In the Matter of the Petition for ) January 23, 1975 Supplemental Order Against ) ) VITA-E DIET ) 11526 Burbank Boulevard ) ) at ) ) North Hollywood, California 91601 ) ) and ) ) 22028 Ventura Boulevard ) Woodland Hills, California 91364 ) P.S. Docket Nos. 2/138 and 2/153 APPEARANCES: Daniel S. Greenberg Consumer Protection Office Law Department Washington, D.C. 20260 for Complainant Richard M. Crane, Esq. 9595 Wilshire Boulevard Beverly Hills, California 90212 for Respondent Lussier, Edward F.
The case is before the Judicial Officer on Petition for a Supplemental Order to Postal Service Order No. 74-22 issued on March 6, 1974 and Postal Service Order No. 74-23 issued on March 7, 1974. Postal Service Order No. 74-22 was issued against E-Diet at Box 376, Encino, California, and Box 29, Tarzana, California, with respect to the sale of a product called "E-Tablets". That case was docketed as Postal Service Docket No. 2/153. Postal Service Order No. 74-23 was issued against Slim and Trim at Box 376, Encino, California, with respect to the sale of a product called "Vital-E Tablets and Vitamin
'E' Diet". That case was docketed as Postal Service Docket No. 2/138. The two cases were otherwise consolidated on motion of the Respondents therein on the basis that one Milton Kalman, who signed the Answer in both cases, was the principal in both proceedings. The referenced orders were mail stop orders issued under § 952.11(a) of our Rules of Practice in Proceedings Relative to False Representation and Lottery Orders, 39 Code of Federal Regulations, Part 952. The basis for the issuance of the orders was that the Respondent had withdrawn its Answer to the Complaint, which alleged false representations in violation of 39 U.S.C. 3005 in each case, and entered a plea of nolo contendere.
The Petition filed in the case presently before me alleges an evasion of the earlier orders by the activities of Vita-E Diet, the Respondent herein. At the request of Vita-E Diet a hearing was held by the former Judicial Officer of the Postal Service at which time both parties presented evidence bearing upon the issue of whether a basis exists for the issuance of a supplemental order under § 952.30 of the Rules of Practice which provides as follows:
"When the General Counsel or his designated representative shall have reason to believe that a person is evading or attempting to evade the provisions of any such order by conducting the same or a similar enterprise under a different name or at a different address he may file a petition with accompanying evidence setting forth the alleged evasion or attempted evasion and requesting the issuance of a supplemental order against the name or names allegedly used. Notice shall then be given by the Docket Clerk to the person that the order has been requested and that an answer may be filed within 10 days of the notice. The Judicial Officer, for good cause shown, may hold a hearing to consider the issues in controversy, and shall, in any event, render a final decision granting or denying the supplemental order."
There is no real dispute of applicable law, the issue being one primarily of fact. Respondent in essence contends that the Complainant has not shown an identity of product, representations, or legal entities sufficient to support issuance of the supplemental order. Complainant contends that the evidence fully supports a finding of an attempted evasion of the earlier orders. For the reasons hereafter given I agree with Complainant's view of the case.
A test purchase from Respondent Vita-E Diet reveals a product (Complainant's Exhibit 20) ostensibly identical in all material respects to those received in response to orders earlier placed with E-Diet (Complainant's Exhibits 18, 19). The ingredients shown on the labels of the bottles are identical. There is the distinction only that the tablets from Vita-E Diet are labeled "Vita-E" and the tablets from E-Diet are called "Vital-E" tablets. Respondent argues that further proof is necessary to show the products are essentially the same. It cites Kirby v. Shaw, 358 F.2d 447, in support of its contention that Complainant has not established the two products were the same.
In the Kirby case the issue before the court was not one of the extent of proof necessary, but rather the right of the Respondent to an evidentiary hearing prior to issuance of a supplemental order. In the Kirby case the Respondent was claiming that the products were dissimilar and wanted a hearing to offer medical testimony to that effect. In the instant case the Respondent offered no evidence to show the products were different. It chose instead to argue that the Complainant has not carried its burden of establishing that the products are essentially the same.
