In the Matter of the Complaint Against ELEANOR MARTIN COMPANY at Douglas, Michigan 49406 P.O.D. Docket No. 3/34 07/30/71 Wenchel, Adam G. APPEARANCES: For Complainant: I. F. Kardos, Esq.; William F. Lawrence, Esq.; Daniel S. Greenberg, Esq.; Law Department, United States Postal Service, Washington, D.C. For Respondent: Charles Rowan, Esq.; Milwaukee, Wisconsin
This proceeding was initiated by the issuance of a Complaint charging Respondent with conducting a business to obtain remittances of money through the mails by means of false representations about "Nutrivena 25", a product Respondent sells as a remedy for wrinkles and other aging skin conditions.
Upon the docketing of the case, Chief Hearing Examiner William A. Duvall signed an Order assigning the proceeding to Hearing Examiner Jesse B. Messitte.
The Answer filed by the Respondent admitted that it advertises and solicits orders through the mails for the product and that the advertising material attached to the Complaint, (which were copies of Complainant's Exhibits A and B, subsequently admitted in evidence at the Hearing) formed a part of its advertising. Otherwise Respondent denied the material allegations of the Complaint. Thereafter, the matter came on for hearing before Hearing Examiner Messitte, who after receiving posthearing briefs issued an Initial Decision in which he recommended the issuance of a remedial order under 39 U.S.C. 4005.
Two further events are pertinent.
a. Enactment of Public Law 91-375. Subsequent to the Initial Decision the Congress on August 12, 1970, enacted the Postal Reorganization Act, P. L. 91-375. It revised and restated Title 39, United States Code; however, no changes in substance were made in provisions of law pertinent to this proceeding. All provisions of the Postal Reorganization Act are now in force.
Appendix A explains the changes made by the Postal Reorganization Act insofar as they are pertinent to this proceeding.
Since the instant proceeding was commenced prior to enactment of the Postal Reorganization Act, citations to sections of Title 39 in this Decision, unless otherwise noted, are to that title as it existed prior to the Postal Reorganization Act.
b. Appointment of Acting Judicial Officer. On June 26, 1969, Deputy Postmaster General E. A. Klassen appointed Chief Hearing Examiner Duvall as Acting Judicial Officer to serve during the vacancy in that office. Mr. Duvall served in that capacity until May 30, 1971. During this period to in continued in his position of Chief Hearing Examiner of the Post Office Department.
Appellant takes six exceptions to the Initial Decision. Stated in brief they are:
1. The Hearing Examiner only found the questioned representations to be false and did not find them to have been fraudulently made.
2. The Hearing Examiner was disqualified because this proceeding was assigned to him by the Chief Hearing Examiner who was then the Acting Judicial Officer and the Hearing Examiner did not rule on this question.
3. There was no evidence that the Appellant was engaged at the time of the proceeding in obtaining money by false pretense.
4. The Hearing Examiner failed to find that Appellant received mail related to aspects of its business not involved in this proceeding.
5. The Order recommended by the Hearing Examiner by which mail addressed to the Appellant would be returned unless examined and identified as not relating to matters involved in this proceeding is not authorized by 39 U.S.C. 4005.
6. The Hearing Examiner based his Initial Decision in part on the facts established in a different proceeding.
I
The first exception taken is that the Initial Decision did not find the representations to have been fraudulent made, but only that they were false. Respondent argues that the amendment to 39 U.S.C. 4005 made in 1968 did not eliminate fraud as a necessary element of proof.
However, a primary purpose of the amendment made by P. L. 90-590 was to eliminate the necessity of proving fraud. In fact P. L. 90-590 changed the caption of Section 4005 from "Fraudulent and Lottery Mails" to "False Representations; Lotteries".
The purpose and effect of P. L. 90-590 are clearly set forth in House Report No. 235, 90th Congress, 1st Session, to accompany the bill (H.R. 1411) that became P. L. 90-590 as follows:
"PURPOSE
"It is the purpose of this legislation to improve one of the major statutory measures for protecting the consuming public by eliminating the necessity for establishing in 'intent to deceive' in connection with the issuance of mail-stop orders by the Postmaster General under 39 U.S. Code 4005, which are issued to protect consumers who are being victimized by false representations by promoters thorough the U.S. mails." (page 3)
"The civil postal fraud statute (39 U.S.C. 4005) is a protective statute seeking to protect a consumer from being victimized by false representations sent through the U.S. mail. It protects the consumer by authorizing the return of his mail containing remittances, generally in the form of checks or money orders, addressed to the unscrupulous promoter.
