In the Matter of the Complaint Against COSVETIC LABS, or any variation thereof, et al. at P. O. Boxes 11627 & 53098 Atlanta, GA 30305, et al. P.S. Docket Nos. 9/118-9/143; P.S. Docket Nos. 10/38-10/43 09/30/81 Cohen, James A. APPEARANCE FOR COMPLAINANT: Daniel S. Greenberg, Esq.; Consumer Protection Division, Law Department, U. S. Postal Service, Washington, DC 20260 APPEARANCE FOR RESPONDENT: John M. Creger, Esq.; H. Robert Ronick, Esq.; Katz, Paller & Land, 470 E. Paces Ferry Road, Suite 2000, Atlanta, GA 30363
Respondents have appealed from the Initial Decisions of an Administrative Law Judge which hold that, with regard to the DIET, GUARANA, FORMULA-12 CREME, WILLPOWER, DIGESTAID, 1980 DIET SYSTEM and ISR KIT, Respondents are engaged in schemes for obtaining money through the mail by means of false representations in violation of 39 U.S.C. § 3005.
On October 21 and December 19, 1980, the Consumer Protection Division, Law Department, United States Postal Service, filed Complaints docketed as P.S. Docket Nos. 9/118 - 9/143 and 10/39 - 10/43 alleging that Respondents, in connection with the sale of the above-named products, are engaged in schemes to obtain money through the mail in violation of 39 U.S.C. § 3005. Except for FORMULA-12 CREME, which is allegedly represented as a product that eliminates and prevents cellulite, Respondents are alleged to represent that their products are effective in various ways in treating obesity.
A hearing to take evidence on the allegations of the Complaints was held before an Administrative Law Judge on January 26-30, 1981. At the hearing, Complainant presented the testimony of Dr. William R. Ayers, a medical doctor; Dr. Sorrell L. Schwartz, a professor of pharmacology; and Mr. M. P. Flynn, a postal inspector. Respondents presented the testimony of Dr. James S. Whitman III, a bio-chemist, and Dr. John T. Cooper, a medical doctor. Both parties introduced exhibits and participated in the examination and cross-examination of the witnesses. On the basis of the testimony presented and the exhibits in the record, the Administrative Law Judge, in nine separate decisions corresponding to the nine separate products which are the subjects of the Complaints, concluded that for the most part Respondents make the representations alleged in the Complaints and that the representations are materially false. Accordingly, he concuded that Respondents are engaged in activities which are in violation of 39 U.S.C. § 3005.
Respondents have stated three exceptions which they contend serve as grounds for reversing the nine Initial Decisions. Each of Respondents' exceptions is considered below.
1. "The Administrative Law Judge erred in the relative weight and credibility attributed to the testimony of Drs. Cooper and Ayers."
Respondents contend that the Administrative Law Judge chose to rely on the testimony of Dr. Ayers over that of Dr. Cooper even though Dr. Cooper possesses superior knowledge and experience in the treatment of the conditions and the use of the products which are the subject of these proceedings. Specifically, Respondents attack the presiding Administrative Law Judge's finding that Dr. Ayers furnishes direct medical care to approximately 100 patients (I.D., P.S. Docket Nos. 9/118, 9/119 and 9/120, p. 4). According to Respondents, the transcript does not disclose that Dr. Ayers furnishes "direct medical care" to any particular number of patients himself, but only that about 100 patients at any one time are treated in the George Washington Medical Center Diet Management Program. Respondents further argue that, contrasted with Dr. Cooper's specialization in the treatment of obesity spanning a period of 14 years and approximately 9,000 patients, Dr. Ayers' experience does not qualify his testimony to be given greater weight than the testimony of Dr. Cooper. Finally, Respondents argue that Dr. Ayers has no first-hand personal knowledge of the products ini issue whereas much of Dr. Cooper's testimony was based on such knowledge. On the strength of Dr. Cooper's knowledge of the products, as well as his specialization and treatment of weight conditions, Respondents contend that greater weight should have been given to Dr. Cooper's testimony.