While Respondent did not elucidate the point, it seems clear that the type of evidence it considers necessary to establish product identity would be laboratory analysis. The record contains neither argument nor legal precedent bearing on such need. There might indeed exist a factual situation where such proof would be necessary but this case does not present it. The physical exhibits above are most persuasive, and viewed in the light of the other circumstances, 1/ leave no doubt about identity of products here.
With respect to the advertising claims made by Respondent Vita-E Diet, they are virtually identical to those made by E-Diet in Postal Service Docket No. 2/153. The advertisement used by E-Diet reads as follows:
"Lose a Pound a Day and More
NEW VITAMIN 'E' DIET
GIVES FAST WEIGHT LOSS
LOS ANGELES (Special)--New scientific discoveries have now produced a Vitamin-E diet that quickly works wonders on overweight people, and reportedly is gaining great popularity across the country with glowing reports of easy weight loss 'while still eating almost as much as you want.'
Those who follow the simple Vitamin E diet report an average loss of at least a pound a day and even more without exercise or starvation. Nutritionists' files are bulging with happy testimonials from formerly overweight people who are now trim and slim again. Best of all, you can still eat almost as much as you want of the 'forbidden foods' like steak, chicken, fish, sauces, gravies, bacon & eggs and still lose weight.
Chewable (candy-like) vitamin E tablets, as used in the diet plan, contain a new scientific combination of ingredients that quickly curbs and controls the appetite while also giving the wondrous benefits of Vitamin E which is so essential to good health.
The use of the new Vitamin E Diet tablets and foods prescribed in the plan will, through natural action, act to help your body use up excess fat. According to recent clinical tests, a person who is deficient in Vitamin E or Protein 'will double the speed of fat utilization' with the use of Vitamin E.
E-DIET AVAILABLE
To get a copy of this highly successful diet and E tablets, send $5.00 for 10 day supply (or $7.00 for 20 day supply or $10.00 for 30 day supply to): E-Diet, Dept. O, Box 376, Encino, Calif. 91316. (Unconditional money back guarantee if not satisfied). In Calif. add 5% tax."
The advertisement (Exhibit A to Complaint; Complainant's Exhibits 13, 16, 17) used by Respondent Vita-E Diet is identical in all but the following respects: The large print of the headline's second and third sentences reads "VITAMIN E DISCOVERY OFFERS FAST WEIGHT LOSS". The dateline is "Hollywood" rather than "Los Angeles". The word "now" is eliminated from the first sentence of the first paragraph beginning "New scientific discoveries have now produced". The word "tests" in the second sentence of the fourth paragraph beginning "According to recent clinical tests" is changed to the singular "test". In two other advertisements in evidence (Complainant's Exhibits 14, 15) there is the additional wording above the headline "Lose 10-20-30 Pounds]".
The address for ordering is also changed to "Vita-E Diet" at various addresses. In an advertisement in the National Tattler of February 24, 1974, the address was given as "11526 Burbank Bl., North Hollywood, Cal. 91601". (Exhibit A to Complaint). In advertisements in March 1974 in the Ledger Gazette and the National Tattler the address of 11526 Burbank was also used (Complainant's Exhibits 14-17). In an advertisement in the May 26, 1974, National Enquirer the address of 22028 Ventura Blvd., Woodland Hills, Calif. 91364" was used (Complainant's Exhibit 13).
The Slim and Trim advertisement which was the basis for the action in Postal Service Docket No. 2/138 mentioned in the first paragraph of this decision used a completely different format. However, it contained essentially the same claims promoting "Vital-E" tablets as used in the above-described advertisements although it also included additional claims regarding specific weight losses. It also used the same box number, 376 at Encino, California, which E-Diet used.
