated proportions or measurements";
7. The Respondent, in current advertising material, does not represent that "the use of the aforesaid product will assure the female user of results in the development or enlargement of her breasts equivalent to that depicted by any illustration, model or other demonstration";
8. In the advertising matter currently used by the Respondent the language of the refund guarantee is not "uncertain, vague, illusory or ambiguous," and it does not "otherwise lend itself to misconstruction by the readers," and
9. In the advertising matter shown herein as proposed to be used by Respondent beginning in May and June 1968, the Respondent will not breach the Affidavit of January 30, 1967, in any manner alleged in Complainant's Motion of December 12, 1967.
1. The Post Office Department is not estopped from bringing and going forward with this proceeding.
2. The Respondent, in the manner set forth herein and in the manner alleged in Complainant's Motion of December 12, 1967, breached paragraph 3(a) of the Affidavit of January 30, 1967.
3. The Respondent did not breach the Affidavit of January 30, 1967, in any other manner alleged in the Complainant's Motion of December 12, 1967.
4. In advertising matter shown herein as proposed to be used by Respondent beginning in May and June 1968, Respondent will not breach the Affidavit of January 30, 1967, in any manner alleged in Complainant's Motion of December 12, 1967.
5. All findings of fact stated herein to the extent that they embody or encompass any conclusions of law are adopted.
Proposed findings of fact and conclusions of law submitted by the parties are adopted to the extent herein indicated. Otherwise, such proposed findings of fact and conclusions of law are denied for reasons given herein, or because they are immaterial, or because they are contrary to the evidence. The Initial Decision is reversed to the extent indicated in this decision.
It should be thoroughly understood that no statement in this decision is intended, nor should it ever be construed, in any way to be a judgment as to the truth or falsity of the representations - past, current or future - used or to be used by the Respondent in the sale of the device and the program. The entire effort and intention has been to determine, solely and in the manner agreed upon by the parties, (1) whether the Respondent breached the Affidavit of January 30, 1967, in the manner alleged in Complainant's Motion of December 12, 1967; and (2) whether the revisions of the challenged advertising cure the specific breach.
Without in any way undertaking to speak for its author, I assume that the statements in the foregoing paragraph, relative to the purpose of this decision are equally applicable to the Initial Decision of the Hearing Examiner, since he, in a somewhat related proceeding, referred with approval to the testimony of a witness whom he described as being "By excellent education, splendid training and professional experience, *** outstandingly qualified as an expert on the subject matter of this proceeding" (development, by exercise, of female breasts). This expert testified that "There is no non-surgical method which would enable a woman with small undeveloped breasts to increase their size permanently or significantly." 9/ It would, thus, appear that the Initial Decision herein and, certainly, this decision are limited to the questions of the alleged breach and the curing of the breach of the Respondent's Affidavit.
While the Initial Decision has been reversed on a crucial point regarding a breach of Respondent's Affidavit, there are just two additional matters that should be disposed of at this time.
The first of these items is the statement on page 8 of the Initial Decision in Finding of Fact number III that "Thus it is fair to infer that the Post Office Department probably faced a substantial risk of losing the lawsuit then pending and described in paragraph designated 7 of the affidavit of January 30, 1967." This portion of this Finding of Fact is set aside as being without foundation in the record and because it is mere speculation.
The last item requiring special attention is the statement on page 9 of the Initial Decision in Finding of Fact number VII that "Closing a file in the Postal Inspection Service means that it has been definitely determined that no further action is required in respect to the subject matter of the closed file." It would be proper, if the occasion arises, for the Chief Postal Inspector, or his representative designated specifically for that purpose, to state the official policy of his Bureau as to the meaning and effect of the closing of a file, so I shall not attempt to do so. Suffice it to say, that the portion quoted above from Finding of Fact number VII is set aside because it is not accurate, and because, if permitted to stand unchallenged, it could later result in embarrassment to the Post Office Department.
William A. Duvall
Acting Judicial Officer
* The Respondent indicated (Appeal Brief, p. 23) that there is no objection to treating this proceeding as that which it is in fact -- namely, another phase, but a continuing part, of the original case involving this Respondent before the Post Office Department. The Respondent was emphatic in its position that the absence of such objection should not be interpreted to indicate its consent to the broadening of the issues of the instant proceeding. It has been made clear herein that the issues of this proceeding have been strictly confined to the issues arising out of the alleged breach of the Affidavit of January 30, 1967. The Docket Clerk advises (1) that, in the course of her nearly 20 years experience in this Department, it has never been found necessary or desirable to fragment a case by dividing the file into sub-parts A and B, etc.; (2) that other cases have been tried in the Department in which the records are fully as voluminous as the present record; and (3) that by segregating a part of this case, the docketing and filing system which has long been successfully employed, will be disrupted without the realization of any compensating benefit. Accordingly, all papers herein will be deemed to be marked to indicate, in conformity with long-standing practice, that they constitute part of P.O.D. Docket No. 2/204, and the contents of the file formerly designated P.O.D. Docket No. 2/204A will be consolidated into the existing P.O.D. Docket No. 2/204. Because it was requested by Counsel for the Respondent, the transcript of the pre-hearing conference herein will be deemed to be, and treated, as a part of the official record of this proceeding.
