In the Matter of the Complaint Against: WOMEN'S ASSOCIATION OF MINNESOTA ORCHESTRA, a corporation d/b/a WAMSO, P.O. Box 25140, Minneapolis, MN 55458-6140 and 1111 Nicollet Mall, Minneapolis, MN 55403-2406 P.S. Docket No. 31/151 05/18/89 Mason, Randolph D., Administrative Law Judge APPEARANCE FOR COMPLAINANT: Jennifer L. Yopes, Esq., Consumer Protection Division, Law Department, United States Postal Service, Washington, DC 20260-1144 APPEARANCE FOR RESPONDENT: Parrel A. Caplan, Esq., 700 Lumber Exchange Bldg., 10 South 5th Street, Minneapolis, MN 55402-1033
This proceeding was initiated on September 16, 1988, when the Postal Service filed a Complaint alleging that Respondent Women's Association of Minnesota Orchestra, a corporation d/b/a WAMSO is engaged in conducting a scheme or device for obtaining money or property through the mail by means of a lottery or scheme for the distribution of a prize by chance in violation of 39 U.S.C. § 3005. Complainant seeks the imposition of a Cease and Desist Order under § 3005(a)(3) but does not request a False Representation Order under § 3005(a)(1) & (2). In its Answer, Respondent denies that it has committed any violation of the statute since its drawing and alleges that any violation it may have committed was unintentional. Respondent requests that the Complaint be dismissed as moot.
The parties entered into a stipulation of facts which was submitted to the Administrative Law Judge for decision without an oral hearing. Thereafter, the parties filed Proposed Findings of Fact and Conclusions of Law which have been duly considered. Based upon the entire record, including the pleadings, stipulations, and arguments of the parties, I make the following findings of fact and conclusions of law:
1. Respondent Women's Association of Minnesota Orchestra is a non-profit Minnesota corporation with its principal offices at 1111 Nicollet Mall, Minneapolis, NM 55303-2406 (Stip. P1; Ans. P2).
2. On or about May 18, 1988, Respondents mailed to members of the public, a letter containing an entry form and return envelope for a drawing on a car. The material was a fundraising device which offered recipients the opportunity to enter a drawing for a BMW automobile by mailing Respondent $10 for each entry ticket. (Stip. PP2-3).
3. Respondent voluntarily discontinued mailing its solicitation on or before June 1, 1988, after being told by the Postal Service Inspector Attorney that such activity constituted a technical violation of postal laws (Stip. P5).
4. However, on June 18, 1988, a drawing was held by Respondent at the Minnesota Orchestra Symphony Ball to determine the winner of the BMW. A winner was selected (Stip. P4).
5. Respondent's promotion constituted a lottery because it contained the elements of prize (car), consideration ($10), and chance.
6. The parties have stipulated, and it is found, that:
"There is no evidence to suggest that the [above] conduct by Respondent . . . occurred before May of 1988 or is continuing in nature. To ensure there will be no future violations of section 3005(a), Respondent intends to obtain the advice of the U. S. Postal Service Consumer Protection Division and/or legal counsel if it should ever consider using the mail for a drawing of any sort as a fundraising device.
1. Respondent concedes that its fundraising device constitutes a lottery and a violation of 39 U.S.C. § 3005. However, Respondent argues that the Complaint should be dismissed as moot and that a Cease and Desist order should not be imposed. In this regard, it contends that the unlawful activity was short-lived, is not continuing, and Respondent has no intention of committing another violation of the statute.
2. In U.S. v. W. T. Grant Co., 345 U.S. 629 (1953) the Supreme Court held that the discontinuance of an unlawful practice, of itself, does not necessarily preclude the issuance of a cease and desist order. Otherwise, the defendant would be "free to return to his old ways." Id. at 632. As stated by the Court:
"[T]he necessary determination is that there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive. . . . To be considered are the bona fides of the expressed intent to comply, the effectiveness of the discontinuance and, in some cases, the character of the past violations." (Emphasis added)
Applying this test, the Court refused to disturb the holding of the trial court that an injunctive order was unnecessary. It has been held that the same consideration applies to Cease and Desist orders issued by the Federal Trade Commission, see, e.g., National Lead Co. v. Federal Trade Commission, 227 F.2d 825 (7th Cir. 1955). Also, the test was recently applied in an action under 39 U.S.C. § 3005. Professional Opportunity Magazine, Inc., P.S. Docket No. 33/55 (Decision on Mot. for Summary Judgment, March 21, 1989), appeal docketed. It is concluded that the Supreme Court's test is applicable here to determine whether a Cease and Desist Order should be issued.
