United States Postal Service(TM) 


 In the Matter of the Complaint Against ) August 2, 1993
                                        )
                                        )
 BUILDING TRADES ASSOCIATION            )
 325 Pennsylvania Avenue, S.E.          )
 Washington, DC  20003-1100             )
                                        )
 and                                    )
                                        )
 BUILDING TRADES ASSOCIATION, INC.      )
 HARVEY OLECK and                       )
 RICHARD OLECK                          )
 1181 S. Rogers Circle, Suite 6         )
 Boca Raton, FL  33487-2724             ) P.S. Docket No. 37/88


 APPEARANCE FOR COMPLAINANT:            Wendy Hocking, Esq.
 Timothy J. Mahoney, Esq.
 Law Department
 United States Postal Service
 Washington, DC  20260-1148

 APPEARANCE FOR RESPONDENTS:            David P. Hendel, Esq.
 Wickwire Gavin, P.C.
 8100 Boone Boulevard, Suite 700
 Vienna, VA  22182-2642

POSTAL SERVICE DECISION

Complainant has filed an appeal from an Initial Decision of an Administrative Law Judge which holds that Complainant failed to establish that Respondents made three of six representations alleged in the Complaint to be materially false. Although the Administrative Law Judge also held that Respondents' solicitation makes the remaining three representations alleged in the Complaint to be materially false, Respondents have not filed a separate appeal with respect to these representations . However, Respondents' Reply to Complainant's Appeal suggests that the Judicial Officer reconsider the entire Initial Decision, not just the portion appealed. In accordance with 39 C.F.R. § 952.26 the entire record has been considered on appeal.

BACKGROUND

The Consumer Protection Division, Law Department, United States Postal Service (Complainant), initiated this proceeding by filing a Complaint alleging that Respondents Building Trades Association, Inc., Harvey Oleck and Richard Oleck, doing business under the name Building Trades Association (BTA), distribute direct mail circulars which make the following materially false representations:

In their Answer to the Complaint Respondents admitted that (1) Building Trades Association Inc. is a closely held Florida corporation located in Boca Raton, Florida; (2) Richard Oleck owns all of the stock of the corporation; (3) the corporation is a for-profit corporation; (4) solicitations distributed by Respondent Building Trades Association describe BTA as a membership organization that provides a number of services for its members; (5) Respondent BTA distributes direct mail circulars soliciting businesses associated with the building trade industry to join BTA; (6) Exhibit 1 to the Complaint is a copy of a solicitation previously used by BTA; (7) another corporation owned by Respondent Richard Oleck receives royalties for insurance policies issued to BTA members; and (8) BTA's status as a for-profit corporation is not mentioned in Respondents' solicitation for membership (Exhibit 1 to the Complaint). However, Respondents denied that Respondent Harvey Oleck is a stockholder, officer, or employee of BTA1/ and that any representations made in the BTA solicitations are materially false.

At a hearing before an Administrative Law Judge Complainant presented the testimony of Postal Inspector Patricia Giroux and three individuals associated with firms that had purchased Respondents' services. Both of the individuals named as Respondents testified on their own behalf, as well as on behalf of BTA.

Following the hearing and the filing of proposed findings of fact and conclusions of law, the Administrative Law Judge issued an Initial Decision in which he found that Respondents' solicitation makes the representations alleged in paragraphs 13(c), (d), and (e) of the Complaint and that those representations are materially false. The Administrative Law Judge further found that Respondents' solicitation did not make the representation alleged in paragraph 13(b) of the Complaint, and although the solicitation made the representations alleged in paragraphs 13(a) and (f), he concluded that those representations were not false. Based on his findings regarding paragraphs 13(c), (d), and (e) the Administrative Law Judge concluded that Respondents are engaged in a scheme to obtain money through the mail by means of materially false representation in violation of 39 U.S.C. § 3005.

COMPLAINANT'S EXCEPTIONS TO THE INITIAL DECISION

Complainant has filed three exceptions to the Initial Decision, each of which is hereafter addressed.

