In the Matter of the Complaint Against STANDARD RESEARCH LABS Post Office Box 9547 at Fort Lauderdale, FL 33310 P.S. Docket No. 7/76; 06/26/80 Cowden, Joseph M. APPEARANCE FOR COMPLAINANT: Thomas A. Ziebarth, Esq. Consumer Protection Division Law Department U. S. Postal Service Washington, DC 20260 APPEARANCE FOR RESPONDENT: Jack Paller, Esq. Christopher S. Barnard, Esq. Katz, Paller & Land 470 East Paces Ferry Road Suite 2000 Atlanta, GA 30305
Respondent has appealed from the Initial Decision of Administrative Law Judge Quentin E. Grant which holds that, with regard to the sale of its product, "Calcium Pangamate (B 15 )," Respondent is engaged in a scheme for obtaining money through the mail by means of false representations in violation of 39 U.S.C. § 3005.
On August 13, 1979, the Consumer Protection Division, Law Department United States Postal Service, filed a complaint alleging that Respondent is engaged in a scheme for obtaining money through the mail in violation of 39 U.S.C. § 3005. Specifically, in paragraphs 3 and 4, the complaint alleges:
"(3) By means of such materials copies of Respondent's advertising materials attached to the complaint , and others similar thereto, Respondent represents, directly or indirectly, in substance and effect, whether by affirmative statements, omissions or implication that:
(a) CALCIUM PANGAMATE (B 15 ) is a 'universal remedy' effective in the prevention, alleviation, treatment or cure of such diseases or conditions as:
heart disease drug addiction
senility schizophrenia
autism hepatitis
angina pectoris jaundice
sexual debilities allergies
breast cancer dermatitis
alcoholism mild poisoning
cirrhosis neuralgia
diabetes sciatica
gangrene neuritis
hypertension minimum damage
brain dysfunction.
glaucoma
(b) CALCIUM PANGAMATE (B 15) will retard the aging process;
(c) CALCIUM PANGAMATE (B15) will neutralize and clear the blood of pollutants thereby increasing oxygen levels in the blood;
(d) CALCIUM PANGAMATE (B15) will maintain cellular health by increasing the efficiency of cellular respiration;
(e) CALCIUM PANGAMATE (B15) is a source of energy;
(f) CALCIUM PANGAMATE (B15) is effective in reducing the pain and discomfort caused by heart problems;
(g) CALCIUM PANGAMATE (B15) will normalize cholesterol levels and keep the arteries free from fatty deposits;
(h) CALCIUM PANGAMATE (B15) will fight fatigue by decreasing the build-up of lactic acid;
(i) CALCIUM PANGAMATE (B15) can prevent and cure heart disease; and
(j) The product furnished in response to its advertisements is CALCIUM PANGAMATE.
(4) The aforesaid representations are materially false as a matter of fact..."
At a hearing held on the complaint, Dr. George Christakis, a medical doctor with extensive experience in nutritional determinants of disease, (i.e., how what individuals eat affects the treatment or prevention of disease (Tr. 311)) testified as an expert witness in support of Complainant's position. Respondent did not call any witnesses to testify on its behalf at the hearing. However, the parties entered into a stipulation which was accepted by the presiding Judge permitting Respondent to submit, for inclusion in the record, an affidavit of Allan Cott, a medical doctor with over forty years of experience (Tr. 362-64). Dr. Cott presently concentrates on the clinical effects of nutrition on the body/brain functions (Cott affidavit).
On the basis of the exhibits received into evidence and the testimony of Dr. Christakis, which Judge Grant found to be persuasive, it was concluded in the Initial Decision that Respondent makes most, but not all, of the representations alleged, that such representations are material, and that they are false. Accordingly, he concluded that Respondent is engaged in activities which are in violation of 39 U.S.C. § 3005.
Respondent has taken eleven exeptions to the Initial Decision, each of which is addressed below.
"1. The Administrative Law Judge erred in Finding of Fact No. 3 that Respondent's advertising (with exceptions) make the representations alleged in paragraph 3 of the Complaint." 1/
Respondent argues that Judge Grant disected its advertising to find the representations alleged. It is Respondent's position that the material should be read in context and that it is the total impression of an advertisement and not phrases taken out of context that should be considered. Respondent cites M.K.S. Enterprises, Inc. v. United States Postal Service, 459 F.Supp. 1180 (E.D. N.Y. 1978) and Cates v. Haderlein, 189 F. 3d 369 (7th Cir. 1951) as supporting its position. Respondent also argues that Judge Grant failed to consider qualifying language with regard to various representations and that there is no evidence upon which Judge Grant could have based his decision as to how the ordinary mind would interpret Respondent's advertising or that the representations found are material. Finally, Respondent argues that Judge Grant relied on language which he subsequently concluded was not part of Respondent's scheme or device.
