In the Matter of the Complaint Against ) June 12, 1996 ) COM-TEL DIRECTORIES, INC. ) formerly known as ) AMERITEL DIRECTORIES, INC. ) 2727 Broadway Street ) Buffalo, NY 14227-1004 ) ) TEL-ADV, INC. ) 2727 Broadway Street ) Buffalo, NY 14227-1004 ) ) YELLOW PAGES ) 2727 Broadway Street ) Buffalo, NY 14227-1004 ) ) NEAL DELEO ) 37 Fruehauf Avenue ) Snyder, NY 14226-3805 ) P.S. Docket No. FR 95-276 APPEARANCE FOR COMPLAINANT: Rodney Gould, Esq. Consumer Protection Law United States Postal Service 475 L'Enfant Plaza, SW Washington, DC 20260-1147 APPEARANCE FOR RESPONDENTS: Frank J. Shannon, III 127 Peachtree Street, N.E. 920 Candler Building Atlanta, GA 30303-1827
INITIAL DECISION
This proceeding was initiated on August 17, 1995, when the General Counsel for the United States Postal Service filed a Complaint alleging that Respondents violated 39 U.S.C. §3005 by engaging in a scheme or device for obtaining money or property through the mail by means of false representations.(1) Specifically, paragraph 7 of the Amended Complaint alleges that Respondents, through solicitations mailed to prospective customers, make the following representations, and that these representations are false:
a. Respondents are affiliated with the addressee's local telephone company;
b. Respondents are affiliated with a yellow pages directory customarily distributed to all telephone subscribers in the addressee's business area;
c. Respondents' notice is to renew or confirm the addressee's existing listing in a yellow pages directory customarily distributed to telephone subscribers in the addressee's business area;
d. Failure to respond to the notice will cause the addressee's business telephone listing to be omitted from a yellow pages directory customarily distributed to the telephone subscribers in the addressee's business area;
e. The addressee has a previous business relationship with the Respondents;
f. The amount set forth on the face of the notice is due and owing to Respondents from the addressee.
In a timely filed Answer, Respondents denied making any false representations. A hearing was held on March 19, 1996 in Washington, DC. Both parties were represented by counsel. The Postal Service called the postal inspector who investigated this case, and three consumer witnesses - Ms. Norman, who runs a mini-blinds cleaning business in Aztec, New Mexico; Mr. Georges, the co-owner of a printing business in northern California; and Mr. Martin, an attorney in Rockville, Maryland. Respondent Neal DeLeo testified on behalf of Respondents. Both parties filed post-hearing briefs, in the form of proposed findings of fact and conclusions of law.(2) To the extent indicated below, proposed findings and conclusions have been adopted; otherwise, they have been rejected as irrelevant or contrary to the evidence. The following findings of fact and conclusions of law are based on the entire record, including all testimony and documentary evidence introduced at the hearing, and observation of the witnesses and their demeanor.
FINDINGS OF FACT
1. Respondent Neal DeLeo is, or was, the president and sole shareholder of Respondents Ameritel Directories, Inc., Com-Tel Directories, Inc., and Tel-Adv, Inc. (Tr. 170).(3)
2. Mr. DeLeo started his business as Ameritel Directories, Inc. sometime in 1993. The name was changed to Com-Tel in January 1995 because of a conflict with another company with a similar name. In June 1995, after another such conflict, Mr. DeLeo formed Tel-Adv, Inc., which took over some of the assets and liabilities of Com-Tel. (Tr. 195-99; Cx-14; Rx-3).
3. Respondents' business is printing and selling what is called a "Nationwide Yellow Pages Directory." They solicit business by mailing solicitations to businesses around the country. If a signed form is returned, they send an invoice for payment, to be mailed to 2727 Broadway, Buffalo, NY 14227. (Tr. 192-93; Cx-13).
