In the Matter of the Complaint Against: THE WASHINGTON MINT, INC., 1718 Connecticut Avenue, N.W., Washington, DC 20009-1148 and FREDERIC L. BERG, 144 Goodhill Road, Weston, CT 06883-1818 P.S. Docket No. 30/42 06/01/89 Finn, Jr., James D., Acting Judicial Officer APPEARANCES FOR COMPLAINANT: Stacy M. Ludwig, Esq., Timothy J. Mahoney, Esq., Law Department, Consumer Protection Division, United States Postal Service, Washington, DC 20260-1114 APPEARANCE FOR RESPONDENTS: Marion Edwyn Harrison, Esq., 840 The Watergate, 2600 Virginia Avenue, N.W., Washington, DC 20037-1905
Complainant has filed an appeal from an Initial Decision of an Administrative Law Judge dismissing a Complaint filed against Respondents which alleged that Respondents had violated 39 U.S.C. § 3005 by conducting a scheme or device for obtaining money or property through the mails by means of false representations.
The Consumer Protection Division, Law Department, United States Postal Service (Complainant), initiated this proceeding by filing a Complaint, alleging that by means of advertisements in publications of general circulation Respondents falsely represent certain material matters pertaining to its offering of "ONE POUND SILVER PROOF[S]," silver medals. The Complaint alleges that Respondents' advertisements direct anyone interested in purchasing the silver proofs to place an order by utilizing a toll-free telephone number or by mailing an order along with a check or money order. Further, the Complaint alleges that Respondent, The Washington Mint, Inc., and its officer Frederic L. Berg, an individual who directs and controls The Washington Mint, falsely and materially represent that:
"6. (a) The Washington Mint is an agency of or is affiliated with the United States Government or an agency thereof;
(b) The offer for sale of 'One Pound Silver Proof[s]' referred to in such advertisements is being conducted by or in affiliation with the United States Government or an agency thereof;
(c) The Washington Mint is a place in Washington, DC, located at the street address identified in such advertisements, where coins or medals are made by or for the United States Government or an agency thereof;
(d) A 'One Pound Silver Proof' referred to in such advertisements is a legal tender United States coin;
(e) A 'One Pound Silver Proof' referred to in such advertisements weighs one pound in the popularly understood sense, i.e., the avoirdupois pound consisting of sixteen ounces;
(f) The bullion value of the silver contained in a 'One Pound Silver Proof' referred to in such advertisements is sixteen times the going market rate for an ounce of silver;
(g) The United States Government or an agency thereof has authorized the release on a specified date of the 'One Pound Silver Proof[s]' referred to in such advertisements; and
(h) The opportunity for a reader of such advertisements to buy a 'One Pound Silver Proof' in response to the advertisements constitutes a special sale or advance release in advance of the normal release of the 'silver proofs' authorized by the United States Government or an agency thereof."
The Complaint also alleges that a purchaser of Respondents' product who utilizes the toll-free number makes payment by means of a credit card; it describes the process of a credit transaction including payment by mail; it alleges the purchaser's credit card institution acts as Respondents' agent; and alleges the credit card institution is the assignee of the purchaser's debt.
In their Answer to the Complaint, Respondents admit The Washington Mint is a Delaware corporation and that Frederic L. Berg is an officer of The Washington Mint who directs and controls its activities. They admit they offer for sale "One Pound Silver Proof[s]" and that their advertisements seek orders either by mail or telephone. They admit some purchasers make payment by the use of a credit card. All other allegations of the Complaint are denied. As an affirmative defense Respondents allege that Complainant selectively prosecutes Respondents as a means of continuing harassment.
Subsequent to filing its Answer Respondents filed a Motion for Leave to Submit Written Interrogatories to seek information in support of its affirmative defense. In its Motion Respondents stated upon information and belief that Complainant's co-counsel had instigated the alleged selective prosecution and Respondents sought information which might act to disqualify him. Complainant opposed the Motion and the Administrative Law Judge denied the Motion in an Order which stated that selective prosecution was not a valid defense to a civil or administrative proceeding.
