In the Matter of the Complaint Against BOX OFFICE, INC., d/b/a FEDERATION OF POSTAL SECURITY POLICE P. O. Box 2069 at St. Louis, MO 63032-2069 P.S. Docket No. 13/44; 03/12/84 Grant, Quentin E. APPEARANCES FOR COMPLAINANT: H. Richard Hefner, Esq. Clark C. Evans, Esq. Consumer Protection Division Law Department United States Postal Service Washington, DC 20260-1112 APPEARANCE FOR RESPONDENT: Barry A. Fisher, Esq. 2049 Century Park East Suite 3160 Los Angeles, CA 90067-3275
On April 7, 1983, Complainant filed a "Petition for Order Based Upon Breach of Consent Agreement" in which it alleged that Respondent has breached the terms of a Consent Agreement executed on March 18, 1982, by Hugh Niles as president of Box Office, Inc. Complainant contends that the agreement is being breached by Respondent in that Performance Productions, Inc. d/b/a Federation of Postal Police, Local No. 37, P. O. Box 35400, Dept. 370 at Houston, TX 77035, a party in alleged privity with Respondent, has resumed making some of the representations which Respondent agreed to discontinue and has failed to include in its telephone solicitations a statement to the effect that the campaign involved is a union sponsored activity.
In its Petition, Complainant sought the issuance of an interim detention order against Respondent pending the final resolution of the issue of breach. Following issuance of the Judicial Officer's order finding the original Petition and attachments thereto insufficient to support the issuance of an interim detention order, Complainant, on April 26, 1983, filed an Amended Petition containing additional support. On May 2, 1983, an order (modified on May 19, 1983) was issued directing detention of mail addressed to: FEDERATION OF POSTAL POLICE, Local No. 37, P. O. Box 35400,
Dept. 370, Houston, Texas 77035-5400 pending resolution of the issue concerning breach of the Consent Agreement. On May 15, 1983, Local 37 of the Federation of Postal Security Police and Performance Productions, Inc. (hereinafter referred to sometimes as Performance/Local 37) filed written opposition to the amended Petition.
The parties have consented to disposition of the matter on the written record as it now stands. A decision on the issue of breach has been held in abeyance for several months pending unsuccessful efforts of the parties to negotiate a supplemental Consent Agreement.
The false representations alleged in the Complaint to have been made by Respondent in direct mailings and telephone solicitations to secure remittances of money through the mail were that:
"a) Money contributed to the Federation of Postal Security Police is of a charitable nature and is tax-deductible;
"b) The Federation of Postal Security Police is a nonprofit charitable organization; and
"c) A portion of the proceeds contributed to Respondent benefits various charitable organizations."
In paragraph 3 of the Consent Agreement, Respondent agreed that the use of such representations for obtaining money or property through the mails has been permanently discontinued.
In paragraph 4 of the Consent Agreement, Respondent agreed that any telephone solicitation would contain a statement to the effect that "This is a union sponsored activity."
The Petition asserts that in telephone solicitations currently being employed Performance Productions, Inc. d/b/a Federation of Postal Police, Local No. 37, is perpetuating the substance and effect of the representations which Respondent, in the Consent Agreement, agreed to discontinue and is not including in telephone solicitations the agreed on statement to the effect that "This is a union sponsored activity" and that since Respondent is in privity with Performance Productions, Inc. the Consent Agreement is being breached.
Performance/Local 37 opposes the petition on the following grounds:
a) That the Consent Agreement furnishes no basis for issuance of an order against Performance/Local 37 because Performance/Local 37 is an organization different from Respondent Box Office/Local 24, and is not in privity with Box Office/Local 24.
b) That should the Consent Agreement be applicable to the activities of Performance/Local 37, there has been substantial compliance with its terms, any deviation therefrom having been immaterial, not justifying the sanction of detention of mail.
c) That the Consent Agreement is not an appropriate vehicle for imposing a detention order because 39 U.S.C. § 3005, the statute under which the proceeding against Respondent Box Office was conducted, lacks First Amendment due process safeguards.
The issues raised by the Petition and the opposition thereto are whether for purposes of this proceeding Performance/Local 37 is in fact, Box Office/Local 24, or is in privity with Box Office/Local 24, whether Performance/Local 37 continues to make the representations Respondent agreed to discontinue and has failed to include in subsequent telephone solicitations the statement concerning union sponsorship of the activity involved.