4. The front page of Respondents' typical solicitation contains a box at the top, with the headings, "BUSINESS NAME/ADDRESS," "CLASSIFICATION," AND "TELEPHONE." Under these are the recipient's business name and address, a number and one or two-word description of the addressee's business, and addressee's telephone number.(4) This upper portion of the form is to be signed, dated and returned in an enclosed return envelope. In the center of the form, in large, bold type, are the words, "CONFIRMATION OF YELLOW PAGE ADVERTISING."(5) Beneath this, also in large, but light, type are the words,"THIS IS NOT A BILL." Beneath this, in smaller, but still relatively prominent type, are the words, "This is a Nationwide Yellow Page Directory Publication." The "Walking Fingers" logo is prominently displayed in the lower left, above Respondents' mailing address.
The alleged misrepresentations
a. Respondents are affiliated with the addressee's local telephone company.
5. This is strongly implied by the overall appearance of the solicitation, as well as by the specific use of the term "yellow page advertising," and use of the "walking fingers" logo. While the logo and the term, "yellow pages," are not copyrighted by any telephone company, and may be used generically, they are nevertheless associated by many people with their local telephone companies' yellow page directories. It is clear that this is what the three consumer witnesses believed. (Tr. 69-70, 86, 131-32).
6. The use of the word "Confirmation" is especially misleading, as it implies that the addressee has already been listed in the "yellow pages," and is simply being asked to "confirm" the accuracy of the information contained in the box at the top of the form. This implication is reinforced in other ways, such as the inclusion of the recipient's full business name, address and telephone number, which the recipient might assume came from the previous listing; the short categorization of the nature of the business, under the heading "Classification," along with an unidentified number, which might well be interpreted as an account number; and use of the words, "your yellow page listing," suggesting that the recipient already had such a listing. Because most of the recipients of the solicitation have quite likely been listed in their local telephone company's yellow pages in prior years,(6) and nothing on the form tells these readers that Respondents' publication is a new publication, many people could be deceived into believing that they are only being asked, by their local telephone company, to renew their current listing. On cross-examination of the three consumer witnesses, Respondents' attorney attempted to show that a more careful reading of the solicitation makes the nature of Respondents' product clear. That may be so, but the fact remains that the overall appearance of the solicitation does deceive many people, and the phrase "Nationwide Yellow Page Directory" is likely to be overlooked once the initial impression is formed. This is evident not only from the credible testimony of the three consumer witnesses, but also from the fact that
several other people filed complaints or inquiries. (Tr. 25-34; Cx-1 through Cx-10).(7) Although Respondents' solicitation is somewhat less deceptive since the removal of the term "Confirmation," it is still deceptive.
7. Although Respondents' corporate name is listed on the front of the form, under the logo, return envelopes are addressed only to "Yellow Pages," (Cx-1, p. 3; Cx-2, p. 3), and customers are instructed to make checks payable to "The Yellow Pages," (Cx-3; Cx-4, p. 5), thus further concealing the fact that Respondents are something other than a telephone company.
8. The reverse of the solicitation form contains several informative statements, including one that disclaims any affiliation with AT&T or any local telephone company. This is in relatively small print, however, and is likely to be overlooked by many recipients. (Cx-1, p. 2). This disclaimer is insufficient to overcome the impression made by the front of the form. Respondents argue that Complainant places too much emphasis on use of the "walking fingers" logo and the term "yellow pages." They argue that, if Complainant's position is accepted, the Postal Service could sustain any complaint merely by showing that a publisher used those generic symbols. That is not so. Respondents could easily distinguish themselves from local telephone company directories, and still lawfully use the symbols. Respondents' failing is that they use those familiar symbols, but only inconspicuously identify themselves, thereby misleading potential customers.
9. Although Respondents deny making this alleged representation, they do not dispute that such a representation would be false. As noted above, Respondents acknowledge that they are not affiliated with any telephone company, and argue that it should be clear to any reader that the solicitation is not from a local telephone company.