At a hearing before an Administrative Law Judge Complainant presented the testimony of four witnesses: Postal Inspector James Hilton, who testified as to his investigation of Respondents; David W. Garrett, a bank card security officer, who testified generally on the credit card transaction process; Eugene Essner, Deputy Director of the United States Mint, who testified as to the practices of the United State Mint in regard to the issuance of coins and medals; Nelson Whitman, an operator of a stamp, coin and political memorabilia business, who testified as to coin and medal pricing practices. Respondents presented the testimony of Respondent Frederic L. Berg, the majority stockholder and officer of Respondent The Washington Mint, who testified as to the operation of his business; William Whitehead, the vice-president and minority shareholder of The Washington Mint, who testified as to the advertising and marketing practices of The Washington Mint in regard to the issuance which is the subject of this proceeding; David L. Ganz, who testified as a numismatic expert; and Lynda M. Maddox, Ph.D., an expert in advertising, who testified as to newspaper readership demographics and consumer perceptions of Respondents' advertisements.
Following the hearing and after the parties filed proposed Findings of Fact and Conclusions of Law, the Administrative Law Judge issued an Initial Decision in which he found that Respondents' advertisements make none of the representations alleged in the Complaint and he dismissed the Complaint. Complainant thereafter filed timely exceptions to the Initial Decision.
Complainant has filed seven exceptions to the Initial Decision. Six pertain to Findings of Fact and one pertains to Conclusions of Law. Each exception and legal argument has been considered fully. To the extent possible the exceptions and arguments have been consolidated for discussion.
In these exceptions Complainant takes issue with findings made by the Administrative Law Judge pertaining to the testimony, qualifications and credibility of Respondents' expert witness, Dr. Lynda A. Maddox. Thus, Complainant's Exception 1 challenges Finding of Fact (FOF) No. 6, which was based upon Dr. Maddox's testimony and which stated "The readership of daily newspapers is the most upscale of all media readership because it is composed of middle aged males of higher than average education and higher than average income." Exception 2 takes issue with the Administrative Law Judge's determination in FOF 8 that Dr. Maddox was a highly qualified expert and a credible witness.
In Exception 1 Complainant contends FOF 6 is too broad in scope in that a substantial number of individuals other than middle aged males of higher than average education and income read daily newspapers. As Complainant contends, FOF 6 is overly broad. The finding was taken from Dr. Maddox's testimony pertaining to demographics. However, the testimony was not as encompassing as FOF 6. For Dr. Maddox stated that readers of newspapers tend to be older, male, better educated, and have higher salaries (Transcript (Tr.) 167, 186). To the extent the finding states that newspaper readership is limited to or mostly composed of that general group it is found the Administrative Law Judge erred and FOF 6 is modified accordingly to reflect that readers of newspapers merely tend to be male, older, better educated and have higher salaries than readers of other media. A substantial number of others from all facets of age, income and educational brackets, as well as a substantial number of women, are readers of daily newspapers.
In regard to Complainant's Exception 2, it is noted initially that FOF 8 accurately sets forth Dr. Maddox's background and qualifications as an expert in consumer perception of advertising. The substance of the exception need not be considered further, as the necessity for and reliability of her testimony will be discussed in Exceptions 3, 4 and 6, infra.
In these exceptions Complainant takes issues with FOF Nos. 9, 10 and 12 of the Initial Decision. In FOF 9 the Administrative Law Judge found the reader of Respondents' advertisements would read the disclaimer contained in the advertisements, would read all of the ads with some interest because of the cost of the product and would conclude the product is not legal tender because of its size.
In FOF 10 the Administrative Law Judge found, based on the disclaimer contained in the ads, that the ordinary reader would know The Washington Mint is a private mint, not affiliated with the U.S. Government, and therefore would not interpret other portions of the advertisements in the manner Complainant contends. The Administrative Law Judge also found that in any event the ordinary reader would read the whole of an advertisement and would make any inquiries as to confusion or doubt engendered by the advertisement before placing an order. Finding of Fact 12 constituted a conclusory finding that Respondents' advertisements make none of the representations alleged in the Complaint.