EXCEPTION ONE

(Paragraph 13(a) of the Complaint)

In Paragraph 13(a) of the Complaint it was alleged that Respondents falsely represent that BTA "is a membership association consisting of members engaged in the construction trades, such as builders, developers, general contractors and architects." The Administrative Law Judge found that Respondents make the representation in their solicitation, but concluded that the representation is not false. The Administrative Law Judge concluded the representation was not false because the solicitation lists a number of services which BTA provides only to its members; BTA has made arrangements with various vendors to provide its members the services listed (although BTA in some instances receives commissions and services sold to members by the vendors); upon remitting the membership fee to BTA a member receives complete descriptions and contact information for the various services offered; and finally, the member has its name listed in the BTA Contractor's Directory.

Complainant takes issue with the Administrative Law Judge's conclusion primarily on the basis that Respondent BTA is a for-profit organization solely owned by Respondent Richard Oleck and, therefore, according to Complainant, is not a "membership association consisting of members." Complainant argues that describing BTA as a "membership association" is contrary to the definition of association contained in Black's Law Dictionary.2/ Complainant contends that to qualify for designation as a "membership association" the members must join together to form the association, whereas BTA was formed as a for-profit corporation which subsequently sought customers which it designates as members.

It is established that Respondents' solicitation must be considered as a whole and its meaning determined in light of its probable impact on a person of ordinary mind. Donaldson v. Read Magazine, 333 U. S. 178, 189 (1948); Peak Laboratories Inc. v. U. S. Postal Service, 556 F.2d 1387, 1389 (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 small construction contractors or subcontractors seeking benefits in pursuit of their trades who would most probably consider a "membership association" to be a non-profit organization where income derived from membership fees would be used for the common good of all members to foster benefits for the members. It is unlikely that the ordinary reader would consider a "membership association" to be a privately owned corporate entity organized for the purpose of making a profit for its owner. Thus, the Administrative Law Judge erred in finding that Respondents' solicitation does not falsely represent that BTA is a membership association.

However, the false representation, although made, does not appear to be material since it has not been shown by Complainant that it would be likely to influence prospective "members" to join BTA. Rather, the testimony presented supports the conclusion that firms joined BTA for "networking," i.e. name exposure for business expansion purposes (Tr. 74, 126) or alternatively to obtain the services offered by BTA (Tr. 77, 169-70). It is thus concluded that Complainant has failed to establish the representation set forth in paragraph 13(a) of the Complaint is materially false. Accordingly, the decision of the Administrative Law Judge is modified as stated herein, but Complainant's exception is denied.

EXCEPTION TWO
(Paragraph 13(b) of the Complaint)

Complainant alleged in paragraph 13(b) of the Complaint the Respondents falsely represented in the solicitation that those who pay BTA its requested membership fee "will . . . receive each of the goods and services described . . . at a cost lower than that at which such goods and services are generally offered." [Emphasis supplied.] The Administrative Law Judge in reviewing the language of Respondents' solicitation found that Respondents represented only that some of the offered goods and services could be obtained at a cost saving, but that there was no blanket representation in the solicitation that all goods and services were offered at lower costs. Since the Administrative Law Judge found the representation was not made, he did not address the falsity issue.

Complainant contends the Administrative Law Judge improperly read Respondents' solicitation literally and did not consider the implications of the language used in the solicitation. According to Complainant, Respondents' solicitation necessarily implies that all goods and services described may be obtained at lower costs than otherwise available to the public.

Express representations are not required to find violations of the false representation statute. 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 the advertisement is worded so as not to make a false representation, if it is artfully designed to mislead, the false representation statute is applicable. G. J. Howard Co. v. Cassidy, 162 F. Supp. 568 (E.D. N.Y. 1958); Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976). The three specific representations3/ in Respondents' solicitation of benefits available at a lower cost which are intertwined with the four services not specifically offered at lower costs could well be interpreted by the ordinary reader as meaning that all services offered could be obtained at costs lower than those available to the general public. Such an interpretation is supported by the capitalized phrase "NO ADD'L CHARGES" for the collection services offered, in print as large as the described service. At best the language of the solicitation is ambiguous or capable of more than one meaning, and if false, the advertisement will be held to be misleading. See United States v. 95 Barrels of Vinegar, 265 U.S. 438, 443 (1924); Rhodes Pharmacal Co., Inc.v. F.T.C., 208 F.2d 382, 387 (7th Cir. 1953), rev'd in part, 347 U.S. 940 (1955); Card Redemption Center, P. S. Docket No. 30/35 at 6 (P.S.D. June 30, 1989).

