In the Matter of the Complaint Against ) December 30, 1997 ) A.C.L. ) 1470 Clara Avenue ) Columbus, OH 43211-2624 ) and ) 626 South High Street ) Columbus, OH 43215-5622 ) and ) DYNAQUEST CORP. ) M. T. KLASS ) 1524 Candlewood Drive ) Worthington, OH 43235-1624 ) and ) MITCH KLASS ) 8161 Running Fox ) Worthington, OH 43235-4439 ) P. S. Docket No. 36/90 APPEARANCE FOR RESPONDENTS: Max Kravitz, Esq. Kravitz & Kravitz 434 North Columbia Avenue Columbus, OH 43209-1004 APPEARANCE FOR COMPLAINANT: Jennifer Y. Angelo, Esq. Thomas V. Sottile, Esq. Civil Practice Section Law Department United States Postal Service Washington, DC 20260-1127
POSTAL SERVICE DECISION
ON MOTION FOR RELIEF FROM, AND TO REVOKE, MAIL STOP ORDER;
AND FOR AN ORDER DIRECTING RELEASE OF ESCROWED FUNDS
Respondents have filed a motion seeking relief from, and the revocation of, False Representation Order No. 3074 and seeking an order directing the release of funds currently being held in escrow pursuant to an Agreed Order issued by the United States District Court for the Southern District of Ohio.
BACKGROUND
In June 1990, Complainant filed a complaint with the Judicial Officer alleging that Respondents were mailing advertising materials containing false representations in violation of 39 U.S.C. §3005 ("the §3005 proceedings"). At the same time, Complainant initiated parallel proceedings in the United States District Court for the Southern District of Ohio, pursuant to 39 U.S.C. §3007 ("the §3007 proceedings"), seeking a temporary restraining order and injunction directing the detention of Respondents' incoming mail by the postmaster, pending resolution of the §3005 proceedings. After issuance of the temporary restraining order and prior to the hearing on an injunction, the parties negotiated an Agreed Order, which was issued by the district court, and which, in part, provided that certain actions be taken with respect to mail addressed to A.C.L. in response to solicitations issued by it prior to June 15, 1990. In particular, the Order provided for the use of "bounce-back" letters and provided that payments received from consumers were to be held
in an escrow account. The terms of the Order were to remain in effect until "final disposition of the administrative complaint," which was deemed to occur after the conclusion of any appeal by Respondents from the decision of the Judicial Officer.
The Associate Judicial Officer issued a Postal Service Decision (PSD) finding that Respondents had made four representations in their solicitations that were material and false. In connection with the PSD, the Associate Judicial Officer issued False Representation Order No. 3074. Respondents then filed a motion for reconsideration of the Postal Service Decision and for an order releasing the funds held in escrow under the terms of the Agreed Order. The Associate Judicial Officer denied the motion, holding, in part, that the Judicial Officer had no jurisdiction over the funds that were held pursuant to the Agreed Order, since that Order had been issued by the district court, which had jurisdiction over its interpretation and enforcement.
Respondents' appeal from the Postal Service Decision was denied by the United States District Court for the District of Columbia with respect to three of the four representations found material and false by the Associate Judicial Officer. The decision by the district court was upheld on appeal by the Court of Appeals for the District of Columbia Circuit. No appeal of the latter decision was filed.
Subsequently, in a continuation of the §3007 proceedings before the United States District Court for the Southern District of Ohio, the court ruled that "final disposition" of the administrative complaint had occurred, as defined under the terms of the Agreed Order, and that funds being held in escrow were to be returned to the consumers who responded to Respondents' solicitation. That ruling was appealed by Respondents to the Court of Appeals for the Sixth Circuit, which affirmed the decision of the district court.
Respondents' Motion
In their current motion, Respondents argue that they are entitled to relief from the False Representation Order under §60(b)(6) of the Federal Rules of Civil Procedure, which allows a court to relieve a party from a final order, judgment or proceeding. They argue that the False Representation Order only provides for the return of mail, but does not give the postmaster the right to return remittances previously made by those who received the bounce-back letter before doing so. Respondents argue that they have never received a hearing on the merits of their claim that they are entitled to return of the escrowed funds because the bounce-back procedures implemented pursuant to the Agreed Order corrected any misleading information that was ultimately found to exist in Respondents' solicitations.
