Appeal of COM-TEL DIRECTORIES, INC, AMERITEL DIRECTORIES, INC, TEL-ADV, INC., YELLOW PAGES, NEAL DELEO

July 27, 2001

In the Matter of the Complaint Against 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: Peter J. Wheeler, Esq. Inspector/Attorney United States Postal Service Gateway II, 9th Floor Newark, NJ 07175-0002 APPEARANCE FOR RESPONDENTS: Frank J. Shannon, III, Esq. 920 Candler Building 127 Peachtree Street, NE Atlanta, GA 30303-1827

POSTAL SERVICE DECISION

Respondents Tel-Adv, Inc., Yellow Pages and Neal DeLeo have filed an appeal from an Initial Decision of an Administrative Law Judge, which held that Respondents are engaged in conducting a scheme for obtaining money through the mail by means of materially false representations in violation of 39 U.S.C. §3005. Complainant, the General Counsel of the United States Postal Service, opposes the appeal.

Background

Complainant initiated this proceeding by filing a Complaint¹ alleging that Respondents are engaged in a scheme or device to obtain money through the mail by means of materially false representations. Specifically, the Complaint alleges in Paragraph 7 that Respondents make the following false representations in violation of 39 U.S.C. §3005:

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 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.

Respondents filed a timely answer denying the allegations of the Complaint. At a hearing before the Administrative Law Judge, Complainant introduced into evidence several documents and presented the testimony of four witnesses to support its position. Respondents presented documentary evidence and the testimony of Respondent Neal DeLeo, who was the President and sole shareholder of Respondent Tel-Adv, Inc. and had also held those same positions with Respondents Com-Tel Directories, Inc. and Ameritel Directories, Inc.²

Following the filing of proposed findings of fact and conclusions of law by both parties, the Administrative Law Judge issued an Initial Decision holding that Respondents make all of the representations alleged in the Complaint except for Representation 7(f) and that those representations are materially false. Respondents Tel-Adv, Inc., Yellow Pages and Neal DeLeo filed an appeal from that decision.

While the appeal was pending before the Judicial Officer, Complainant filed a Motion to Add Further Solicitations to Record. By its Motion, Complainant sought to have orders issued in connection with the most recent solicitation distributed by Respondent Tel-Adv, Inc., which had been revised in an attempt to correct the false representations found in the Initial Decision.³ Respondents opposed the motion and moved for an evidentiary hearing. Complainant’s motion to add the new solicitation to the record and Respondents’ motion for an evidentiary hearing were granted and the proceeding was remanded to the presiding Administrative Law Judge to take evidence and issue a further decision on the new solicitation. A hearing on remand was held thereafter to determine if the new solicitation continued to make the materially false representations found in the Initial Decision. In an Initial Decision (On Remand) the Administrative Law Judge held that the revised solicitation continued to make the representations alleged in Paragraphs 7(a)-(e) of the Complaint, that the representations were materially false and that the false representation and cease and desist orders attached to the Initial Decision should also apply to the new solicitation. Although Respondents were notified they could file an appeal from the Initial Decision (On Remand), no such appeal was filed.

Decision

Since Respondents did not appeal the Initial Decision (On Remand) that decision is now the final decision of the Postal Service in accordance with 39 C.F.R. §952.24(a), and the orders sought by Complainant and recommended for issuance by the Administrative Law Judge in that decision are being issued with this decision. The Initial Decision (On Remand) only concerned the most recent solicitation distributed by Respondent Tel-Adv, Inc., but under the terms of the cease and desist order recommended for issuance, anyone who would be bound by an injunction issued against Respondent Tel-Adv, Inc. pursuant to Federal Rule of Civil Procedure 65 is also prohibited from engaging in any of the conduct listed in the order.⁴ The Rule 65 prohibition applies to the officers of Respondent Tel-Adv, Inc., which includes its president and sole shareholder Respondent DeLeo. Therefore, Respondent DeLeo, as well as the other named Respondents, which are or were owned and controlled by him, are bound by the prohibitions of the cease and desist order recommended for issuance by the Administrative Law Judge in his Initial Decision (On Remand).⁵

Respondents’ exceptions to the Initial Decision have nonetheless been considered and are hereafter addressed. None of Respondents’ exceptions establish that the Administrative Law Judge committed reversible error or that the orders sought by Complainant should not be issued.

Exception 1

Whether or not the trial court (ALJ) erred in the taking of official notice and whether or not the Respondents are entitled to a hearing on the facts of which the trial court (ALJ ) took official notice.