The Fund Raising/Public Relations
In view of the peculiar nature of the circumstances involved in this breach petition a complete statement of the facts concerning the parties to the Performance/Local 37 promotion, its initiation, purposes, and conduct, is required. The following uncontested facts are taken largely from the Performance/Local 37 opposition to the petition and the attachments thereto: */
Performance Productions, Inc., is a public relations and fund raising company which specializes in producing performances for union, civic, charitable, and fraternal organization fund raising campaigns.
The Federation of Postal Security Police was formed as a national organization in 1975 to represent the employment-related interests of member Postal Police who are members of the United States Postal Service Security Force which provides uniformed police protection of, and general security for, Postal Service property and facilities throughout the United States and Puerto Rico. Local 37, an affiliate of the national organization, represents the Postal Police assigned to Houston in collective bargaining and in other aspects of the labor-management relationship. (Miller Declaration para. 2, at 1)
In late 1982 Local 37 needed funds in addition to what it received in dues to be effective in representing its membership. Therefore, the Local 37 president signed a contract with Performance Productions, Inc., to stage a show for the benefit of Local 37. It was decided by a majority of the officers of Local 37 that a substantial proportion of the net proceeds realized by the union from the show would be donated for the benefit of underprivileged children and other needy persons. The remainder would be used by the union for organizing, arbitrations, grievances, and similar activities. (Id. para. 3, at 1)
The fund raising campaign itself was under the direction of Daniel Scherer, who subcontracted with Performance Productions, Inc., to conduct ticket solicitations and sales. The campaign began on January 3, 1983, and ended with a family-oriented theatrical performance in Houston, Texas, on May 30, 1983. Solicitations ended on May 3, 1983. (Scherer Declaration para. 1, at 1)
Mr. Scherer, who has had training in personnel management and accounting procedures, has been conducting fund raising ticket solicitations and sales for two years. He employs a number of telephone operators who call businesses and residences and solicit ticket sales to the performance. If a person wishes to donate, tickets and written material, including a brochure about the Federation of Postal Police, Local 37 and the Postal Police, are mailed or delivered. (Id. para. 2, at 1-2)
The brochure, invoice, and ticket clearly identify the sponsor as the Federation of Postal Security Police Officers and further identify the Postal Police as a uniformed personnel branch of the U.S. Postal Inspection Service. The brochure also outlines the duties of the Postal Police. Each ticket states on its back that "This ticket is not sold or represented as a charitable donation." The ticket further contains the statement that "It is contemplated that a substantial portion of the proceeds received will be used to pay for the expense of bringing this professional entertainment event to this City." (Id. para. 3, at 2)
This material is received before any money is paid for tickets and anyone has a right to cancel the transaction if not satisfied. Although the back of the ticket provides that the transaction may be cancelled within 3 days of the purchase, it is the policy of Mr. Scherer and Performance Productions to give a refund on request at any time. All persons contacted are told that if they wish to return their tickets after purchasing them, tickets will be distributed to area youth homes and organizations so that children may see the show free of charge. (Id. para. 4, at 2)
Mr. Scherer's employees are for the most part in their late teens or early twenties and are recruited through newspaper advertisements and through a sign at his place of business. Employees receive about one hour of instruction before they begin calling, and are told they must strictly follow a written presentation which is provided for them. In this instance, they were explicitly instructed not to make any statements to the effect that the purchase price of the ticket would be a tax deductible charitable contribution or that the money would go to charity. (Id. para. 5, at 2-3)
During the course of the solicitations, the employees are carefully and constantly monitored, almost always either by Mr. Scherer personally or by his wife. They listen closely to the statements made by the employees to be as certain as possible that they conform to the written presentation and to the instructions. When necessary, firm action, including outright firing, is taken against unreliable employees. (Id. para. 6, at 3)
From the beginning, an effort was made to keep Postal Inspection Service management informed of the fund raising activity. About the time the campaign began on January 3, 1983, Ray Miller, the Local 37 president, wrote a letter to D. C. Strader, the Inspector-in-Charge of the division in which Local 37 operates, in Fort Worth, Texas. In the letter Miller stated that Local 37 had contracted with Performance Productions, Inc., to conduct a children's variety show to raise funds. It was reported that a portion of the net proceeds would be donated to children and adults with special needs or problems to begin an ongoing project to run throughout the year and that the remainder of the net proceeds would be used for union operating expenses. It was further stated that Mr. Miller would be happy to meet with the inspectors concerning the fund raiser if they had questions. (Miller Declaration para. 4, at 2)