In Finding of Fact No. 3 of the Initial Decision Judge Grant quoted the specific portions of Respondent's advertising which he concluded make the representations alleged. In addition, however, in Conclusions of Law Nos. 3 and 4 he recited, with citation to appropriate case law, and applied the proper test for determining whether Respondent makes the representations alleged in the complaint. Although M.K.S. Enterprises, supra, and Cates, supra, were not cited in the decision they establish essentially the same test and rely on the same line of authority as the cases cited by Judge Grant. Moreover, contrary to Respondent's assertions, reading the portions of the advertising quoted in the Initial Decision in the context of the remainder of the language of the advertisements substantially enhances rather than diminishes the accuracy of Judge Grant's finding that the representations alleged in the complaint are made in Respondent's advertising. Respondent cites examples of language of its advertising which it argues when properly and reasonably read in context do not make the representations alleged in the complaint. The examples cited by Respondent, when taken in the context of the remainder of the advertising and, considered in the light of the effect they would most probably produce on ordinary minds, do make the representations alleged in the complaint to the extent found in the Initial Decision.
Respondent claims terminology such as "as the Russians see it" and "according to Russian research" in CX-5b qualifies the representations so that they would not be understood by the ordinary mind to make the representations alleged in the complaint. Taken in context, again as Respondent correctly insists should be done, the language pertaining to the Russians conveys and endorsement, not a qualification, of B15. For example, a subheadline in CX-5b states, "Tests on Soviet rowers prove B15 increases athletic energy." The body of the exhibit, in several places, indicates positive success by Russians and others with B15 and the article concludes with a listing headed:
"B15 AS THE RUSSIANS SEE IT
This is a list of the areas in which B15 is effective, according to Russian research."
This is followed by a list of "Functions of B15" and "Diseases treated by B15" which includes most of the functions and diseases listed in paragraph 3 of the complaint. The overall impression is that impressive benefits have in fact been realized by persons taking B15.
Respondent's position that there is no evidence concerning how its advertisements would be read and understood by an ordinary person and whether the representations are material, have been raised previously by Respondent and found to be without merit (see Standard Research Laboratories, P.S. Docket No. 7/48 (P.S.D. 1980) and the decisions cited therein).
Respondent's final contention that Judge Grant relied on a rejected exhibit, while true, does not affect the result reached since the same statement is made in Respondent's advertising which is part of its promotional materials (CX-5b)
"2. The Administrative Law Judge erred in Finding of Fact No. 6 that references to pangamic acid and calcium pangamate as B15, giving it the semblance or connotation of a legitimate vitamin is misleading because there is no vitamin officially designated as B15."
In its argument pertaining to this exception Respondent acknowledges that the finding is superfluous to the decision reached. Accordingly, while noting that this finding is supported by the record (Tr. 316), it need not be further addressed.
"3. The Administrative Law Judge erred in Finding of Fact No. 7 that calcium gluconate and Dimethyl glycine are not unique and have no special physiological or pharmacological properties.
"4. The Administrative Law Judge erred in Finding of Fact No. 14 insofar as it determines that Dr. Christakis represents the informed medical consensus.
"5. The Administrative Law Judge erred in Finding of Fact No. 15 that the representations in Respondent's advertisements are false in fact and are materially so and that they are obvious inducements to purchase the product."
These enumerations of error are based on Respondent's position that the Administrative Law Judge improperly relied on the testimony and affidavit of Dr. Christakis and failed to give proper weight to the affidavit of Dr. Cott. The fact that the presiding Judge placed greater reliance on the testimony of Dr. Christakis than the affidavit of Dr. Cott is not surprising. The credentials of Dr. Christakis are equal, if not superior, to those of Dr. Cott (Tr. 310-312; CX-6, Cott curriculum vitae and affidavit). Dr. Christakis testified in person at the hearing and was subject to cross-examination which placed the presiding Judge in a superior position to determine the reliability of his testimony and the weight that should be given thereto.
Respondent points out that Dr. Christakis had not read the Russian literature since translations were not available to him. While this contention is true, it does not significantly detract from the testimony of the witness. Dr. Christakis testified on the basis of his knowledge, experience, and review of American medical literature. According to his testimony, his conclusion that Respondent's product will not produce as represented is in accordance with the concensus of informed medical opinion (Tr. 335). This testimony is unchallenged by any evidence submitted by Respondent, notwithstanding the fact that Respondent's affidavit was prepared subsequent to the availability of the transcript of the hearing at which Dr. Christakis testified. In contrast, in a rebuttal affidavit, Dr. Christakis directly challenges the views expressed by Dr. Cott concluding:
"This reviewer respectfully submits that the evidence cited in Dr. Cott's affidavit to support the above physiological effects is unsubtantiated, has not met the standards of critical peer review which is a process which normally and usually occurs in the evaluation of scientific investigation, does not, therefore, meet the criteria of scientifically-based truth, and, therefore, does not merit acceptance at this time.