The Administrative Law Judge's findings which Complainant excepts to are based primarily upon Dr. Maddox's testimony, especially her testimony pertaining to the disclaimer set forth in Respondents' advertisements. Complainant contests her opinion that the disclaimer will be read by those readers interested in the advertisement.
Expert testimony is generally unnecessary if all the primary facts can be accurately and intelligently described and the trier of fact can comprehend the primary facts and draw correct conclusions from them. Salem v. U.S. Lines Co., 370 U.S. 3l (1962); Pool v. Dowdle, 834 F.2d 777 (9th Cir. 1987); Morgan v. District of Columbia, 824 F.2d 1049, (D.C. Cir. 1987). In regard to expert testimony in false representation matters it is established that no expert testimony is needed to interpret an advertisement's effect on the ordinary mind. The question is one which may be determined by the Administrative Law Judges and the Judicial Officer as the triers of fact without reference to such testimony. 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); Vibra Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957), Rev'd on other grounds, 256 F.2d 681 (2d Cir. 1958); Beatrice Bayley, Inc., P.S. Docket No. 22/113 (P.S.D. Sept. 16, 1986).
It is also established that an agency 1/ reviewing an Administrative Law Judge's decision under the Administrative Procedure Act is authorized to decide all issues de novo. See, F.C.C. v. Allentown Broadcasting Corp., 349 U.S. 358 (1955); Containerfreight Transp. Co. v. I.C.C., 65l F.2d 668 (9th Cir. 1981); Hamlin Testing Laboratories, Inc. v. A.E.C., 357 F.2d 632 (6th Cir. 1966). In the matter of Respondents' advertisements Dr. Maddox's testimony as to consumer perceptions, especially Complainant's disclaimer, is not credible in view of the contents of the advertisements described below and the impression they most probably create. Further, expert testimony was not necessary in this matter as an aid in interpreting the advertisements or as assistance in making certain factual determinations pertaining to the advertisements. Vibra Brush Corp. v. Schaffer, supra; Salem v. U.S. Lines Co., supra.
Respondents' advertisements were approximately one-half of a page of a newspaper, running from the top of the page to the bottom (Complainant's Exhibits 1 and 2; Respondents' Exhibits 3A and 4). 2/ A bold black headline more than one-half inch high announced "Giant 'Silver Eagle.'" Below the headline was a photograph showing the obverse and reverse sides of the "Silver Eagle." The offering shown in the photograph measures approximately 3 1/4 inches in diameter. It is an exact replica, albeit in larger size, of the United States Mint's 1986 one ounce silver dollar offering (Complainant's Exhibit 3). Below the picture of the "Silver Eagle" are more bold black headlines, again more than one-half inch high stating "One Pound Silver Proof," followed by a smaller headline "The Washington Mint Hereby Announces the LIMITED MINTING [or ADVANCE RELEASE] of a Massive Bullion Proof in .999 Fine Silver." Other smaller headlines appearing in the advertisements state: "RECORD-SHATTERING SIZE AND WEIGHT, SPECIAL PRE-ISSUE PRICE; MULTIPLE ORDER DISCOUNT; ONLY 5,000 SILVER PROOFS AVAILABLE; TOLL FREE [number]; THE WASHINGTON MINT, INC."
The smaller text of the advertisements states in part: "On June 15, The Washington Mint will issue to the American Public a Giant 'Silver Eagle' Proof - the heaviest piece it has ever certified;" "This Giant One Pound 'Silver Eagle' is a precise magnification of the original coin." The characteristics of the "Silver Eagle" were described as "pure .999 Silver, 3.5" in diameter, circumference of over 9.6", weighs one troy pound, contains 373.24 grams (5760 grains) of Silver." The advertisements further state: "[E]ach one is minted according to the exacting procedures that qualify it as a coveted 'Silver Proof.'"; "[R]eserve your 'Silver Eagle' at a special advance price of $249.00."; "The Washington Mint will reserve only 5,000 Giant 'Silver Eagles' for advance issue." The address of The Washington Mint was given as 1718 Connecticut Ave. N.W., Washington, D.C. The last line of the advertisements contained an italicized disclaimer no larger than the smallest line of print in the advertisement stating "The Washington Mint is not affiliated with the United States Government."
