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U.S. v. RAYMOND & WHITCOMB CO.

June 19, 1999

UNITED STATES OF AMERICA, PLAINTIFF,
v.
RAYMOND & WHITCOMB CO., DEFENDANT.



The opinion of the court was delivered by: Motley, District Judge.

[EDITOR'S NOTE: THIS PAGE CONTAINED  AND  ARE
NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT
DISPLAYED.]

OPINION ON SUMMARY JUDGMENT

The United States of America, on behalf of the United States Postal Service, alleges that Raymond & Whitcomb Co. (hereinafter, "R & W") illegally used the non-profit mail rate for 6.1 million mailings not eligible for that rate, causing the Postal Service to suffer a deficiency of $398,960.05. The United States has brought this civil action under the Federal Debt Collection Procedure Act, 31 U.S.C. § 3001 et seq. (Count I), unjust enrichment common law (Count II), and the False Claims Act, 31 U.S.C. § 3729 et seq. (Count III). The United States seeks actual damages, treble damages, and a civil penalty of at least $5,000 for each of 753 false mailing statements. Both parties have moved for summary judgment. For the reasons given below, summary judgment is granted to the United States on Count I (Federal Debt Collection Procedure Act) and Count II (unjust enrichment). Summary judgment is denied to both parties in all other respects.

I. BACKGROUND

Except as otherwise noted, the facts in this section are undisputed. R & W, a New York corporation, is a commercial travel agency that specializes in cruises and tours for institutional clients and their members. Compl. ¶ 6; Answer ¶ 6. R & W works almost exclusively with non-profit institutions, such as the Metropolitan Museum of Art (hereinafter, "Met") and the Smithsonian Institution (hereinafter, "Smithsonian") (collectively, "Institutions"), on travel programs that advance their educational missions. Def.'s R. 56.1 Stmt. ¶ 2.*fn1 R & W does not provide conventional retail travel services to the public. Def.'s R. 56.1 Stmt. ¶ 1.

From November 1, 1992 to August 31, 1996 (hereinafter, "complaint period"), R & W played a role in the operation of each Institution's travel tour programs. Pl.'s R. 56.1 Stmt. ¶ 1. Targeting its members, each Institution made its tours educational in focus. "The objective of the Smithsonian study tour program is to provide special opportunities for Smithsonian members to learn about the history and culture of other areas of the world through travel with scholars and authorities provided by the Institution. . . . The focus of a Smithsonian study tour is educational." Def.'s R. 56.1 Stmt. ¶¶ 4, 26. "The Metropolitan travel program is essentially the same as the Smithsonian study tour program, with education of Metropolitan members and the advancement of the educational mission of the Metropolitan as its goal." Def.'s R. 56.1 Stmt. ¶ 30. The Smithsonian tours are available only to its members, with Smithsonian personnel dictating the basic tour blueprint, helping staff the tour, and scrutinizing and approving all aspects of the tour. Def.'s R. 56.1 Stmt. ¶¶ 6-8, 11-15, 18-19, 22. "The Metropolitan has final approval over every facet of its travel program." Def.'s R. 56.1 Stmt. ¶¶ 31-32. The Met tours were at least "primarily for members" of the Met, and members were the targets of the brochure mailings that the Met directed. Compl. ¶ 21; Def.'s R. 56.1 Stmt. ¶ 32.

R & W's work for the tour programs included the following: helping plan itineraries; procuring and paying for cruise ship, hotel, and tour reservations; hiring travel staff; and, in the actions at issue here, printing and mailing brochures and tour bulletins (hereinafter, "disputed mailings"). Pl.'s R. 56.1 Stmt. ¶¶ 7-9. R & W's financial gain or loss from its work with the Institutions depended on the number of paying participants in the tours. Pl.'s R. 56.1 Stmt. ¶¶ 10-13. R & W had each tour priced so as to earn R & W a profit, and most tours generated a profit of $100,000 to $300,000 for R & W. Pl.'s R. 56.1 Stmt. ¶¶ 11-14. R & W also bore a risk of financial loss when trips were canceled, and at least one canceled tour did cause R & W to suffer a loss. Pl.'s R. 56.1 Stmt. ¶¶ 10, 13.

The disputed mailings included 6.1 million pieces of mail in 753 separate submissions to the Postal Service during the complaint period. Pl.'s R. 56.1 Stmt. ¶¶ 2, 3.*fn2 For the disputed mailings, R & W paid the postage as well as the costs of printing the brochures and bulletins. Pl.'s R. 56.1 Stmt. ¶¶ 6, 7. R & W hired St. John Associates, Inc. (hereinafter, "St.John"), a mailing agent, to submit the mailings to the Postal Service. Pl.'s R. 56.1 Stmt. ¶ 15. All disputed mailings were mailed at the non-profit standard mail rate (formerly, the special bulk third-class rate) (hereinafter, "non-profit rate"), which is available only to authorized non-profit organizations such as the Institutions. Pl.'s R. 56.1 Stmt. ¶ 4. At the non-profit rate, postage for the disputed mailings was $398,960.05 cheaper than it would have been at the regular third-class bulk rate. Pl.'s R. 56.1 Stmt. ¶ 5.