APPENDIX A
NATHAN G. GRAY
American Trust Building
Berkeley, California 94704
Tel: 845-6161
STARK & CHAMPLIN
1100 Financial Center Building
Oakland, California 94612
Tel: 834-2200
Attorneys for Respondent
BEFORE THE POST OFFICE DEPARTMENT
* * *
In the Matter of the Complaint that ) ) Mark Eden, ) ) P.O.D. Docket at ) No. 2/204 ) San Francisco, California, ) AFFIDAVIT OF ) DISCONTINUANCE (hereinafter called Respondent, is ) engaged in conducting a scheme for ) obtaining money through the mails ) in violation of 39 U.S. Code 4005.) )
_________________________________________)
The undersigned, being the owners of all the capital stock of Respondent, being first duly sworn, say:
1. That the advertisement complained against and involved in the captioned proceedings herein (a copy of which is attached to the Complaint) has been discontinued and aforesaid advertisement or advertising matter containing express or implied representations similar to those alleged in the complaint herein will not be published hereafter by Respondent or the undersigned under the name "Mark Eden" or any other name;
2. That neither Respondent nor the undersigned will fill any orders for the Mark Eden device and exercise program which are based on the advertisement agreed herein to be discontinued; that any remittances hereafter received based on such advertisement will be promptly returned to the remitters with a statement to the effect that the advertisement in question has been discontinued, and that orders relating to the discontinued advertisement are no longer being filled; it being understood that remittances which cannot be identified as relating to the discontinued advertisement need not be returned to the senders;
3. It is agreed that future advertising matter employed by Respondent or the undersigned will not contain any representations, whether expressly stated or reasonably implied from express statements, or reasonably implied from the advertisement as a whole, including any pictorial display or other advertising device therein contained to the effect that:
(a) Every female user of the "Mark Eden" device and exercise program is assured some degree of development or enlargement of the female breasts;
(b) The use of aforesaid product constitutes a scientific break-through with respect to the successful development or enlargement of the female breasts or that scientific or medical proof exists establishing the efficacy of aforesaid product for such purpose;
(c) The use of aforesaid product will assure the female user of results in breast development or enlargement to the extent of specifically stated proportions or measurements;
(d) The use of aforesaid product will assure the female user of results in the development or enlargement of her breasts equivalent to that depicted by any illustration, model, or other demonstration;
4. That in the event a refund guarantee is employed in the advertising matter, the language describing or representing such guarantee will not be uncertain, vague, illusory or ambiguous, or otherwise lend itself to misconstruction by the readers;
5. That in the event the Post Office Department receives evidence showing a breach of this affidavit, the Postmaster General or the Deputy Postmaster General or the Judicial Officer for the Post Office Department may issue an order against the name or names employed in the violative practice, provided that such other may be issued only upon written application therefor by the General Counsel of the Post Office Department, or his authorized deputy, in accordance with the procedures hereinafter provided. Said written application shall be filed with the Docket Clerk and shall set forth the specific nature of the claimed breach and the facts relating thereto in a manner reasonably sufficient to apprise the undersigned of the objectionable aspects of the advertising involved in the alleged breach. The Docket Clerk shall upon receipt of such application cause the same to be served by mail upon the undersigned, with copies to counsel for the undersigned at their addresses of record in the above captioned proceeding. Within 15 days of service by the Docket Clerk of an application as aforesaid, the undersigned may file with the Docket Clerk a written answer responding to the alleged grounds upon which it is claimed that this affidavit has been breached. Upon receipt of such answer, the Docket Clerk shall notify the parties and their counsel in writing of the time and place of a hearing upon said application. The time of said hearing shall be not less than 30 days from the receipt by the Docket Clerk of the answer. The place of said hearing shall be Washington, D. C., provided that the hearing officer may specify a different place upon consent of both parties. The undersigned may at any time prior to the hearing revise its advertising matter consonant with the charges of alleged breach in the aforesaid application and furnish a copy of such revised advertising matter to the General Counsel's office no later than 5 days prior to the scheduled hearing. Such revision shall be deemed to have been done upon the giving of notice of the said revisions by the undersigned to all publications carrying said advertising matter, and upon service of copies of the said notices to the General Counsel, with proof of service thereof. The hearing authority presiding at the hearing on the aforesaid application shall determine first, whether this affidavit has been breached in the manner alleged and, second, whether the revisions, if any, of the challenged advertising have cured the alleged breach. Pending a hearing on the matter of breach, the Judicial Officer of the Department may order the mail of the Respondent to be impounded and afford the undersigned the opportunity to inspect all such mail and to receive mail unrelated to the alleged breach; provided, however, that any mail related to the alleged breach which is so impounded shall upon the request of Respondent be ordered released to Respondent upon condition that Respondent deposit all cash, checks, postal orders or other remittances therein contained, in trust, with a responsible trustee. Upon a hearing and determination of the question of breach, the hearing examiner shall order appropriate distribution of the funds so deposited in trust. In the event that the undersigned neither revises its advertising nor requests a hearing within the time period above provided, the order applied for may be thereupon issued;
