In the Matter of the Complaint Against: PATTIE HACKNEY d/b/a WENDY ANDERSON, 3208 East Colonial Drive, Suite 189 at Orlando, FL 32803-5109 P.S. Docket No. 32/184 05/31/89 Mason, Randolph D., Administrative Law Judge APPEARANCES FOR COMPLAINANT: Jerry Belenker, Esq., Alan B. Ostroff, Esq., Consumer Protection Division, Law Department, United States Postal Service, Washington, DC 20260-1144 APPEARANCE FOR RESPONDENT: Pattie Hackney, pro se, 3217 N.E. 40th Court, Fort Lauderdale, FL 33308-6415
This proceeding was initiated on December 8, 1988, 1/ when the Postal Service filed a Complaint alleging that Respondent Pattie Hackney d/b/a Wendy Anderson is engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations in violation of 39 U.S.C. § 3005.
Specifically, the Complaint, as amended at the hearing, alleges in paragraph 5 that Respondent falsely represents, directly or indirectly, in substance and effect, whether by affirmative statements or omissions, that:
(a) Respondent will fill all orders for her money making system within a reasonable amount of time;
(b) Persons responding to Respondent's advertisements will receive a refund in a reasonable amount of time if the product is unavailable; and,
(c) Respondent's system does not require that Respondent's customers sell anything.
A motion to amend the Complaint to allege representation (c) was granted at the hearing (Tr. 7). Although Respondent initially objected to the amendment on the ground that she was selling a "book" rather than a "system," she later agreed to go forward with the issue and present evidence at that time (Tr. 6-7). On brief, Respondent reverses her position and now objects to the amendment. This objection is denied as untimely. In any event, the ruling granting the amendment is reaffirmed since no prejudice has been shown. It is noted that representation (c) is explicitly made in the solicitation and its material falsity is clearly established by Respondent's book.
In her Answer, Respondent denies that she made false representations (a) and (b) or that she has otherwise violated the statute. Respondent denied P5(c) at the hearing.
A hearing was held by the Administrative Law Judge on January 4, 1989, in West Palm Beach, Florida. Complainant was represented by counsel and Respondent represented herself. Both parties were afforded full opportunity to be heard, adduce relevant evidence, and examine and cross-examine witnesses. Complainant presented the testimony of Annette Watkins and Postal Inspector Robert Cregger. Respondent testified on her own behalf. Both parties presented documentary evidence.
At the conclusion of the hearing, Complainant moved to amend P5 of the Complaint to allege the following false representation:
(d) Persons who purchase such materials and who utilize the information therein will make substantial sums of money corresponding to the sums that are contained in the solicitation. Respondent objected on the basis that she was not prepared to defend herself on that issue (Tr. 169). The motion was denied due to surprise and undue prejudice to the Complainant (Tr. 171).
The parties filed proposed findings of fact and conclusions of law which have been duly considered. To the extent indicated below, proposed findings and conclusions have been adopted; otherwise, they have been rejected as irrelevant or contrary to the evidence. Based on the entire record herein, including my observation of the witnesses and their demeanor, the exhibits, stipulations, and other relevant evidence adduced at the hearing, I make the following findings of fact and conclusions of law:
1. Respondent Pattie Hackney does business under the name "Wendy Anderson" and solicits orders through the mail for a money making system (Ans. P2; Exh. 1 to Complaint).
2. Customers sent their orders, together with $12, to Wendy Anderson, 3208 East Colonial Drive, Suite 189, Orlando, Florida, which is the address of Mail Boxes, Etc., USA, a commercial mail receiving agency (Tr. 138). The agency sent the orders once or twice a week by UPS to another private commercial address at 5200 North Federal Highway, Fort Lauderdale, Florida, where mail was held for Respondent until she picked it up (Tr. 139). Her "office" is located at 3101 North Federal Highway, where she operates under the name Capital Financial Associates (Tr. 139-141). The latter is merely another address that she uses, rather than her actual business location (Tr. 141).