"In order to establish a basis to issue a mail-stop order under the civil postal fraud statute, the Post Office Department is required to prove that--
(1) Advertising is being used by a promoter who seeks money or property through the mail;
(2) The advertising contains representations which are material and false as a matter of fact; and
(3) The false representations were made with intent to deceive.
* * * * * * *
"The Post Office Department is not usually troubled with proving the use of the advertising or that the advertising contains representations which are material and false as a matter of fact. It is seriously hampered by the necessity of meeting the burden of proof as to intent. The courts consistently have held that the word 'fraudulent' as used in the statute, requires a proof of intent (Reilly v. Pinkus, 338 U.S.C. 269).
"The bill will eliminate the necessity for establishing the intent to deceive, which is wholly incompatible with the underlying purpose of the civil fraud statute--the protection of the public--the consumer--against the use of the mail to distribute false representations as a basis for obtaining money or property." (page 6)
The purpose of the Congress in enacting the law is clear. I see no impediment in the statutory language to effectuating that purpose.
II
Respondent contends the Hearing Examiner was disqualified because this proceeding was assigned to him by the Chief Hearing Examiner who was then the Acting Judicial Officer and that the Hearing Examiner did not rule on this question. 1/
At all times during the pendency of this proceeding until May 30, 1971, the posif Judicial Officer was vacant. On June 26, 1969, the Chief Hearing Examiner was appointed Acting Judicial Officer and served as such until May 30, 1971.
Two Hearing Examiners appointed under the first sentence of Section 11 of the Administrative Procedure Act (formerly 5 U.S.C. 1010, now 5 U.S.C. 3105) were employed by the Post Office Department for a period that commenced prior to the filing of the Complaint in this case, and ended after the Hearing Examiner's decision. Mr. Messitte, to whom this case was assigned, was one and Chief Hearing Examiner Duvall was the other.
To support this exception Respondent cites the requirement of 5 U.S.C. 3105 that "Hearing Examiners shall be assigned to cases in rotation so far as practicable, and may not perform duties inconsistent with their duties and responsibilities as Hearing Examiner".
Respondent has relied almost completely on two District Court decisions namely: Federal Trial Examiners Conference v. Ramspeck, 104 F.Supp. 734 (D.C. 1952) and Borg Johnson v. Christenberry, 169 F.Supp. 746 (S.D.N.Y. 1959). However, this reliance is misplaced, since the former was reversed by the Supreme Court (345 U.S. 128) in an opinion totally at odds with the theory of the District Court and the latter was reversed in effect by the Congress when it established the position of Judicial Officer by legislation.
The position of Judicial Officer was established by regulation in 1958 under authority of Reorganization Plan No. 3 of 1949 and former 5 U.S.C. 383 and was so established at the time of the proceeding involved in Borg Johnson which held that the Judicial Officer could not preside at the testimonial Hearing.
Congress enacted P. L. 676 to give an express statutory authorization for position of Judicial Officer and to authorize him to perform the function that Borg Johnson said violated Administrative Procedure Act provisions unless statutory authorization existed. The provisions of P.L. 86-676 were subsequently codified in 39 U.S.C. 308a by P. L. 87-646. 39 U.S.C. 308a provides "The Judicial Officer shall be the agency for the purposes of the Administrative Procedure Act." The Senate Committee Report explains the purpose of this language as follows:
"The legislation will result in no additional position or employee in the Department since the position was established by administrative action in 1958. However, certain of the duties assigned to the judicial officer were rendered ineffective by a court decision. The court enjoined enforcement of a fraud order on the ground that the judicial officer who presided at the reception of evidence in the case was without authority to do so under the Administrative Procedure Act. The court found in effect that legislative authority is necessary in order to permit the judicial officer to perform this function." (S. Rep. 1825, 86th cong., to accompany the bill (H.R. 11516) that became P. L. 86-676).
