Hannegan v. Read Magazine, Inc.

PRETTYMAN, Associate Justice. Appellant, as Postmaster General, issued an order forbidding the use of the mails to appellees. They brought a civil action in the District Court to enjoin enforcement of the order. That court granted their motion for summary judgment and granted a permanent injunction. This appeal followed. Appellees publish two magazines and also publish books in the form of reprints of classical literature. In one of these magazines, they conducted a contest, called a puzzle contest, for large cash prizes. A group of eighty puzzles, divided into twenty series of four each, was initially offered for solution. The contest was promoted by national newspaper advertising, by extensive advertising in appellees’ Facts Magazine, and by a booklet sent in response to coupons clipped from the advertisements. The “Official Rules of the Contest” were printed in full text,in the newspaper and magazine advertisements and in the booklet. They contained the following: “In case of ties, if two or more persons tie in submitting the correct solutions, then the first two or more prizes will be reserved for those contestants and will be awarded in the order of accuracy of the submissions of those contestants to a first, and if necessary, a second tie-breaking group of puzzles, divided into Series exactly like the first Group. In case a second tie-breaking Group of puzzles is necessary, contestants eligible to solve same will be required to accompany their solutions to this second tie-breaking Group of puzzles with a letter of not more than 200 words on the subject: ‘The Puzzle I Found Most Interesting and Educational in This Contest.’ All tie-breaking Series must be qualified in accordance with the provisions of Rule No. 8. Only in case ties exist after such final tie-breaking puzzles have been checked will the letters be considered, and in that event they will be judged on the basis of originality in description and general interest. In case of final ties, duplicate prizes will be awarded. Upon entering the contest, the entrant is asked to realize that the sponsor anticipates that a large number of persons may enter The contest and that a large number may solve one, two or all three of the Groups of puzzles, and that the sponsors will not make known the number of persons competing in any phase of the contest, irrespective of how large or how small that number may be. FACTS Magazine reserves the right to offer contestants the opportunity to win increased prizes, or to offer consolation prizes or additional prizes at any time prior to the conclusion of the contest.” 'These Official Rules were printed in the same type and with equal prominence with the remainder of the text of the advertisements, except for the headlines. They were likewise printed in full in the booklet of puzzles sent to each entrant. Con [544] testants were told, both in the advertisements and in the booklet, to read the Rules —“The Rules are printed in full below. Please read them carefully and be sure you understand them.” The Rules were repeatedly referred to in the advertisements and in the booklet. The entry blank itself recited that the entrant wished to qualify “in accordance with the official rules.” The headlines at the top of the advertisements, in large headline type, were “$10,000 First Prize — Puzzle Contest” and variations of the same terminology. The headlines and the text emphasized the puzzle feature of the contest. The contestants were told that they must enclose 15 cents with each series of four solutions, and that in return for the remittances for the twenty series, each contestant would receive a book issued by the appellee book company. Such .books were duly sent each contestant as promised. Contestants who solved the first group of eighty puzzles were sent a letter in which they were told 'that by buying additional books they could make themselves eligible fQr increased prizes. The letters were quite emphatic in stating that eligibility for the original prizes remained whether or not the contestants wished to qualify for eligibility for the increased prizes. At the time of the hearing in the Post Office Department, $760,000 in fees had been received, and appellees had expendéd, or become obligated to expend, $935,000, including prizes, books distributed, printing, advertising, etc. The completion of the contest was interrupted by the Post Office action. Appellant says that appellees knew at the outset that the winners of the contest would be finally determined not upon the accuracy of puzzle solutions, but upon a judging of the letters submitted by the tie-ing contestants. He also puts much stress upon the communications sent to all contestants who successfully solved the first series of puzzles. He says that the scheme was cleverly designed and intended to create the impression (1) that eighty puzzles comprised the contest, (2) that the contest, though simple in nature, would be decided on the strength of the puzzles and without recourse to letter-writing, and (3) that it would cost not more than three dollars to become eligible for a prize. Appellant does not claim that any statement in the advertisements was untrue or that there was any departure from the procedure announced in the Official Rules of the Contest. There is no claim by him that the judging of the letters was to be other than bona fide, or that any contestant failed to receive the promised books. No contestant, so far as the record shows, complained of being misled or defrauded. In other words, the fraud order is not premised upon specific or affirmative misstatements, or upon failure to perform as promised, but is premised upon an impression which appellant says is conveyed by the advertisements as a whole. He derives the impression from the headlines in the advertisements and the comparative urgency which he finds in some of the expressions 'in them. The statutory clause under which appellant acted, authorizes him to forbid the use of the mails to any person or company conducting any “Scheme or device for obtaining money or property of any kind through the mails by means of false or fraudulent pretenses, representations, or promises.” 