In the Matter of the Complaint Against CONSUMER RESEARCH, INC., a/k/a C.R.I. P. O. Box 45 at Stuart, FL 33495-0045 and P. O. Box 3149 at Stuart, FL 33495-0000 and 2317 NE Dixie Highway at Jensen Beach, FL 33457-5956 P.S. Docket No. 18/33; 03/26/84 Duvall, William A. APPEARANCES FOR COMPLAINANT: Clark C . Evans, Esq. H. Richard Hefner, Esq. Law Department United States Postal Service Washington, DC 20260-1100 APPEARANCE FOR RESPONDENT: Robert L. Beals, Esq. Price, Kaczmarek & Beals 900 North Federal Highway. Suite 310 Boca Raton, FL 33432-2794
On November 21, 1983, the Complainant filed a Complaint alleging that Respondent is engaged in conducting a scheme for obtaining money or property through the mails by means of false representations within the meaning of 39 U. S. Code § 3005.
The specific allegations of false representation are set forth below in the Findings of Fact.
Respondent filed an Answer to the Complaint in which it admitted paragraphs 1 - 4 thereof, denied paragraphs 5 - 9, 1/ and asserted a plea of estoppel as an affirmative defense to the entire proceeding. Later, on January 5, 1984, Respondent filed a Motion to Dismiss the Complaint based upon the Affirmative Defense of Estoppel. This Motion was denied in my Order of January 19, 1984, which Order is hereby reaffirmed and incorporated herein by reference.
At Respondent's request the place of hearing was changed from Washington, D.C., to Fort Lauderdale, Florida. The hearing was held on February 14, 1984.
The parties have filed proposed findings of fact and conclusions of law, all of which have been fully considered. To the extent indicated herein the proposed findings of fact and conclusions of law have been adopted. Otherwise, such proposed findings and conclusions are rejected because they are unsupported by and contrary to law and the evidence in this case or because of their irrelevance or immateriality.
Complainant's witnesses were Mrs. Phyllis Tyre, St. Simons Island, Georgia, and Postal Inspector Judith Groom. Mrs. Tyre is employed by the Chamber of Commerce in Brunswick, Georgia, where her duties consist, primarily, of mailing brochures promoting tourism. (Tr. 16-17) Inspector Groom is assigned to the Miami, Florida, Inspection Service Office, and she conducted the investigation of the operations of Respondent. (Tr. 34)
Mrs. Tyre saw and responded to an advertisement identical, or closely similar, to those at the top of CX-A (quoted later in F.F. 3) which begins "PROCESS MAIL AT HOME] $75.00 per hundred. ***" Mrs. Tyre wrote for the "details" as indicated in the advertisement, and in response to her inquiry she received CX C-1 and 2, which are the front and back pages of an advertising circular. From a hasty reading of language on CX C-2 she at first thought that Respondent was a company in the travel business, and that she probably would be mailing hotel-motel literature advertising that business. It was her belief that Respondent would send the advertising material to her at her home for mailing. She expected to be paid by Respondent, as her employer, 75 cents per envelope for each brochure she mailed. Mrs. Tyre sent to Respondent a money order for $38.00, covering the required $35.00 registration fee, and the optional $3.00 extra amount asked if the participant wished to have delivery by first class mail. She believed that there would be no further cost to her in connection with participation in the program. She sent her remittance to the address shown in the order blank portion of CX C-3. (Tr. 17-20)
In return for her registering as a participant, Mrs. Tyre received, among other papers, CX D-1 and 2 which are the front and back sides of a form letter bearing the salutation "Dear Independent Mailer." In this letter Mrs. Tyre learned for the first time that her participation in the plan was to consist of inserting, at her expense, advertisements similar to the one to which she first responded in "weekly publications that are outside of your own state." (CX D-1, p. 1, § 4) She was told, also, that when she received her "first batch of names," she must "BE SURE" to send to Respondent a copy of the ad she had run to produce the response. A further admonition was that failure to send the copy of the ad would result in Respondent's refusal to process her check because the only names Respondent wants are those of the people who responded to the ad. (Tr. 21-22; CX D-2)
Other papers received by Mrs. Tyre in the packet from Respondent included CX-E, pages 1 through 8, CX-F, and CX-I. CX-E is a form letter at the top of which is the caption reading "Please Read These Instructions Before Doing Anything Else]]]" The salutation is "Dear Independent Mailer" and it contains more instructions on how to advertise and obtain self-addressed, stamped envelopes into which Respondent's brochures, including CX-I, are to be stuffed. The flaps of the envelopes are to be left unsealed, and they are to be put into a larger envelope or carton and sent to Respondent once a week. The minimum shipment accepted is 10, but no envelopes are to be held longer than 30 days. The language of the ad to be used to obtain the envelopes is set forth and further instructions as to the kind of publications and the locations of them are prescribed. CX-F is an "Offer and Agreement" form to be executed by the prospective participant. (Tr. 22-24)