3. Respondent "generally" sent the orders by Federal Express to Bruce Cook of Impressions in Pinellas Park, Florida, for fulfillment. However, Respondent did not make any record of incoming orders (Tr. 149-150), and it is possible that many of these orders were never sent to Impressions, or that the latter failed to fulfill the orders.
4. Impressions is a direct mail subsidiary of SOS, a printing company managed by Mr. Cook. When it received the orders, the customers' names and addresses were entered on a computer, labels were printed, and the books were sent by third-class mail. If there were less than 200 orders, they were sent by first-class mail (Tr. 113). At times Cook would deliver these to another company, Modern Inserting, to be taken to the post office; otherwise, Cook would take them himself (Tr. 100). Cook later mailed Respondent a floppy disc with the computer entries for the orders. The latter constituted her only record of the orders. Cook would send her an invoice showing the number of books sent out, charging her $1 for each book (Tr. 150).
5. The third-class mailing receipts obtained by Impressions indicate that 8,185 pieces were mailed (Tr. 92-94, 172; RX-8). The record does not disclose how many were mailed by first-class mail.
6. As alleged in P5(a) of the Complaint, Respondent represents that she will fill all orders for her money making system within a reasonable amount of time (Complaint Exh. 1; Ans. P4). For example, the order form states that "Prompt Shipping is Ensured."
7. Representation (a) is materially false. The Postal Inspector received numerous complaints from people who ordered the product from Respondent between January and July, 1988, but never received it (Tr. 28). For example, no response was made to Annette Watkins' order sent on May 14, 1988, even though Respondent cashed her check 2/ (Tr. 11, 14-17; CX-1). In addition, the Inspector listed many other examples of orders that were never filled (CX-2; CX-3; Tr. 29, 33). Some of the latter customers wrote to Respondent more than once, and also complained to consumer agencies such as the Better Business Bureau. At the time of the hearing, the Inspector was still receiving additional complaints (Tr. 49). Even Respondent's printer and mailing agent, who asserted that the orders had been filled in a timely manner, admitted that there have been "an unusual number of complaints" (RX-9).
8. As alleged in P5(b) of the Complaint, Respondent represents that persons responding to Respondent's advertisements will receive a refund in a reasonable amount of time if the product is unavailable. This representation is implied in the solicitation (Exh. 1 to Complaint).
9. Representation (b) is materially false. The Inspector received complaints from many persons who requested, but did not receive, a refund (Tr. 28; CX-2; CX-3). Most of these had not received the book (Tr. 83). He lists 35 people who requested a refund, and only one of these ever received one. The latter made two refund requests and finally received his refund after seven months (Tr. 33, 49-50; CX-2). Some of these people made several requests for a refund and also contacted consumer agencies such as the Better Business Bureau. It is noted that Respondent provided the Inspector with a list of only 26 people (out of thousands of orders), allegedly representing all persons to whom refunds had been sent (CX-6, p. 5). However, even some of the people she listed had not received a refund (Tr. 47-48, 76-77, 115, 117).
10. As alleged in P5(c) of the Complaint, Respondent represents that her system does not require that Respondent's customers sell anything (Tr. 13). The solicitation specifically states "[y]ou don't have to sell anything" (Tr. 18; Complaint Exh. 1 and Ans. P4). This representation is material since it tends to induce readers who do not like selling to purchase the book or system (Tr. 19).
11. Representation (c) is false. The ordinary reader considers "selling" to include influencing or inducing a person to make a purchase (Webster's Ninth New Collegiate Dictionary, 1986). Although Respondent argues that her system merely involves "brokering" or "soliciting accounts," the substance of the system described in the Respondent's book clearly requires the selling of printing services (CX-4; Tr. 91). In addition, Respondent's book uses the terminology of "sale[s]" and instructs the reader to use invoices and other sales materials (CX-4, pp. 14, 31).