Respondents contend the Administrative Law Judge erroneously took official notice that the term "yellow pages" is associated by many people with their local telephone yellow page directory (Finding of Fact (FOF) 5) and that yellow page directories are customarily distributed to all telephone subscribers in the addressee’s business area (FOF 13). The Administrative Law Judge’s conclusion in FOF 5 that the term "yellow pages" and the walking fingers logo are associated with local telephone company yellow page directories was properly based on the testimony of the consumer witnesses called by Complainant. All three witnesses testified they believed the walking fingers logo and the term "yellow pages" were used to identify the yellow page directory in which they had previously advertised and which was distributed by their local telephone company.⁶ While Respondents are correct that the term "yellow pages" and the walking fingers logo are generic,⁷ the evidence presented in this case clearly shows that ordinary consumers associate the term and the symbol with the directory distributed by their local telephone company.

Furthermore, the testimony presented at the hearing made it unnecessary for the Administrative Law Judge to take official notice of the customary distribution of yellow page directories "to all telephone subscribers in the addressee’s business area" (FOF 13). All three consumer witnesses testified that they received a yellow page directory from their local telephone company and that they only wished to advertise in, and reach potential customers/clients in the area covered by, that directory.⁸ Therefore, even though the Administrative Law Judge stated he could take official notice of this fact, he also correctly concluded that sufficient evidence had been presented to establish that local yellow page directories are distributed to telephone subscribers in the addressee’s business area (FOF 13). Accordingly, there is no basis for reversing the Initial Decision.

Exception 2

Whether or not the trial court (ALJ) erred in denying Respondents’ motion to bind the Postal Service to its responses to Respondents’ Request for Admissions.

Respondents next contend that the Administrative Law Judge erred by not binding Complainant to its responses to Respondents’ proposed admissions. Respondents requested that Complainant respond to 17 separate admissions to which Complainant replied either that the request was "irrelevant and cannot lead to admissible evidence" (Admission 1) or that it "lacks knowledge to either admit or deny this request" (Admissions 2-17). On motion of Respondents to bind Complainant to its responses to the admissions and to preclude it from introducing any contradictory evidence, the Administrative Law Judge determined at the hearing it was more appropriate to allow all evidence to be presented at the hearing and not hold Complainant to its responses to the admissions.⁹

Under Sections 952.17 & 18 of the Rules of Practice,¹⁰ the Administrative Law Judge has discretion to relax the rules governing the admissibility of evidence to the extent he deems proper to insure a fair hearing.¹¹ Given the overly broad nature of Respondents’ request for admissions, it was proper for the Administrative Law Judge to refuse to prohibit Complainant from introducing evidence at the hearing. Moreover, Respondents have not shown that they have been prejudiced by the Administrative Law Judge’s ruling or that they are otherwise entitled to relief on appeal.

Exception 3

Whether or not the trial court (ALJ) relied upon inadmissible evidence in the issuing of the Initial Decision.

Whether or not the use of inadmissible evidence by the trial court (ALJ) in issuing the Initial Decision denied the Respondents due process as required by law.

Respondents argue that FOF 5¹² is not supported by the record and that the similarity of the language in that finding to language in previous decisions is the use of inadmissible evidence and a violation of their due process rights. Contrary to Respondents’ assertion, the Administrative Law Judge cites the testimony of three consumer witnesses to support his finding.¹³ Moreover, reliance on similar language in previous decisions involving similar issues is not a violation of due process where, as here, reliable and probative evidence has been presented to support the finding.

Respondents further argue that the words "yellow pages" and the walking fingers logo cannot be misleading because they are a generic term and symbol which cannot be found to indicate any particular local telephone directory. Although Respondents are correct that the phrase and logo are generic,¹⁴ the overall impression created by their use in the context of a particular solicitation may be misleading to ordinary consumers and, therefore, a violation of the false representation statute.¹⁵ The evidence presented in this case establishes that the walking fingers logo and the term "yellow pages" were misleading to the recipients of Respondents’ solicitations. Therefore, the Administrative Law Judge did not rely on inadmissible evidence or deny Respondents their due process rights.

Exception 4

Whether or not the ALJ and the Initial Decision in "amending" paragraphs 7 b., 7 c., and 7 d. of the Amended Complaint through the taking of "official notice" denied these Respondents due process of law.

Respondents’ next contend that they were denied due process because the Administrative Law Judge improperly took official notice and changed the meaning of the Complaint when he was considering the representations alleged to be false in paragraph 7(b)-(d) of the Complaint. According to Respondents, the Administrative Law Judge’s failure to precisely quote the language of the Complaint in the body of the Initial Decision constituted an amendment of the Complaint which they did not have an opportunity to address at the hearing.