10. This representation is material because far fewer consumers would remit money to Respondents if they realized what they were buying. The consumer witnesses testified that they did no nationwide business and would have no reason to advertise in a nationwide yellow pages directory. (Tr. 64, 66, 87, 108). While there may be some market for Respondents' product, it would appear that part of Respondents' formula for success lies in getting consumers to believe that the product is something other than what it is.
b. Respondents are affiliated with a yellow pages
directory customarily distributed to all telephone
subscribers in the addressee's business area.
c. Respondents' notice is to renew or confirm the
addressee's existing listing in a yellow pages
directory customarily distributed to telephone
subscribers in the addressee's business area.
11. These two representations are made in the same manner, and for the same reasons, discussed in paragraphs 5 through 10, above. Two of the consumer witnesses, who actually sent payment to Respondents, testified that they believed they were paying for a listing in their local yellow page directory. (Tr. 65, 110). The third witness at first thought he was being billed by his local yellow pages, but realized on careful reading that Respondents were soliciting for something altogether different. (Tr. 86). Respondents arguments as to why a consumer should understand that their solicitation is not affiliated with a local telephone company, or local directory, are off the mark. The overall impression created by the solicitation is that it is something from the addressee's local "yellow pages." The fact that many people may read the solicitation more carefully before ordering the product, as Mr. Georges did, and ultimately not be deceived does not prove that the solicitation is not misleading.
The Official Notice Issue
12. I raised an issue at the hearing as to whether it was necessary, or proper, for the Presiding Officer to take official notice that yellow pages directories are "customarily distributed to all telephone subscribers in the addressee's business area," there being no evidence offered directly to prove that fact. Complainant argues that it would be proper to take official notice because this is a matter of common knowledge. Complainant's primary contention, however, is that official notice is unnecessary because proof of this fact is inherent within the testimony of the consumer witnesses. Respondents' position is that official notice cannot be taken because the evidence of record tends to disprove that there is such a thing as a yellow page directory "customarily distributed to all telephone subscribers in the addressee's business area." For this reason, Respondents argue that Complainant has failed to prove either of the allegations in (b) and (c). Respondents' argument is based on the premise that the term "addressee's business area," is undefined, and that the evidence does not show that any addressee's "business area" corresponds to the distribution coverage of any particular yellow page directory.
13. I find both of Complainant's arguments persuasive. I find that it is common knowledge, and not subject to reasonable dispute, that yellow page telephone directories listing businesses in the subscriber's local area are
customarily distributed to all telephone subscribers.(8) I also find the testimony of the three consumer witnesses sufficient to establish that local yellow page directories are distributed to telephone subscribers in each of their local areas.
14. It is not necessary that the evidence show that the geographical distribution of any particular yellow page directory precisely matches the area in which any addressee does business. That is the fallacy of Respondents' argument. The term "addressee's business area" requires no definition limited by precise geographical boundaries. The point is that business owners, who are generally aware that telephone companies distribute local yellow page directories, may misperceive the true nature of Respondents' solicitation because of its deceptive appearance. It is not relevant that Ms. Norman's yellow pages in Aztec, New Mexico are not distributed in Durango, Colorado, where she occasionally has customers, or that Mr. Georges may do some business in areas of northern California that extend beyond the reach of his local yellow pages. (Tr. 76, 96).
15. Again, Respondents' do not claim that these representations are true, and they clearly are not. Respondents are not affiliated in any way with any local yellow page directories, and are not offering to renew any existing listings. They are attempting to sell consumers a new and different product, which will be distributed only to those who buy it, not to all telephone subscribers in any particular area.
16. These representations are material because consumers would be much less likely to remit money if they realized that payment was for a "nationwide" directory, rather than a local directory.
d. Failure to respond to the notice will cause the addressee's business telephone listing to be
omitted from a yellow pages directory customarily
distributed to the telephone subscribers in the
addressee's business area.