Mrs. Tyre was not particularly interested in a three-day holiday offer described in CX-F, but it was the thought of the good pay and a shorter work week that caused her to enlist in the program. She hoped it would make it possible for her to go to work less frequently and to make more money at home than she could be going to work at her regular job. (Tr. 24-31) When she read the contents of the packet of papers whe received from Respondent, she became very angry because she realized that for such earnings, if any, as she might receive, she would be required to do just what Respondent had done to her --"take somebody else for money on what she considered false." Mrs. Tyre did not request a refund because she believed it would be futile to do so. She did, however, report her experience with Respondent to the Postal Service. (Tr. 32-33)
Inspector Groom identified CX-B which is a letter on Respondent's letterhead, "Re: Classified Advertisement Insertion," and addressed "To Whom it may concern". The letter asks for the insertion under the heading "MISC. HELP WANTED", for four or eight (4 or 8) consecutive weeks, of an advertisement, which reads substantially the same as the language of the two ads at the top of CX-A. (Tr. 35-39)
Following the instructions on CX E-3 relating to placing newspaper ads by telephone, Inspector Groom called six newspapers and asked them to run the ad appearing in CX-B, and bill her later. All six newspapers refused to accept the order, five of them saying they had to be paid in advance, and the other one of them stating that it did not take that type of advertising. (Tr. 41)
On April 6, 1983, Inspector Groom caused the mailing to Respondent of a $20 money order payable to Consumer Research, Inc., along with a completed order form from CX-I. The purpose of this mailing was to have Respondent send the name and address she was using to "500 legitimate and honest companies" to see whether "within 14 days she would be flooded with fantastic work at home offers." The first response was received on May 16, 1983, and it was an offer from Respondent to provide a home worker program distributing mail lists, but it required an additional payment of $69.50 to Respondent. There were no further responses to the test purchase until August 5, 1983. Since that date and up to and including Friday, February 10, 1984, there were 37 responses, as follows:
13 offers selling merchandise (4 offers from same company)
10 offers selling magazines, books, or reports
9 offers categorized as chain letters, multi-level chain selling schemes
5 miscellaneous (included 1 of this Respondent's programs, 1
sweepstakes, 1 credit card application, and 1 envelope
stuffing offer). (Tr. 41-42)
1. Respondent is engaged in a scheme to obtain money or property through the mails. (Ans., § 1; CX-A, CX C-3 and 4)
2. In the conduct of its scheme, Respondent uses classified advertisements (CX-A), circular matter (CX C-3 and 4), and direct mail solicitation (CX-I).
3. In its advertising materials Respondent makes the representations alleged in paragraphs 5(a) through (d) and 8(a) and (b). The representations will be quoted and underscored below and each will be followed by language which forms part, but not necessarily all, of the basis for the particular charge or charges.
5(a) "Amounts of earnings will be primarily determined by whatever time participants devote to the routine, mechanical tasks of placing sales circulars into envelopes and otherwise preparing these envelopes for mailing to sales prospects."
"PROCESS MAIL AT HOME]
$75.00 per hundred] No
experience. Part or full
time. Start immediately.
Details-send self-addressed
stamped envelope to C.R.I.
2594, P. O. Box 3149, Stuart,
FL 33495."
(CX-A)
If persons of no experience can start immediately to earn the sum of $75.00 per hundred by processing mail at their leisure and in the comfort of their own homes, the work must be easy and of a routine nature.
"***There are no quotas set on the amount of assembled mailers you can submit. You can send as many as you are able to send and you have our assurance that you will definitely be paid promptly no less than 75 cents for each mailer submitted. WE GUARANTEE IT]***"
(CX C-3, mid. col., § 1)
The above language vividly suggests that the amount of pay received will be commensurate with the amount of work performed.
5(b) "Envelopes to be processed will be furnished to participants by Respondent."
