Appeal of P.S. Docket No. 31/28 -- YPD OF ILLINOIS and YELLOW PAGE DIRECTORIES

In the Matter of the Complaint Against: YPD OF ILLINOIS and YELLOW PAGE DIRECTORIES, 175 Fifth Avenue, Suite 2278 at New York, NY 10010-7703 P.S. Docket No. 31/28 11/18/88 Cohen, James A., Judicial Officer APPEARANCE FOR COMPLAINANT: Jerry Belenker, Esq., Consumer Protection Division, Law Department, United States Postal Service, Washington, DC 20260-1144 APPEARANCE FOR RESPONDENTS: Rod A. Dunlap, Esq., 1966 Penobscot Building, Detroit, MI 48226-4107

POSTAL SERVICE DECISION ON MOTION TO RECONSIDER AND/OR TO SET ASIDE DEFAULT

Respondents have filed a Motion to Reconsider and/or to Set Aside a Default Judgment issued on September 22, 1988. The Order dated September 22, 1988, finding the captioned Respondents in default was issued because Respondents had not filed an Answer to the Complaint within the fifteen-day period provided in the Rules of Practice, 39 C.F.R. Part 952. Complainant opposes Respondents' motion challenging the credibility of their assertions and contending that their failure to file a timely Answer was the result of their own carelessness.

Findings of Fact

1. On July 15, 1988, a Complaint was filed alleging that Respondents Donald E. Stewart, Anita Harris, YPD of Illinois, and Yellow Page Directories were engaged in (1) a scheme or device for obtaining money or property through the mail by means of materially false representations in violation of 39 U.S.C. § 3005, and (2) the mailing of non-mailable solicitations in the guise of bills or invoices in violation of 39 U.S.C. § 3001(d) which constitutes prima facie evidence of a violation of 39 U.S.C. § 3005.

2. The Complaint together with the Notice of Answer and Hearing were properly served on Respondent Stewart on July 30, 1988, on Respondent Harris on August 11, 1988, and on Respondents YPD of Illinois and Yellow Page Directories on July 22, 1988 (P.S. Form 3849-A dated July 30, 1988; statement of D. Baily, U.S.P.S., Atlanta, GA, filed Aug. 16, 1988; P.S. Form 3849-A dated July 22, 1988).

3. On August 24, 1988, Respondents Stewart and Harris filed an Answer in their individual capacities denying the allegations in the Complaint. Respondent Stewart further denied that Respondent YPD of Illinois was involved in the conduct described in the Complaint during his tenure as president of that organization which ended on or about January 30, 1988.

4. Respondents Stewart and Harris entered into settlement discussions with Complainant in September 1988, and the parties filed a Stipulation and Joint Motion to Dismiss on September 20, 1988.

5. By Order dated September 21, 1988, the presiding Administrative Law Judge dismissed the Complaint without prejudice with respect to Respondents Stewart and Harris. The Administrative Law Judge concluded that Respondents YPD of Illinois and Yellow Page Directories were in default and referred the matter to the Judicial Officer for appropriate action.

6. On September 22, 1988, the Judicial Officer found Respondents YPD of Illinois and Yellow Page Directories in default and issued a False Representation Order and a Cease and Desist Order against them. On October 13, 1988, Respondents YPD of Illinois and Yellow Page Directories filed a Motion to Reconsider and/or to Set Aside Default Judgment.

7. In affidavits submitted with the Stipulation and Joint Motion to Dismiss, Respondents Stewart and Harris denied having made mailings soliciting yellow page subscriptions during their involvement with the yellow page business. An initial mailing scheduled for the fall of 1987 was continually delayed and never materialized (Affidavit of Respondent Stewart). The participation of Respondents Stewart and Harris in the yellow page business was limited to setting up corporations, locating printing equipment, opening bank accounts and contacting attorneys (Affidavits of Respondents Stewart and Harris).

8. On January 12, 1988, Respondent Stewart sold YPD National, Inc. to Finn H. Laursen, FHL Enterprises, Inc., for $100 (Sales Agreement dated Jan. 12, 1988). YPD National, Inc. is the sole shareholder of all issued and outstanding shares of YPD of Illinois, Inc. (id.). In March and April 1988, Respondent Stewart made several trips with Mr. Laursen to assist him in gaining access to the mailing addresses for the subsidiaries of YPD National, Inc. (Affidavit of Respondent Stewart).

Decision

Respondents YPD of Illinois and Yellow Page Directories (hereafter referred to as Respondents) argue that they failed to file a timely Answer because Mr. Stewart reneged on a promise to provide effective legal representation for all Respondents. According to Respondents, Mr. Laursen, President of YPD of Illinois, upon receiving the Complaint, contacted Mr. Stewart who agreed to have his attorney defend Respondents and accepted consideration from Mr. Laursen for payment of attorneys' fees. Respondents claim that when they learned Mr. Stewart was neglecting their interests, the default order had already been issued. Respondents further argue that they have a number of meritorious defenses which provide grounds for setting aside the default order.

Complainant opposes Respondents' Motion to Reconsider and/or to Set Aside Default Judgment. In its Reply to Respondents' Motion, Complainant points out that Respondents' assertions are unsupported and argues that even if true, Respondents should bear the consequences for having carelessly entrusted their legal representation to Mr. Stewart.

Respondents' contention that Mr. Stewart's deception prevented them from filing a timely Answer is unsubstantiated. Although Respondents assert that in the summer of 1988 Mr. Laursen paid consideration to Mr. Stewart for Respondents' legal defense, these assertions are not accompanied by affidavits or other supporting evidence. Furthermore, the affidavits of Mr. Stewart and Ms. Harris make no mention of the alleged agreement between Mr. Stewart and Mr. Laursen, and Mr. Stewart's affidavit indicates that his relationship with Mr. Laursen and his involvement in the yellow pages subscription business ended in the spring of 1988.

Even if their assertions are true, Respondents have not established that their failure to file a timely Answer is excusable. Respondents' selection of Mr. Stewart to protect their interests and their failure to assure that he provided them with effective legal representation do not excuse their default. It is well established that carelessness or inadvertence on the part of a respondent or his agent does not constitute good cause for setting aside a default order. Ritz, Division of MVCO, Inc., P.S. Docket No. 12/174 (P.S.D. Jan. 26, 1982) at p. 2; Commercial Industrial Supply Co., P.S. Docket No. 11/165 (P.S.D. Sept. 28, 1981) at p. 2; Adam York, P.S. Docket No. 11/138 (P.S.D. Sept. 10, 1981) at pp. 2-3; see Comuni-Centre Broadcasting, Inc. v. FCC, No. 87-1331 (D.C. Cir. Sept. 16, 1988) (LEXIS, Genfed Library, USApp File); ViAids Laboratories, Inc. v. United States Postal Service, 464 F. Supp. 976, 982 (S.D.N.Y. 1979).

Respondents' assertion that a meritorious defense exists is insufficient to support a revocation of the default order. In the absence of a showing of good cause or improper service, the allegation of a meritorious defense alone does not serve to excuse Respondents' failure to file a timely Answer. See, Robinson v. Bantam Books, Inc., 49 F.R.D. 139, 140-41 (S.D.N.Y. 1970); Nelson v. Coleman Co., 41 F.R.D. 7, 9-10 (D.S.C. 1966); Sheldon Lewenfus, P.S. Docket No. 30/159 (P.S.D. Sept. 30, 1988) at p. 6; Ritz, Division of MVCO, Inc., supra. Respondents have not established that the default order should be set aside. Accordingly, Respondents' request to set aside the default order is denied.