17. This representation is another aspect of the overall representation that the notice is from the distributor of the addressee's local telephone yellow pages. This representation is not directly made in the solicitation, but is implied, as it follows logically from the representation in subparagraph c. If consumers believe that they are being asked to pay for renewing a prior listing, it follows that those consumers will also believe they will not be listed if they do not pay. One of the consumer witnesses testified that this is what he believed. (Tr. 109).
18. The fact that the solicitation also tells the recipient to "Return Upper Portion By [specific date]" also suggests some urgency if the customer wishes to avoid being unlisted.
19. This representation is false because, as is made clear above, Respondents have no affiliation with, and no effect on, publication of local yellow page directories.
20. The representation is material because potential customers are more likely to remit money if they believe they must do so to maintain their local yellow page listing.
e. The addressee has a previous business relationshipwith the Respondents.
21. The essence of this representation is discussed in paragraphs 5 and 6, above. In their post-hearing brief (¶¶ 68-69), and by implication in Mr. DeLeo's testimony (Tr. 172), Respondents' concede that the word "Confirmation" was misleading, but argue that removal of that word has cleansed the solicitation. That argument is not persuasive, for there are a number of other things about the appearance of the solicitation that suggest a previous business relationship. These are discussed in paragraphs 5 and 6. This finding is based on the appearance of the solicitation, but is corroborated by the testimony of the consumer witnesses, who said that they believed the notice was from their local yellow pages, with whom they did have a previous business relationship.
22. This representation is false because Respondents were starting a new publication, and had no previous business relationship with any addressees.
23. The representation is material because potential customers are more likely to remit money to renew a previous yellow page listing than to buy a "nationwide" directory which, for most of them, would have little value.
f. The amount set forth on the face of the notice is due
and owing to Respondents from the addressee.
24. Although the word "notice" is used in this allegation, the Complaint references Respondents' invoices as making this false representation. The theory is that even though a customer may have ordered Respondents' product, the invoice falsely represents that payment is due because the customer was induced to order the product by the other false representations discussed above.
25. This theory has been rejected on similar facts. Charles Smith, P.S. Docket No. 36/129 at 21-22 (P.S.D. December 9, 1993; I.D. at 8, March 27, 1991). Contracts induced by fraud are voidable, not void. FDIC v. Aetna Cas. & Sur. Co., 947 F.2d 196, 203 (6th Cir. 1991); Levin v. Garfinkle, 492 f. Supp. 781, 207 (E.D. Pa. 1980), aff'd, 667 F.2d 381 (3d Cir. 1981); Robert Smith, P.S. Docket No. 34/170 (P.S.D. April 30, 1992). This situation is different from that in Michael C. Spence, P.S. Docket No. 40/143 (I.D. October 21, 1994), where the invoice was found to be a false representation because the parties had never entered into a contract.
26. The solicitation itself does not represent that money is due, and the alleged representation, i.e. the invoice calling for payment, is not false because it does represent a payment that is owed.(9)
CONCLUSIONS OF LAW
1. Respondents' solicitations must be considered as a whole and their meaning determined in light of the probable impact on the mind of the ordinary recipients to whom they are directed. Donaldson v. Read Magazine, 333 U.S. 178 (1948); Peak Laboratories v. U.S. Postal Service, 556 F.2d 1387 (5th Cir. 1977); Allen Glazer, P.S. Docket No. 40/59 (P.S.D. January 27, 1994); Charles Smith, P.S. Docket No. 37/180 at 14 (P.S.D. January 31, 1994); Building Trades Association, P.S. Docket No. 37/88 at 6 (P.S.D. August 2, 1993).
