In the Matter of the Complaint Against: AMERICAN SKI ASSOCIATION, Post Office Box 2606 at Kansas City, Missouri 64106 and 15 West 10th Street, Room 511, and 934 Wyandotte at Kansas City, Missouri 64105 P.S. Docket No. 5/101 03/31/77 Duvall, William A.; Chief Administrative Law Judge Thomas A. Ziebarth, Esq. Law Department United States Postal Service Washington, D.C., for Complainant Dudley Briggs, President, and Chyrel S. Mitchell, Corporate Secretary, Kansas City, Missouri, for Respondent Before: William A. Duvall, Chief Administrative Law Judge
The Complaint in this case was filed on November 16, 1976. In the Complaint it is alleged that the Respondent, American Ski Association, sometimes hereinafter referred to as ASA, is engaged in conducting a scheme or device to obtain money or property through the mail by means of false representations contrary to the provisions of Section 3005 of Title 39, United States Code.
The specific charges in the Complaint are that the Respondent falsely represents that:
"(a) The American Ski Association has active Chapters in Minneapolis, Minnesota, Chicago, Illinois, St. Louis, Missouri and Houston, Texas;
"(b) The American Ski Association operates ASA Airline which has scheduled ski excursions for the exclusive use of its Members beginning December 10, 1976 and continuing every few days thereafter through April 1977;
"(c) The American Ski Association has purchased two Lockheed Electra airplanes which are operated and maintained by McCulloch International Airlines;
"(d) Jan Stenerud is a Member of the American Ski Association's Board of Directors and has agreed to serve as the Association's membership 2/ director; and
"(e) The American Ski Association has pledged $45,000 in financial support for the Winter Park, Colorado school which teaches skiing to amputees, blind and otherwise physically handicapped people."
An Answer to the Complaint, signed by Chyrel S. Mitchell as Corporate Secretary, was docketed on December 16, 1976. In this Answer it is stated that, "the allegations in Complaint filed against Respondent are misinterpretations made by or on behalf of complainant, and therefore Respondent denies each and every allegation set forth in the Complaint."
Respondent does not deny that it employed certain promotional materials attached as exhibits to the Complaint, but, instead, Respondent questions the characterization of those materials as alleged in Paragraph (3) of the Complaint.
On January 5, 1977, Complainant filed a Motion for an Order Directing Discovery accompanied by Interrogatories and Demand for Production of Documents.
By Order dated January 6, 1977, the presiding Administrative Law Judge directed Respondent to respond to these interrogatories within seven days after receipt thereof and to furnish the documents requested. As of this date, no responses have been filed. The Order also specified that the hearing would commence in Kansas City, Missouri, on January 24, 1977.
Shortly thereafter, in a telephone conference call, in which counsel for both parties and the presiding Administrative Law Judge participated, Respondent's attorney advised this Administrative Law Judge that he, Respondent's counsel, and his client had decided to enter into an appropriate consent agreement which would obviate the necessity for a hearing and that, should his client change his mind and decide not to sign the consent form, he, counsel, would not represent the client at the hearing. This statement subsequently was confirmed by letter dated January 17, 1977, which letter is in the file of this proceeding.
On the strength of these representations, the hearing was continued until February 7, 1977, by Order dated January 19, 1977.
The consent agreement was furnished to Respondent's attorney on January 17, 1977, but it has not been offered for filing and, presumably, it has not been executed by the Respondent.
On February 3, 1977, Complainant filed a "Motion for Summary Initial Decision Recommending Order Under 39 U.S. Code, 3005." In support of this Motion counsel relied upon, among other things, the transcript of the hearing on a motion for the issuance of a preliminary injunction under 39 U.S. Code 3007, held on November 23, 1976, before Honorable William H. Becker, Chief Judge, United States District Court, Western District, Missouri. (U.S. Postal Service v. American Ski Association, Civil Action No. 76 CV 726-W-3) The preliminary Order and injunction sought by the plaintiff in that case were issued by the Court.