Dr. Ayers' testimony establishes that for the past four years he has been the Medical Director and sole full-time physician treating patients at the Georgetown University Diet Management Clinic (Tr. 15-17, 105-106). At any one time, the clinic has under its direct medical care approximately 100 patients (Tr. 15-17, 105-106). Based on this evidence the finding of the Administrative Law Judge that Dr. Ayers furnishes "direct medical care to about 100 patients, mostly obese," if anything, understates the number of patients treated by Dr. Ayers. Since the clinic treats approximately 100 patients at any one time, it is reasonable to assume that Dr. Ayers has treated for more than 100 patients over a four-year period. Accordingly, with respect to this argument, there is no error in the Administrative Law Judge's findings which would support Respondents' appeal.
While the evidence establishes that Dr. Cooper has been involved with the treatment of overweight patients for several years and that he has treated more patients for those conditions than has Dr. Ayers, nonetheless it was proper for the Administrative Law Judge to give greater weight to Dr. Ayers' testimony. Dr. Ayers testified not only on the basis of his personal experience in the treatment of patients, but also on the basis of his review and knowledge of current medical literature on the subject of obesity and cellulite and his knowledge of the consensus of informed scientific and medical opinion (Tr. 101-102). Dr. Cooper's testimony, on the other hand, was based on uncontrolled studies and clinical observations which he readily admitted were inadequate to establish proof of the accuracy of the observations (Tr. 494-504, 539, 541-542). Furthermore, Dr. Cooper's opinions do not represent the consensus of informed medical and scientific opinion (Tr. 101-102, 450). For these reasons the presiding Administrative Law Judge did not err in his reliance on the testimony of Dr. Ayers.
Respondent's argument that reliance should not be placed on Dr. Ayers' testimony because he does not possess first-hand, personal knowledge of the products at issue, is also not persuasive. While it is true Dr. Ayers had not used Respondents' products, it was well within the province of his professional knowledge to testify about the effect of the ingredients of the various products inasmuch as those ingredients are not unique or esoteric. Furthermore, Respondents' inability to present persuasive evidence that their products were capable of performing as represented in their advertising, when the existence of such capabilities by the products is at odds with the presenet state of informed medical opinion, constitutes an ineffective rebuttal of the prima facie case established by Complainant through Dr. Ayers and Dr. Schwartz.
For the above reasons it is concluded that the Administrative Law Judge did not err in his evaluation of the expert witnesses. Accordingly, Respondents' first enumeration of error is without merit.
2. "The Administrative Law Judge erred in finding that Dr. Cooper's opinions were not supported by valid scientific proof (I.D., p. 28)."
Respondents argue that the criteria for determining the credibility of expert witnesses requires a foundation of known scientific facts not possessed by Dr. Ayers. Referring to Original Cosmetics Products, Inc. v. Strachan, 459 F.Supp. 496 (S.D. N.Y. 1978), Respondents define known scientific facts as: "(a) [w]ell known medical and pharmacological texts which are consistent with the testimony of the expert; (b) [a]ctual treatment of patients in ways relevant to and consistent with the testimony to be given." (Resp. Brief, p. 4.) Respondents contend that Dr. Ayers' testimony was not supported by well known medical or pharmacological texts, and that only Dr. Cooper's testimony was supported by his actual experience with patients. Neither position is well taken. Dr. Ayers' testimony is replete with references to the medical literature (Tr. 26-103) and numerous medical articles supporting Complainant's position are included in the record (CX 233-272). Furthermore, as has been concluded previously, Dr. Ayers' testimony is also supported by his personal experience in the treatment of patients with weight problems. Dr. Cooper's first-hand knowledge about the products at issue and his testimony about his use of those products in his medical practice does not support the advertised claims for the products. His testimony is most often confined to the use of Respondents' products as interventionary devices, which are the means of altering the patients' nromal behavior pattern, rather than the effect the products themselves would have on the user (Tr. 251).
