In the Matter of the Determination of ) September 21, 1995 Nonmailability of Certain Material of ) ) CLAIM CENTRAL ) No. 400 15415 24th Ave. ) ) at ) P.S. Docket Nos. M 95-12, ) 95-27, 95-113, 95-159, Surrey, B.C. ) 95-160, 95-161, 95-162, Canada V4B4V8 ) 95-163, 95-192, 95-193, ) 95-194, 95-195, 95-196, ) 95-197, 95-232, 95-233 ) 95-234 (consolidated) APPEARANCE FOR APPELLANT: William Wewer, Esq. 21 North Last Chance Gulch P.O. Box 555 Helena, Montana 56924-0555 APPEARANCE FOR RESPONDENT: Daniel S. Bryant, Esq. Consumer Protection Law United States Postal Service 475 L'Enfant Plaza SW Washington, DC 20260-1147
INITIAL DECISION
This case arises from a Determination of Nonmailability issued to Appellant on November 29, 1994. The Determination, by the General Counsel, United States Postal Service, was that certain materials deposited in the United States mail by Appellant constitute a "lottery, gift enterprise, or similar scheme" in violation of 18 U.S.C. §1302.(1) The appeal from that Determination was docketed on January 20, 1995 as Postal Service Docket No. M 95-12. Sixteen subsequent determinations of nonmailability, all for very similar material, were issued in January through May 1995 and timely appeals were filed in all cases. On agreement of the parties, all cases have been consolidated. Respondent, the U.S. Postal Service, filed a Motion for Summary Judgment on June 12, 1995. Appellant filed its Opposition on August 3, 1995. Appellant opposes summary judgment on the basis that there are issues of material fact that require a hearing and, in the alternative, argues that the undisputed facts require judgment in its favor.
The parties agree that the three elements that make up a lottery are "a prize," "consideration," and "chance," and they agree that Appellant's mailings include the first two elements. (Joint Status Report, April 26, 1995.)(2) In addition, Appellant does not dispute that the manner in which individuals are selected for the various prizes is solely by chance. Appellant's position in all of these cases is that their mailings do not constitute a lottery because they have eliminated the element of "chance," by providing recipients with the means to learn which prize they will receive before they are required to remit the necessary "processing fee." Based on the materials submitted by both parties, including copies of the mailings themselves, the following facts are found to be not in dispute:
FINDINGS OF FACT
1. Appellant is a Canadian corporation located in British Columbia, Canada. Appellant mails notices to addressees in the United States soliciting payment of money to Canadian addresses under the names "Claim Central" and "International Money Center."
2. The notices display a list of five prizes, four of which are cash ranging from $3,000 to $542. The fifth is described as a "Limited Edition collectable of Pacific Rim origin," or an "Australian opal triplet," depending on which version of the notice is received.
3. The notices state that the recipient is "Guaranteed" to receive one of the prizes, but all the notices, as well as the outside envelope, are prominently marked "Urgent," and tell the recipient to "Act Immediately," or to "Hurry - Beat the Deadline." Some give a specific deadline date.
4. Each notice is mailed to a named person, and includes a number called a "transmittal code," or "claim number," or "shipment code," or "item release code."
5. The notices require the recipient to mail in a fee to receive the prize. This fee ranges from $6.97 to $19.83, depending on which version of the notice is received. A return envelope is provided.
6. On the reverse side of the notice is a tightly-spaced paragraph
consisting of fourteen to nineteen lines, depending on the different versions of
the notice. This paragraph again guarantees that the recipient will receive one
of the listed items. It also tells the reader that:
these items are not prizes or gifts, instead they are incentives
designed to introduce selected consumers to the opportunities
and values from claim central. this is not a lottery, contest
or sweepstakes but rather is a merchandise incentive offering.
. . . all items to be distributed have been assigned a pre-selected
identifying number. The estimated odds of receiving the opportunity
to purchase the items listed in this promotion are: special limited
edition stamp(s) with philatelic value 1:1, all other items 1:73,337. . . .
To find out which item was assigned to you before sending processing
fee, call 1-800 668 2344 or write to: distribution dept., claim
Central, private mail bag 6, st. Ives, nsw 2076, australia.
7. Recipients who call the toll-free number contained in the above
paragraph hear a recorded message that tells them which of the five listed items
corresponds to their code number. In accordance with the odds listed above,
virtually everyone is told that they have won "an Australian limited edition
collector stamp with philatelic value," or in the case of those who received a
different notice, "a bona fide Australian opal triplet." Callers are not given any
further description of these items, or their value.
