Court Opinion

ID: 9486277
Source: CourtListenerOpinion
Date Created: 2023-08-05 11:42:46.268322+00
Date Added: 2024-06-11T17:51:36.868732
License: Public Domain

STEPHEN F. WILLIAMS, Circuit Judge,
dissenting:
DynaQuest Corporation and related appellants (collectively called “DynaQuest”) are primarily in the business of liquidating what is called “distressed merchandise” — goods for which the immediate owner has little or no úse or market. • DynaQuest also has sold an instructional program, in' the form of a manual entitled “Liquidate Your Way to a Fortune”, as well as tapes, telling those who bought the program how to go about locating and then profitably disposing of distressed merchandise. In a sense, this recruited finders for its own business; among other ways of disposing of distressed merchandise, the manual explained to the reader/customer that he or she could use DynaQuest in liquidating merchandise by sending it specified items of information about the goods. In addition, DynaQuest used the manual itself to urge buyers to purchase various supplemental services and products. The most pertinent of these were the opportunities to bring DynaQuest in on the liquidation of specific merchandise by telephone rather than written correspondence, and to have DynaQuest purchase the goods for its own account rather than merely help the reader/eustomer to sell them. In some places in the manual DynaQuest described these supplementary items in what were surely extravagant terms — characterizing a book of likely purchasers of distressed merchandise, for example, as a “must for anyone wanting to make a fortune in liquidating and turn deals very quickly.” See Joint- Appendix (“J.A.”) 199.
The Postal Service, however, in claiming that DynaQuest had “eonduct[ed] a scheme or device for obtaining money or property *1150through the mails by means of false representations”, in violation of 39 U.S.C. § 3005, did not charge that the manual overstated the benefits of the supplementary services. Rather, it rested on the theory that Dyna-Quest’s mailings had touted the manual with false representations. Basically, its theory was that if the supplementary services were as great as the manual said they were, then the manual could not have been as great as the mailings said. There are two troubles with this view. First, as the Postal Service is required to prove the falsity of the statements that it points to as false, see, e.g., Silver v. U.S. Postal Service, 951 F.2d 1033, 1042 (9th Cir.1991), a mere demonstration of contradiction between two utterances of Dy-naQuest is not enough; it must show that the specific mailing claimed to be false was false. Second, carefully examined, DynaQuest’s claims in the mailings turn out to have been “not literally false”; as the district court rightly noted, DynaQuest Corp. v. United States Postal Serv., No. 91-1582, slip. op. at 8 (D.D.C. Mar. 6, 1992) (“DynaQuest”), J.A. 13, nor even false in substance. I turn now to the two specific charges.
I. The first charge
■ The Postal Service alleges that DynaQuest falsely represented in its mail solicitation that it would
assist purchasers of [its] program [i.e., a manual and two tapes for $149] to earn sums of money in the thousands of dollars without the need for purchasers to malee any additional payments to [DynaQuest].
Postal Service Complaint 10(d), In re A.C.L., P.S. Docket No. 36/90. J.A. 59. In finding that this was false, the Postal Service’s adjudicator, the Associate Judicial Officer (“AJO”), acknowledged that “For the most part [the Postal Service] relie[d] upon [Dyna-Quest’s] solicitation and program information to establish ... the existence of materially false representations.” See In re A.C.L., P.S. Docket No. 36/90 (U.S. Postal Serv., Dec. 28, 1990). J.A. 34. What proved the mail solicitation false, in the AJO’s view, was that the manual induced the belief that the supplemental products were a “necessary adjunct” to successful participation. J.A. 38-39. As I’ve already observed* the manual’s hyping of the supplementary services does not in itself show that the mailings improperly touted the manual.
Nonetheless, since the mail solicitation represented a promise, and the manual was also by DynaQuest, it is not unreasonable to treat the manual as evidence that DynaQuest made a false promise, as DynaQuest knew of the manual’s claims about the supplementary services at the time it made the mail solicitations. For two reasons, however, that analysis is insufficient to sustain the Postal Service’s findings. First, the manual in fact conveys a rather mixed image of the need for the supplementary services. While it refers to the purchase of one of them as a “must”, this bit of puffery — found in the description of the items at the back of the manual — is explicitly undermined by statements to the contrary in the manual itself. It states, for example, at page 9: “This manual is complete and contains' everything you need to begin immediately. Whether or not you choose to become certified and join the Association of Certified Liquidators, you can ‘sell’ the merchandise that you’ve located through the Association, to our customers, who are ready buyers with CASH.” J.A. 118 (emphasis added). And at page 3: “Throughout this manual, you will read about our Association for liquidators and other services. Let me tell you now, that these are only suggestions, and you certainly need not join anything or make any other investment other than what you have made with this manual in order to make this work for you. You can begin immediately.” J.A. 114 (emphasis added). Indeed, the complained-of description of the supplemental items itself starts by saying that they are “not required for you to perform as a liquidator.” J.A. 198 (emphasis added).