Thus, Dr. Cooper's testimony addresses the effect of the interruption of routine which could be caused by Respondents' products, and not the effects of the various products on the body which are represented in Respondents' advertising. Therefore, while he fails to characterize the products as useless, neither does his testimony support the representations made in the advertising (Tr. 379-380, 445, 457, 462-468, 491-492, 506-538). Dr. Cooper's supportive testimony is also damaged by the fact that it is consistent with informed medical opinion and based upon observations which are too uncontrolled to constitute a basis for acceptance as scientific fact (Tr. 45-, 541-542; cf. 101-102). Accordingly, Respondents' second enumeration of error is without merit.
3. "The Administrative Law Judge erred in finding that Respondents' advertising claims were material in the absence of specific evidence of materiality."
Respondents contend that in order for Complainant to prevail it must establish not only that the alleged representations are false but that such falsity is material. According to Respondents, Complainant has not produced evidence with respect to the materiality of any of the claims alleged to be false and, therefore, the Complaints must be dismissed. Respondents also argue that the presiding Administrative Law Judge should have required evidence on materiality, and his failure to do so deprived Respondents of due process of law in violation of the first and fifth amendments of the Constitution. Respondents further argue that a proceeding under 39 U.S.C. § 3005 is analogous to private litigation under the Lanham Act, 15 U.S.C. § 1125(a), in which the Courts have held that evidence of consumer perception is required as proof of the cause of action. In support of this argument Respondents cite American Home Products Corp. v. Johnson & Johnson, 436 F.Supp. 785 (S.D. N.Y. 1977), aff'd, 577 F.2d 160 (2d. Cir. 1978) and American Brands, Inc. v. R. J. Reynolds Tobacco Co., 413 F.Supp. 1352 (S.D. N.Y. 1976).
Although the record includes no testimony of consumer reaction to Respondents' advertising, it does include the advertisements themselves which alone can, and in this case do, show that their natural effect is to induce purchasers to buy the products. See Standard Research Labs, P.S. Docket Nos. 9/63 and 9/64 (P.S.D. Aug. 31, 1981), and cases cited therein. They, therefore, establish a prima facie case of materiality, and in the absence of persuasive rebuttal evidence it is unnecessary for the Complainant to produce lay or expert testimony. See Kimberly Jewels, Inc., P.S. Docket No. 9/65 (P.S.D. July 23, 1981), and cases cited therein. Thus, while there is an absence of testimony on the question of materiality there is evidence of materiality and, therefore, Respondents have not been deprived of their due process rights.
The Lanham Act cases cited by Respondents have been previously considered and found to be inapplicable to a proceeding under 39 U.S.C. § 3005. See Standard Research Labs, P.S. Docket Nos. 7/78 and 7/86 (P.S.D. Oct. 27, 1980); Standard Research Labs, P.S. Docket Nos. 9/63 and 9/64 (P.S.D. Aug. 31, 1981). In the cited Standard Research cases it was held that, while the Courts in Lanham Act cases have recognized that they are not in a position to make the appropriate findings without the aid of testimony, nonetheless, in an administrative proceeding under 39 U.S.C. § 3005 the Administrative Law Judges and the Judicial Officer are fully capable of determining the materiality of representations. This position has been upheld in Peak Laboratories, Inc. v. United States Postal Service, 556 F.2d 1387, at 1389 (5th Cir. 1977), in which the Court stated:
"Peak argues that although the Judicial Officer correctly applied Donaldson to the issue of whether or not representation (d) was made, the Judicial Officer went far beyond the scope of Donaldson in erroneously applying such principle to the issue of material falsity of the representation. We find no merit in this contention. We do not read Donaldson as so limited in its application in view of the purpose of protecting the public." (Emphasis supplied)
Accordingly, it was not improper to make a finding of materiality without testimony of consumer reaction. Respondents' argument with regard to materiality is without merit.
After consideration of the entire record and Respondents' exceptions, it is concluded that Respondents are engaged in a scheme to obtain money through the mails by means of materially false representations. Accordingly, Respondents' appeal is denied and remedial orders under 39 U.S.C. § 3005 are being issued contemporaneously with this decision.