Mr. Miller's supervisor was also given a copy of a brochure received from Performance Productions, Inc., which contained information about the firm and the proposed show, as well as a letter stating to whom Local 37 expected to contribute money. In fact, half of Local 37's net proceeds to date have already been donated to the following organizations, each of which has received the same amount: Houston School for the Deaf; Center for the Retarded (Houston); Muscular Dystrophy Association; Texas Children's Hospital; American Cancer Society; Sickle Cell Disease Research; Easter Seals; Southwest Wheelchair Athletic Association. (Id. para. 4, 5, at 2)
The only comment made by the supervisor was that Local 37 had better do what it said it intended, because a lot of people were watching. (Id. para. 5, at 2) Local 37 was never contacted by the Postal Inspectors or anyone else concerning any problems with the ticket sales. (Id. para. 6, at 2)
Although the Inspection Service did not ask any questions of Local 37 directly, it began an investigation of the campaign, at first invoking the assistance of the Harris County (Houston), Texas, District Attorney's office. Local 37, Performance Productions, Inc., and Mr. Scherer first became aware of the investigation on February 24, 1983, when Mr. Scherer's place of business was searched pursuant to a search warrant, and Mr. Scherer and three of his employees were subpoenaed to appear before a Harris County grand jury. The search warrant was issued upon the affidavit of Warren Heikes, a Houston Postal Inspector, who swore he gained entry into Mr. Scherer's office and overheard conversations. Mr. Heikes, who first brought Local 37's campaign to the attention of the District Attorney's Office, was also a member of the group of several police officers and deputy district attorneys who executed the warrant. Mr. Heikes' affidavit alleges that callers employed by Mr. Scherer had led persons called to believe that the Postal Inspectors were involved in the fund raiser. However, when the Harris County District Attorney's Office telephoned each person who had sent in a check found during the search, it was found that no one had been told that the Postal Inspectors were involved in the fund raising. Each donor was offered an opportunity to get his money back, but none accepted. (Morris Declaration para. 2, at 1-2)
The search warrant affidavit further alleged that callers were misrepresenting that the purchase price of the tickets was a tax deductible donation. A few of the ticket purchasers called by the Harris County District Attorney's Office believed that they had been told that the tickets were tax deductible, and others stated that they assumed that the tickets were deductible. Whether or not deductible, none of the purchasers wanted his money back. (Id. para. 3, at 2)
The attorney in charge of the investigation, upon examining the written sales presentations and training materials used by Mr. Scherer to instruct his employees concerning proper telephone technique, decided not to proceed any further with the investigation concerning the practices of Dan Scherer or Performance Productions, Inc. It appeared from the warnings and instructions given to callers that if any misrepresentations were made they were made without the knowledge and against the instructions of Local 37, Dan Scherer and Performance Productions and were the independent acts of the individual callers. (Id. para. 4, at 3)
No complaints were received by the Harris County District Attorney's Office concerning the Federation of Postal Police other than the complaint of Mr. Heikes. (Id. para. 5, at 3)
Under paragraph 5 of the Consent Agreement, Box Office agreed that Box Office, under any name or through any corporate or other device does not authorize telephone solicitations or advertisements making representations substantially similar to the representations alleged in the Complaint (supra) and that its representatives had been so advised. Under paragraph 7 of the agreement, Box Office agreed to issuance of an order pursuant to 39 U.S.C. § 3005 against Box Office or any other name or names then in use for a willful breach of the agreement by Box Office or any party in privity with Box Office.
The Consent Agreement was signed by Hugh Niles as President of Box Office, Inc. The contract between Federation of Postal Police, Local No. 37, and Performance Productions, Inc. (Ex. C) is signed for Performance by H.E. Niles. Performance does not dispute the identity of Hugh Niles to H.E. Niles. The two corporations share the same headquarters address, i.e., 1271 Simpson Way, Escondido, CA 92025 (Ex. D). Respondent's promotional material lumps Box Office and Performance, together with several other corporations, under the Mark X Productions, Inc. Group. Privity, or identity, is further evidenced by a letter (Ex. L) dated February 9, 1983 on Box Office letterhead, signed by its Director of Public Relations, in which Box Office states "***we are now successfully working with the Postal Police Officers Associations in Denver, Houston and Kansas City." As its Houston reference, the letter names Ray Miller, who signed, as President of Local 37, the contract with Performance.
These facts establish the requisite privity, or identity, of Box Office, Inc. with Performance.
Petitioner's record concerning the representations and omissions of Performance/Local 37 said to be in breach of the Consent Agreement consists of the affidavit of W. J. Heikes, a Postal Inspector, and the transcript of four telephone conversations.