Respondents also argue that the False Representation Order should be revoked because the reason for the Order no longer exists. Specifically, Respondents argue that the Postal Service is under a duty to relax or withdraw false representation orders where it is shown that those likely to be deceived by misleading advertising require no further protection. Respondents assert that the offending advertising materials have not been used since the administrative proceeding began in June 1990, and that no orders responding to the solicitation have been received since approximately April 1992. For these reasons, Respondents argue, there is no risk of future harm to the public and, therefore, there is no reason for the False Representation Order to continue in effect.
In reply, Complainant argues that Respondents' effort at this time to raise the issue of the "curative effect" of the bounce-back letters is untimely since the merits of the dispute have long since been decided. Complainant contends that the bounce-back letters were not intended by the parties to have any effect on the merits of the §3005 proceedings, but were merely an "agreed vehicle sought by Respondents to allow them to continue to do business during the pendency of the administrative case." Complainant argues that, having lost the §3005 proceeding, Respondents' attempt to use the bounce-back procedure to overturn the result of that proceeding is untimely and frivolous.
As to the revocation of the False Representation Order, Complainant argues that revocation could cause the Agreed Order to be moot, since there would be no "final disposition" of the administrative case for it to relate to and, thus, no mechanism for returning the escrowed funds to consumers.
Decision
The issue of the disposition of the escrowed funds is essentially a question of interpreting the provisions of the Agreed Order that was negotiated by the parties and issued by the United States District Court for the Southern District of Ohio. The district court concluded that Respondents had failed to prevail in the §3005 proceedings, and that under the terms of the Agreed Order the funds held in escrow were to be returned to the consumers who had ordered Respondents' materials. The Court of Appeals for the Sixth Circuit affirmed the decision of the district court. Although the Sixth Circuit noted that Respondents might have sought to amend their pleadings in the administrative proceeding for a determination of the effect of the bounce back letters on prior misrepresentations, the court concluded that,
"Furthermore, forwarding the money to Dynaquest would violate the intent of the parties when they entered into the agreement. Statements from the injunction hearing indicate the parties' understanding that Dynaquest would not receive the funds unless it prevailed on all of the claims of misrepresentation . . . . The record clearly demonstrates Dynaquest's expectation that it would not receive the escrowed funds unless it prevailed. We agree with the district court's determination that a finding of at least one false misrepresentation makes the Postal Service the prevailing party." (emphasis added).
Therefore, both courts have clearly concluded that Respondents are precluded from receiving the escrowed funds by the terms of the Agreed Order that they entered into. Respondents' current motion is, in effect, a collateral attack on the judgments of those two courts and seeks to have the Judicial Officer overrule the courts and direct that the funds held in escrow be paid to Respondents. The Judicial Officer does not have the authority to do so, and will not issue an order directing that the funds be disbursed in any way other than as directed by those courts.
With regard to the False Representation Order, the regulation at 39 C.F.R. §952.29 provides a vehicle through which a party may apply to have such an order modified or revoked. The regulation does not require that a hearing be held or specify conditions under which such an application must be granted. Therefore, the decision whether to hold a hearing and grant an application is left to the discretion of the Judicial Officer. Although the specific concern expressed by Complainant that the Agreed Order would become moot if the False Representation Order were
revoked appears unfounded,(1) Respondents have also not shown that they would be prejudiced by the continued existence of that Order for the time necessary to return the escrowed funds, as directed by the courts. Moreover, Complainant has indicated that, after return of the escrowed funds, it would be open to reexamining its position with regard to revocation of the False Representation Order. Accordingly, further proceedings relating to a determination on the revocation of the False Representation Order will be deferred until 60 days after the escrowed funds have been returned. At the conclusion of the 60-day period, the parties are to advise whether they have reached agreement on the revocation of the False Representation Order, or whether the matter should be reinstated on the docket for a decision on Respondents' motion.
Respondents' motion for an order directing the release of the escrowed funds is denied. A determination on Respondents' motion for relief from, and revocation of, False Representation Order No. 3074 is deferred as stated herein.
David I. Brochstein Associate Judicial Officer