"OUR SYSTEM OF ASSEMBLING MAILERS IS VERY EASY TO OPERATE] You will not be required to buy any envelopes or postage stamps. We will gladly furnish all circulars without charge for as long as you wish to participate.***"
(CX C-3, left col., § 7)
5(c) "Payment of the initial fee will allow immediate participation without further substantial financial investment by the homeworker."
"IN ORDER TO GET YOU STARTED IMMEDIATELY, we must require a one-time payment of only $35.00. This covers our expenses in showing you what to do and guarantees you can work with us as long as desired. There is nothing else to ever buy in order to get started and keep going for years.***"
(CX C-3, middle col., § 2)
5(d) "Respondent offers paid employment for routine processing of mail."
The advertisements from the Aberdeen Daily World, Aberdeen, Washington, and the Citizen, South Amboy, New Jersey, appeared in the "HELP WANTED" ad sections of the respective papers. (CX-A) This fact suggests to the reader that paid employment is being offered.
"We want to be sure you make excellent money so you can enjoy your work and stick with it for many years. Since we'll make good money through your efforts, we are only too glad to pay 75 cents per mailer and see that you earn good profits from the comforts of home.***"
(CX C-3, mid. col., § 1)
"***As you can see, the biggest part of your work will be securing envelopes, assembling them with circulars and sending them to us for payment.***."
(CX C-3, left col., § 7)
8(a) "Payment of the requested fee will result in a participant being 'flooded with' up to 500 mailings within a period of two or three weeks."
8(b) "Mailings received will primarily consist of work-at-home employment offers."
The following language appears in CX-I under a caption occupying approximately two-fifths of an 8 1/2" x 11" page and reading as follows:
WORK AT HOME
$ EARN $
$20 --- $50 --- $100
$200 --- $500
EACH WEEK
photocopy of an advertisement.
4. The foregoing representations, all of which are made by Respondent, are false in fact for the reasons set forth below after the quotation of each charge.
5(a) "Amounts of earnings will be primarily determined by whatever time participants devote to the routine, mechanical tasks of placing sales circulars into envelopes and otherwise preparing these envelopes for mailing to sales prospects."
In addition to the proof of falsity that is apparent from the reading of the various pieces of advertising and circular matter used by Respondent, the testimony of Mrs. Tyre established the falsity of the allegation in paragraph 5(a) of the Complaint. After carefully reading what she received in exchange for her money, she realized that she had been misled. Such earnings, if any, as might result to Mrs. tyre would come only as the result of receiving favorable returns on the amounts she expended in buying advertising space in various newspapers. Mrs. Tyre realized, further, that to participate in this program she would have to engage in the same practices, so repugnant to her, that were being followed and promoted by Respondent. She refused to do this, so she reported her situation to postal authorities.
The unsuccessful experiences of Inspector Groom in (1) placing newspaper advertisements by telephone, (2) sending 20 letters to newspapers asking for rate information and (3) enrolling in the program offered in CX-I corroborate the fact testified to by Mrs. Tyre that Respondent's program does not consist of having the participants devote time to routine tasks of placing sales circulars into envelopes and preparing the envelopes for mailing to sales prospects.
5(b) "Envelopes to be processed will be furnished to participants by Respondent."
Respondent's own circular matter provides proof of the falsity of the representation in paragraph 5(b) of the Complaint. One illustration of this statement is found in post-sale literature (CX E-3) where there is this disclaimer:
"Once in a while we receive a letter from an individual saying the following: 'Oh, but you said you would provide the envelopes to assemble.' Our reply to such individuals: We're sorry, but that is not what our advertising said. What was said was, you would be securing mailers through classified ad insertion, which simply means you must get the envelopes through placing classified ads.***"
5(c) "Payment of the initial fee will allow immediate participation without further substantial financial investment by the homeworker."
The falsity of the representation alleged in Complaint paragraph 5(c) is evidence from the quotation in connection with representation 5(b), above, as well as from the uncontroverted testimony on this point by Mrs. Tyre and Inspector Groom.
5(d) "Respondent offers paid employment for routine processing of mail."
Despite representations to the contrary, Respondent does not offer paid employment for anything, and Respondent acknowledges this fact in its business literature. For example, in CX-D and CX-E, Respondent describes its program as one in which the participants develop sales prospects for Respondent. In order to do this, participants must expend their own funds to obtain the names and addresses to send to Respondents.