Mr. Heikes' affidavit states that his investigation has disclosed that telephone solicitations are being made by representatives of Performance from an office space known to Mr. Heikes as a "boiler room" located in Stafford, Texas. Mr. Heikes does not state the reason he knows this office space to be a "boiler room". Generally this slang term is applied to the location of a felonious enterprise, i.e., a room equipped with many telephones and used for high pressure selling of stock securities that are often without real value (Webster's Third New International Dictionary). The term in this case appears to be gratuitous hyperbole since this is not a criminal proceeding and the Harris County District Attorney's office elected not to proceed with a criminal action against Performance/Local 37. (Morris Declaration, p. 3)
The Heikes' affidavit contains the very general assertion that "Contact with numerous postal patrons who have been solicited by Performance Productions, Inc. representatives discloses that many of the individuals and businesses solicited are told their donations constitute tax deductible charitable donations, and the sales pitches frequently fail to disclose the activity is a union sponsored one." Except for the individuals involved in the four recorded telephone conversations attached to the Petition, at least one of whom appears to have been Inspector Heikes using a fictitious name (Ex. I), and another of whom is unidentified except for a first name (Ex. K), the number of postal patrons contacted, their names, and the number who claim to have been given the "tax deductible charitable contribution" pitch and/or not given the union sponsorship statement are not supplied. The affidavit does not state that any complaints about Performance/Local 37 have been received by the Inspection Service. Without such supporting detail, or most of it, the Heikes' affidavit is inadequate to support the action sought in the Petition.
The transcripts of the recorded telephone conversations are, also, not impressive as evidence of breach. The Richard Devine transcript, consisting of eight pages, (Ex. H) identifies Mr. Devine as being associated with the firm of Richard Devine and Associates. The call was made by Devine, returning one made the week before by a solicitor named Doug Williams. The solicitor did state that the price of the ticket was tax deductible, but as a business deduction, not a charitable contribution. Such a representation did not violate the Consent Agreement and was probably true. (See Morris Declaration, para. 3). The solicitor also identified Local 37 as a union of Postal Police in spite of repeated efforts of Mr. Devine to persuade the solicitor to say, or agree, that it was a Postal Service activity and a charity-type benefit. Further, the solicitor urged Devine to allow him to hand-deliver the tickets with a brochure which would have shown without question that Local 37 is a union and that the price of the tickets was not to be considered a charitable donation (Ex. B-2 through B-4).
The transcript of the "Robert Schultz" telephone call is interesting. The call appears to have been made by Mr. Heikes under the assumed name, Robert Schultz. Nothing was said by the solicitor about the nature of the contribution and its tax deductibility until "Schultz" (Heikes), himself, stated and asked for confirmation that it would be a charitable contribution. "Schultz," too, refused the solicitor's offer to hand-deliver the tickets and brochure.
The Joe Elder transcript, also, reflects the firm suggestion by Elder (who is not identified except for his name) and confirmed by the solicitor, that the price of the tickets would be a charitable contribution.
The fourth recorded and transcribed telephone call was made by a person identified only as "June." It contains nothing regarding charitable contributions or tax deductibility. The sponsoring organization is identified by the solicitor as the Federation of Postal Police. "June" refused the solicitor's offer to deliver any tickets she might order together with some brochures and further information about the sponsoring organization and indicated no interest in buying any tickets.
The record shows reasonable efforts on the part of Performance/Local 37 in organizing and conducting the Houston fund raising activity, including the instructions and script provided to telephone solicitors, the monitoring of their calls, and the information provided on tickets and in brochures (delivered prior to pick-up or mailing of donations) to assure compliance with the terms of the Consent Agreement, claimed by Petitioner to have been violated.
The opening of the telephone solicitation clearly identifies union Local 37 as the sponsor of the activity. This is not reflected in some of the recorded telephone conversations, presumably because they were return calls, the union sponsorship having been disclosed pursuant to the script in the original call by a solicitor. In only two of the four transcripts did a solicitor indicate that the donation would be tax deductible as a charitable contribution. As noted, this was contrary to emphatic instructions at the top of the script sheet and was not offered gratuitously by the solicitor but only after "Schultz" (Inspector Heikes) and Elder advanced a strong suggestion to that effect. In the very long Devine transcript, the solicitor did not go along with Devine's suggestion that the donation would be a charitable contribution.
At most this record shows two isolated instances of a representation by a solicitor contrary to the Box Office/Local 24 Consent Agreement. This, together with the generalities set forth in the postal inspector's affidavit, is inadequate to support the finding of a breach of the Consent Agreement under the circumstances disclosed by this record.
This conclusion makes discussion of the constitutional argument unnecessary.
The Petition is denied and the Order dated May 2, 1983, as modified on May 19, 1983, directing the detention of Respondent's mail is revoked.
*/ Declarations referred to are those attached to Performance/Local 37 opposition to the Petition.