6. That in the event scientific or medical proof in the future should establish the efficacy of the product in question for the purposes advertised in the advertising matter agreed to be discontinued herein, Respondent or the undersigned may, in future advertising matter, employ representations as to the alleged scientifically or medically established efficacy of the aforesaid product, it being understood that the General Counsel's office reserves the right to apply for the issuance of an order pursuant to the statute cited in the caption hereof in the event it is believed that such scientific or medical proof is lacking, and, in such event, it is agreed that the undersigned may request a hearing as provided above;
7. That upon the execution by the undersigned and acceptance by the General Counsel's Office of this affidavit, the fraud order issued herein shall be revoked, the temporary restraining order issued in Civil Action No. 46064, Mark Eden v. Lim P. Lee, now pending in the U. S. District Court for the Northern District of California, Southern Division, shall be revoked and any funds held in connection therewith shall be released to the undersigned for disposition in accordance with Paragraph 2 of this affidavit. It is understood that any funds so released pursuant to the foregoing shall not be construed as funds approved by the General Counsel's office for retention by the undersigned. It is further understood that approval by the General Counsel's office of this affidavit shall not be construed as approval of affiant's current advertising, and nothing herein contained will be construed in this, or any other proceeding, as constituting an admission by the undersigned of any impropriety in the past use of the advertising herein agreed to be discontinued, the purpose of this affidavit being to compromise and settle the conflicting contentions of the parties to this proceeding. Upon acceptance of this affidavit by the General Counsel's office, all further proceedings by the General Counsel with respect to the representations alleged in the complaint herein, or representations substantially similar thereto, will be suspended, to be reopened only in the manner provided in paragraph 5 above;
8. Except as hereinabove provided it is understood that the acceptance of this affidavit by the General Counsel's office does not estop the said office or the Department from instituting proceedings against the Respondent pursuant to Title 39, U. S. Code, Section 4005, on the basis of any advertising matter employed by Respondent and/or undersigned, deemed to be in violation of the provisions of aforementioned statute;
9. It is further understood that the General Counsel's office has not reviewed, screened or evaluated any advertising matter submitted or exhibits by the Respondent or its attorneys, nor has the General Counsel's office indicated or suggested any express or implied approval or acceptance of such advertising matter;
And further affiant saith not.
Jack Feather
Eileen Feather
Subscribed and sworn to before me, a Notary Public in and for the State of California, County of Alameda , this 30th day of January , 1967.
1/ At the suggestion of the Hearing Examiner, a supplementary proceeding (Tr., pp. 405-465, inclusive) was requested by the Respondent and held before the undersigned on the afternoon following the conclusion of the hearing on March 22, 1968. At this proceeding, Respondent's motion to release the impounded funds of the Respondent was denied for reasons there and then stated.
2/ The Affidavit in question is attached hereto as Appendix A.
3/ U.S. Bio-Genics Corp. v. Christenberry, 173 F. Supp. 645 (DCSDNY, 1959); aff'd. per curiam, 275 F.2d 561 (CA 2, 1960).
4/ At Respondent's request, the Judicial Officer on November 8, 1966, ordered the impounding of Respondent's mail pending the filing by the Respondent of a Motion for Reconsideration of the Departmental Decision.
5/ At this point there was some insignificant departure from the strict terms of the affidavit in that the 5th sentence provided that the notice of hearing would not be sent to the parties until after the receipt of Respondent's Answer. The 6th sentence provided that the hearing would be not less than 30 days from the receipt by the Docket Clerk of the Answer. The effect of the divergences from these provisions, however, was to move the proceeding along more expeditiously, and the Respondent has repeatedly indicated a desire for speedy action.
6/ These sentences are numbered herein, but, of course, they are not numbered in the Affidavit.
7/ See In re Rice, 256 F. 858 (DCNY, 1919). Another example involved Hollywood Import Co., P.O.D. Docket No. 1/154, (1960). There have been other such proceedings.
8/ These Appendices are identical, respectively, with Exhibits B, C, D and E to the Complainant's Motion of December 12, 1967, as amended, except that the address shown in Appendix C hereto shows "Dept. M-1067" while the comparable item in Ex. C to the Complaint shows "Dept. G-107." Appendices B-E hereto are also identical, respectively, with Exs. C-3-B, C-3-C, C-3-A, and C-3-D which were received in evidence at the hearing (Tr., p. 113).
9/ In re National Health, P.O.D. Docket No. 2/271, Transcript of hearing, pages 35-36; Initial Decision, January 10, 1968, page 10. The Departmental Decision in this case, and the accompanying Fraud Order, were issued April 24, 1968. See also, remarks of Respondent's Counsel, at Tr., p. 362.