DISCUSSION
In their briefs, the parties present many arguments dealing with the law pertaining to lotteries, but there are only two issues to resolve. First, can Appellant remove the element of "chance" from the solicitations in this case by its toll-free telephone number and recorded message? Second, is it necessary to have an evidentiary hearing to resolve this issue?
Respondent argues that the message conveyed by Appellant's solicitations is that a recipient must respond quickly, with the required fee inclosed, to take advantage of the opportunity to receive a valuable prize. The information about the toll-free number, Respondent argues, is not likely to be read by the ordinary recipient and is too inconspicuous to dispel the impression made by the front side of the mailing. In the course of the parties' efforts to stipulate a record, Appellant proffered telephone records purporting to show some 30,000 calls to the toll-free number during December 1994 and January 1995. Respondent stated its willingness to stipulate that "some" recipients notice the "800" number and call it. (Joint Status Report, April 26, 1995.) Neither party submitted any evidence as to how many solicitations were mailed by Appellant, although the Joint Status Report, Paragraph 3, states, "Claim Central has offered to gather additional evidence showing the percentage rate of response to the solicitations in terms of phone calls to the "800" number and how many money remittances are received." Appellant argues that a hearing is necessary so that they can introduce the telephone records, and related testimony, into evidence.
A grant of summary judgment is proper when there are no issues of material fact in dispute and when, as a matter of law, the moving party is entitled to judgment. A material fact is one that could change the outcome in litigation, and any inferences from the pleadings must be taken in a light most favorable to the opposing party. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); Brown v. United States, 31 Fed. Cl. 585 (1994). The moving party has the burden of establishing the absence of a genuine issue of fact and, if that burden is met, the opposing party must counter with something more than "mere denials or conclusory statements." Mingus Contractors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987); see also Adickes v. S.H. Kress Co., 398 U.S. 144, 157-59; Fed. R. Civ. P. 56(e).
Respondent's argument for summary judgment is based on the often-cited principles that solicitations are to be judged by their probable impact on the ordinary reader, Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories v. U.S. Postal Service, 556 F.2d 1387, 1389 (5th Cir. 1977), that
the best evidence of what a solicitation conveys to the reader is the mailing itself, Allen Glazer, P.S. Docket No. 40/59 at 4 (P.S.D. Jan. 27, 1994); The Washington Mint, Inc., P.S. Docket No. 30/42 at 7 (P.S.D. Nov. 7, 1992), and that the Administrative Law Judge is entitled to rely on the solicitations without the aid of lay or expert testimony, American Testing Institute v. United States Postal Service, 579 F. Supp. 1345, 1349 (D.D.C. 1984); Charles Smith, P.S. Docket No. 36/129 at 7 (P.S.D. Dec. 9, 1993).
Respondent makes three arguments that address Appellant's claim that the toll-free number eliminates the element of "chance." First, Respondent argues that because winners of the various prizes are selected by chance "at the outset," this makes the enterprise a lottery, and that fact cannot be changed by giving potential customers a means of learning which prize is theirs. (Resp. Br. at 14.) Next, Respondent argues that the information about the toll-free number is too inconspicuous to overcome the overall impression that a recipient must quickly remit the fee to preserve the chance to win one of the valuable prizes. (Resp. Br. at 19-20.) Finally, Respondent argues that, even if a recipient does call the toll-free number, "chance" still exists because the caller is not told the value of the "collector stamp" or the "opal triplet." (Resp. Br. at 20.) Because the second of these arguments has merit, the other two will not be addressed.