Section 952.17 of the Rules of Practice (39 C.F.R. 952.17) which were applicable to the hearing provided in part:
"The presiding officer at any hearing shall be a Hearing Examiner qualified pursuant to the Administrative Procedure Act (5 U.S.C. 1010) or the Judicial Officer (74 Stat. 553, P. L. 86-676). The Chief Hearing Examiner shall assign cases to Hearing Examiners upon rotation so far as practicable."
Respondent asserts that because Mr. Duvall was the Acting Judicial Officer, he was not the Chief Hearing Examiner and that as a consequence the rotation of Hearing Examiners directed by 5 U.S.C. 3105 was not followed. Not only are several links in the chain of thought missing, but the conclusion is erroneous.
The Chief Hearing Examiner, who was called to testify at the Hearing as to his duties, testified cases are assigned on a purely mechanical rotation basis. An examination of the dockets of the Division of Hearing Examiners for the period involved confirms the strict rotation of assignments.
Tr. p. 36.
The Chief Hearing Examiner remained Chief Hearing Examiner even though designated to perform the duties of the Judicial Officer during the vacancy in that office. That those duties were not inconsistent with his duties as Chief Hearing Examiner is established by the consent of the Civil Service Commission to his continuing as Acting Judicial Officer. But, if as Respondent argures that nonwithstanding the Civil Service Commission's action Mr. Duvall was disqualified from, or incapable of, performing the duties of Chief Hearing Examiner in this proceeding, he would have been disqualified from, or incapable of, performing any Hearing Examiner function in it. Since Mr. Messitte then would have been the only available qualified Hearing Examiner, only he could properly have heard the case, and, of course, he did.
See Mr. Duvall's testimony (Tr. p. 37). CSC regulations in point are 5 C.F.R. 930.209(b).
Mr. Messitte was not disqualified from sitting as the Hearing Examiner and rendering the Initial Decision in this proceeding.
III
Respondent's third exception is that there was no evidence that it was engaged at the time of the proceeding in obtaining money by false pretenses.
While the case was before the Hearing Examiner, Respondent neither denied that it was using Complainant's Exhibits A and B, nor offered proof that it had discontinued their use. Rather, paragraph 2 of Respondent's Answer filed less than a month before the Hearing admitted "Exhibits A and B are a part of its advertising material." (underscoring supplied). Thus, the currency of the advertising was to hear and dispose of this matter. The applicable Postal Service Regulations (39 C.F.R. 221.11; 36 F.R. 12409) authorize the Judicial Officer to modify, suspend or rescind any decision of a Judicial Officer in a False Representation proceeding. Thus, even if the former Acting Judicial Officer had acted as such in this proceeding, the incumbent Judicial Officer could properly modify, suspend or rescind that action. A fortiori, there is no basis for concluding that the incumbent Judicial Officer cannot act on matters on which the Acting Judicial Officer did not act.
See to the same effect National Association of Trailer Owners v. Day, C.A.D.C. 1962, 299 F.2d 137.
The June 4 Notice afforded the parties opportunity to raise objections to the incumbent's making the Postal Service Decision on the basis of his prior postal employment. No such objections having been raised and the other objections of the Respondent having been considered and found insufficient to preclude my consideration of the matter, I find no valid objection exists to the incumbent Judicial Officer's acting in this matter. Accordingly, the appeal is being decided on the merits.
After a review of the entire record and consideration of the arguments presented, I find the Initial Decision to be supported by the evidence presented. Hearing Examiner Messitte was properly designed to hear this case and render an initial decision herein and no reason exists for the undersigned not to dispose of this proceeding on the merits.
It does not appear that the Hearing Examiner's reference to that Initial Decision was intended as anything more than a demonstration that the result he reached in this matter was not capricious or discriminatory. But whatever his reason for referring to that proceeding may have been, it is clear that the Hearing Examiner based his findings of fact solely on the record made in this proceeding.