Respondents have presented no meaningful argument that the wording used by the Administrative Law Judge in discussing the distribution of yellow page directories varies in any substantial manner from the misrepresentations alleged in the Complaint. Moreover, as was previously stated, it was unnecessary for the Administrative Law Judge to take official notice of any fact relating to the distribution of yellow page directories since a preponderance of evidence on this issue was presented by the testimony of the consumer witnesses who testified at the hearing.¹⁶ Respondents were given a full opportunity to present evidence challenging the allegations of the Complaint and the record does not reflect any denial of Respondents’ due process rights.

Exception 5

Whether or not the Postal Service, ALJ, and/or Judicial Officer may use their "expert understanding" of ordinary consumers to change the generic nature of an item contrary to the decision of a higher federal court. Does the use of such understanding deny the Respondents due process?

In connection with this Exception, Respondents argue that the Administrative Law Judge exceeded his authority in FOF 5 by finding that many people associate the term "yellow pages" and the walking fingers logo with their local telephone company’s yellow page directory. Respondents argue that, as a matter of law, a generic mark can never be used to designate the source or origin of an item, such as the local telephone company directory. Respondents’ characterization of FOF 5, however, is incorrect. The Administrative Law Judge did not find that either the term "yellow pages" or the walking fingers logo is used to depict a particular directory, but only that Respondents’ use of the term and logo in the overall context of their solicitations was misleading to ordinary consumers.¹⁷ The Administrative Law Judge’s finding regarding the effect of Respondents’ solicitations on the ordinary reader¹⁸ did not exceed his authority or deny Respondents due process.

Exception 6

Whether or not the Postal Service and the Initial Decision show by a preponderance of reliable and probative evidence of record that the Respondents made the representations contained in paragraphs 7 a., b., c., d., and e. and that the representations are false.

Finally, Respondents contend that the evidence does not support the Administrative Law Judge’s conclusion that Respondent Tel-Adv, Inc. has made the representations alleged in Paragraph 7(a)-(e) of the Complaint. While no consumer testimony was specifically presented regarding the Tel-Adv, Inc. solicitations, the impression of a solicitation on the ordinary reader may be determined by the trier of fact solely on the basis of the solicitation itself, and neither lay nor expert testimony is necessary to establish whether the solicitation makes the representations alleged in the Complaint or the effect of those representations on the ordinary reader.¹⁹ Although the Tel-Adv, Inc. solicitations varied somewhat from the solicitations that were the subject of consumer testimony at the first hearing, the overall impression they conveyed to the ordinary recipient was most probably the same impression conveyed by the Com-Tel, Inc. solicitations.²⁰ Moreover, the revised Tel-Adv Inc. solicitations²¹ were the subject of consumer testimony at the hearing on remand²² and were found to make the same misrepresentations as those originally found by the Administrative Law Judge. Therefore, there is no merit to this exception.

Conclusion

Respondents’ appeal from the Initial Decision of the Administrative Law Judge is denied. Accordingly, the Initial Decision and the Initial Decision (On Remand) are the final decisions of the Postal Service, and the orders recommended by the Administrative Law Judge and sought by Complainant are issued herewith.


					James A. Cohen

					Judicial Officer

¹ The Complaint was subsequently amended to add Tel-Adv, Inc. as a Respondent. References hereafter to the Complaint are to the Complaint as amended.

² March 19, 1996 Hearing Transcript (Tr1.) 170; Initial Decision (ID), Findings of Fact (FOF) 1 & 2.

³ April 1, 1997 Hearing Transcript (Tr2.) 85-87, 99-100.

⁴ Rule 65(d) states in pertinent part that any order issued pursuant to the rule is "binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise."

⁵ Respondent Com-Tel Directories, Inc. (formerly Ameritel, Inc.) did not appeal the original Initial Decision and therefore, under Rule 65, the prohibitions of the cease and desist order sought in the Complaint and recommended for issuance by the Administrative Law Judge against Com-Tel Directories, Inc. in that decision would also bind all of the other named Respondents.

⁶ See Tr1. 69-70 (witness believed solicitation was from local telephone company for local yellow page ad because "it said yellow pages and it's got the yellow page logo on it…"); Tr1. 86 (testimony that walking fingers logo used by local telephone company and "[e]verybody refers to [the directory as], the yellow pages" even if that isn't the official title); and Tr1. 131-2 ("the yellow pages and…[t]he walking fingers symbol" led witness to believe the solicitation was from his local telephone company). This testimony was also cited in the Initial Decision despite Respondents' contention that the Administrative Law Judge did not cite any facts in the transcript to support his finding.

