The opinion of the court was delivered by: MEDINA
MEDINA, Senior Circuit Judge:
In this action Vincent Lynch prays for an adjudication that 39 U.S.C. Section 3005 is unconstitutional on its face and as applied to plaintiff in an administrative proceeding initiated by the Postmaster General of the United States. In this proceeding the Postmaster General seeks to obtain a stop order in connection with what is claimed to be a scheme to defraud the public by mailing large quantities of printed matter advertising a worthless so-called "Formula 11" as a miraculous way of "draining off fat" in a few days. The complaint requests a temporary and permanent injunction against these administrative proceedings and against the issuance of a stop order. A three-judge District Court was properly convened, and Judge Metzner has already denied a stay of the administrative proceedings which are now in progress.
Plaintiff asserts that 39 U.S.C. Section 3005
violates the Due Process Clause of the Fifth Amendment and also the Freedom of Speech provision of the First Amendment.
Section 3005 provides that the Postmaster General,
after finding that a mailer is engaged in conducting a scheme for obtaining money by means of false representations, may stop the incoming mail of such a person and return it to the sender, by issuing what is known as a stop order. The Postmaster General may also forbid the payment of any money order or postal note made out to such a person and return the money. But under the relevant Postal Service Regulations, 39 C.F.R. Part 952 (1971), a stop order of this kind cannot issue until either a default by the respondent to an administrative complaint or a decision after a hearing on the matter before a civil service hearing examiner. In addition, the decision of the hearing examiner may be stayed pending an administrative appeal to a civil service judicial officer. The entire procedure normally requires about 90 days to complete.
Lynch, doing business as Brewster Products, rented a Post Office box at the Madison Square Station in New York City in the late fall of 1970 and then began an intensive advertising campaign which included the use of the mails, offering Formula 11 as a weight-reducing product to the public for sale. The advertising circular Lynch mailed highly praised the effectiveness of Formula 11 as a weight-reducing aid and asked the recipient to purchase the capsules by returning cash, a check or a postal money order to the plaintiff's Post Office box. The mailings for Formula 11 were very extensive, with over 97,000 circulars being sent out in a two-day period in early April of 1971.
On March 11, 1971 the Postmaster General docketed an administrative complaint against plaintiff, thereby starting the administrative process that determines if a stop order should be imposed on mail addressed to plaintiff. In the Matter of the Complaint Against Brewster Products, P.O.D. No. 3/79. The complaint was served on Lynch on March 17, 1971.
In the complaint the Postmaster General claimed that the advertisement for Formula 11 contained several material false representations, including: (1) although the circular stated that Formula 11 users could "break every 'rule in the book' and still * * * lose seven pounds in the first 48 hours * * * 12 pounds in the very first week * * * 34 pounds the very first month * * * Yes lose up to 71 pounds in less than three months' time!", the Postmaster General claimed that a person using Formula 11 would not lose weight at all if he did not restrict his calorie intake below the level required to maintain his present body weight, and the user of Formula 11 could not lose the specified amounts of weight in the stated time periods; (2) although the advertisements claimed that Formula 11 is "the method that is actually used by doctors themselves when they want to lose weight," the Postmaster General alleged that medical doctors do not regard it as a sound weight-reducing medication; and (3) although the circular stated that Formula 11 will "liquify and draw away any existing fat" and will keep the fat off "permanently," the Postmaster General claimed that the capsules do not alter the metabolism of the user and do not permanently cure obesity.
After the complaint was filed, Lynch had until April 9 to answer and a hearing was scheduled for April 21. On April 7, 1971, Lynch filed a complaint in this Court, asking for a declaratory judgment on the constitutionality of Section 3005 and for injunctive relief against its enforcement by the defendant. The next day Judge Metzner issued an order to the Postmaster General to show cause why a three-judge court should not be convened and further granted a temporary restraining order staying the administrative proceedings. In the application to convene a three-judge court pursuant to 28 U.S.C. Section 2282, plaintiff only asked the Court to issue a preliminary and permanent injunction restraining the enforcement of Section 3005 against him. That is the only issue before this Court.
In his opinion of April 16, 1971 convening the three-judge court, Judge Metzner found no irreparable injury would occur to Lynch and dissolved the stay, ordering the administrative proceedings to continue, but he enjoined the enforcement of any stop order which might issue against plaintiff until the constitutionality of the statute had been determined. Lynch then entered a general denial to the administrative complaint and a hearing was held on May 24 in Washington, D.C. Proposed findings of fact were to be submitted to the civil service hearing examiner by June 21. As of now, there has been no administrative decision in this case, and a final decision will probably not be entered until September, 1971. No stop order can be imposed against plaintiff until that time, assuming that the administrative decision is in favor of the Postmaster General, and in the meantime Lynch is free to continue the mailings on Formula 11.
The power of the Congress to pass legislation authorizing the Post Office Department to investigate commercial frauds and to issue stop orders, without prior judicial adjudication, after proper findings describing the scheme to defraud the public, has frequently been upheld by the Supreme Court in cases where resort has been made to a great variety of supposed constitutional infirmities in the underlying statute, including alleged violations of Freedom of Speech requirements. Donaldson v. Read Magazine, 333 U.S. 178, 68 S. Ct. 591, 92 L. Ed. 628 (1948); Public Clearing House v. Coyne, 194 U.S. 497, 24 S. Ct. 789, 48 L. Ed. 1092 (1904).
But plaintiff relies on two subsequent decisions of the Supreme Court. Thus it is said that the effect of Reilly v. Pinkus, 338 U.S. 269, 70 S. Ct. 110, 94 L. Ed. 63 (1949), in the light of the 1968 amendment of the basic statute,
is to make the amended statute void. The reasoning is that the law now plainly permits a stop order to issue without proof of scienter or intent to defraud, and this is said to authorize a taking of property without due process of law. Plaintiff's other point is that the situation here is identical with that of the obscenity stop order in Blount v. Rizzi, 400 U.S. 410, 91 S. Ct. 423, 27 L. Ed. 2d 498 (1971), which dealt with 39 U.S.C. Sections 3006 and 3007, and that the anti-fraud statute must be held to violate the First Amendment because it does not provide for a prior judicial adjudication and does not require the Government to take the initiative promptly in a proceeding in which the Government has the burden of proof.
It is a sufficient answer to the first point, we think, to say that the courts have upheld many other laws passed by the Congress, such as Section 5 of the Securities Act of 1933, 15 U.S.C. Section 77e, and Section 12 of the amended Federal Trade Commission Act, 15 U.S.C. Section 52, to protect people against fraudulent use of the mails, even if the false statements are made without scienter.
The purpose of these laws is not to punish the offender but to protect the public. The Post Office Department strongly supported the 1968 amendment for the very purpose of making it less difficult to put an end to these swindles. We think that was a worthy purpose. If, in a given case such as the one now before us, the selling of some particular nostrum is the sole business in which plaintiff is engaged and the stop order will put him out of business, so much the better, if the proofs substantially support the finding that the false statements were made as part of a scheme to defraud.
This is not to say that stop orders will be upheld by the courts whenever a person has resorted to a little exaggeration or mere puffing. The false statement must be material and it must be substantial ...