In the Matter of the Complaint Against: THE CANADIAN EXPRESS CLUB, C.E.C. SERVICES, 624654 ONTARIO LIMITED, FIRST TELEMEDIA GROUP, GEORGE MICHAEL YEMEC, ANITA FERN RAPP and ELIZABETH TOTH, 1030 Rand Building, 14 Lafayette Square, Buffalo, NY 14203-1928 and Main Post Office Box 823, Niagara Falls, NY 14302-0661 P.S. Docket No. 28/52 11/18/88 Cohen, James A., Judicial Officer APPEARANCES FOR COMPLAINANT: Jennifer L. Yopes, Esq., Jeffrey S. Kahn, Esq., Consumer Protection Division, Law Department, United States Postal Service, Washington, DC 20260-1144 APPEARANCE FOR RESPONDENTS: Elizabeth St. Clair, Esq., Rabinowitz, Boudin, Standard, Krinsky & Lieberman, P.C., 740 Broadway at Astor Place, New York, NY 10003-9518
By Postal Service Decision on Motion for Reconsideration dated July 20, 1988, a prior Postal Service Decision dated March 7, 1988, finding Respondents C.E.C. Services, 624654 Ontario Limited, First Telemedia Group, George Michael Yemec, Anita Fern Rapp and Elizabeth Toth in default was affirmed. However, it was determined that the defaulting Respondents would be allowed to join with Respondent The Canadian Express Club to defend against the allegations of the Amended Complaint since, under the circumstances of this case, there would be no prejudice to Complainant.
Complainant has filed a motion for clarification of the Postal Service Decision dated July 20, 1988. The parties have stipulated that the Judicial Officer could issue the decision on the motion despite the pendency of the proceeding on the docket of the assigned Administrative Law Judge.
In its motion for clarification, Complainant seeks guidance regarding the extent of the defaulting Respondents' participation in this proceeding. Specifically, Complainant asks the following questions:
1. whether facts alleged against the defaulting Respondents are deemed to be admitted;
2. whether the defaulting Respondents will be permitted to present evidence rebutting the admissions or whether their evidence will be limited to that relating to affirmative defenses;
3. whether Complainant will be permitted to introduce evidence on any "admitted" facts; and
4. whether the defaulting Respondents will be required to respond to discovery requests. Both Complainant and Respondents refer to Frow v. De La Vega, 82 U.S. 552 (1872), as establishing the procedure to be followed in a case such as this which involves defaulting and nondefaulting parties. However, while Frow provides guidance, it is distinguishable on its facts from the present case and does not dictate the procedure to be followed in this administrative proceeding. In Frow, the Court was confronted with inconsistent judgments against defendants who would otherwise be jointly liable. In order to avoid such an "unseemly and absurd" 1/ result, the Court fashioned a procedure under its own default rule 2/ to assure that the same judgments would be issued against all parties. The Postal Service Decision in this case which Complainant seeks to have clarified already assures that there will not be inconsistent judgments against the various Respondents. In addition, the procedural rule applicable in Frow is not applicable to this proceeding. Accordingly, Complainant's questions are answered as follows:
1. the facts alleged against the defaulting Respondents are deemed admitted insofar as the facts relate only to each individual defaulting Respondent;
2. the defaulting Respondents will not present evidence or defenses pertaining only to themselves but may join with The Canadian Express Club to present evidence and defenses common to all Respondents. Successful defenses of the nondefaulting Respondent will apply equally to the defaulting Respondents.
3. Complainant will not be permitted to introduce evidence on admitted facts pertaining to the defaulting Respondents unless it pertains to an issue or defense common to both the nondefaulting Respondent and the defaulting Respondents; and
4. the defaulting Respondents will not be required to respond to Complainant's discovery requests unless it pertains to an issue or defense common to both the nondefaulting Respondent and the defaulting Respondents.
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1/ Frow v.
De La Vega, 82 U.S. 552, 554 (1872).
2/ The rule referred to is the 18th Rule in Equity. Id. at 553.
The rules of procedure applicable to this proceeding have been
interpreted to allow the Judicial Officer discretion in
determinations involving defaults. See ViAids Laboratories,
Inc. v. United States Postal Service, 464 F. Supp. 976, 982
(S.D.N.Y. 1979); Ferndale Nurseries, P.S. Docket No. 9/31
(P.S.D. Oct. 6, 1980); Americanwide Auto Buying Service, Inc.,
P.S. Docket No. 7/59 (P.S.D. Aug. 9, 1979). In the exercise of
this discretion, it was held in the July 20, 1988, Postal Service
Decision that the defaulting Respondents would be allowed to join
with Respondent The Canadian Express Club to defend against the
allegations of the Amended Complaint. It was contemplated that
the defaulting Respondents could participate in the hearing and
defend against issues common to both Respondent The Canadian
Express Club and themselves, but could not raise additional issues
or defenses. These holdings were based on the conclusion that the
allegations of a lottery enterprise 3/ are the same with respect
to The Canadian Express Club and the defaulting Respondents, and
that Complainant would not be prejudiced since it would be dealing
with defenses common to all Respondents and all Respondents would
be represented by the same counsel.