In the Matter of the Complaint Against SALES UNLIMITED P.O. Box 8129 at Mobile, AL 36689 and 6805 Stinson Court at Mobile, AL 36608 P.S. Docket No. 12/147; 10/26/82 APPEARANCE FOR COMPLAINANT: H. Richard Hefner, Esq. Consumer Protection Division Law Department U.S. Postal Service Washington, DC 20260-1112 APPEARANCE FOR RESPONDENT: Robert E. McDonald, Jr., Esq. Suite 100, 955 Downtowner Boulevard Mobile, AL 36609
Complainant has appealed from the Initial Decision of an Administrative Law Judge dismissing the Complaint which alleges that Respondent, through the sale of its newsletter distributorships, is engaged in the conduct of a scheme to obtain money through the mail by means of materially false representations in violation of 39 U.S.C. § 3005. The Initial Decision held that Complainant had failed to prove (1) that Respondent makes the representations alleged in two subparagraphs of the Complaint, and (2) that the representations alleged in the remaining subparagraphs of the Complaint are false.
On November 6, 1981, the Consumer Protection Division, Law Department, United States Postal Service (Complainant), filed a Complaint which alleges that Respondent, expressly or by implication, falsely represents that:
"(a) it is mathematically possible for all distributor participants to recoup their $50.00 initial investment through the sale of distributorships to others;
(b) it is mathematically possible for all distributors/participants to earn $6,820;
(c) market saturation will not occur through over-sales of distributorships;
(d) sufficient numbers of nonparticipants are continually available to provide the opportunity for profit;
(e) the $50.00 fee is charged for subscribing to a newsletter; and
(f) Respondent's scheme 'meets all STATE and FEDERAL requirements.'"
In its Answer, Respondent denied all of the allegations of the Complaint. At a hearing before an Administrative Law Judge, Complainant presented the testimony of Postal Inspector Jane T. Schoefer and Mr. Billy W. Barron. Respondent presented the testimony of Mr. Bennie U. Hicks. On the basis of the evidence in the record, the Administrative Law Judge concluded that Respondent does not make the representations alleged in subparagraphs (e) and (f) of the Complaint and that the representations alleged in subparagraphs (a) through (d), while made, had not been proven to be false. Accordingly, he dismissed the Complaint. Complainant filed a timely appeal from the Initial Decision of the Administrative Law Judge.
Complainant does not take exception to the findings of fact and conclusions of law of the Initial Decision. Instead, it has filed a motion to amend the Complaint to conform to the evidence pursuant to § 952.12(c) of the Rules of Practice.
In its motion, Complainant seeks to amend paragraph III of the Complaint to provide:
(a) It is probable that all distributor - participants will recoup their $50.00 initial investment through the sale of distributorships to others.
(b)j It is probable that all distributor - participants will earn $6,820.
(c) Continued participation in Respondent's program will earn the participant $6,820 or more every six months.
(d) Following Respondent's instructions for participation in the program will create a geometrically expanding chain of purchasers through five stages."
In addition, Complainant seeks to add the following new count to the Complaint:
IV.
"Respondent's enterprise constitutes a lottery inasmuch as the requisite three elements of chance, prize and consideration are present."
Complainant argues that the issues framed by the proposed amendment to the Complaint are reasonably within the scope of the proceeding initiated by the original Complaint and were tried by express or implied consent of the parties. While recognizing that such amendments are discretionary, it argues that in this case the discretion of the Judicial Officer should be exercised liberally in favor of the amendment in the interest of justice.
The original Complaint raised the issue of the "mathematical possibility" of participants earning $50 and $6,820. The proposed amendment raises the issue of the "probability" of realizing such earnings. According to Complainant, the "probability" issue was tried at the hearing by express or implied consent of the parties. Complainant cites the testimony of its expert witness to support its argument. Complainant's expert witness testified on two occasions in response to questions relating to the "possibility" of earnings that while it was "possible" it was not "probable" that such earnings would be realized (Tr. 54, 78). One of these questions was posed by the presiding Administrative Law Judge who reminded the witness that the question related to the "possibility" of earnings (Tr. 78). An additional question by Complainant's counsel directed to "probability" was objected to on other grounds, but allowed (Tr. 54-55).
These facts do not warrant a finding of implied consent. While admission of evidence without objection concerning an issue that is the subject of an amendment is an indication of implied consent, it is not dispositive. McLeod v. Stevens, 617 F.2d 1038 (4th Cir. 1980). Other than the two unsolicited answers and the question which was objected to, there is no evidence regarding "probability" and no indication that either party or the presiding Administrative Law Judge recognized "probability" as an issue. Had Complainant recognized that the "probability" of earnings was an issue it should have sought to amend the pleadings at the hearing so that Respondent would have had an opportunity to present evidence with respect to that issue. This it did not do. Therefore, at this stage of the proceeding, it would be prejudicial to Respondent to allow the amendment to the Complaint and to make findings thereon. See, Cox v. Fremont County Public Building Authority, 415 F.2d 882, 887 (10th Cir. 1969); United States v. 47 Bottles, More or Less, 320 F.2d 564, 573 (3d Cir. 1963) cert. denied, 375 U.S. 953 (1963). Accordingly, Complainant's Motion to Amend the Complaint with respect to the issue of "probability" is denied.
Complainant also seeks to amend its Complaint to include an allegation that Respondent's enterprise constitutes a lottery. Respondent's advertisements are the only evidence in the record on which Complainant relies to support its allegation of implied consent to the lottery issue. The advertisements are directly related to the issues raised in the original Complaint. Therefore, the failure to object to the admission of the advertisements can not be construed as an implied consent to the lottery issue. Cook v. City of Price, 566 F.2d 699, 703 (10th Cir. 1977). Accordingly, Complainant's Motion to Amend the Complaint to include the lottery issue is denied.
After consideration of Complainant's Motion to Amend the Complaint and the arguments in support thereof, it is concluded that Complainant's Motion should be denied. Furthermore, although Complainant has not taken exception to the findings of fact and conclusions of law of the Initial Decision, the entire record has been reviewed and found to support the Administrative Law Judge's conclusion that Complainant failed to sustain its burden of proof on the allegations of the original Complaint. Accordingly, Complainant's appeal is denied.
James A. Cohen Judicial Officer