⁷ See Scott P. Cullinane, et al., P.S. Docket No. 39/32 (P.S.D. Nov. 7, 1994); Directory Publishing Services, et al., P.S. Docket No. 38/122 (P.S.D. Feb. 28, 1994); Charles Smith, et al., P.S. Docket No. 37/180 (P.S.D. Jan. 31, 1994).

⁸ See Tr1. 67 (witness thought she was buying an ad in a directory just for her local area in which she does business); Tr1. 87 (witness's company has no reason to advertise in a national yellow pages and its business is limited to Northern California); and Tr1. 112 (witness had not wanted a nationwide listing).

⁹ Tr1. 17-18.

¹⁰ 39 C.F.R. Part 952, Rules of Practice in Proceedings Relative to False Representation and Lottery Orders.

¹¹ See Farley v. Simmons, 99 F.2d 343, 346 (D.C. Cir. 1938), cert. denied, 305 U.S. 651 (1938); see also Dennis Smith, P.S. Docket No. 37/176 (P.S.D. June 23, 1993), and cases cited therein. ¹² Although Respondents refer to FOF 9, it is obvious they intended to refer to FOF 5 of the Initial Decision.

¹³ See ID at 5, FOF 5 (citing Tr1. 69-70, 86, 131-32). Respondents also contend that the use of the word "many" in FOF 5 is not supported by the record since only three people testified and three does not constitute "many". Regardless of the appropriateness of the use of the word "many" in the finding, the record establishes that ordinary readers associate the walking fingers logo and the term "yellow pages" with their local telephone company.

¹⁴ See infra Exception 1 and note 7.

¹⁵ Directory Publishing Services, Inc. v. Runyon, 851 F. Supp. 484, 488 (D.D.C. 1994); Charles Smith, et al., P.S. Docket No. 36/129 (P.S.D. Dec. 9, 1993); Charles Smith, et al., P.S. Docket No. 37/180 (P.S.D. Jan. 31, 1994).

¹⁶ See infra Exception 1 and notes 6 & 8.

¹⁷ A solicitation as a whole may be misleading even though every sentence separately considered is literally true. See Donaldson v. Read Magazine, Inc., 333 U.S. 178, 189 (1948); Allen Glazer d/b/a Poster Distribution Center, P.S. Docket No. FR 40/59 (P.S.D. Jan. 27, 1994); The National Gold Mint, P.S. Docket No. 22/165 (P.S.D. May 1, 1987).

¹⁸ Respondents' solicitations must be considered as a whole and their meaning determined in light of the probable impact the representations would have on an ordinary reader. See Donaldson v. Read Magazine, Inc., 333 U.S. 178, 189 (1948); G.J. Howard Co. v. Cassidy, 162 F. Supp. 568, 572 (E.D.N.Y. 1958); Gottlieb v. Schaffer, 141 F. Supp. 7, 15-16 (S.D.N.Y. 1956); Dennis Ward, et al., P.S. Docket No. 37/118 (P.S.D. B/CA Oct. 16, 1991).

¹⁹ See Peak Laboratories, Inc. v. United States Postal Service, 556 F.2d 1387, 1389 (5th Cir. 1977); Scott P. Cullinane, et al., P.S. Docket No. 39/32 (P.S.D. Nov. 7, 1994); Charles Smith, et al., P.S. Docket No. 37/180 (P.S.D. Jan. 31, 1994).

²⁰ The solicitations themselves are the best evidence of their contents and the Administrative Law Judge may rely solely on them to determine whether the alleged representations are made and their effect on the ordinary reader. See Allen Glazer d/b/a Poster Distribution Center, P.S. Docket No. FR 40/59 (P.S.D. Jan. 27, 1994); Charles Smith, et al., P.S. Docket No. 36/129 (P.S.D. Dec. 9, 1993); The Washington Mint, Inc., P.S. Docket No. 30/42 (P.S.D. P/SO Nov. 27, 1992).

²¹ April 1, 1997 Hearing Exhibits CX-16 and CX-17.

²² Tr2. 53-55 (testimony that witness originally thought the solicitation was for an existing advertisement in the local yellow page directory and that she had no reason to advertise in a national directory); Tr2. 65-69 (testimony that witness initially believed the solicitation was a bill for her local yellow page advertisement because of the yellow pages logo and that she did not have any reason to advertise nationally because the customers at her beauty salon are local).