Viewing Respondents' solicitations in their entirety it is concluded that the disclaimer is inconspicuous and would not dispel the probable effect of false representations on the ordinary mind. Kurzon v. United States Postal Service, 539 F.2d 788, 795 (1st Cir. 1976); Vibra Brush Corp. v. Schaffer, 152 F. Supp. 461, 465 (S.D. N.Y. 1957), Rev'd on other grounds, 256 F.2d 681 (2d Cir. 1958); Leo Daboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986). By print size, location and text Respondents could easily have prominently displayed the disclaimer in their solicitations. It is not difficult to compose an advertisement which will not deceive. See United States v. Ninety Five Barrels of Vinegar, 265 U.S. 438 (1924); Robertson-Taylor Co., P.S. Docket Nos. 16/98-102, 16/120 and 16/121 (P.S.D. March 31, 1986). It is thus found that the Administrative Law Judge erred in giving great weight to Dr. Maddox's testimony and finding that the reader of Respondents' advertisements would read the disclaimer and understand that The Washington Mint is a private mint, not affiliated with the United States Government. The testimony was not sufficiently probative or persuasive to overcome the language of the advertisements. Such error vitiates and makes legally defective the findings of the Administrative Law Judge pertaining to the false representations alleged in the Complaint, supra, as a fair reading of the advertisements shows such representations are made.
In interpreting advertisement representations the probable impact of the advertisement upon ordinary minds is the test to be applied. Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948); Peak Laboratories, Inc. v. United States Postal Service, 556 F.2d 1387 (5th Cir. 1977). The ordinary reader is generally the person to whom the advertisement is directed. Scott David Wilcox, P.S. Docket No. 23/70 at 5 (P.S.D. June 29, 1987); Anderson Pharmacals, P.S. Docket No. 28/90 (P.S.D. March 3, 1989). In this proceeding the ordinary reader would most probably be from within a group of collectors or investors, including first time buyers, not necessarily limited to numismatic experts. Deception may be present in advertisements when they contain untrue statements or when statements which ought to be contained are omitted. In considering the interpretation which ought to be given to advertising claims, the reasonable implications arising from the claims are to be given weight as well as those claims which are stated expressly. Speigel, Inc. v. F.T.C., 411 F.2d 481 (7th Cir. 1969); Baslee Products Corp. v. U.S.P.S., 356 F. Supp. 841 (D.N.J. 1973); Vibra Brush Corp. v. Schaffer, supra. It is the net impression that the advertisement as a whole is likely to make upon those to whom it is directed that must be considered. G.J. Howard Co. v. Cassidy, 162 F. Supp. 568, 572 (E.D.N.Y. 1958). As stated in Aronberg v. F.T.C., 132 F.2d 165, 167 (7th Cir. 1942) "[a]dvertisements are intended not 'to be carefully dissected with a dictionary at hand, but rather to produce an impression upon prospective purchasers.'"
Paragraph 6(a) of the Complaint alleges The Washington Mint to be an agency of or affiliated with the United States Government; 6(b) alleges the offering to be conducted by or in affiliation with the United States or any agency thereof; 6(c) alleges The Washington Mint to be a place where coins or medals are made for the United States or any agency thereof. The person of ordinary mind would most probably conclude these representations are made by Respondents' advertisements due to the following: The headline "Silver Proof" (the U.S. Mint issue was designated "Proof Silver" or "Silver Proof" (see Complainant's Exhibit 3)); the offering being "a precise magnification of the original coin" minted by the United States Government; the picture or photograph of the offering showing it to be an exact replica, except for size, of the United States silver dollar minted in 1986; the word "Washington" in the Mint's name, as well as the Washington, DC mailing address for an organization operating from Connecticut (some members of the public believe that coins are minted in Washington, DC (Tr. 34-36)). The use of the word "issue" (the United States Mint "issues" coins (Tr. 41)); the use of the term "Silver Eagle" (the United States Mint refers to their silver bullion coins as "Silver Eagles" in their promotional material (Tr. 41) and they are referred to as "Silver Eagles" in the coin business (Tr. 81)); the designation of the medal as a "piece," (a "piece" refers to a coin in the coin business and United States coins are only minted by the United States Government (Tr. 83)).