For each of the 753 submissions, St. John signed the required Postal Service mailing statement claiming that, under applicable Postal Service regulations, the mailed material was eligible for the non-profit rate. Pl.'s R. 56.1 Stmt. ¶¶ 3, 17, 18. St. John, acting in accord with instructions it received from R & W, claimed such eligibility by listing either the Met or the Smithsonian, but not R & W, as the holder of the non-profit permit that allowed the use of the non-profit rate. Pl.'s R. 56.1 Stmt. ¶¶ 16, 19, 20. While the Met and the Smithsonian each had such a permit, R & W, which was not a non-profit entity, never did. Pl.'s R. 56.1 Stmt. ¶¶ 19, 22. St. John sent, along with its own invoice, each mailing statement to R & W. Pl.'s R. 56.1 Stmt. ¶ 21.

By 1991, R & W knew of the Postal Service regulations on cooperative mailings and knew that the Postal Service had investigated the eligibility for the non-profit rate of Met and Smithsonian travel mailings. Pl.'s R. 56.1 Stmt. ¶¶ 24, 25. R & W argues that these Postal Service investigations vindicated the sort of travel-related mailings at issue here. Def.'s Resp. to Pl.'s R. 56.1 Stmt. ¶¶ 26. R & W asserts that in hiring and instructing St. John, it merely acted on behalf of, and under instructions from, the Institutions to help the Institutions mail brochures to their own members under their own non-profit mailing permits. Def.'s Resp. to Pl.'s R. 56.1 Stmt. ¶¶ 15-16, 26.

II. ANALYSIS

A. Summary Judgment Standards

The basic summary judgment standard is that "[u]ncertainty as to the true state of any material fact defeats the motion." Gibson v. Am. Broad. Cos., 892 F.2d 1128, 1132 (2d Cir. 1989). The non-moving party's burden is to produce concrete evidence sufficient to establish a genuine unresolved material issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Dister v. Continental Group, Inc., 859 F.2d 1108, 1114 (2d Cir. 1988). The court then must view the facts in the light most favorable to the non-movant. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Gallo v. Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1224 (2d Cir. 1994). The court neither weighs evidence nor resolves material factual issues, but only determines whether, after adequate discovery, any such issues remain unresolved because a reasonable fact finder could decide for either party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Gibson, 892 F.2d at 1132.

  B. Prohibition on Using Non-Profit Rate for Cooperative
          Mailings

Each Institution, a non-profit entity, qualifies for the non-profit rate; R & W, a for-profit commercial entity, does not. The Domestic Mail Manual (hereinafter, "DMM"),*fn3 which is adopted as a Postal Service regulation, see 39 C.F.R. §§ 111.1, 111.5, 211.2(a)(2), prohibits use of the non-profit rate when the mailings are for a cooperative venture between a non-profit and a for-profit entity. "An organization authorized to mail at the Nonprofit Standard Mail rates may mail only its own matter at those rates. An authorized organization may not lend the use of its authorization to mail at the Nonprofit Standard Mail rates to any other person or organization." DMM § E670.5.1. "No person or organization may mail, or cause to be mailed . . ., any ineligible matter at the Nonprofit Standard Mail rates." DMM § E670.5.2. "A cooperative mailing may be made at the Nonprofit Standard Mail rates only when each of the cooperating organizations individually is authorized." DMM § E670.5.3. See also Siebert v. Conservative Party of N.Y., 724 F.2d 334, 335-36 (2d Cir. 1983) ("An organization which qualifies for the special rates may only mail its own matter at these rates. Moreover, cooperative mailings may only be made at the special rates when each organization individually qualifies for the use of the special rates.") (citing DMM).

The question is whether the disputed mailings were truly the mailings of each Institution or instead were cooperative mailings of each Institution in conjunction with R & W.*fn4 R & W asserts that it was not a joint venturer with the Institutions, but merely their agent, aiding in the execution of non-profit activities that the Institutions controlled. The cooperative mailing inquiry certainly looks to traditional agency principles. See Richards Decl. Ex. A, Customer Support Ruling PS-209, July 1989, updated Oct. 1996 (hereinafter, "PS-209") ("A cooperative mailing may be considered proper if the authorized organization uses a for-profit entity . . . as an agent."). "[T]raditional indicia of an agency relationship include `(1) consent; (2) fiduciary duty; (3) absence of gain or risk to the agent; and (4) control by the principal.'" Berger v. Iron Workers Reinforced Rodmen Local 201, et al., 843 F.2d 1395, n. 29 (C.A.D.C. 1988) (citation omitted). ...


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