Second, to the extent that there is an inconsistency between the solicitation and the statements in the back of the manual that the supplementary products are critical, it is the solicitation that is both literally and materially true. The AJO found that DynaQuest “did provide assistance to participants pertaining to the saleability of located merchandise and the location of purchasers of mer*1151chandise whether or not the participants purchased the supplemental services.” (emphasis added.) J.A. 32. And, he found, “Participants in the program were not required to purchase the three supplemental services or book in order to act as a locator or liquidator for Respondents.” (emphasis added.) Id.
The evidence fully supports these findings. Once a participant established the existence of surplus merchandise, answered a list of questions, obtained a sample, and mailed these to DynaQuest, then DynaQuest would attempt to broker a deal, and, if successful, would send half of the profits to the locator. The AJO found that participants could contact DynaQuest by mail whether or not they purchased the telephone consulting service, J.A. 32, and that those “who locate[d] merchandise and referred] the matter, to [Dyna-Quest] [were] paid 50% of the profits of the sale of the merchandise.” J.A. 36, See J.A. 228-29 (testimony on deal going through and check arriving from DynaQuest after locator had lost interest); J.A. 251-52 (testimony on working with DynaQuest through the mail). Thus, the AJO quite properly rejected another Postal Service claim, a charge that Dyna-Quest had falsely represented that it “will share profits in liquidating merchandise with any addressee who purchases [DynaQuest’s] program”, Postal Service Complaint 10(e), affirmatively finding that DynaQuest’s representation was true. J.A. 36.
The second component to this representation — that the DynaQuest help would assist purchasers in earning thousands of dollars— is also sustained by the record. As the AJO observed, DynaQuest “presented the testimony of participants who had made substantial sums of money”, J.A. 35; there was no evidence to suggest that these participants had some magical attribute that enabled them to use the manual, and DynaQuest’s assistance, in ways unavailable to other purchasers. Indeed, the AJO expressly found that “sums of money in the thousands of dollars have been earned within weeks by purchasers of [Dyna-Quest’s] program.” Id. In doing so, he also found that another representation claimed by the Postal Service to be false — that Dyna-Quest “will assist purchasers of [Dyna-Quest’s] program in earning sums of money in the thousands of dollars”, Postal Service Complaint 10(c) — was in fact “not false”. Id.
Thus, unrefuted evidence supported the truth of both elements of the first claimed misrepresentation.
The majority rests its affirmance on supposed contradictions that on close examination prove not to be such. The solicitation states that “After you locate an item ... you can contact our headquarters and we’ll take it from there”,-J.A. 67, and the majority finds this belied by the manual’s statement that “you need to be certified in order to join the Association of Certified Liquidators and sell merchandise to us.” Maj. Op. at 1147 (citing J.A. 199). In context, however, it is clear that these statements are not contradictory. The first involves a service by which the purchaser of the manual can locate surplus products and have DynaQuest liquidate them — a service DynaQuest did in fact provide — while the second involves the locator selling directly to DynaQuest.
The majority also notes a contrast between the solicitation’s announcement that “it’s extremely easy with our proven copyrighted system to make a FORTUNE in this business, right from your kitchen table and without any money from your own pocket!” and the manual’s' declaration' “that the book Dy-naQuest sells for $80 is' a must for anyone wanting % to make a ' fortune in liquidating. ...” Id. But these two quotations are not addressing the same issue. The first merely indicates that you can engage in the liquidation business without risking your own. capital in the purchase of the located merchandise (i.e., by using the liquidation service provided by DynaQuest, or by lining up the ultimate buyer and seller directly). Other language in the solicitation confirms this understanding of the passage. It seeks to lure the reader who is “interested in a money making program that requires NO MONEY to operate.” (emphasis added.) J.A. 74. The manual also makes the same point, explaining how the reader embarks on a properly brokered deal with “no money out of [his] own pocket”. J.A. 167. See also the manual at 139, 141 (J.A. 188-89) (discussing how a locator can broker a deal without risking his own capital); at 41 (J.A. 137) (“With our *1152system the buyer ends up paying”); at 5 (J.A. 116) (“There isn’t the need for large financial risks.”); and see J.A. 252 (purchaser-witness describes actual transaction, saying that he “didn’t use any of [his] own money.”)