The similarities between the U.S. Mint's coin and Respondents' product, the use of similar terms in the promotional materials, and Respondents' use of terms unique to the description of U.S. Mint products, absent a conspicuous disclaimer, convey the impression that Respondents are affiliated with the United States Government and that the offering in issue is conducted in accordance with that affiliation. The advertisements likewise represent The Washington Mint to be a place where coins or medals are made for the United States. The advertisements state the mailing address of The Washington Mint to be Washington, DC. Considering that some members of the public believe coins to be minted in Washington, DC, it appears more probable than not that the person of ordinary mind would find the representation alleged to be made. The representations of paragraphs 6(a), (b) and (c) of the Complaint are thus found to be made. It is not genuinely disputed that they are false. They are material in that they would tend to induce the purchase.
The representation alleged by paragraphs 6(d), (e) and (f) of the Complaint are likewise found in Respondents' advertisements. Paragraph 6(d) states that the advertisements represent the "One Pound Silver Proof" is legal tender United States coin. The offering is an exact replica, except for size and weight, of a United States silver dollar. It is being offered by an entity that represents itself to be affiliated with the United States Government. In determining the effect of the representation on ordinary readers it is not necessary that all or even a majority would likely be deceived. The purpose of the Postal statutes is to protect all members of the public, both the wary and the gullible. N. Van Dyne Advertising Agency, Inc. v. U.S.P.S., 371 F. Supp. 1373, 1376 (S.D.N.Y. 1974); Gottlieb v. Schaffer, 141 F. Supp. 7, 16 (S.D.N.Y. 1956). Thus, in determining whether representations are false under 39 U.S.C. § 3005, they are to be interpreted according to their effect on the ordinary reader including both the wary and the gullible. Fort Morgan Vapor Jet, P.S. Docket No. 12/64 (P.S.D. Sept. 29, 1982); Oriental Nurseries, P.S. Docket No. 8/24 (P.S.D. March 31, 1981). While some readers of Respondents' advertisements might realize the offering not to be a coin due to its size and weight, the unwary or gullible could well reach a contrary conclusion. It is thus found the representation alleged in paragraph 6(d) of the Complaint is made. There is no dispute that it is false or that it is material as an inducement to purchase the product.
Paragraph 6(e) alleges the advertisements represent the offering weighs one pound avoirdupois (16 ounces), while paragraph 6(f) alleges the advertisements represent that the value of the silver in the medal is 16 times the market rate for an ounce of silver. Although the advertisements state that the offering weighs one troy pound they do not advise the reader how many ounces are contained in a troy pound. While those in the coin business would probably understand that the offering weighs 12 ounces (a troy pound) other readers might well believe it to weigh 16 ounces. In this regard, where an advertisement is ambiguous or capable of more than one meaning, and one of the meanings is false, the advertisement will be held to be misleading. Rhodes Pharmacal Co. v. F.T.C., 208 F.2d 382, 387 (7th Cir. 1953); Ralph Galliano, P.S. Docket No. 19/15 (P.S.D. May 2, 1985). This is the case here. The representations of paragraph 6(e) and (f) are thus found to be made. They are false and they are material as they would induce the purchase of the product.
Paragraphs 6(g) and (h) of the Complaint allege Respondents' advertisements represent that the release of the "Silver Proof(s)" has been authorized on a specified date by the United States Government or agency and that the release constitutes a special sale or advance release by the United States Government or agency. The advertisements specifically state the release has been authorized on a specified date and that it constitutes a special or advance sale. Since Respondent The Washington Mint represents itself to be an agency of or affiliated with the United States Government, the allegations of paragraphs 6(g) and (h) are found to be made, to be false and to be material.