The factual issue Appellant wishes to litigate is not material. Whether Appellant has received "some" calls in response to its solicitations, as Respondent is willing to stipulate, or the several thousand calls that Appellant claims it can prove, would not remove this enterprise from being properly characterized as a lottery. Respondent is entirely correct in the assertion that these solicitations must be examined from "the point of view of the ordinary person," and their contents judged "in their totality with an eye to their over-all effect upon the average reader." United States Postal Service v. Paul, Marbin & Company, Inc., 1987 WL 27465 (E.D.Pa.), citing Donaldson v. Read Magazine, supra; American Testing Institute v. U.S. Postal Service, 579 F. Supp. 1345, 1347-49 (D.D.C. 1984). While many recipients no doubt do notice the recitation of the odds, and the "800" number, that information, found on the reverse side of the notice in a tightly compressed paragraph, is designed to be overlooked. The reader's attention is focused on the large, multicolored print on the front side of the solicitation proclaiming large cash prizes and the need to act quickly. The postal false representation and lottery statutes are designed to protect the gullible and the naive, as well as the more sophisticated and wary. Fields v. Hannegan, 162 F.2d 17, 18 (D.C. Cir. 1947), cert. denied, 332 U.S. 773 (1947); Leo Daboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986); cf. Federal Trade Commission v. Standard Education Soc., 302 U.S. 112 (1937). The standards for interpreting advertisements, and judging the message they convey to ordinary readers are the same for solicitations for lottery promotions as they are for false representation cases. Great American Giveaway, P.S. Docket No. 36/102 at 5 (P.S.D. February 5, 1993).
The Postal Service is not required to prove that all, or even a majority, of the recipients of these solicitations would overlook the "fine print" and be deceived. It is enough to violate the statute if any significant number of recipients would interpret the solicitaiton as requiring remission of the fee before learning what prize awaits. Sharon L. Taylor, P.S. Docket No. 14/32 at 8 (P.S.D. April 23, 1984). The mere fact that Appelllants provide a means for the careful reader to ascertain what his/her prize is before remitting the fee does not automatically eliminate the element of chance. Great American Giveaway, supra. Appellants do not claim to have evidence that no recipients, or an insignificantly small number, send the fee without first calling the "800" number or writing to the Australia address. In the absence of such evidence it is safe to assume that many recipients of these notices do send in the "processing fee" without first calling or writing. Otherwise, there would seem to be no reason for Appellant to be in this business.
Appellant's arguments that cases brought under the "Mailability" statute, 39 U.S.C. §3001, require a higher standard of proof than cases brought under the "False Representation," or "Lottery" statute, 39 U.S.C. §3005, and that decisions in cases brought under §3005 are not valid precedent here, are not persuasive. Both statutes prohibit use of the mail for the promotion or carrying-out of a lottery, and both prescribe administrative remedies to be taken by the Postal Service. Neither subjects the mailer to criminal penalties. The traditional standard of proof in civil and administrative proceedings is preponderance of the evidence, and a higher standard is applied only in proceedings in which the sanctions to be imposed constitute "drastic deprivations." Woodby v. INS, 385 U.S. 276, 285 (1966); Collins Securities Corp. v. SEC, 562 F.2d 820, 823 (D.C. Cir. 1977); Michigan Bulb Co., P.S. Docket No. 7/43 (P.S.D. October 30, 1979).
Despite Appellant's protestations to the contrary, declaring Appellant's solicitations to be "nonmailable" is not a "drastic deprivation," as was a deportation order in Woodby, for example.
The fact that 39 U.S.C. §3001 incorporates a criminal statute, 18 U.S.C. §1302, does not require a different standard of proof, or a different standard for determining whether a given enterprise is a lottery. The elements of a lottery are the same under §1302 as they are under 39 U.S.C. §3005. Federal Communications Commission v. American Broadcasting Co., Inc., 347 U.S. 284, 290 (1954); United States v. Tansley, 986 F.2d 880, 886 (5th Cir. 1993); Paul, Marbin & Company, supra. I find no sound rationale, therefore, for not applying the reasoning articulated in the many Postal Service decisions in cases brought under 39 U.S.C. §3005.
CONCLUSION
Respondent's Motion for Summary Judgment is granted, and the General
Counsel's determinations of nonmailability are affirmed.
Bruce R. Houston Acting Chief Administrative Law Judge
1. 18 U.S.C. §1302 makes it illegal to deposit in the mail:
[a]ny letter, package, postal card, or circular concerning any lottery, gift enterprise or similar scheme offering prizes dependent in whole or in part
upon lot or chance.
39 U.S.C. §3001 makes such material "nonmailable," and gives the Postal Service authority to detain or dispose of such material.
2. "A lottery is a scheme for the distribution of prizes by lot or chance; it is a device whereby the amount of return an individual receives for the amount contributed by him is made to depend on chance. . . . The three essential elements of a lottery are: (1) the distribution of prizes (2) according to chance (3) for a consideration." Martin v. Federal Trade Commission, 242 F.2d 530 (7th Cir. 1957).