On February 3, 1977, also, the undersigned issued an Order requiring the Respondent to show cause, on or before February 23, 1977, why Complainant's Motion for summary initial decision should not be granted. The Show Cause Order was served upon Martin M. Gorin, Esq. of Kansas City, Missouri, who was believed to be Respondent's counsel. However, by the time service had been had upon Mr. Gorin he no longer represented the Respondent. There is no indication that the Respondent, or any of its officers, or anyone on its behalf, was served with, or made aware of the contents of, the Show Cause Order. No response to the Show Cause Order was ever filed by, or on behalf of, the Respondent.
Because of the lack of certainty of service upon the Respondent, Complainant's Motion for summary initial decision was denied on February 24, 1977, and the case was re-set for hearing on March 10, 1977, in Washington, D.C.
An extra copy of the Order denying Complainant's Motion and re-setting the hearing was sent to Complainant's counsel, who enlisted the assistance of the Postal Inspector who investigated this case to assure that the copy of the Order be served upon the Respondent, one of its chief officers, or its attorney, if any. Service is evidenced by a receipt in the record signed on March 1, 1977, by the Corporate Secretary of Respondent and certified on the same date by Postal Inspector M. J. Mullally by whom service was effected. And, of course, the President and the Corporate Secretary of the Respondent were present at the hearing on this day, March 10, 1977.
In this proceeding there are generally three issues to be resolved. One is, does the Respondent use the mails in the conduct of its business. The second issue is, does the Respondent make the representations with which it is charged in the Complaint. And the last issue is, are the Respondent's representations, if found to be made, materially false as a matter of fact.
With respect to the first issue, there are numerous exhibits that have been received in evidence which establish that mailings have been accomplished through the Post Office in Kansas City, Missouri. There are numerous exhibits that bear the postmark of Kansas City on letters, and they bear also the return addresses listed in the caption of the Complaint. Therefore, there is no question but that the Respondent, in the conduct of its business, does use the United States mails.
The next question to be resolved is whether the Respondent makes the advertising claims set forth in sub-paragraphs (a) through (e) of Paragraph (3) of the Complaint. Set out below are those portions of Respondent's promotional materials which make these representations. All references that follow hereafter with respect to this issue are to the Complaint and to Exhibits 1 and 2 attached to this decision which were Exhibits 1 and 2 to the Complaint.
With respect to charge (3)(a) there is found in Exhibit 2B in column two, paragraph one, the statement that, "The remaining eight Chapters are Minneapolis, Chicago, St. Louis, Kansas City, Dallas, Houston, San Diego and Los Angeles."
With respect to the charge set forth in paragraph (3)(b) of the Complaint, if one looks at Exhibit No. 1 there is the following language: "The ASA Airline *** Only members of the ASA can ride the ASA Airline." Then on the righthand side of Exhibit 1 under the caption "Schedules" there is the following language: "Departures begin December 10th and continue every few days thereafter through April." Then back to the lefthand side of the Exhibit, down near the bottom, are the words "Flying regularly to the Rockies finest areas."
The bases for the charge set forth as paragraph (3)(c) of the Complaint are found in Exhibits 1 and 2. The basis for the first half of the charge in (3)(c) is found on Exhibit 1 in the following language: "Ride the Association's own 90 passenger, 400 MPH Lockheed Electras, operated and maintained by McCulloch International." The basis of the charge in the last half of (3)(c) is found in Exhibit 2B, column two, paragraph two, in the language -- "The first is expected to be delivered in the red, white and blue ASA colors in mid-September."
The basis for the charge set forth in paragraph (3)(e) of the Complaint is found on Exhibit 2A in both columns at the bottom of the page. This portion of this exhibit contains the following language: "The American Ski Association has pledged $45,000 in financial support for the Winter Park, Colorado school which teaches skiing to amputees, blind and otherwise physically disadvantaged people."
That ASA's advertising makes the representations set forth in the Complaint is readily apparent by reference to the promotional materials themselves. In the case of Donaldson v. Read Magazine, 333 U.S. 178, at pages 188 and 189, it was said, in substance, that advertisements are to be interpreted in the light of the effect they would most probably produce on ordinary minds. In this case, however, there is no need to exercise any powers or skill of interpretation because the charges of the Complaint are stated in the precise language, or are borne out by the precise language of the advertising material employed by the Respondent.
There remains, therefore, the question as to the truth or falsity of the representations found to have been made by the Respondent.