The identity of the parties presents a major issue in this case. Respondent's principal witness was Mrs. Sharon Kalman. Mrs. Kalman personally signed the Answer to the Petition for Supplemental Order in this case. She married Milton Kalman, the owner of E-Diet and Slim and Trim, in November 1973. She had previously had the surnames "Huffman" and "Fernandez". The names Sharon Fernandez, Sharon Huffman and Sharon Kalman are all prominent in documents in this record as they relate not only to Respondent Vita-E Diet but also to E-Diet and Slim and Trim.
Box 29 at Tarzana, California, was opened in 1971 upon application of Sharon Fernandez for a firm shown as "Antigo at Home" at the business address of 18584 Ventura Boulevard, a building owned by her (Tr. 103; Complainant's Exhibit 2). Mrs. Sharon Kalman testified that she has maintained a business named "Sharon's Antiques" at the 18584 Ventura address for eleven years (Tr. 91). Box 29 was used by Milton Kalman in the conduct of E-Diet. It would appear from Complainant's Exhibit 18A that this box was also used by Milton Kalman in the conduct of his Slim and Trim business. This box is still held by Sharon (Tr. 135). Box 376 at Encino, California, used by both E-Diet and Slim and Trim had been opened in 1971 upon joint application of Dore Kalman, Milton's former wife (Tr. 293), and Sharon Fernandez (Complainant's Exhibit 11) for a firm shown as "Antiquities at Home" at the business address of 18584 Ventura Boulevard, Tarzana, California. Sharon Kalman testified that she still holds Box 376 but does not receive any mail there (Tr. 153-155). She further testified:
"By Mr. Robertson:
Q It is your box. Are you aware that an order was entered against Slim & Trim, doing business as (sic), in Encino, California, a False Representation Order on March 5, I believe, of 1974?
A No
Q You are not aware of that?
A It is Mr. Kalman's business. I am not involved.
Q. Mr. Kalman's business is in your Post Office Box?
A Yes." (Tr. 155-156).
Later, in her testimony on cross-examination, Sharon was to admit to a knowledge of the orders against E-Diet and Slim and Trim but contend she did not know the nature of the problem (Tr. 170-173).
Sharon Kalman's testimony on direct examination was that she operated three mail order businesses in the years 1971-1973, namely, "Bee Slim", "MD & S Associates" and "MGM" before starting Vita-E Diet in January 1974. On cross-examination she confirmed this testimony but upon being shown Fictitious Business Name Statements signed by her and filed with the State of California her memory was refreshed that she also owned and operated mail order businesses known as "Nu Vital-E" and "Air Force Diet" at the 18584 Ventura Boulevard address (Complainant's Exhibits 21, 22, Tr. 123-125). She also remembered that both firms were the subject of Postal Service false representation proceedings (Tr. 126, 128). She testified, however, that while she had help from Milton Kalman and his former wife in the "Air Force Diet" operation they were not partners (Tr. 131). However, the official records of this office in Postal Service Docket No. 1/95, which involved the "Air Force Diet" business, and Postal Service Docket No. 2/53, which involved the
"Nu-Vital E" business, reveal that compromise agreements were signed in each of these cases by Milton Kalman as owner. Additionally, one of the multiple firms covered in Postal Service Docket No. 2/37, a case combined with Postal Service Docket No. 2/53 because Milton Kalman was the principal in both cases, was "Vital-E" at Box 4735 North Hollywood which Complainant's Exhibit 23 shows was opened on application of Sharon Fernandez. This application shows the business address of "Vital-E" also to be 18584 Ventura Boulevard.
Sharon held office as secretary and treasurer of "Vital E" corporation resigning these offices shortly before the hearing in this case (Tr. 144; Complainant's Exhibit 3). In October 1972 Sharon Fernandez signed a Fictitious Business Name Statement with the State of Califonria representing that the business "Vital E" was being conducted as "an individual" at the 18584 Ventura Boulevard address (Complainant's Exhibit 6). She testified, however, that she did not do business as "Vital-E" as an individual but instead gave permission to Milton Kalman "to use the name in a corporation and not use it as a dba, single" (Tr. 146, 147).