However, the burden of proving the falsity of the representation rests with Complainant. Richard W. Verret, P. S. Docket No. 20/18 (P.S.D. Dec. 31, 1986); Cf. Magic Mold, Inc., P. S. Docket No. 2/115 (P.S.D. Feb. 6, 1974). Here Complainant has not established that BTA members did not receive the advertised services at a lower cost than they would have paid had they not joined BTA. In fact, based upon the evidence presented by Respondents at the hearing the record supports a conclusion that for the most part BTA members received the advertised services at rates lower than those otherwise available to the general public (Tr. 240-41, 243, 252, 255 256-57, 261-62, 265, 267-68, 275-77).4/

Thus, contrary to the Administrative Law Judge's findings it is concluded that Respondents make the representation alleged in paragraph 13(b) of the Complaint, but that the representation is not false. Accordingly, the Administrative Law Judge's decision is modified as stated herein. Complainant's exception is otherwise without merit.

EXCEPTION THREE

(Paragraph 13(f) of the Complaint)

In paragraph 13(f) of the Complaint Complainant alleged that Respondents falsely represented BTA acted "solely as agents on behalf of BTA's members in obtaining the benefits of membership in BTA . . ." offered in Respondents' solicitation. The Administrative Law Judge found such a representation was made, but that it was not false. Complainants' contends that the representation is in fact false.

Complainant's contention is premised on the same argument made in Exception One -- namely that BTA is a for-profit organization owned solely by Richard Oleck and not a bona fide association formed by its members for a common purpose. As in Exception One it is concluded that Respondents' failure to fully disclose the complete information as to its corporate-profit and ownership status constitutes a false representation as BTA members would believe BTA acted "solely" on their behalf, and not also for Respondents' profit. The representation alleged in paragraph 13(f) of the Complaint is therefore false. However, for the reasons stated in connection with Exception One the false representation is not material since Complainant has not shown it would be likely to influence those solicited to purchase Respondents' services.

CONCLUSION

After consideration of the entire record it is concluded that Respondents' solicitation makes the materially false representations alleged in paragraphs 13(c), (d), and (e) of the Complaint. Respondents' solicitation makes the representation alleged in paragraph 13(b) of the Complaint, but this representation is not false. The representations alleged in paragraphs 13(a) and (f) of the Complaint are made in Respondents' solicitation and although false, are not material in that they would be unlikely to induce an ordinary reader to join BTA. The Initial Decision of the Administrative Law Judge is affirmed as modified herein. Complainant's appeal is denied. The Orders authorized by 39 U.S.C. § 3005 are issued with this decision. 

                                        James D. Finn, Jr.
                                        Acting Judicial Officer

 
 CEASE AND DESIST ORDER NO.  3668                August 2, 1993

 RE:    BUILDING TRADES ASSOCIATION

 BUILDING TRADES ASSOCIATION, INC.

 HARVEY OLECK and

 RICHARD OLECK

 P. S. Docket No. 37/88

I. Authority and Scope:

This Order is issued under the authority of 39 U.S.C. § 3005(a)(3) and extends to any advertisement in which the persons identified below solicit remittances of money or property through the mail.

II. Persons Covered:

This Order applies to Building Trades Association, Inc., Richard Oleck, Harvey Oleck, and to their agents, employees, representatives, successors, assigns or any persons in privity with them irrespective of the name or trade style they employ.

III. Conduct Prohibited:

The persons identified in Paragraph II are ordered to cease and desist immediately from falsely representing in solicitations or advertisements, directly or indirectly, in substance and effect, whether by affirmative statements, implication or omissions that: 

                                        James D. Finn, Jr.
                                        Acting Judicial Officer

1/ The parties subsequently stipulated that Harvey Oleck is properly a party to this proceeding (I.D., FOF 4).

2/ Although not directly quoted in Complainant's exceptions "Association" is defined in part in Black's Law Dictionary, Fourth Edition, as "The act of a number of persons in uniting together for some special purpose or business. . . . It is a word of vague meaning used to indicate a collection of persons who have joined together for a certain object. . . ."

3/ Collection services - "less than $10.00 per account NO ADD'L COSTS." Leasing . . . "at guaranteed lowest rates." Credit reports "without subscription charges."

4/ The record contained no evidence as to the rates for BTA's construction loans and mortgages. According to Respondent, Richard Oleck, there is little request for those services (Tr. 260-61).