2. The statute (39 U.S.C. §3005) is intended to protect the gullible, less critical reader, as well as the sophisticated and the wary. Fields v. Hannegan, 162 F.2d 17 (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). Representations may be false, within the meaning of §3005, even if many of the statements in a solicitation are literally true. Borg-Johnson Electronics, Inc. v. Christenberry, 169 F. Supp. 746, 750-51 (S.D.N.Y. 1959); Joseph N. Wilkinson, P.S. Docket No. 38/183 (I.D. June 2, 1992). "This section forbids representations that are false or artfully designed to mislead." Dynaquest Corp. v. U.S. Postal Service, 12 F.3d 1144, 1146 (D.C. Cir. 1994). "Recipients of solicitations, whether careful or careless, have no obligation to critically scrutinize every sentence to determine the nature and source of the yellow page listing being offered." Directory Publishing Services, P.S. Docket No. 38/122 at 14-15 (P.S.D. February 28, 1994) It is the net impression likely to be made by the solicitation that determines whether false representations are made. Donaldson, supra; G.J. Howard Co. v. Cassidy, 162 F. Supp. 568, 572 (E.D.N.Y. 1958); 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); Charles Smith, P.S. Docket No. 37/180 at 15 (P.S.D. January 31, 1994).
3. The solicitations themselves are the best evidence as to what representations are made, and the Administrative Law Judge is qualified to make that determination. Directory Publishing Services, Inc. v. Runyon, 851 F. Supp. 484, 488 (D.D.C. 1994); Erica Lynn Kortje, P.S. Docket No. 40/176 at 3 (P.S.D. September 27, 1995); Directory Publishing Services, P.S. Docket No. 38/122 at 6 (P.S.D. February 28, 1994); Allen Glazer, supra at 4. The use of lay or expert testimony is not required, Dynaquest, supra at 1149; Scott P. Cullinane, P.S. Docket No. 39/32 at 7 (P.S.D. November 7, 1994), but testimony from consumer witnesses as to the impression a solicitation made upon them may properly be considered, as it was in this case. Joseph N. Wilkinson, supra at 13.
4. Solicitations that are ambiguous or capable of more than one meaning are misleading if one of those meanings is false. Rhodes Pharmacal Co. Inc. v. FTC, 208 F.2d 382,387 (7th Cir. 1953); Scott P. Cullinane, supra at 13; Directory Publishing Services, P.S. Docket No. 38/122 at 11 (P.S.D. February 28, 1994). It is not difficult to select words that will not deceive. United States v. 95 Barrels of Vinegar, 265 U.S. 438, 443 (1924).
5. "The issue in a 39 U.S.C. §3005 proceeding is not whether Respondents have the right to use any particular words or logo, but whether materially false representations are being made. Although the walking fingers logo is a generic symbol and words 'yellow pages' a generic term commonly used by many telephone directory publishers, they may nevertheless contribute to the overall impression created by a solicitation, and thus, mislead consumers as to the telephone directory listing being solicited." Directory Publishing Services, P.S. Docket No. 38/122 at 8-9 (P.S.D. February 28, 1994). "[I]t is the obligation of plaintiffs in the instant case to distinguish its product from those commonly associated with the 'Yellow Pages' term and walking fingers logo by the advertisement's recipient." Directory Publishing Services, Inc. v. Runyon, 851 F. Supp. 484, 489 (D.D.C. 1994). A solicitation may be deceptive because it makes statements that are untrue, or because it omits information that should be disclosed. It is the total impression on the reader, or recipient, that must be judged. Harold P. Weingold, P.S. Docket No. 41/23-30 at 63 (I.D. July 3, 1995); Michael C. Spence, P.S. Docket No. 40/143 at 19 (I.D. October 21, 1994); see also U.S. v. Keplinger, 776 F.2d 678,697 (7th Cir. 1985), cert. denied, 476 U.S. 1183 (1986).
6. An inconspicuous disclaimer is not sufficient to overcome the overall impression made by an advertisement - in this case, that Respondents' solicitation is for renewal of a listing in a local yellow pages directory. Gottlieb v. Schaffer, 141 F. Supp. 7, 17 (S.D.N.Y. 1956); American Publishing Services, P.S. Docket No. 34/191 at 6-7 (P.S.D. June 20, 1994); Scott P. Cullinane, supra at 14-16; Leo Daboub, supra at 16.