Sharon Kalman's explanation of how she decided to go into business as Vita-E Diet, the Respondent in this proceeding, is that at the end of 1973, at which time she was married to Milton Kalman, she began looking through the newspapers and magazines for a mail order item in the diet field (Tr. 97). The Postal Service Complaints against Slim and Trim and E-Diet had been filed in October 1973 (Postal Service Docket Nos. 2/138 and 2/153) and consolidated on motion of Respondent in early December 1973. Sharon filed a Fictitious Business Name Statement (Complainant's Exhibit 8) and obtained a post office box (Complainant's Exhibit 9) in January 1974 and a postage meter license (Complainant's Exhibit 1) in May 1974, using the name Sharon Huffman because, she says, her banking accounts and all her businesses were getting very confused with the name Fernandez and she wanted to separate it and hide the identity from "competitors" in her antique business (Tr. 98, 151). For advertising the Vita-E Diet business she chose Norman Lender and Associates, the same firm used by Milton Kalman (Tr. 104). She decided to use the advertisement used by her husband at the time, Milton Kalman, as "her own idea" because "It is very common in the mail order business to use ads that are running, and that appear to be a winner" (Tr. 171, 172). Her testimony is also to the effect that she alone issues instructions regarding the business affairs of Vita-E Diet (Tr. 105).
Sharon used one Wendy Kazmarek, an employee of Milton Kalman, to open a post office box in North Hollywood on behalf of the Respondent Vita-E Diet (Tr. 132; Complainant's Exhibit 12). She also hired one Irene Phillips to help her with the Vita-E Diet business (Tr. 99). Irene Phillips initially testified that she worked for Milton Kalman some years ago (Tr. 190) but admitted, after further examination, that every week she screens mail for Milton Kalman which is being detained at the Encino post office and that she does other errands for him all "as a favor", not being on his payroll (Tr. 198-199). While testifying that at one time her weight was as high as 135 pounds she had no knowledge or recollection of the fact that in the E-Diet and Slim and Trim Postal Service cases, referenced at the beginning of this decision, the Respondent's pleadings listed her as a witness who would testify that she used the product advertised and went from 220 to 133 pounds within 6 months (Tr. 191-194). Her further testimony was that while Milton Kalman maintains an office in the same building he never assists in the business of Respondent Vita-E Diet (Tr. 200).
The record also reveals that on April 30, 1974, about two months after the above-referenced Postal Service orders were issued against E-Diet and Slim and Trim, Milton Kalman opened a post office box in the firm name of "Vital E" and in listing the names of persons entitled to receive mail through the box listed, among others, both E-Diet and Vita-E (Complainant's Exhibit 2). In opening up this box, Milton gave the business address of "Vital E" as 18588 Ventura Boulevard, Tarzana, which is a building owned by Sharon and from which she carries on the Vita-E Diet business (Tr. 103). Sharon's testimony is that "Vital-E" does not own any interest in Vita-E (Tr. 153-154).
Respondent's argument that there is no factual basis for a finding of privity between Respondent Vita-E Diet (Sharon Kalman) in this case and Respondent E-Diet and Slim and Trim (Milton Kalman) in Postal Service Docket Nos. 2/138 and 2/153 is without merit. The intertwining of business activities and total incredibility of the testimony leave no doubt that the activity engaged in by Respondent Vita-E Diet is anything but another tentacle of Milton Kalman's E-Diet and Slim and Trim activities against which the Postal Service orders were issued. to permit the use of the mails by Vita-E Diet to promote the same product under the circumstances would be to endorse and approve a blatant evasion of those orders.
In view of the facts above found, a supplemental remedial order to Postal Service Orders Nos. 74-22 and 74-23 is being issued under the provision of 39 U.S.C. 3005 contemporaneously herewith.
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