The President of the Respondent, Mr. Dudley Briggs, was the principal witness for the Respondent, and most of the evidence presently relied upon, although it is not the only evidence in the record, is from the testimony of Mr. Briggs, himself. I see no need to dwell at length on these matters, but the record will reveal that Mr. Briggs stated that ASA does not have chapters in Minneapolis, Chicago, St. Louis, or Houston. Respondent makes the contention that it did not really represent that it had active chapters. It simply said it had chapters. But if persons are interested, in the late summer and early fall, in joining an organization which is going to fly to the Rockies to participate in the activity of skiing, it must be assumed that those chapters are viable organizations, and that they are in existence and ready and able to perform the functions that are necessary to carry their objective into being. Thus, while it has been stated that the Respondent does not have chapters in these various cities, since there are no chapters, there are certainly no active chapters, and it is not an unreasonable construction of the advertising material to interpret the language to mean that the chapters are active.
With respect to the charges in paragraphs (3)(b) and (3)(c) of the Complaint, namely, with reference to whether ASA owns two Lockheed Electras and operates an airline, the Respondent's witness stated quite frankly that Respondent was never able to complete the financial arrangements necessary to acquire the aircraft. And not having the aircraft it followed logically that there could be no airline. In addition, there is evidence in the record that there are no applications on file, and that there have been none on file with the Civil Aeronautics Board by or from ASA or American Ski Association to obtain authority to operate an airline.
With respect to the charges set forth in paragraph (3)(e) of the Complaint, namely that ASA has pledged $45,000.00 to the Winter Park School, it is true that one of the purposes of the Association, as stated in its Articles of Incorporation, is that it is to provide support for this school. I think, however, it is a matter almost of common knowledge that there are many purposes stated in the Articles of Incorporation of many organizations which are never put into effect. That is not necessarily intended as a criticism. Articles of Incorporation are drafted with sort of a general pen so that corporations may exercise options that later may be necessary or desirable. But the fact of the matter is that the statement set forth in the bottom of Exhibit 2A, that the Association has pledged $45,000.00 in financial support to the school is not true. There is some evidence that it attempted to make some sort of a pledge such as that but the pledge was never accepted and the Association was instructed to stop using the statement in its advertising material.
The remaining charge in the Complaint to be dealt with is that found in paragraph (3)(d) relating to whether it is a misrepresentation to state that Jan Stenerud was named as a director of the Association. There is in the Exhibits which were received in evidence a letter from the President of the Association, and it is dated in July of 1976, addressed to Mr. Stenerud, in which it is indicated that a position as a director of the organization had been offered to Mr. Stenerud. This letter is supported, somewhat, by an affidavit of a Mr. Halstead, president of an advertising agency in Kansas City, to the effect that it was his understanding that at about the time the letter of July 19th which is Respondent's Exhibit No. 5 was written, it was also Mr. Halstead's understanding that Mr. Stenerud was, or was about to become, a director of this Association. The date of Exhibit 2 attached to this decision is August 1976, so it is conceivable that at the time this statement was made Respondent entertained the idea and the belief, whether completely justified or not, that by the time this matter reached print and was distributed, Mr. Stenerud would have become a director. It developed later, however, that Mr. Stenerud withdrew from any arrangement or agreement, if any, that he may have had with the Respondent to become a Director. Nevertheless, despite whatever belief the President of the Respondent Association had, the fact remains that Mr. Stenerud was never, so far as this record shows, a Director of the Association.
Generally speaking, this case presents a situation in which the thinking and the planning and the hoping of the Respondent on most of these matters, in fact, on all of the matters that are specified in the charges, were in the future tense. But the statements made in the publicity material, the advertising matter, are made in the present tense as if those things which are desired and which are hoped for have already become matters of fact that had been accomplished. The fact of the matter is that those things had not been accomplished, and the basis for this conclusion is the testimony of the President of the Respondent.
Accordingly, it is found that the representations found to have been made by Respondent are materially false as matters of fact.
It is concluded as a matter of law that the Respondent is, as charged in the complaint, engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations within the meaning of Section 3005 of Title 39, United States Code.
An appropriate Order as authorized by 39 United States Code 3005, should be issued against this Respondent.
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1/ This decision was rendered orally at the close of the hearing. It has been edited and transcribed for formal issuance.
2/ Charge (d)
was amended at the hearing to delete "membership".