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M.K.S. ENTERPRISES v. USPS

July 21, 1978

M.K.S. ENTERPRISES, INC. and/or Growing Glory and/or Pro-B-5 and Pro-B-5 Division, Plaintiff,
v.
UNITED STATES POSTAL SERVICE, Postmaster, Westbury, New York 11590, Postmaster, New York, New York 10010, Defendants



The opinion of the court was delivered by: NEAHER

MEMORANDUM AND ORDER

This is an action brought to enjoin defendants from enforcing a "mail stop" order issued following an administrative determination that plaintiff was engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations, in violation of 39 U.S.C. § 3005(a). Plaintiff now moves for summary judgment in its favor, pursuant to Rule 56, F.R.Civ.P., contending that the Postal Service determination is not supported by substantial evidence in the administrative record and that it is now as a matter of law entitled to a judgment permanently enjoining enforcement of the mail stop order. The parties agree that there is no issue as to any material fact. *fn1"

 Plaintiff M.K.S. Enterprises, Inc. ("M.K.S.") is the manufacturer of Growing Glory Lotion ("Growing Glory") and Pro-Vitamin B 5 d-panthenol Lotion ("Pro-B-5"), two hair care preparations which it advertises in periodicals of general circulation and markets through the mails. The products are of identical composition and consist of perfume, germicidal agents, a coloring agent, a solubilizing agent, and two "active" ingredients, Wilson WSP-X250 protein (a commercially produced derived protein of relatively small molecular weight and size), and the vitamin d-panthenol (the alcohol analog of pantothenic acid, vitamin B 5).

 On January 14, 1977, the Postal Service filed an administrative complaint charging that plaintiff in its advertising had made materially false representations about its products Pro-B-5 and Growing Glory. Specifically, the Postal Service alleged that the advertisements falsely represent that Pro-B-5 and Growing Glory if correctly applied will (1) "cause the user to have thicker, stronger, and longer hair"; (2) cause "the hair to grow longer and become stronger because (the product) is absorbed into the individual hair strands and permanently affects their structure"; (3) "produce the promised results within one week"; (4) "repair hair damaged by "chemicals, brushing, teasing, bleaching . . .' and heal split ends"; and (5) "cause the user to have thick, long hair such as that of the model pictured in the advertisement(s)." See USPS Complaint, Docket No. 5/121 (filed 1/14/77). PP 3-4. Plaintiff in its answer conceded that the advertisements in question had been published at its direction, but denied all other allegations of the complaint.

 On March 1, 1977, an evidentiary hearing was conducted before an administrative law judge who, on April 20, 1977, rendered an initial decision in favor of the Postal Service. The administrative law judge concluded that plaintiff's advertisements together make all of the representations alleged in the complaint and make materially false representations that Pro-B-5 and Growing Glory will (1) cause the user's hair to grow longer; (2) heal split ends; and (3) cause the user to have long hair like that of the model pictured in the advertisements. He did, however, find that there was proof "that the products will help to bring split ends together," Init. Dec. (4/20/77) at 11, and that there was in the record

 
"substantial evidence that the products will cause the user to have thicker and stronger hair; that it will permanently affect the structure of the hair; that the products will produce thickening and strengthening of the hair within one week; and that they will repair hair damaged by chemicals, brushing, teasing and bleaching." Id. at 12. *fn2"
 
On appeal, the initial decision was affirmed, with slight modification, by a Postal Service judicial officer. Specifically, the judicial officer affirmed all but one of the findings of the initial decision, reversing only the determination that the Pro-B-5 advertisement (in contrast to that for Growing Glory) represents that that product will "heal" split ends. Postal Service Decision (6/21/77). Accordingly, a mail stop order (United States Postal Service Order No. 77-30 (6/21/77)) was issued, directing the postmasters of Westbury, N.Y. and New York, N.Y. to withhold delivery to plaintiff of mail relating to sales of Pro-B-5 and Growing Glory and to return all such mail to the senders, and to stop payment of postal money orders payable to plaintiff for purchases of these products. In order to afford plaintiff an opportunity to seek judicial review, the Postal Service on June 24, 1977, temporarily stayed so much of the stop order as required return of mail to senders and advice to remitters of postal money orders concerning refunds.
 
On July 13, 1977, this court granted plaintiff's application for an order temporarily restraining the enforcement of the Postal Service mail stop order, and directed defendants to show cause why a preliminary injunction should not issue. After hearing counsel for the parties, the court on August 3, 1977, denied defendants' motion for summary judgment and granted plaintiff's application for a preliminary injunction. Defendants originally sought to appeal from so much of this order as granted preliminary injunctive relief; their appeal was, however, withdrawn by stipulation in November 1977.
 