"The views I have expressed herein are consistent with the consensus of informed medical opinion." (Christakis' affidavit of December 28, 1979, pp. 3 and 4.)
Furthermore, Dr. Cott's affidavit falls far short of supporting most of Respondent's representations. It states in conclusion:
"Based on the foregoing experimental literature and my practical clinical experiences I conclude that:
a) B-15 increases the supply of oxygen in the blood and its uptake into the body's tissues through transmethylation, such that it corrects or reverses hypaxia, as B-15 stimulates the hypothysis of the supra-renal glands.
b) That B-15 along with enhanced oxygenation at the cellular level is lipatropic in character and hence produces protection of the liver and with detoxification of the blood from the effects of alcohol and drugs.
c) That B-15 lowers blood lactic acid and cholesterol levels, normalizing blood sugar metabolism and reducing the effects of fatigue."
Dr. Cott's affidavit does not directly address whether the doctor believes the alleged representations set forth in the complaint to be true or false.
In addition to advising that "B15" will not perform as represented, Cr. Christakis testified that there is no agreement as to the substances that make up "B15" or pangamate acid (Tr. 314-316, 330-335, 350, 351). Therefore, there is no assurance that the substances which make up Respondent's product are the same as those which apparently have been tested and are in use by Russians.
In connection with Exception No. 5, Respondent takes issue with the finding that its representations are materially false. According to Respondent, while it is accurate that material misrepresentations are those which induce purchasers to buy, the materiality of representations is to be determined from the perspective of consumers. Respondent's contention correctly states the test to be applied. A review of Finding of Fact No. 15 and
Conclusions of Law Nos. 2 and 7 reveals no misapplication of this test by Judge Grant. As stated previously, evidence regarding the materiality of representations is unnecessary. See Standard Research Laboratories, P.S. Docket No. 7/48 (P.S.D. 1980).
It is concluded that the evidence presented by Dr. Christakis is more persuasive and entitled to greater weight than the affidavit of Dr. Cott. Accordingly, the reliance placed by Judge Grant on that evidence was warranted. Respondent's exceptions three, four and five are without merit.
"6. The Administrative Law Judge erred in Conclusion of Law No. 2 that the article reprint (CX-5b) was sent directly to customers by Respondent for the purpose of inducing readers thereof to order B15 and that such article reprint contains the alleged false representations.
"7. The Administrative Law Judge erred in Conclusion of Law No. 4 that Respondent's advertisements and the article reprint make representations as alleged in the Complaint (with exceptions)."
In support of these exceptions to the Initial Decision, Respondent restates objections which have been addressed above and found to be without merit.
"8. The Administrative Law Judge erred in Conclusion of Law No. 5 that Complainant established the falsity of these representations except as to subparagraph j of paragraph 3 of the Complaint by a preponderance of the evidence."
Respondent's argument in support of this exception is essentially the same as that expressed in support of exceptions three, four and five, i.e., that Dr. Cott's affidavit should have been given greater weight than the testimony and affidavit of Dr. Christakis. As concluded above, this position is without merit.
"9. The Administrative Law Judge erred in Conclusion of Law No. 7 that the representations made by Respondent are materially false as a matter of fact.
"10. The Administrative Law Judge erred in Conclusion of Law No. 8 that Respondent is engaged in the conduct of a scheme for obtaining remittances through the mails by means of materially false representations in violation of 39 U.S.C. § 3005.
"11. The Administrative Law Judge erred in Conclusion of Law No. 9 that an order pursuant to 39 U.S.C. § 3005 in the form attached to the Initial Decision should be issued against Respondent."
Respondent contends that Conclusions of Law Nos. 7, 8 and 9 are incorrect inasmuch as it has shown in connection with Exceptions 1-8 that "(1) the alleged representations were not proven by Complainant to exist, (2) that they were not proven to be material, (3) that there was conflicting evidence on the medical falsity question of a nature precluding a legal conclusion of falsity, and (4) that, therefore, Respondent does not stand in violation of the false representations statute." Exceptions 1-8 have been found to be without merit. Therefore, these exceptions are also without merit.
After consideration of the entire record and Respondent's exceptions, it is concluded that Respondent is engaged in a scheme or device for obtaining money through the mail by means of materially false representations. Accordingly, Respondent's appeal is denied and a remedial order under 39 U.S.C. § 3005 is being issued contemporaneously with this decision.