Complainant's Exceptions 3, 4, and 6 to the Initial Decision are sustained to the extent discussed herein, i.e., it is found that Respondent's advertisements make the materially false representations alleged in paragraphs 6(a), (b), (c), (d), (e), (f), (g) and (h) of the Complaint. The findings of the Administrative Law Judge in this regard are reversed.
In this exception Complainant contends the Administrative Law Judge erred in FOF 11 in which he found, based upon the testimony of Respondents' vice-president, that none of Respondents' customers have indicated confusion as to the private nature of The Washington Mint, and that returns of Respondents' product have been less than one percent. He further found no evidence had been presented that any of the returns were based on the representations alleged in the Complaint. The Administrative Law Judge concluded that these facts corroborated his opinions and those of Dr. Maddox pertaining to the perceptions the average reader would receive from the advertisements.
The existence of actual dissatisfied customers need not be established in order to find a violation of § 3005. Oriental Nurseries, Inc., P.S. Docket No. 9/116 (P.S.D. May 19, 1981); See Farley v. Heininger, supra. Rather the decisive factor is whether the mails are being used to obtain money by means of false representations. Gilles J. Bitbol, et al., P.S. Docket No. 12/158 (P.S.D. Aug. 24, 1982). Thus, to the extent the facts set forth in FOF 11 are contained in the opinion they are not dispositive of the determination of the false representations. Moreover, as pointed out by Complainant there may be a variety of reasons for the small percentage of returns. To the extent the Administrative Law Judge relied upon FOF 11 in reaching his conclusion that Respondents' advertisements contained no false representation he erred.
By this exception Complainant contends Conclusion of Law Nos. 4-10 of the Initial Decision are erroneous. With the exception of Conclusion 8 these conclusions held that Respondents' advertisements did not make the false representations alleged. As such they are in error and are reversed. Respondents' advertisements made the representations set forth in paragraph 6 of the Complaint. The representations are material and are false.
In Conclusion 8 the Administrative Law Judge specifically made no findings pertaining to Respondents' credit card transactions and whether or not they may be part of a scheme for obtaining money through the mail under 39 U.S.C. § 3005. He likewise made no findings relative to Respondents' affirmative defense of selective prosecution. It is unnecessary to determine the legal effect of Respondents' credit card transactions. False representations have been shown and the Complaint alleges and the Answer admits that Respondents' advertisements seek orders by mail. Thus sufficient grounds exist to support issuance of the orders authorized by 39 U.S.C. § 3005.
In regard to the allegation of selective prosecution prior false representation proceedings have been held involving other manufacturers or vendors of medals or coins. See Richard W. Verret, P.S. Docket Nos. 20/18, 20/30, 20/63 (P.S.D. Dec. 31, 1986); The National Gold Mint, P.S. Docket No. 22/165 (P.S.D. May 1, 1987); The American Mint, P.S. Docket No. 23/110 (P.S.D. June 16, 1987). Regardless, it is no defense in a § 3005 proceeding that others are conducting similar activities. Gottlieb v. Schaffer, supra; Universal Life Church, Inc., P.S. Docket No. 7/62 (P.S.D. Feb. 14, 1980); see F.T.C. v. Universal-Rundle Corp., 387 U.S. 244 (1967). The agency has discretion in deciding whether to initiate proceedings and is not required to take action against all violators. Heckler, Secretary of Health and Human Services v. Chaney, 470 U.S. 821 (1985); Water Transport Association v. I.C.C., 715 F.2d 581 (D.C. Cir. 1983).
Respondents are found to have made the materially false representations alleged in paragraphs 6(a), (b), (c), (d), (e), (f), (g) and (h) of the Complaint in violation of 39 U.S.C. § 3005.
To the extent stated herein the Initial Decision is reversed. The orders authorized by 39 U.S.C. § 3005 are issued with this decision.
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