3. Section 3005 provides that if the Postal Service finds a violation it "may" issue a cease and desist order. Thus the issuance of such orders is clearly discretionary. Similarly, the Federal Trade Commission has broad discretion regarding the issuance of cease and desist orders. However, it has been held that this discretion must be confined within the bounds of reasonableness. Marlene's, Inc. v. Federal Trade Com., 216 F.2d 556 (7th Cir. 1954). As stated in National Lead Co. v. Federal Trade Commission, 227 F.2d 825 (7th Cir. 1955):
"This rule of reasonableness requires something more than a mere guess or suspicion contrary to the evidence and to the finding of the trial examiner that a resumption of discontinued practices may not reasonably be anticipated. . . . [T]he Commission is not empowered to 'enjoin one from doing what he is not attempting and does not intend to do'.
4. Finally, as stated by the Seventh Circuit in Marlene's, Inc. v. Federal Trade Com., supra:
"The propriety of an order to cease and desist must depend on all the facts which include the attitude of respondent towards the proceedings, the sincerity of its practices and professions of desire to respect the law in the future and all other facts."
5. The discontinuance should be voluntary and that normally means "before the [government's] hand is on the respondent's shoulder." Verrazzano Trading Corporation, 91 F.T.C. 888 (1978).
6. Although the burden of proof remains on the Complainant to show a need for a cease and desist order, this need is normally satisfied by the showing of a violation of § 3005, notwithstanding Respondent's voluntary cessation of activities. Respondent must carry a "heavy burden" if it wishes to pursuade the Administrative Law Judge that such an order is inappropriate. In this regard, in U.S. v. W. T. Grant Co., supra, the Supreme Court acknowledged that "the moving party must satisfy the court that relief is needed," but noted that "the burden [on Respondent to avoid the order] is a heavy one."
7. Turning to the case at hand, it is concluded that there is no cognizable danger of recurrent violation. Respondent's burden of going forward on this issue was met by the stipulations of the parties. Respondent is a charitable organization designed to support the Minnesota Orchestra, with no prior history of violations, and the unlawful activity was brief in duration. Respondent stopped its mailings as soon as the Postal Service informed it of the illegality of the promotion, and the activity is not continuing. More importantly, however, the parties have stipulated that "to ensure there will be no future violations of § 3005(a)" Respondent intends to seek legal advice should it ever consider having another drawing. Thus it is clear that Respondent has no intention of violating the statute in the future.
8. Complainant does not dispute Respondent's professed intention to comply with the statute in the future. Instead, Complainant argues that Respondent's discontinuance of the mailings at issue and its intent to seek legal advice in the future is irrelevant. However, in view of the case law previously discussed, such matters are clearly relevant, and Complainant's contention in this regard is rejected.
9. In reaching the conclusion herein, it is recognized that Respondent was informed of the illegality of the lottery, but nonetheless effectuated the illegal enterprise by subsequently holding the drawing. Although Respondent was seeking to live up to its agreement with the public, this action also indicates a lack of respect for the law at that time. But since Complainant agrees that Respondent now intends to ensure future compliance with the statute, there is no doubt about the Respondent's future intentions. Under these circumstances, the imposition of a Cease and Desist order is unwarranted.
10. It is clear that Respondent engaged in a lottery or scheme for the distibution of property by chance in violation of § 3005.
11. However, in view of the absence of some cognizable danger of recurrent violation, no Cease and Desist Order should be imposed.
12. The Complaint is dismissed without prejudice on the ground of mootness.