Further proof of falsity of this representation is found in the testimony of the witnesses Tyre and Groom.
8(a) "Payment of the requested fee will result in a participant being 'flooded with' up to 500 mailings within a period of two or three weeks."
8(b) "Mailings received will primarily consist of work-at-home employment offers."
In her testimony Inspector Groom described the results she obtained by enrolling in Respondent's program described in CX-I. The bait here was the prospect of being "flooded with legitimate and honest work at home offers so she could earn from $20.00 to $500.00 per week." The order blank reassuringly incorporates the statement that the enrollee understands that Respondent "will send my name and address to 500 companies that you Respondent have investigated to be 100% legitimate and honest" and that "within 14 days I the enrollee will be flooded with offers."
The facts as disclosed by Inspector Groom's test are that (1) she received 37 offers which (2) came to her between May 16, 1983 and February 10, 1984, or a period of not less than 270 days. This record falls far short of reflecting a "flood of offers."
5. The false representations herein found to have been made by Respondent are material representations for the reason that they can, and do, cause readers of Respondent's advertising to enroll in Respondent's program which is something the readers would not do had the truth been told in the advertising. Chaachou v. American Central Insurance Co., 241 F.2d 889, 893 (5th Cir. 1957)
1. The meaning of advertising representations is to be considered in light of the probable impact of the entire advertisement on the person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories, Inc. v. United States Postal Service, 556 F.2d 1387, 1389 (5th Cir. 1977); Unique Ideas, Inc. v. United States Postal Service, 416 F. Supp. 1141, 1145 (S.D.N.Y. 1976).
2. "***Advertisements which are capable of two meanings, one of which is false, are misleading ***. Advertisements which create a false impression, although literally true, may be prohibited." Rhodes Pharmacal Co. v. F.T.C., 208 F.2d 382, 387 (7th Cir. 1953)
3. The purpose of 39 U. S. Code § 3005 is to protect the public, both the wary and the gullible, and the Postal Service is an instrumentality through which this protection is to be provided. Lynch v. Blount, 389 F. Supp. 689, S.D.N.Y. (1971), aff'd 404 U.S. 1007 (1972); Gottlieb v. Schaffer, 141 F. Supp. 7 at 15-16, S.D.N.Y. (1956).
4. " P rinciples of equitable estoppel cannot be applied to deprive the public of the protection of a statute because of the mistaken action, or lack of action, on the part of public officials. *** Generally, a governmental unit is not estopped when functioning in a governmental capacity ***." 28 Am. Jur. 2d, Estoppel and Waiver, section 122.
5. The undated letter (Ex. R-1) signed by attorney for Complainant in the matter of Worldwide, et. al., P.S. Docket No. 11/71 to counsel for Respondent in that proceeding, while it may have been ill-advised, does not provide a valid basis for a plea of estoppel as to the right of the Postal Service to proceed in this case.
6. The average person reading Respondent's advertisements would interpret them substantially as characterized in paragraph 5, subparagraphs (a) through (d) and in paragraph 8, subparagraphs (a) and (b) of the Complaint.
7. The representations specified in paragraph 5, subparagraphs (a) through (d), and in paragraph 8, subparagraphs (a) and (b), of the Complaint are materially false.
8. Complainant has established its case by a preponderance of the reliable and probative evidence of record. S.E.C. v. Savoy Industries, 587 F.2d 1149, 1168 (D.C. Cir. 1978); S.E.C. v. National Student Marketing, 457 F. Supp. 682, 701 n. 43 (D.D.C. 1978); Wilmont Products, P.S. Docket No. 6/46 (P.S.D. 1979); Gard, Jones on Evidence, § 30:4 (1972); Wigmore, Evidence, § 2498 (3d ed. 1940).
9. A promise to refund if a customer is dissatisfied will not dispel the effect of false advertisements. Farley v. Heininger, 105 F.2d 79 (D.C. Cir. 1939); Borg-Johnson Electronics, Inc. v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1959).
10. Respondent is engaged in the conduct of a scheme for obtaining remittances of money through the mails by means of materially false representations in violation of 39 U.S.C. § 3005.
11. An order pursuant to 39 U.S.C. § 3005 in the form attached should be issued against Respondent.
1/ The charge in paragraph 5(e) of the Complaint was dismissed on Complainant's motion. (Tr. 3)