Title 39 U.S.C. § 3005(a) authorizes the Postal Service to issue mail stop orders "(u)pon evidence satisfactory to (it) 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 scope of this court's power to review such decisions of the Postal Service is governed by 5 U.S.C. § 705, and is confined "to determining whether there is, considering the record as a whole, substantial evidence to support (the Judicial Officer's) findings of fact, and whether he has committed errors of law." Baslee Products Corp. v. United States Postal Service, 356 F. Supp. 841, 844 (D.N.J.1973). See Vibra Brush Corp. v. Schaffer, 152 F. Supp. 461, 463-64 (S.D.N.Y.1957), Order vacated on other grounds, 256 F.2d 681 (2 Cir. 1958). Indeed, at least one court has formulated the standard of judicial review in terms recalling the test formulated by the Supreme Court nearly a half-century prior to the adoption of the Administrative Procedure Act, holding that "(t)he power . . . vested in the Postal Service (by 39 U.S.C. § 3005) may not be interfered with by the courts unless it has exceeded its authority or is palpably wrong." N. Van Dyne Advertising Agency, Inc. v. United States Postal Service, 371 F. Supp. 1373, 1375 (S.D.N.Y.1974) (citing Public Clearing House v. Coyne, 194 U.S. 497, 509, 24 S. Ct. 789, 48 L. Ed. 1092 (1904)), followed in Unique Ideas, Inc. v. United States Postal Service, 416 F. Supp. 1142, 1144 (S.D.N.Y.1976). See Vibra Brush Corp. v. Schaffer, supra, 152 F. Supp. at 463-64; see also Bates & Guild Co. v. Payne, 194 U.S. 106, 24 S. Ct. 595, 48 L. Ed. 894 (1904); American School of Magnetic Healing v. McAnnulty, 187 U.S. 94, 23 S. Ct. 33, 47 L. Ed. 90 (1902). Hence,
 
"even though the court, as the original trier of the facts, might have reached a different conclusion, it may not substitute its own judgment if there is substantial evidence to support the findings of fact made by the (Postal Service). . . . (T)he court's power to upset a finding by the (Postal Service) that the mails are being used in furtherance of a fraudulent scheme is restricted to those instances where there is no substantial evidence reasonably to support (its) conclusion."
 
Vibra Brush Corp. v. Schaffer, supra, 152 F. Supp. at 463-64 (footnotes omitted), quoted in Unique Ideas, Inc. v. United States Postal Service, supra, 416 F. Supp. at 1144, and N. Van Dyne Advertising Agency, Inc. v. United States Postal Service, supra, 371 F. Supp. at 1375-76.
 
Prior to amendment in 1968, the immediate predecessor of § 3005, 39 U.S.C. § 4005, *fn3" authorized the Postmaster General to issue mail stop orders upon a showing that "any person is engaged in conducting a scheme or device for obtaining money or property through the mail by means of False or fraudulent pretenses, representations, or promises . . . ." The 1968 amendment, see Pub. L. No. 90-590, 82 Stat. 1153 (1968), substituted for the emphasized language the phrase "false representations," and was intended to eliminate the requirement of proof of scienter or intent to defraud, which had emerged from a number of Supreme Court decisions interpreting former §§ 259 and 732 of Title 39 (the forerunners of § 4005), *fn4" and similar regulatory statutes, most notably Reilly v. Pinkus, 338 U.S. 269, 70 S. Ct. 110, 94 L. Ed. 63 (1949), and Seven Cases v. United States, 239 U.S. 510, 36 S. Ct. 190, 60 L. Ed. 411 (1916). See United States v. International Term Papers, Inc., 477 F.2d 1277, 1280 (1 Cir. 1973); Lynch v. Blount, 330 F. Supp. 689, 692-95 (S.D.N.Y.1971) (three-judge court), Aff'd, 404 U.S. 1007, 92 S. Ct. 673, 30 L. Ed. 2d 656 (1972); H.R.Rep. No. 235, 90th Cong., 2d Sess. (1967), reprinted in 1968 U.S.Code Cong. & Admin.News at 4290-4302. Hence, a reviewing court will not set aside a Postal Service mail stop order where there is substantial evidence in the administrative record to support the agency's determination that an advertiser has employed false material representations in order to generate sales of its products through the mails. See Peak Laboratories, Inc. v. United States Postal Service, 556 F.2d 1387, 1389 (5 Cir. 1977); Unique Ideas, Inc. v. United States Postal Service, supra, 416 F. Supp. at 1145; United States v. International Term Papers, Inc., supra, 477 F.2d at 1279; N. Van Dyne Advertising Agency v. United States Postal Service, supra, 371 F. Supp. at 1375.
 
As noted above, the mail stop order challenged by plaintiff was issued on the basis of a Postal Service determination that the advertisements for Pro-B-5 and Growing Glory contain a number of false material representations. Specifically, the agency found that the advertisements for both products falsely represent that the products will cause hair to grow longer and will cause the user to have long hair like that of the model pictured in the advertisements, and that the advertisements for Growing Glory falsely represent that it will heal split ends. Although plaintiff appears to argue that even if made, the foregoing representations have not been shown to be materially false, it is sufficient, in view of the agency's finding that both products yield certain beneficial results, to consider only plaintiff's contention that the Postal Service's determination of the representations made is not supported by substantial evidence.
 
As the Supreme Court has observed, advertisements are to be interpreted in terms of "the effect (they) would most probably produce on ordinary minds." Donaldson v. Read Magazine, 333 U.S. 178, 189, 68 S. Ct. 591, 597, 92 L. Ed. 628 (1948) (quoted in Unique Ideas, Inc. ...

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