1. (a) Each of Respondent's advertisements must be considered as a whole and the meaning is to be determined in light of the probable impact of this material on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories, Inc. v. U.S. Postal Serv., 556 F.2d 1387, 1389 (5th Cir. 1977). The statute is intended to protect the gullible, naive, and less critical reader, as well as the more sophisticated, wary reader. Fields v. Hannegan, 162 F.2d 17 (D.C. Cir. 1947), cert. denied, 332 U.S. 773 (1947); M.K.S. Enterprises, Inc. v. United States Postal Service, 459 F. Supp. 1180, 1184 (E.D.N.Y. 1978); Gottlieb v. Schaffer, 141 F. Supp. 7 (S.D.N.Y. 1956); Leo Daboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986). Express misrepresentations are not required. It is the net impression which the advertisement is likely to make upon individuals to whom it is directed which is important, and even if an advertisement is so worded as not to make an express representation, if it is artfully designed to mislead those responding to it, the false representation statute is applicable. G.J. Howard Co. v. Cassidy, 162 F. Supp. 568 (E.D.N.Y. 1958); see also, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976).
(b) Where an advertisement is ambiguous or capable of more than one meaning, if one of those 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 J. Galliano, P.S. Docket No. 19/15 (P.S.D. May 2, 1985, at p. 9).
(c) An inconspicuous disclaimer is not sufficient to dispel the effect of false representations. Leo Daboub, supra; Gottlieb v. Schaffer, supra.
(d) The Administrative Law Judge can determine whether the representations are made, their effect on the ordinary mind, and materiality without the assistance of lay or expert testimony. Standard Research Labs, P.S. Docket No. 7/78 (P.S.D. Oct. 27, 1980); The Robertson-Taylor Company, P.S. Docket Nos. 16/98-102, 16/120-121 (P.S.D. March 31, 1986, at page 29); Vibra-Brush v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958).
2. Applying the foregoing standards, I find that Respondent's advertisements make the representations alleged in P5(a)-(c) of the Complaint, as amended at the hearing. The language contained in the advertisements, when read in context, which directly or impliedly makes representations (a) and (c), is set forth in the findings of fact. Representation (b) is obviously implicit in the solicitation.
3. As set forth in the findings of fact, the representations set forth in paragraph 5 of the Complaint are materially false.
4. Although Respondent contends that she conducted her operation in a "business-like" manner, it is clear from the evidence provided by the Complainant that this is not so because many customers did not receive their books or refunds and did not even receive a response to their complaint letters. Respondent's explanation for this failure is not convincing. She speculates that the books were lost in the mail, or that the people who complained are competitors, people who failed to send remittances or who lied about non-receipt, and customers who moved (Tr. 102, 119). There is no probative evidence to support this contention.
5. Instead, it is concluded that Respondent simply failed to deliver her product to many customers. Although she introduced evidence purporting to show that 8,185 pieces had been mailed by the printer, she did not introduce any credible evidence indicating the total number of orders or checks she had received before sending the coupons to the printer. She merely estimated that she had received 8,000 to 9,000 order coupons. Thus she has no way of knowing whether all of these were filled.
6. With regard to refunds, Respondent claims that she "did not keep" any evidence of refunds paid before mid-August of 1988 when she was notified of the investigation by the Postal Service (Tr. 156). Also, she argues that refunds may not have been paid because some customers may not have sent back the materials (Tr. 103). However, most people who requested a refund did not receive a book.
Although Respondent states that she had a system for timely responding to requests for refund (she allegedly paid with money orders) (Tr. 106-107), this testimony is not credible since many customers with valid refund requests did not receive refunds.
7. Complainant has established its case by a preponderance of the reliable and probative evidence of record. S.E.C. v. Savoy Industries, Inc., 587 F.2d 1149, 1168 (D.C. Cir. 1978).
8. The representations made by Respondent are material because they have a tendency to persuade readers to order and pay for Respondent's product.
9. Respondent is engaged in the conduct of a scheme for obtaining remittances of money through the mail by means of materially false representations in violation of 39 U.S.C. § 3005.
10. The attached False Representation Order and Cease and Desist Order should be issued.
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