7. A representation is material when it is calculated to cause the reader to do what the representor wants the reader to do, or causes the reader to do other than he or she would have done had the truth been told. F.T.C. v. Colgate-Palmolive Co., 380 U.S. 374,387 (1965); Chaachou v. American Central Insurance Co., 241 F.2d 889, 893 (5th Cir. 1957); Charles Smith, P.S. Docket No. 37/180 at 30 (P.S.D. January 31, 1994); Directory Publishing Services, P.S. Docket No. 38/122 at 16 (P.S.D. February 28, 1994).
8. Applying the foregoing standards, I find Respondents' solicitations make the representations alleged in paragraph 7 of the Amended Complaint and, as set forth in the findings of fact, with the exception of subparagraph (f) these representations are materially false.
9. 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). Respondents are engaged in the conduct of a scheme for obtaining remittance of money through the mail by means of false representation, in violation of 39 U.S.C. §3005.
10. The attached False Representation Order and Cease and Desist Order should be issued.
Bruce R. Houston Acting Chief Administrative Law Judge
(a) Upon evidence satisfactory to the Postal Service that any person is engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations, . . . the Postal
Service may issue an [appropriate] order . . ..
2. On May 30, 1996, Respondents filed a motion to exclude Complainant's post-hearing brief, under 39 C.F.R. §952.23(a), because it was not filed by the due date, May 17, 1996, as prescribed in the Order of April 26, 1996. Complainant's attorney, who was out of town on May 17, deposited the brief in Express Mail service on May 17 (Friday) and it arrived in the Recorder's Office on May 20, 1996 (Monday). The rules on filing documents are found in 39 C.F.R. §952.9. Read literally, Subsection (c) of that rule seems to say that to be "filed," a document must arrive in the Recorder's Office on or before the due date. That has not been the interpretation that has long been practiced in this office, however. Unless a Judge's Order specifies that a document must be "received" by a certain date, documents are considered "filed" when they are placed in the mail. United States Testing Authority, P.S. Docket No. 14/77 (J.O. Order September 12, 1984). It is also noted that, in the instant case, the possible harm feared by Respondents, i.e. that Complainant might have had access to Respondents' brief before filing his own, did not happen. Respondents' motion to exclude Complainant's brief is denied.
3. References to the Transcript are "Tr." References to Complainant's Exhibits will be "Cx_," and Respondents' Exhibits will be "Rx_."
4. Cx-1, for example, is addressed to "Frey Gems" in Denver, Colorado, and says " 509416 Diamonds Wholesale," under "CLASSIFICATION."
5. In the more recent, Tel-Adv solicitations, the words "confirmation of" have been deleted. (Cx-6, Rx-4). Mr. DeLeo testified that this was done because some people complained that it was misleading. (Tr. 171-72, 206).
6. For example, the three consumer witnesses said they had advertised in their local yellow pages for 4 to 6 years (Tr. 77-Ms. Norman), 13 years (Tr. 84-85-Mr. Georges), and 3 years (Tr. 111-Mr. Martin).
7. Because these complaints/inquiries were received through normal channels by the postal inspectors, they were admitted over Respondents' objections. They are clearly hearsay, however, and would not be sufficient, standing by themselves, to establish that consumers found Respondents' solicitations to be deceptive. They are useful as corroboration of the testimony of the three consumer witnesses.
8. Fed. R. Evid. 201; 39 C.F.R. §952.18(d). Because this issue was raised and discussed at the hearing, the requirement that the parties have an opportunity to be heard, Fed. R. Evid. 201(e), was met. Cf. Charles Smith, P.S. Docket No. 36/129 (P.S.D. on Motion, June 3, 1991).
9. Although Ms. Norman recalled getting only the invoice, not the solicitation, I find Mr. DeLeo's testimony that invoices are not sent unless a customer returns a signed order form to be credible.