As the district court put it: “The AJO’s finding makes it clear, that if a person purchases the DynaQuest manual for $149, he may be able to make a substantial amount of money without spending any additional money to purchase DynaQuest’s supplemental services.” DynaQuest, slip. op. at 8 (J.A. 13). The district judge went on to conclude that DynaQuest’s representation that it would assist purchasers in earning thousands was misleading, because once the manual arrived, it suggested that success was “much more probable” if the participant, bought the supplementary services. Id. at 9. J.A. 14. Granted that the glow cast by the manual on the supplementary services may have tended to put the manual’s own contribution in the shade, the record indicates that the manual and accompanying tapes did give the buyer the substance of what DynaQuest had said they would. There is no substantial evidence to the contrary.
II. The second charge
The Postal Service, also alleges that Dyna-Quest falsely represented that it would
provide purchasers ,of the program with comprehensive training in the merchandise liquidation field.
.Postal Service Complaint 10(i). J.A. 60. Although the DynaQuest solicitation does not explicitly state that the manual provides “comprehensive training”, the Postal Service’s recharacterization is not materially unfair. Claims that the manual “provides all the information you need to start MAKING BIG BUCKS!”, J.A. 18, and will “show you how to do everything”, J.A. 75, are clearly assertions that DynaQuest would impart enough information to enable purchasers of the program to engage in the business and make a lot of money.
The Postal Service quite rightly conceded that it had no evidence that the DynaQuest manual in and of itself (without reference to supplemental products) failed to provide comprehensive training in the merchandise liquidation field. See Plaintiffs’ Statement of Material Facts, ¶ 13 (J.A. 102), and the Postal Service’s response, admitting ¶ 13 (J.A, 105). Nonetheless, the AJO asserted conclu-sorily, “The manual does not provide sufficient information for the ordinary purchaser to be able to successfully participate. The tapes are of the same nature.” J.A. 39-40; see also J.A. 29. The AJO cited no evidence in support of this proposition other than to suggest that DynaQuest had “implicitly acknowledge[d] the deficiencies of their initial $149 program” “by offering for sale the supplemental services and book in a manner which clearly, indicates their purchase is necessary if one is to have success in the liquidation business.” J.A. 40.
There is no evidence in the record that DynaQuest did not fulfill its promise to provide “all the information you need to start MAKING BIG BUCKS!” Indeed, the evidence indicates without contradiction that the representation was not only literally, but materially true, This measure of comprehensiveness — the only kind of comprehensiveness that DynaQuest can properly be said to have warranted — is in effect the same as the second component of the first alleged misrepresentation, discussed above. As I noted there, the AJO observed that DynaQuest had “presented the testimony of participants who had made substantial sums of money”, and he affirmatively found that “sums of money in. the thousands of dollars .have been earned within weeks by purchasers of [DynaQuest’s] program.” J.A. 35. The Postal Service never even argued that the circumstances of these participants were in any way exceptional.
In upholding the AJO’s decision, the majority holds DynaQuest to a representation it never made: “DynaQuest led purchasers to believe that, in return for the initial payment of $164, [$149 plus $15 postage] they would receive all the training DynaQuest had to give; whereas the manual and tapes in fact provided only a partial disclosure of Dyna-Quest’s expertise in the field, and instead withheld valuable elements of training to be offered in the form of supplemental services.” Maj. Op. at 1148 (emphasis added). Dyna-*1153Quest never promised to impart all of the expertise it held. An offer of “comprehensive” training is not an offer to impart all of a teacher’s expertise and experience. If a law school offers comprehensive legal training, no one supposes that to be a promise to transmit all of the faculty’s knowledge. Dy-naQuest’s partial disclosure of its body of knowledge simply does not speak to the issue of whether the training it supplied was adequate by the standard that DynaQuest’s representation actually set — enough to make large sums of money. The record — and even the findings of the AJO — establish that it did just that.
As several of the quotations show, Dyna-Quest indulged in a lot of capitalized words and repeated references to large sums of money, and played upon immature people’s ardent hopes for quick and easy money. The style was tasteless, but the substance was not materially inaccurate. I believe the decision of the district court should be reversed and the Postal Service order vacated.