1 Findings of the Postmaster General in cases of this sort will not be disturbed by the court where they are fairly arrived at and have substantial evidence to support them.2 Furthermore, “Even if an advertisement is so worded as not to make an express misrepresentation, nevertheless, if it is artfully designed to mislead those responding to it, the mail fraud statutes are applicable.” 3 It is upon the latter rule that appellant relies in the case at bar. The rule is broad; a false pretense,' representation, or promise may be [545] made by impression. But such impression must be fairly derived. As we said in Farley v. Simmons, 4 the question is what the advertisement is “Reasonably intended to cause the reader thereof to believe.” To support appellant’s conclusion in this case, one must ascribe to the advertisements an impression directly contrary to the stated rules of the contest. One must thus assume that readers were led not to read the Rules, or were led to ignore them or to misunderstand them or to believe something else contrary to their statement. There is no evidence, we think, to support any of those assumptions. The Rules were legibly printed. They were emphasized, rather than minimized, in the text. They were clear to any reasonable mind. No contradictory expressions occurred elsewhere. That this contest was an advertising device designed to promote the book-publishing business of appellees must have been plain to the most casual reader. The advertisements specifically told him, “This contest with FACTS MAGAZINE as sponsor, is being presented as a means of popularizing the Literary Classics Book Club.” Moreover, the puzzles presented were so simple that patience and time were obviously the only requirements for the successful solution of the whole series. It is impossible to believe that any prospective contestant could think that only one person would be successful in the solutions, lie was told in the Rules that the sponsors anticipated that a “large number” of persons would solve all the puzzles, and his own impressions must have told him the same thing. We fail to see that the letters which were written to the contestants who successfully solved the first series of puzzles, cast any complexion upon the venture different from that cast by the original advertisements themselves. We are told that the Postmaster General must be sustained if his action is within “The most malign interpretation which can in reason be put on” the advertisements, the quoted words being from an opinion of Judge Learned Hand while on the District Court in 1909.5 But that broad expression is limited by “in reason,” and the judge’s further description of the Postmaster General’s power was circumscribed by the words “reasonably conclude.”6 We think that it must necessarily be contemplated that any reasonable person proposing to enter a contest would read the rules if he were cautioned to do so, and would understand plain terms in them. To be within reason even the most malign impression must proceed from that minimum premise. If the Postmaster General’s power were coextensive with the most malign impression to which advertisements might be susceptible, contrary to unambiguous terms plainly stated, he would be the unrestricted master of much of the country’s business. We do not find that power in the simple and explicit language of the statute, which is limited to false or fraudulent pretenses, representations, or promises. Advertisements which are clearly not false or fraudulent frequently have a certain extravagance and urgency in their appeals, which to the most malign, and even to the mildly cynical, are beyond the boundary of precise accuracy. If a general impression contrary to terms plainly stated is to be the basis for a fraud order, it must, we think, be the impression reasonably conveyed to the public to which the advertisement is addressed. The impression which is the criterion is that of a reasonable reader, not the most malign impression uninhibited by reason. We so held in Farley v. Simmons.7 We think that the advertisements before us fairly urged contestants to read the Rules and that the Rules stated fairly, in style of type, placement, and terms, what was proposed. That being so, and there being no ambiguity in or departure from the proposals stated, a finding of false pretenses, representations, or prom [546] ises could not properly be made. Legally speaking, that conclusion upon these facts was arbitrary and capricious. We think that the District Court was correct in its judgment. Affirmed. Footnotes [1] R. S. § 3929, 39 U.S.C.A. § 259. [2] Farley v. Simmons, 1938, 69 App.D.C. 110, 114, 99 F.2d 343, 346, 347, and cases there cited. [3] Id., 69 App.D.C. at page 113, 99 F.2d at page 346. [4] 69 App.D.C. at page 114, 99 F.2d at pages 346, 347. [5] Putnam v. Morgan, C.C., 172 F. 450, 451. [6] See our discussion of the same quotation in Farley v. Simmons, 1938, 69 App.D.C. 110, 114, 89 F.2d 343, 347. [7] 1938, 69 App.D.C. 110, 99 F.2d 343.