Following the appointment of the incumbent Judicial Officer, he advised the parties of that occurrence and gave them information concerning his responsibilites in his prior capacity as Assistant General Counsel, in charge of the Legislative Division of the Post Office Department. In connection therewith the notice stated:
"Nevertheless, the parties are hereby allowed fifteen days from the date of their receipt of this notice to interpose such objections, if any, as they may have to my considering and deciding the appeal in the above-captioned matter. If no objection is filed within the time specified, the parties will be deemed to have waived any objection to my considering and deciding the appeal in this matter."
In response thereto the Respondent filed an untitled paper (hereinafter referred to as the "Response") on July 8, 1971, approximately 31 days after receipt of the Notice.
The Response raises three points. These are quoted and discussed below. The first paragraph of the Response is as follows:
Respondent hereby objects to all further proceedings in the above matter and to the Honorable Adam G. Wenchel, Judicial Officer deciding the appeal in this matter because this matter has become moot by reason of the discontinuance by the respondent of all of the advertising claims objected to in the complaint on and since June 22, 1970. The Statute under which this proceeding was brought, 39 U.S.C. 3005 provides that a fraud order may be issued upon evidence satisfactory to the Postmaster General to the Postal Service that 'any person is engaged in conducting a scheme' to obtain money upon false representations. The Statute confers authority to issue an order where it is found that the advertiser is presently engaged in the alleged scheme. The respondent here has not used any of the objectionable advertising claims for the past year."
The decision in this case must be based on the evidence of record herein. Obviously, there is not now any evidence of record covering the matter stated in the paragraph of the Response quoted above. That paragraph might form the basis for an appropriate motion under Section 952.29 or some other rule by which the facts could be developed if their significance should be shown. The Respondent's contentions go to the merits; they cannot form a basis for the Judicial Officer to abandon the proceeding short of final decision.
The second point stated in the Response is:
"Furthermore the respondent is engaged in the sale of various other products through the mails under the name of Eleanor Martin Company. Samples of the advertising material used to sell these other products is attached hereto."
The matter presented in this paragraph covers the same ground as Exceptions 4-5. It requires no separate discussion. See pages 8-10 above.
Finally Respondent states:
"The right of the new Judicial Officer to hear the appeal in this case is further challenged on the ground that an appeal must be decided by the Judicial Officer to whom the appeal was made where the objection has been raised that he had no right to appoint the Hearing Examiner who heard the case. This invalid appointment of the Hearing Examiner cannot be cured a year and a half later by the appointment of a new Judicial Officer."
It is difficult to see the connection between the part of the first sentence preceding the clause beginning with "where" and the balance of the paragraph. The latter has been considered and disposed of on page 5 through 8, above, in response to Exception 2. As to the former, it is clear that the undersigned has jurisdiction
The false representation law authorizes the issuance of a remedial order that directs the return of mail if the Respondent or his representative "is first notified and given reasonable opportunity to be present at the receiving post office to survey such letters or mail before the postmaster returns such letters or mail to the sender."
House Report No. 235, 90th Congress, 1st Session, to accompany H. R. 1411, which became P. L. 90-590 explains this provision as follows:
"The fifth amendment adds provisions to paragraph (1) of section 4005(a) to make what is now an administrative procedure, a statutory requirement. The requirement is that the addressee or his representative be given an opportunity to survey the mail which may be the subject of a mail-stop order."
Thus, the terms of the proposed Order to which exception is taken are terms the Congress in enacting P. L. 90-590 contemplated would be included in orders issued under 39 U.S.C. 4005.
The full discussion of the form of the Order contained in the Report is set out in Appendix B.
VI
Respondent's final exception is that the Hearing Examiner based his Initial Decision in part on the facts established in a different proceeding.
The Hearing Examiner in the Initial Decision carefully reviewed the evidence in the instant proceeding. He found form that evidence that the representations charged were made by the Respondent and that they were false. After having made these findings and having stated his conclusion, he referred to a case involving a similar product.
Accordingly, the Initial Decision is affirmed and a remedial order as provided in 39 U.S.C. 3005 (formerly 39 U.S.C. 4005) will issue forthwith. The form of the remedial Order heretofore used in False Representation proceedings is modified with the decision in this matter in order to recognize the enactment of the Postal Reorganization Act, to modernize the language of the Order in some respects, and liberalize the terms of the Order.
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