Standard Educators, Inc. And James A. Melley, Sr. v. Federal Trade Commission

475 F.2d 401, 154 U.S. App. D.C. 290, 1973 U.S. App. LEXIS 11228

• Court: Court of Appeals for the D.C. Circuit
• Decided: March 9, 1973
• Docket: 72-1164
• Status: Published

Opinions

PER CURIAM:

This case is here on a petition to review an order of the Federal Trade Commission. The Commission directed its order against James A. Melley, Sr. in his individual capacity, as well as against the company, because it found that Melley knew of and approved many of the false and deceptive practices. Testimony before a hearing examiner showed that Melley was the organizer of the company, served as its president and treasurer, and owned 51 per cent of its stock. In the company’s infancy he did much of the selling himself, and although at the time in question Melley no longer engaged in any selling himself, he still, in the words of the trial examiner, “spends his time in the office supervising the over-all operations * * *.” In addition, he devised the form contract used by the company’s salesmen, a contract whose provisions were an integral part of the deceptive scheme. All of these factors, combined with the uncontradicted proof of widespread instances of deceptive practices by company salesmen, support the Commission’s finding that Melley knew of and approved the deceptive practices. See Fred Meyer, Inc. v. F.T.C., 9 Cir., 359 F.2d 351, 368 (1966).

The Commission introduced testimonial evidence as to 12 typical sales, dating from February 1965 to May 1968, taking place at sites as widespread as Oahu, Hawaii, Colorado Springs, Colorado, Groton, Connecticut, Portsmouth, New Hampshire, and Havre de Grace, Maryland.¹ The same oral misrepresentations were made in every one of these cases, and in each the pattern of deception was facilitated by the contract written by Mr. Melley. The Commission does not engage in speculation when it rejects the conclusion that these similarities occurred purely by coincidence and instead infers that they were the result of direction from above.

In drawing inferences about the knowledge of corporate officers in cases such as this, the Commission properly draws upon its expertise. And where it does so, our guiding principle in reviewing the Commission’s findings of fact is Mr. Justice Black’s statement for a unanimous Court in F.T.C. v. Standard Education Society,² 302 U.S. 112, 117, 58 S.Ct. 113, 116, 82 L.Ed. 141 (1937):

“The courts do not have a right to ignore the plain mandate of the statute which makes the findings of the Commission conclusive as to the facts if supported by testimony. The courts cannot pick and choose bits of evidence to make findings of fact contrary to the findings of the Commission. * * * ”

(Footnote omitted.)

In this case, the conclusion that Melley knew of and authorized the deceptive practices was amply supported by evidence of record. A heavy burden of exculpation rests on the chief executive and primary shareholder of a closely held corporation whose stock-in-trade is overreaching and deception.

The other issues raised by petitioners are without merit, and were dealt with at length in the Commission’s careful, well reasoned opinion. Accordingly, the order of the Commission is

Affirmed.

1 . We might add, in response to the dissent’s unwarranted characterization of these instances as “scattered misrepresentations,” that petitioners’ own counsel sought to limit the number of customer-witnesses that could be called by the Commission in order “to reduce the case to manageable and realistic proportions” and to avoid burdening petitioners.

2 . It is interesting to note that, although the Standard Education Society is apparently not related to Standard Educators, Inc., the record does indicate that when he incorporated Standard Educators, Inc. Mr. Melley made arrangements with Standard Education Society to purchase its line of encyclopedias for resale to the public. Standard Education Society also provides the broadsides used by Standard Educators’ salesmen in their sales presentations. In addition, the false and deceptive practices of Standard Educators, Inc. parallel in many respects the false and deceptive practices condemned in Standard Education Society, including: representing that encyclopedias are given away free or sold at a specially reduced price to selected persons in return for use of the purchaser’s name for advertising; representing that the recipient pays only for purchase of a 10-year annual yearbook extension service; and representing that the recipient was getting a special combination offer not generally available.